Bank of America National Trust and Savings Association v Taylor [1997] FCA 1553 | Case summary

Paragraph 4(a) has not been amended in the current version of the statement of claim. The timetable originally stipulated for discovery proved wildly optimistic. Nonetheless, the discovery process continued on the basis that the State accepted that it was obliged to make discovery of documents in the possession or control of all Agencies. Thus, written submissions prepared on behalf of the State for a hearing on 13 March 1996 noted that the State had identified and approached 450 separate Agencies, with a view to discharging its discovery obligations. At a further directions hearing on 21 March 1996, counsel for the State confirmed that the State would provide discovery in respect of some 450 Agencies and that the discovery process would be complete within five or six months. At that same directions hearing I queried the State's apparent determination to make full discovery notwithstanding the expense of such a course. The following extract gives the flavour of the discussion: "HIS HONOUR:...If the parties themselves want to undertake what seems to be the monumental expense of providing full discovery in a case, without demur, it may be that the role of the Court is to say, that is all right, the good taxpayers of New South Wales can fund that and the Court has got nothing to say about it. However, it does seem on the face of it a little curious that with so many issues raised by Telstra, the State of New South Wales does not appear to have a difficulty making full discovery in accordance with the traditional tests. Perhaps you might just tell me, why that approach is being adopted. It may be, despite the sceptical note in my voice, it may be the entirely appropriate course, and I am not saying that it is not, but I would like to know why you have adopted that course. MR MUDDLE: Your Honour, the State has agreed to give full discovery subject to one qualification by agreement with the parties, accounts and invoices have been excluded at least at this stage. ... MR MUDDLE: Having excluded those, we could not ourselves see any sensible way of limiting discovery which would not involve a similar amount of work policing it than in simply giving general discovery. We considered formulating if possible a limited discovery but we could not see one that would be significantly shorter or cost saving. ... MR MUDDLE:...My impression is, and it is only this, Telstra's discovery burden will be much greater than ours. Our discovery obligation concerns the dealing with BT before this agreement was entered into and its operation. Most of those matters are issues which even on a limited form of discovery would require discovery because they are all in issue. All of the dealings between BT and the New South Wales government before the agreement was entered into are important, as is the operation of the agreement itself. That regrettably does involve what attempts, if any, BT made to have the agencies of the government sign the agreements or sub-agreements under the principal TDN agreement and that necessitates the State now going to each of those agencies. HIS HONOUR: 450 of them it is said. MR MUDDLE: However many there are, yes, to have them forward their documentation, but I cannot say to your Honour that it would be proper not to do that because that will be a critical issue in the case." It should be noted that, after considerable negotiations between BT and Telstra and some rulings by me on disputed questions, orders were made on 29 May 1996 for specific discovery by Telstra. Those orders required discovery of certain categories of documents relating to any "New South Wales Government Entity" or "New South Wales Government Agency". These expressions were confined to the "Entitles" or "Agencies" set out in Schedules 2B and 2C to the orders. Schedule 2C lists 158 Agencies, of which 125 are recorded as having signed an ASA. Schedule 2B lists a further eleven "Entities", including the State of New South Wales, the then Premier and the Premier's Department. Thus, Telstra's discovery is limited to documents relating to a total of 169 Agencies and Entities. (These are not the same 169 Agencies as I have already referred to.) Considerable correspondence took place between the solicitors for BT and the solicitors for the State, during the latter part of 1996 and the first half of 1997. It is clear from the correspondence and from the State's written submissions to the Court during this period that the State continued to accept that its discovery obligations extended to all Agencies, as defined in the statement of claim. It is equally clear that the State has never satisfied the discovery obligations it voluntarily accepted. This is despite the fact that the State asserted on several occasions that it was on the verge of discharging its obligations. For example, at the hearing on 21 March 1996, counsel for the State informed the Court that completion of all discovery would take place within five or six months. On 28 August 1996, counsel for the State told the Court, in relation to the State's discovery obligations: "The Crown estimated 30 August [1996] and we have finished it." (Emphasis added.) As Mr Tobias conceded in argument in the present case, that statement was simply wrong. On 29 July 1997, the State was ordered to serve a list of Agencies for which it had taken responsibility in relation to discovery. The State's solicitors complied with this order on 5 August 1997, listing approximately 227 Agencies for which it had given discovery, although it did not specify how complete discovery had been in respect of each Agency. Later, the State adopted a stance whereby it maintained that the burden imposed on it by the requirement to make discovery in respect of the Agencies was too great and should be curtailed. This stance was adopted nearly a year after the Court had been told that the State's discovery was complete. In the meantime, the State's solicitors had written to BT's solicitors suggesting that statements from officers of Agencies should be limited to a total of 94 Agencies. The 94 Agencies (later reduced to 93) comprised those specifically referred to in BTA's pleadings (although not all such Agencies listed in the Schedule to the statement of claim) and in statements filed on behalf of BT. However, the State's solicitors, in a letter dated 24 July 1997, disclaimed any connection between the Agencies from which statements would be obtained and those from which discovery was to be obtained. (Statements from officers of Agencies are presumably required by the State to pursue the claim pleaded by it in the first cross claim.) In a position statement dated 29 August 1997, filed on behalf of the State, the so-called "Agency Issue" was addressed as follows: "4.2 On the broadest possible construction, the Crown has identified over 400 bodies which might be "Agencies". The Crown does not concede that all of those bodies are "Agencies", but of course the Crown's obligations extend to the limit of the case as put by the Applicant. As early as 25 October 1995 the Crown wrote seeking agreement on a list of Agencies. BT declined even to endeavour to reach such an agreement. 4.3 BT has now served all of the evidence in support of its case. Annexure A, is a schedule identifying every reference to an Agency in BT's Statement of Claim, the Crown's Cross Claim or any of the Statements served by BT. There are only 93 such Agencies. It must follow those 93 Agencies represent the limit of contention between the parties in relation to Agencies. 4.4 By correspondence of 24 July 1997 and 5 August 1997, the Crown has sought BT's agreement to that list or proposal of an alternative. No reply directed to that point has been received. 4.5 The task of interviewing officers (on average 3 per Agency) from over 400 possible Agencies to ensure compliance with discovery orders and to take statements is impossible within the existing timetable. Moreover it is an intolerable waste of public funds, given that the ambit of dispute between the parties is limited to (at most) 93 Agencies. 4.6 Accordingly the Crown has no alternative but to move to strike out the Application and Statement of Claim as vexatious, oppressive and an abuse of process. This can be done within 14 days and a date for hearing of the Motion should be fixed as soon as possible." This was the first time the State had indicated that it proposed to limit discovery to a limited number of Agencies, or that it proposed to move to strike out the application or statement of claim. On 10 September 1997, the State filed the motion to which I have already referred. As I have noted, par 3 of that motion seeks an order that discovery by the State be limited to 93 Agencies identified in a schedule. The schedule is substantially the same as the list of 94 Agencies to which the State had previously referred in correspondence. I have already noted the modification of the State's position on this issue during the hearing. An affidavit by Ms Grant, the solicitor having conduct of the matter on behalf of the State, was read in support of the State's motion. In that affidavit, Ms Grant deposed that a document management service had devoted 11,777 hours to the discovery process on behalf of the State during the period 1 September 1995 to 19 August 1997. For the same period the State had paid the management service approximately $820,000 for "document management and related services associated with the litigation". Of this amount, 55 per cent was "directly attributable to services provided in relation to discovery by the State in the litigation". Ms Grant further deposed that the cost of conducting interviews with personnel from each Agency that had been identified (a total of over 400) was estimated exceed $1 million, although this estimate appears not to apportion the projected cost between the discovery process and the taking of statements for evidentiary purposes. I should add that in the course of the hearing I asked Mr Tobias (who has only recently been briefed on behalf of the State) what was the explanation for the State's late change of heart on the discovery issue. The explanation proffered was that the State's legal representatives realised only when BT filed statements in support of their case, that BT relied only on dealings with a limited number of Agencies. As Mr Tobias explained it, this led to the further realisation that the discovery burden which the State had voluntarily undertaken was excessive and inappropriate having regard to the true issues. It is not clear whether the legal representatives appreciated that the scope of the State's discovery obligations arising from the case pleaded in the statement of claim might be different from those arising from the cross claim. Although the explanation given by Mr Tobias was not directly supported by evidence, I accept that it reflects the state of mind of the legal representatives involved. However, it does not explain why the State took so long to come to the realisation that it required relief from the discovery burden it had agreed, in the face of questioning from the Court, to discharge. Nor does it explain why the Court was provided with incorrect information and why no steps were taken to correct the error at the first opportunity. I do not lay these failings at the feet of any individual. In my opinion, however, the State's approach to discovery in relation to Agencies has been most unsatisfactory. THE PLEADINGS The Statement of Claim In order to consider BT's application for a representative order, it is necessary to consider the case now pleaded by BTA in the statement of claim. I have referred earlier to the general nature of that case. Paragraph 1.2 of the statement of claim pleads that the State is sued "(a) as the State of New South Wales in accordance with the Crown Proceedings Act, 1988 of the State of New South Wales; (b) as a party which entered, and purported to perform obligations under the TDN Agreement (more particularly described in paragraph 11(b) below) on behalf of itself and Agencies as defined by clause 1.1 of the TDN Agreement; and (c) further and alternatively, pursuant to Order 6 rule 13 of the Federal Court Rules, as representing itself and each and every Agency (in the meaning of clause 1.1 of the TDN Agreement) not otherwise liable to be sued in the name of the "State of New South Wales" pursuant to the Crown Proceedings Act 1988 including (without limiting the generality of the foregoing) the Agencies identified in the Schedule to this Statement of Claim." The schedule to the statement of claim identifies 159 Agencies, but does not specify the criteria for their inclusion in the schedule. It is to be noted that the schedule does not identify all Agencies within the definition of cl 1.1 of the TDN Agreement. As I have previously noted, there is a total of about 450 Agencies. Insofar as the statement of claim seeks relief against the State, representing itself and Agencies, BTA relies upon causes of action in contract and in tort (negligence), misleading and deceptive conduct in contravention of ss 41 and 42 of the FT Act 1987 (NSW) and breaches of fiduciary obligations owed by the State. The principal relief claimed by BTA comprises claims for damages, including damages under the FT Act, ss 68 and 72, and an account of profits or, alternatively, equitable compensation. The statement of claim pleads a number of events preceding the execution of the TDN Agreement. In particular, the following are pleaded: · in April 1991, the State invited interested parties to submit expressions of interest in the development and management of an integrated telecommunications network for the Public Sector of the State, to which BTA responded (par 2.1); · on about 28 August 1991, the State issued a media release, headed "Shortlist Announced for NSW Telecommunications Network" (par 2.2); · in about September 1991, the State distributed to certain persons, including BTA, the RFT and an RFT Management Overview (par 2.3); and · the State caused to be passed the GT Act, assented to on 17 December 1991 (par 3). By this conduct, including distribution of the RFT and the media release, par 4 alleges that the State represented to BTA, inter alia: "(a) that the integrated telecommunications network ("the network") in respect of which the Government was requesting tenders would be a network for the whole of Government intended to be used and which would be used by all the Government's departments, agencies and authorities in Australia and all Boards or other bodies in Australia under the responsibility or administrative control of any such department, agency or authority, with the exception only of the State Bank of New South Wales and the Government Insurance Office of New South Wales (which users of the network are hereafter referred to as the "Agencies"); (b) that participation by all the Agencies in the network would provide the maximum possible economies of scale to ensure the lowest feasible cost of inter-site telecommunications for the Government; ... (e) that the network would service over 150,000 public sector employees of the Government and would include connection of an estimated 1300 sites, 350 key systems, 120,000 telephones, 950 PABX, 15,000 mobile radio services, 23,000 date terminals and 4,000 data lines; ... (j) that Agencies would not be permitted to build their own telecommunications infrastructure so as to duplicate or overlap with the functions of the TDN; ... (l) that the Government was committed to ensuring, bringing about and supporting (and was able to ensure, bring about and support) each of the matters alleged in paragraphs 4(a) [and] 4(b)...; (m) that in preparing its tender BTA should assume and it was reasonable and safe for BTA to assume as the basis for the tender and that BTA should tender on the basis: (i) that all the Agencies would use the network; (ii) that the maximum possible economies of scale would be achieved as a result; (iii) that the TDN part of the network would supply services through a mix of a private network structure and public network structures provided by Licensed Carriers; (iv) that the successful tenderer would have the right to procure access to, and to manage, inter alia, virtual private networking on behalf of the Government and Agencies. ... (p) that the Government and the Agencies were spending amounts of the order of $80-85 million per annum on telephone calls." It is alleged that, in reliance upon these representations, BTA prepared and submitted its response to the RFT and submitted its final tender offer in about October 1992 (par 5). BTA says that, in the course of subsequent negotiations and discussions, the State made further representations to it (pars 6-9). These included a representation that information concerning the volume of telecommunications traffic and the size of the market for the TDN was based on a consideration of actual sites and upon actual assets surveys, traffic management, data collection and processing (par 9.1). BTA further pleads that the relevant terms of the TDN Agreement, which are set out later in the statement of claim, constituted representations of a continuing character made by the State, on behalf of itself and the Agencies, to BTA (par 10AA). BTA alleges in par 11 that, induced by the State's representations and conduct, it "(b) entered into a written contract with the Government (the "TDN Agreement"), clause 2.1 of which provided that, with the exception of seven specified clauses, the TDN Agreement would become valid and binding if and when the Government gave written notification to BTA that it was the successful tenderer under the RFT and clause 27 of which provided that the full consideration to BTA thereunder would be the End User Charges referred to therein; (c) committed itself to substantial expenditure and investment in New South Wales and proceeded to expend substantial sums of money to perform its obligations under the TDN Agreement; and (d) otherwise proceeded to perform the TDN Agreement and to implement the TDN." Paragraph 12 of the statement of claim is as follows: "The TDN Agreement became binding pursuant to clause 2.1 thereof with effect on and from 20 November 1992." It should be noted that, except for pars 11(b) and 12 of the statement of claim (when read in conjunction with par 1.2) there appears to be no pleading which alleges the making of the TDN Agreement. No pleading, except to the extent pars 11(b) and 12 do so, identifies the parties to the TDN Agreement. The statement of claim then goes on to specify the express terms of the TDN Agreement upon which BTA relies. These include: · cl 12 of the TDN Agreement, which required the State to procure each of the Agencies to enter into an ASA (that is, an Agency Service Agreement with BTA, for connection to CNH (that is, the Custom Net Horizon service provided by Telstra) (par 15(f)); and · cl 59 of the TDN Agreement, which provided that each party (including the Government on behalf of itself and the Agencies and each of the Agencies) would take all steps and execute all documents to give effect to any of the transactions contemplated by the TDN Agreement (par 15(i)). A large number of implied terms are also alleged (par 16). The statement of claim alleges, in par 18, that "[a]fter 20 November 1992, the Government failed to carry out its obligations under and was and remains in breach of the TDN Agreement in that: (a) the Government did not procure that certain Agencies enter into an Agency Service Agreement with BTA for, inter alia, connection to CNH; (b) the Government did not take reasonable steps and use reasonable diligence to procure that certain Agencies enter into an Agency Service Agreement with BTA for, inter alia, connection to CNH, within a reasonable time of the Effective Date of the TDN Agreement, namely 20 November 1992; ... (d) the Government failed to take itself, and to procure that each Agency as soon as reasonably practicable took, all steps reasonable and necessary to ensure that each Agency entered into an Agency Service Agreement under the TDN Agreement for the acquisition from and supply by BTA in accordance with the TDN Agreement of all Required Services used or required from time to time by the Agency to the full extent of that Agency's use and requirements from time to time; ... (g) the Government failed to take reasonable steps and to use reasonable diligence to ensure that Agencies did not obtain or attempt to obtain from Telstra services which were Required Services, or which were incompatible with the TDN." It is further alleged that the State breached the TDN Agreement, by procuring from Telstra a basic carriage communications service known as CVPN, for itself and the Agencies (pars 19-20). These breaches constituted a repudiation by the State of its obligations under the TDN Agreement, which repudiation BTA accepted on 1 August 1995 (pars 21, 23). The statement of claim then alleges that each of the representations previously pleaded was false or misleading (par 25.2), in that (inter alia): "(a) The Government was not committed, and/or did not have the capacity and resources, to ensure that all Agencies would use the TDN. (b) Insufficient Agencies participated in the TDN to provide the represented economies of scale and costs. ... (e) On the case for which the Government contends in these proceedings, BTA did not enjoy the exclusive right to supply Required Services to Agencies and the Government denied its right to do so in relation to CVPN. ... (h) It was not reasonable or safe for BTA to make the assumptions referred to in paragraph 4(m)." Part B18 of the statement of claim pleads that the State was involved in what are said to be Telstra's contraventions of the FT Act. This part of the statement of claim was added by amendments made in May 1997. Paragraphs 25A and 25C-25D are as follows: "25A At all material times the Government and the Agencies were (within the meaning of section 61 of the Fair Trading Act) involved in the contraventions by Telstra of sections 42 and 44 of the Act (pleaded in paragraphs 34(b) and 34A-34E below) in that they: (a) aided, abetted, counselled or procured the contraventions; (b) further or alternatively, induced the contraventions; (c) further or alternatively, were knowingly concerned in, or party to, the contraventions; (d) further or alternatively, conspired with Telstra to effect the contraventions. ... 25C BTA has suffered, and continues to suffer, loss and damage by conduct of Telstra in contravention of the Fair Trading Act sections 42 and 44. 25D Accordingly, BTA is entitled to damages against the Government (as a person, and as the representative of persons, involved in contraventions of Telstra) pursuant to sections 68 and 72 of the Fair Trading Act." Subsection B19 of the statement of claim is headed "Fiduciary Obligations: Breaches of Obligation owed by the Government". This section pleads that the "Government and/or the Agencies" occupied a position of dominance vis a vis BT and had special knowledge about various matters, including levels of telecommunications traffic (par 25E). By reason of these matters and others, the State and the Agencies owed BTA fiduciary obligations in relation to dealings between the State and the Agencies (on the one hand) and Telstra (on the other) about the suitability of Telstra's telecommunications services for the purposes of the TDN (par 25F). In breach of their fiduciary obligations, the State and the Agencies, inter alia, failed to act for the benefit of BTA in the acquisition of telecommunications services from Telstra during the operation of the TDN Agreement (par 25H). Paragraph 25I is as follows: "25I The Government and the Agencies having breached their fiduciary obligations to BTA, the Government (by itself and as representative of the Agencies) is liable to BTA, at the election of BTA, for (a) an account of profits; or (b) equitable compensation." Paragraphs 25J to 25L plead that the State and the Agencies were privy to breaches of fiduciary obligations owed by Telstra to BTA (pleaded in pars 35R to 35U). Paragraphs 25K and 25L are as follows: "25K At all material times the Government and the Agencies were privy to those breaches of fiduciary obligations on the part of Telstra in that: (a) the Government and the Agencies (for their own benefit) participated in Telstra's breaches; (b) further and alternatively, the Government and the Agencies (for their own benefit) knowingly assisted Telstra in its breach of the fiduciary obligations owed by Telstra to BTA. 25L The Government and the Agencies having been privy to Telstra's breaches of fiduciary obligations, the Government (by itself and as representative of the Agencies) is liable, at the election of BTA: (a) to account to BTA for any gain the Government or the Agencies thereby obtained; or (b) to compensate BTA for losses suffered by BTA by reason of the conduct of Telstra, the Government and/or the Agencies referrable to Telstra's breaches of its fiduciary obligations." The particulars to par 25K refer to pars 18 and 21 (in which BTA alleges that the State breached the TDN Agreement, procured the CVPN in breach of the TDN Agreement and repudiated the TDN Agreement); pars 28 and 29 (alleging that Telstra knew of the TDN tender process and made representations to BTA, inter alia, about Telstra's ability to connect Agencies to CNH); pars 32 to 33 and 35F (alleging that Telstra knew of the TDN Agreement, made representations to BTA in 1994 and 1995 concerning CNH/CPNH equivalence and engaged in impermissible conduct, inter alia, by failing to ensure that CNH was reasonably fit for the represented purpose and by inducing Agencies to enter into or renew discount plans on terms designed to deter them from connecting to CNH). Paragraphs 25M to 25Q plead that the State and the Agencies and Telstra are bound by estoppel not to deny either the character of CVPN as a replacement for CNH or BTA's entitlement to CVPN under the TDN Agreement. Paragraph 25M alleges that Telstra and the State (on behalf of itself and Agencies) represented to BTA, that CVPN was a product to replace CNH; that BTA would be entitled to obtain CVPN from Telstra for resupply, for the purposes of the TDN, to the State and Agencies; and that BTA (on behalf of the State and the Agencies) should liaise with Telstra to prepare a CVPN tariff so as to accommodate the requirements of the State and Agencies. The particulars to par 25M refer to a representation made in November 1994 by an officer of the TCU, made on behalf of the State and Agencies; to BTA. It is then alleged that BTA relied on the representations and acted to its detriment in liaising (on behalf of the State and Agencies) with Telstra in the preparation of a CVPN tariff and in continuing to roll out the TDN comprising both a PN and a VPN (par 25O). It is further alleged that it would be unconscionable for Telstra, the State and the Agencies to resile from the representations (pars 25P, 25Q). Section D of the statement of claim addresses Telstra's "conduct and role". Subsection D9 pleads certain "impermissible conduct" of Telstra. Paragraph 33 alleges that, between the Effective Date of the TDN Agreement (20 November 1992) and its Termination (1 August 1995), Telstra, (inter alia): "33 (b) induced and procured Agencies to enter into or to renew discount plans such as Flexi-plans with Telstra on terms which Telstra knew and intended would discourage or deter or be likely to discourage or deter them from agreeing to connect to CNH and until about July 1994 marketed Flexi-plans to Agencies in combination with Strategic Partnership Agreements ("SPA's") and Long Term Agreements ("LTA's"); ... (h) attempted to procure and procured that the Government and the Agencies would obtain telecommunications services by CVPN in accordance with the current CVPN Tariff allegedly outside the TDN Agreement and to the exclusion of BTA; ... (n) attempted to procure and procured that Agencies which were parties to Agency Service Agreements with BTA pursuant to the TDN Agreement would and did request and agree to receive services including Required Services under the TDN Agreement in accordance with the current CVPN Tariff and represented to Agencies that those services were outside the TDN Agreement and the Agency Service Agreements". This conduct, among other conduct, is said to have constituted misleading or deceptive conduct in contravention of the TP Act and FT Act (par 34(b)). It is also said to have been conduct which induced the State to breach its obligations under the TDN Agreement and the Agencies to breach their obligations to BTA under the ASA's (par 34(e)). Section E of the statement of claim specifies BTA's claims for relief. The claims include the following (par 38): "(a) against the Government (representing itself and the Agencies) BTA claims: (i) damages, including damages under the Fair Trading Act, sections 68 and 72; ... (iii) further or alternatively; (A) an account of profits; or (B) equitable compensation; .... (c) against each of the Government (representing itself and the Agencies) and Telstra, BTA claims: ... (iii) declarations as to (A) the circumstances in which the TDN Agreement was discharged; and (B) the operation (if any) of... the Fair Trading Act, the Trade Practices Act, and the Telecommunications Act, giving rise to entitlements to relief summarised in sub-paragraphs (a) and (b) above; (iv) consequential relief, including injunctive relief, or other relief under section 72 of the Fair Trading Act (or, in the case of Telstra, section 87 of the Trade Practices Act), as the nature of the case may require". The First Cross Claim The content of the State's cross claim against BT is not relevant to BT's motion for a representative order. The cross claim is, however, relevant to the scope of the State's discovery obligations. It is therefore necessary to outline briefly the principal allegations in the cross claim. Before doing so, reference should be made to par 94 of the cross claim: "94. Notwithstanding the scope of the term "Agencies" herein, the First Cross Claimant claims only in respect of the agencies identified in the First Schedule hereto." As previously noted, the Schedule lists 129 Agencies, being most of those referred to in statements filed on behalf of BT. Paragraph 94 was included in the second amended first cross claim filed on 5 October 1997. It would seem that par 94 was included in the cross claim, at least in part, because of criticisms made in BT's written submissions in respect of the motions, which submissions were filed on 22 September 1997. In those submissions BT, in support of its contention that the State's discovery obligations in respect of Agencies should not be curtailed, argued that the cross claim contained "fundamental ambiguities" about the content of the expression "Agencies" and the extent to which the State does and properly can claim relief on behalf of Agencies which are unidentified and which may or may not fall within the province of the "State of New South Wales" as sued pursuant to the Crown Proceedings Act 1988 (NSW). BT illustrated its concern by reference to a number of paragraphs in the first cross claim. For example, par 26(d) alleges that BTA represented to the State that, pursuant to the TDN Agreement, BTA would provide the CNH service to "all Agencies" within a six to twelve month period from commencement of the TDN Agreement. It was unclear which Agencies were referred to and whether the State's claim for damages under the TP Act and FT Act was intended to embrace a claim against some or all of the Agencies. Paragraph 94 is itself ambiguous. It could mean that the State intends to claim on behalf of the nominated Agencies, presumably as represented parties. It could also mean that the expression "Agencies", wherever used in the cross claim, is to be read as limited to the nominated Agencies. However, Mr Tobias explained that par 94 was not intended to achieve either of these results. As Mr Tobias explained the position, par 94 is not intended as a dictionary provision. In other words, it does not limit the meaning of the expression "Agencies" wherever used in the cross-claim. Nor is it intended that the State should make a representative claim on behalf of Agencies. Further, Mr Tobias disclaimed any intention that the Agencies should be parties to the cross claim. The point of par 94 was to limit the relief sought by the State, in respect of detriment caused to Agencies by BT's breaches of obligations owed to the State. For example, insofar as the State is entitled, in its own right, to claim damages in respect of misleading representations made to Agencies on which they relied, the State's damages would be limited to compensable losses sustained by it, referable to the actions of the 129 Agencies listed in the Schedule. Of course, whether the State itself can recover losses in respect of detriment sustained by Authorities such as the Totalizator Agency Board or Sydney Electricity may be debatable. The cross claim alleges (par 26) that, in the course of its communications with the State, BT made a number of representations. These included representations that "(c) The TDN Agreement would provide savings to the Government of $280 Million - $450 Million over the life of the TDN Agreement; (d) Pursuant to the TDN Agreement BTA would provide a service known as CustomNet Horizon ("CNH") to all Agencies within a 6-12 month period after the commencement of the TDN Agreement; (e) BT would accomplish cut-over of Agencies from CNH to a Private Telecommunications Network ("the PN") by or about the second year of the operation of the TDN Agreement; (f) CNH would be used by BT to: (i) bring all Agencies on to the TDN; (ii) provide early savings to the Government; (iii) provide a means of data collection as to the use and requirements of Agencies for telecommunications services; (iv) provide additional network resilience for Agency sites after connection to the PN. ... (j) The TDN Agreement would provide benefits to the Government by: (i) making a direct investment of $570 Million over the life of the TDN Agreement in the State by ensuring that BTA's principal suppliers were located in and/or had resources in the State; ... (l) BTA would market the TDN to Agencies." The State alleges that it relied on the representations in accepting BTA as the successful tenderer and that, but for the representations, it would have accepted the tender of Pacific Star Communications Pty Ltd. The cross claim then sets out what are said to be the relevant terms of the TDN Agreement. These include the following (par 29): "(b) BTA would market and promote effectively the TDN and the services to the Government and the Agencies; ... (f) Prior to connecting an Agency Site, BTA was required to enter into an Agency Service Agreement with the Agency; (g) BTA was required to use all reasonable efforts as defined by the TDN Agreement to ensure that each Agency entered into an Agency Service Agreement. (h) BTA was required to: ... (iii) market and promote to each Agency and the appropriate personnel to each Agency all Services". The cross claim alleges that BTA breached the TDN Agreement in a number of respects (see par 83). It is alleged, inter alia, that · BTA did not market or properly market the TDN to Agencies (par 46); · BTA failed to provide adequate services to Agencies in respect of the Agencies' telecommunications needs and requirements (par 48); and · although BTA procured ASAs from 145 Agencies between 20 November 1992 and 10 August 1995 (par 54A), the TDN network had a variety of deficiencies which meant that it did not provide the promised services (pars 57-62). It is further alleged that, on 1 August 1995, BT unlawfully repudiated the TDN Agreement (par 79). The State claims that, during the period early 1993 to July 1995, BTA issued "price books" to the State and "various Agencies" (pars 68C and 68D). It is said that BTA, in the price books, made representations relating to fees and tariffs, some of which were false (pars 68E, 68F). Paragraph 68G pleads that, in reliance on the representations, the Agencies acquired services from BTA. The price book representations are said to have been misleading and deceptive in a variety of respects (par 85). The cross claim pleads that the State has suffered loss and damage in a variety of forms. These include the loss of represented savings totalling up to $450 million, financial losses flowing from the delay in the provision of promised services and loss of State development benefits (par 93). THE CLAIM FOR A REPRESENTATIVE ORDER The Rule BT's application for a representative order is made under Federal Court Rules ("FCR"), O 6, r 13. The rule reads as follows: "13(1)Where numerous persons have the same interest in any proceedings the proceeding may be commenced, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them. 13(2) At any stage of a proceeding pursuant to this rule the Court, on the application of the applicant, may appoint any one or more of the respondents or other persons (as representing whom the respondents are sued) to represent all, or all except one or more, of those persons in the proceeding. 13(3) Where, under sub-rule (2), the Court appoints a person who is not a respondent, the court shall make an order under rule 8 adding him as a respondent. 13(4) A judgment pronounced or an order made in a proceeding pursuant to this rule shall be binding on all the persons as representing whom the applicants sue or, as the case may be, the respondents are sued but shall not be enforced against any person not a party to the proceedings except with the leave of the Court. 13(5) An application for leave under sub-rule (4) shall be made by motion, notice of which shall be served personally on the person against whom it is sought to enforce the judgment or order. 13(6) Notwithstanding that a judgment or order to which an application under sub-rule (5) relates is binding on the person against whom the application is made, that person may dispute liability to have the judgment or order enforced against him on the ground that by reason of facts and matters particular to his case he is entitled to be exempted from the liability. 13(7) This rule does not apply to a proceeding concerning property subject to a trust or included in a deceased estate." Mr Lindsay, in oral argument, rested BT's application on O 6, r 13(2). BT's Submissions Mr Lindsay argued that a representative order is appropriate in this case because the statement of claim pleads (and, as I understood his submissions) was always intended to plead a claim for relief against the Agencies. The relief sought against each Agency in the statement of claim includes (but is not limited to) damages and equitable compensation. The Agencies against whom relief is claimed are all those defined in cl 1.1 of the TDN Agreement (see par 1.2(b) of the statement of claim). Mr Lindsay submitted that the statement of claim should be read as pleading that the Agencies were parties to the TDN Agreement and that they each breached the Agreement. Further, according to Mr Lindsay's contentions, the statement of claim alleges that the State, by its various representations, bound all the Agencies or, alternatively, warranted and represented that it would do so. Mr Lindsay acknowledged that BTA has not attempted to provide in its statement of claim a definitive list of Agencies against whom relief is sought. However, he maintained that this is no barrier to a representative order, especially where (as in this case) the State has always had peculiar knowledge of and control over the Agencies. Moreover, the ambit of the concept of "Agencies" is extremely broad, as shown by the scope of the TDN Agreement itself (for example, by sub cl 3(1)(a)(i),(j)). Indeed, the concept was intended to be ambulatory in character. Mr Lindsay invoked the proposition that FCR, O 6, r 13 is to be construed and applied beneficially as a flexible tool for the administration of justice: Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398. While recognising that there might be some imprecision inherent in the notion of "Agencies", this could be overcome by a representative order. Such an order could not, it was said, operate to the prejudice of any Agency. The State had already voluntarily assumed discovery obligations on behalf of the Agencies. In any event, O 6, r 13(4) (which requires leave before a judgment against a representative party can be enforced) provided protection to any Agencies bound by an adverse determination. It was important that all Agencies should be bound by the proceedings, since this would avoid the possibility of a multiplicity of proceedings. According to Mr Lindsay, it was at least an arguable proposition that the intention underlying the Minister's execution of the TDN Agreement was to bind the Agencies, pursuant to s 20(1) of the GT Act. That provision is as follows: "20(1)The Minister may, on behalf of the Government of the State and the Authority, enter into contracts or arrangements for the management by any person or body of communications on the Government telecommunications network." Section 3(3) of the GT Act provides that "a reference to the Government of the State includes a reference to a Government Agency". The term "Government Agency", as I have already noted, is defined to mean: "(a) a Government department or administrative office; or (b) a statutory body representing the Crown; or (c) an electricity county council; or (d) any other public or local authority (including any State-owned corporation) which is declared by proclamation to be a Government agency for the purposes of this Act." Mr Lindsay pointed to other factors supporting the contention that the TDN Agreement was intended to bind all Agencies. These included the following: · the legislative and administrative background to the TDN Agreement showed that it was to involve a "whole of Government" contractual commitment, requiring all Agencies to use the TDN and not to enter arrangements with Telstra inconsistent with that obligation. · The manner of execution of the TDN Agreement "on behalf of the State Government of New South Wales" indicated that it was intended to bind the Agencies. · The terms of the TDN Agreement (such as the Recitals, the definition of "Agency" in cl 1.1 and the general objectives stated in cl 3.1) showed that the TDN was intended to be part of the "Government Telecommunications Network" governed by the GT Act. · The TDN Agreement was intended to have an "ambulatory operation", as shown by the minimum period of ten years' duration (cl 1.5) and the application of the Agreement to authorities replacing an "Original Authority" (cl 1.7). The State itself, both before and after execution of the TDN Agreement, treated the TDN Agreement as a "whole of government contract", which meant that all government agencies, departments and authorities were required to use the TDN. This was reflected in commitments made by the State in the Agreement on behalf of itself and Agencies not within the core concept of Government. For example, cl 16.2 required BTA to use all reasonable efforts to ensure that each Agency entered into an ASA. BTA relied on internal records of the State to show that all negotiations with the State were to be conducted through the Telecommunications Unit ("TCU"), within the department of Administrative Services, rather than through the individual Agencies. As I understood Mr Lindsay, this evidence was intended to support the allegation in the statement of claim that the State, on behalf of the Agencies, had made false and misleading representations to BTA. The State's Submissions Mr Tobias, on behalf of the State, resisted BT's application for a representative order on several grounds. Mr Bathurst adopted these submissions on behalf of Telstra. First, Mr Tobias contended that, assuming the statement of claim was intended to plead a case against each of the Agencies, the case was not even arguably sustainable. Section 20(1) of the GT Act, for example, although empowering the Minister to enter into a contract for the management of communications on the Government telecommunications network, was not invoked by the TDN Agreement as a source of authority. The Minister was simply not purporting to exercise the power conferred by the GT Act. Moreover, the TDN Agreement could not be read as imposing obligations on the Agencies themselves. It distinguished clearly between the State as contracting party and the Agencies for which services were to be provided or in respect of which BTA undertook other obligations. While some Agencies had no separate existence from the State itself (such as Government Departments), others were distinct entities and were not intended to be bound by the TDN Agreement. For example, if the Agencies were intended to be parties to the TDN Agreement, it would have been quite inappropriate to require BTA to use reasonable efforts to ensure that each Agency entered an ASA (cl 16.2). It would have also been inappropriate for BTA to acknowledge that the State was not to be responsible for marketing or promoting the use by any Agency of the TDN (cl 20.4(a)). Mr Tobias seemed to accept (although Mr Bathurst did not) that at least one provision (cl 27.1(a)) appeared to contemplate obligations being imposed directly upon Agencies, but he contended that this did not suffice to make the Agencies contracting parties to the TDN Agreement. Secondly, Mr Tobias submitted that the statement of claim simply does not plead that all Agencies were bound by the TDN Agreement. Nor does it plead that the State made representations on behalf of the Agencies, or that it warranted or represented that the Agencies would be bound by all proposed arrangements. While par 1.2 alleged that the State was sued as representative of itself and the Agencies, that allegation was not followed up by any factual basis supporting the assertions and, indeed, positions of the statement of claim were not compatible with the assertion in par 1.2. Thirdly, even if the statement of claim could be read as pleading a case on behalf of Agencies, this was not a suitable case for a representative order. The class identified by BTA was open-ended because of what Mr Lindsay had described as the ambulatory nature of the definition of "Agencies". The class could not be relevantly identified and thus should not be the subject of a representative order. In effect, BTA was attempting to define a represented class by incorporating one of the disputed issues in the proceedings, namely, the scope of the concept of "Agencies". Carnie v Esanda In Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398, the High Court considered Part 8, r 13 of the Rules of the Supreme Court of New South Wales ("SCR"), which is in substantially the same terms as FCR, O 6, r 13. In Carnie, two persons ("the plaintiffs") who had entered into a loan contract with a credit provider claimed that, by reason of the credit provider's failure to make disclosures required by statute, certain credit charges were irrecoverable. The plaintiffs purported to bring the proceedings on their own behalf and on behalf of all other persons who had entered into similar loan contracts with the lender. The relief claimed included a declaration that no represented debtor was required to pay the credit provider any amount on account of credit charges as defined in the legislation. On an application to stay the proceedings or to strike out the statement of claim insofar as it pleaded a representative action, the Court held that the many people who had entered into the loan contracts with the lender had the "same interest" in testing the agreements against the relevant legislation and in obtaining relief releasing them from liability for the credit charges: at 403, per Mason CJ, Deane and Dawson JJ; at 408, per Brennan J; at 421, per Toohey and Gaudron JJ; at 430, per McHugh J. The majority (Mason CJ, Deane, Dawson and Brennan JJ) considered that the appropriate order was to set aside orders of the Court of Appeal, which had struck out the amended statement of claim insofar as it purported to plead a representative action, and remit the matters to the Court of Appeal. The purpose of the remitter was to consider whether the Court of Appeal should make an order under SCR, Pt 8, r 13(1), that the action not continue as a representative action. All members of the Court took a broad view of the language used in FCR, O 6, r 13(1). Mason CJ, Deane and Dawson JJ (at 404) said this: "But we do not think that this approach of the majority of the Court of Appeal can prevail in the face of the language of r 13(1). All that this sub-rule requires is numerous parties who have the same interest. The sub-rule is expressed in broad terms and it is to be interpreted in the light of the obvious purpose of the rule, namely, to facilitate the administration of justice by enabling parties having the same interest to secure a determination in one action rather than in separate actions. It has been suggested that the expression 'same interest' is to be equated with a common ingredient in the cause of action by each member of the class. In our view, this interpretation might not adequately reflect the content of the statutory expression. It may be it extends to a significant common interest in the resolution of any question of law or fact arising in the relevant proceedings. Be that as it may, it has now been recognised that persons having separate causes of action in contract or tort may have 'the same interest' in proceedings to enforce those causes of action." (Citations omitted.) Toohey and Gaudron JJ traced the history of representative actions, which were permitted in courts of equity, although not at common law (at 415 ff) (see Cockburn v Thompson (1809) 16 Ves 321, at 325-329; 33 ER 1005, at 1007-1008, per Lord Eldon LC. Their Honours pointed out (at 416) that the English rule, which had been derived from the practice of Courts of Chancery, had initially been construed narrowly (principally in Markt & Co Ltd v Knight Steamship Co Ltd [1910] 2 KB 1021). However, in more modern times, the rule had been construed more broadly. In Prudential Assurance Co Ltd v Newman Industries Ltd [1981] Ch 229 (Vinelott J), for example, it was held that a plaintiff could bring a representative action on behalf of members of a class, each of which is alleged to have a separate cause of action in tort, subject to three conditions. First, no order could be made conferring a right of action on a member of the represented class that would not have been available in separate proceedings; secondly, there had to be a common ingredient in the cause of action of each class member; and, thirdly, the representative action had to be for the benefit of the represented class: Carnie, at 417-418. Toohey and Gaudron JJ approved (at 419) a passage from the judgment of Bull JA in Shaw v Real Estate Board of Greater Vancouver (1973) 36 DLR (3d) 250, at 254: "It appears to me that the many passages uttered by Judges of high authority over the years really boil down to a simple proposition that a class action is appropriate where if the plaintiff wins the other persons he purports to represent win too, and if he, because of that success, becomes entitled to relief whether or not in a fund or property, the others also become likewise entitled to that relief, having regard, always, for different quantitative participations." Against this background, their Honours addressed the nature of the interest that was required to attract the rule (at 420-421): "The authorities are clear that the fact that claims arise under separate contracts does not mean that the requirement for the same interest is defeated. A refusal to allow a representative action on this ground is open to the criticism that it looks to the question of the Court's discretion to allow a representative action to proceed rather than to the basic question of whether the rule is applicable. That question, stated in terms of the rule, is this: Do numerous persons have the same interest in the action which the appellants have commenced? If they do not then that is the end of the matter. If they do, then the action is properly begun and, unless the Court otherwise orders, it may be continued." (Citations omitted.) Toohey and Gaudron JJ considered that there was no need to remit the proceedings to determine whether, as a matter of discretion, they should be permitted to continue on a representative basis. They adopted (at 426) a passage from the judgment of Kirby P in the New South Wales Court of Appeal (Esanda Finance Corporation Ltd v Carnie (1992) 29 NSWLR 382, at 403): "Once these are excised, what remains is a proper case for a representative order. The class of person affected is clear, defined and now closed. The primary relief sought is a declaration as to the meaning of an Act of Parliament as it affects the members of that claim in respect of which all of them will have a common interest and a common legal grievance. So far as the orders are concerned, as so amended, they seek relief which is wholly beneficial to all the persons represented." (Citations omitted.) The majority, however, considered that the matter should be remitted to the Court of Appeal for consideration of whether it should "otherwise order" within the meaning of r 13(1). Mason CJ, Deane and Dawson JJ pointed out that a variety of important matters required consideration (at 405): "Once the existence of numerous parties and the requisite commonality of interest are ascertained, the rule is brought into operation subject only to the exercise of the court's power to order otherwise. And that leaves for consideration the question whether the case is one in which the court should, in the exercise of that power, make an order that the action should not continue as a representative action. Relevant to that question are some of the comments of Gleeson CJ in the course of explaining his concern about the absence of a detailed legislative prescription. In that context, Gleeson CJ mentioned the need to deal with such important matters as: (1) whether or not consent is required from group members; (2) the right of such members to opt out of the proceedings; (3) the position of persons under a disability; (4) alterations to the description of the group; (5) settlement and discontinuance of the proceedings; and (6) the giving of various notices to group members." See also Brennan J, at 410-411. The proceedings in Carnie were ultimately remitted to Young J of the Supreme Court: Carnie v Esanda Finance Corporation (1996) 38 NSWLR 465. His Honour pointed out (at 471) that, where proceedings involve a joint right or a general right, there is no need to consider whether represented parties should have been able to opt-in or opt-out of the proceedings. But in other cases, the common law courts in other countries had adopted opt-in or opt-out procedures where representative proceedings were proposed or adopted. The evidence disclosed that there were eighty-eight loan contracts similar in all respects to those of the plaintiffs. Young J considered (at 473) that notices should be sent to all eighty-eight persons, so as to provide them with an opportunity to consider whether they wish to be involved in the proceedings. His Honour observed (at 473) that "[t]he notification may throw up the fact situation that each individual case is so affected by idiosyncrasies that there is in truth no common principle which can conveniently be dealt with in a representative action which will solve existing problems. Again, an indication from the group affected that as a whole they supported the present procedure would go a long way into making me consider that it would not be right to 'otherwise order'." His Honour further considered that an "opt-in" procedure was appropriate, since a represented person might incur a liability should the credit provider institute a representative cross claim. He also considered that the plaintiffs should initially bear the costs of the notification. Subsequently, the plaintiffs advised the Court that they were unwilling to take this course (at 475). Reasoning The present case is different from Carnie in one important respect, although the difference was not the subject of submissions. In Carnie, the issue was whether the plaintiffs were entitled to plead a representative action on behalf of other persons who were said to have the same interest. In this case, BTA seeks a representative order, whereby the State would be appointed to represent all Agencies against each of which (according to Mr Lindsay) BTA seeks relief. A similar order is sought in respect of BT plc's fourth cross claim against the State. It was accepted by Mr Lindsay that, if BTA's application failed, BT plc's application would also fail. The Law Reform Commission, in its report on Grouped Proceedings in the Federal Court (Report No 46, 1988), par 6, observed that the most common form of defendant representative action is one brought by a plaintiff against the member of an unincorporated association, such as a club or trade union: see Taff Vale Railway Co v Amalgamated Society of Railway Servants [1901] AC 426, at 438-439, per Lord Macnaghton; at 443, per Lord Lindley; Concrete Constructions (NSW) Pty Ltd v Australian Building Construction Employees' and Builders' Labourers' Federation (1988) 83 ALR 385 (FCA/Morling J), at 397-401. See also Irish Shipping Ltd v Commercial Union Assurance Co plc [1991] 2 QB 206 (CA) (representative claim permitted in relation to seventy seven insurers on the one risk, some of which were outside the jurisdiction); Bank of America National Trust and Savings Association v Taylor [1992] 1 Ll LR 484 (QBD/Waller J) (representative order in relation to underwriters, even in the absence of a "leading underwriter clause"). The Commission pointed out that, "[a]lthough defendant classes appear to mirror plaintiff classes they differ in several important respects". These were identified as follows (par 6): "· A defendant representative does not voluntarily take on that role but is selected to represent others by the plaintiff · Although a representative plaintiff who brings proceedings on behalf of a group exposes group members to the risk of their claim being defeated, no personal liability ensues. Proceedings against a representative defendant on the other hand exposes defendant group members to the risk of liability being found against them and that they will have to pay damages · The institution of a representative claim prevents the limitation period running against a member of the plaintiff group; where a claim is brought against a representative group the limitation period will cease to run in favour of group members." The Commission also suggested that, since representative actions have the potential to impose direct liability on a member of the group, there was a strong argument for personal notice to be given to each member of the proposed group. The representative procedure established by Part IVA of the Federal Court of Australia Act 1976 (Cth) applies only where seven or more claimants have claims against the same person: s 33A (definition of "representative proceedings"), 33C(1)). It will be noted that O 6, r 13(2) does not expressly require that, where an applicant seeks to appoint a respondent as representing other persons, the respondent and the other persons must have the "same interest in [the] proceedings". However, so much seems to be implicit in O 6, r 13(2), having regard to the terms of r 13(1). This was the view taken on the equivalent English rule by Waller J in Bank of America v Taylor, at 494-495. In any event, argument proceeded on the basis that O 6, r 13(2) was available only if the State had the same interest in the proceedings as the Agencies. It was common ground that the Court has a discretion whether or not to make a representative order under O 6, r 13(2). All parties seemed content to assume that the discretion is to be exercised having regard to the purpose of the rule as identified in Carnie (at 404), namely, "to facilitate the administration of justice by enabling parties having the same interest to receive a determination in one action rather than separate actions." It may be that this statement requires some modification where an applicant seeks a representative order against parties which are said to have the same interest in the proceedings. Where an order is sought against respondents, the purpose of the application is not to enable parties with the same interest to receive a determination in one action; it is to enable the applicant to bind all persons having the same interest. But I do not think anything turns on this in the circumstances of the present case. In my opinion, the fundamental difficulty in BT's path is that the statement of claim does not plead matters that enable the Court to determine whether: · the Agencies have the same interest in the proceedings as the State; and · it would facilitate the administration of justice for a representative order to be made. Paragraph 1.2(b) of the statement of claim, introduced in the amended version filed in May 1997, plainly asserts that the State (referred to in the pleading as "the Government") is sued as a party which entered and purported to perform obligations under the TDN Agreement on behalf of itself and the Agencies it defined in cl 1.1 of the TDN Agreement. Despite this assertion, the body of the pleading does not clearly allege that the Agencies were parties to or bound by the TDN Agreement. Sub-paragraph 11(b) pleads that BTA was induced by certain representations to enter into a written contract with the State. While this sub-paragraph doubtless must be read with par 1.2, it is not an allegation that an agreement was entered into between particular parties. It is merely a pleading that certain action was taken by BTA in reliance on representations made by the State. Paragraph 12 simply pleads that the TDN Agreement became binding on 20 November 1992. It does not identify the parties which became bound by the TDN Agreement. Perhaps more importantly, there is no attempt in the pleading to identify the mechanism or mechanisms by which the Agencies are said to have become parties to the TDN Agreement. Did they, or some of them, expressly or impliedly authorise the State, or a particular Department or officer, to execute the TDN Agreement on their behalf? Is the authority to be gleaned from s 20 of the GT Act or from some other statutory source? Is a distinction to be drawn between various categories of Agencies, such as Government Departments and statutory authorities? Are all Agencies to be subject to precisely the same legal obligations under the TDN Agreement? None of these questions is addressed on the statement of claim. Some references in the pleadings imply that the TDN Agreement might have been intended to bind Agencies. For example, sub par 18(i), added in the most recent amendments, pleads that each party "including the Government on behalf of itself and [each Agency]" would take all steps to give effect to transactions contemplated by the TDN Agreement. But this sub-paragraph does not address the issues that require consideration if BTA is to allege that the Agencies were parties to the TDN Agreement and if BTA is to demonstrate that the State and the Agencies have the same interest in the proceedings. Indeed, the pleaded allegations of breach of the TDN Agreement repeatedly distinguish between the position of the State and that of the Agencies. For example, subpar 18(a) pleads that the State breached its obligations under the TDN Agreement in that it failed to procure certain Agencies to enter into ASAs: see also subpars 18(b), (c), (d) and (g). This form of pleading suggest that the statement of claim is intended to allege only that the State (as distinct from Agencies) was a party to the TDN Agreement and that only the State failed to comply with its obligations under the Agreement. Despite Mr Lindsay's submission that the statement of claim is intended to plead a case that the State made representations to BTA on behalf of each of the Agencies, I do not think it does so. Paragraph 1.2(c) refers to the State being sued pursuant to O 6, r 13 "as representing itself and each and every Agency". But the body of the statement of claim does not allege material facts that support a claim of misleading and deceptive conduct against each of the Agencies. The statement of claim pleads certain conduct by "the Government", such as distributing the RFT and causing the GT Act to be passed by the New South Wales Parliament (pars 2,3). It is alleged that, by this conduct, the State represented certain matters to BTA (par 4). It is difficult to see how this form of pleading can be read as alleging that, by means of the State's conduct, the Agencies made representations to BTA. The difficulties are compounded by those portions of the statement of claim which plead that the State made representations about the activities of "the Government and Agencies". Once again, this form of pleading draws a distinction between the State (as representor) and the subject matter of its representations (activities of the Agencies): see, for example, par 9.2A; see also par 10, alleging misleading or deceptive conduct by the State. If it be assumed that BTA intends to plead a case of misleading and deceptive conduct against the Agencies, there are striking omissions from the statement of claim. The pleading does not identify the circumstances by which the State was allegedly constituted the agent of the Agencies for the purposes of making the pleaded representations. At one point in the argument, Mr Lindsay identified s 20(1) of the GT Act as the source of authority for this purpose. At another point, he identified the role of the TCU as central to the making of representations on behalf of Agencies. The statement of claim, however, contains no reference to either of these matters. It is therefore impossible to discern from the pleading the basis of BTA's claim that (presumably) all Agencies made representations to BTA through representatives of the State. Is the alleged source of authority the same for all Agencies? Are all Agencies alleged to be in an identical position? Does it matter whether a particular Agency was in direct contact with BT? Are the issues of reliance the same in the case of each Agency? Are damages to be assessed separately for each Agency? In my opinion, having regard to the matters to which I have referred, the statement of claim does not make clear the basis of the claim which (it is said) is intended to be made against the Agencies. In particular, the pleading does not address critical issues which need to be considered if BTA is to plead that the Agencies were parties to and breached the TDN Agreement and that they made representations to BTA upon which it relied when executing the TDN Agreement. In the absence of clarity on these issues, it is impossible to assess whether the Agencies have the same interest in the proceedings (with each other and the State). It is therefore impossible to conclude that the requirements for the application of O 6, r 13(2) have been satisfied. The obstacles in BT's path do not end there. In Carnie, Young J took the view that the persons in respect of whom a representative order was sought should have the opportunity to decide whether they wished to be joined in the proceedings before a decision was made by the Court. Unlike Carnie, in the present case the representative order is not being sought for the benefit of the Agencies but (as Mr Lindsay explained) in order to ensure that all claims are dealt with in the one set of proceedings. Even so, it seems to me that, before a representative order could be made (assuming this was ultimately considered to be the appropriate course), an appropriate effort should be made to ascertain whether the Agencies themselves consider it appropriate to be joined in the proceedings through a representative order and whether they accept that their interests are the same as the State and other Agencies. This is consistent with the view expressed by the Law Reform Commission in 1988. Mr Lindsay pointed out, correctly, that the State had accepted that it was bound to make discovery in relation to Agencies. But this does not mean that the State - for all its dilatoriness and inconsistency on this aspect of discovery - understood or could reasonably have been expected to understand, prior to the filing of BT's motion, that the Agencies were intended to be parties to the litigation. Moreover, a perusal of the list of Agencies annexed to the statement of claim makes it apparent that there are a number of statutory authorities, which may have been in a quite different position to, say, Government Departments. I have in mind bodies such as Sydney Electricity, the State Rail Authority, the Totalizator Agency Board and the Casino Control Authority. It may well be that the Government Departments identified in the various schedules or list that have been prepared or tendered are in substantially the same position as the Crown (and, perhaps, do not need to be the subject of any representative order). But statutory authorities may be in a quite different position and might be expected to articulate that position, if requested to do so, at relatively short notice. It is not necessary to consider what form of notification might have been appropriate and whether notification would be appropriate for all 450 or so Agencies identified thus far. The point is that no notice has been given to the Agencies and, accordingly, there is no information available from any of them as to their attitude to the proposed order. I have not found it necessary to consider whether BTA's case against the Agencies, if pleaded and permitted to continue as a representative action, would be well-founded, or at least arguably well-founded. That question can be answered only if and when the nature of the case relied on is adequately pleaded. Nothing I have said should be construed as an invitation to BTA to apply to amend its pleadings and to seek a representative order on the basis of the amended pleadings. It is enough to say that there may be formidable difficulties in the path of such action, not least being the inevitable delay and further increase in costs that the application would entail. I should add that, although Mr Lindsay sought to explain why BTA considered it necessary for a representative order to be made in respect of the Agencies, I am not yet convinced that any such order would be of practical benefit to BTA. BTA's motion for a representative order in relation to the statement of claim should be dismissed. The same result follows for BT plc's application in respect of the fourth cross claim. DISCOVERY IN RELATION TO AGENCIES Relevant Factors The State's motion to limit discovery in relation to Agencies must be considered having regard to the conduct of the litigation. The following points are important: · As I have explained, the State freely accepted (despite scepticism expressed by the Court as to whether this course of action was appropriate) the obligation to make full discovery in relation to all Agencies. The case was conducted on that basis for two years. · The State's approach to discovery in relation to Agencies has been (as I have found) most unsatisfactory. · Discovery in these proceedings has been an extraordinarily lengthy and costly exercise. It has generated repeated disputes, not merely in relation to Agencies. Those disputes show little sign of diminishing in scope and intensity. In my view, discovery disputes have distracted the parties from addressing more important questions, such as the adequacy of the pleadings to identify and refine the issues in dispute and the need to complete statements in order to ensure that a final hearing can take place within a reasonable period from the commencement of the proceedings. · The uncontradicted evidence shows that to require the State to complete discovery in relation to all Agencies would be very costly and would be likely to delay the hearing of the matter beyond February 1999, the date presently fixed. It should be noted that the case had previously been tentatively fixed for August 1998, with the approval of the parties, but it has become apparent that, independently of any question of discovery relating to Agencies, they will not be in a position to ensure that the case is ready by that time. Hence the relisting of the matter for February 1999, a date that will be some three and a half years from the commencement of the proceedings. · Despite the fact that the State's notice of motion sought to limit discovery to ninety-three agencies, the State's position is now that it is prepared to provide general discovery in respect of 162 Agencies, including all those specified in the first cross claim. The Principles Understandably enough, the first ground on which BT resisted the State's motion was that the State had belatedly shifted its ground on discovery and that it should not be permitted to resile from a position freely adopted and adhered to for two years. I have had occasion to deal with a similar argument in connection with a previous dispute in this litigation. After referring to authorities on the question of re-opening interlocutory orders, I summarised the position as follows: "Clearly, the Court ought to exercise any such discretion to reopen discovery issues with restraint, particularly if the orders were made following a contested hearing, or in consequence of a carefully negotiated compromise. However, in recent times, Judges and courts have emphasised the need to control the scope of discovery which "unless properly controlled ... can get out of hand and become extremely burdensome both as to time and cost, and delay the trial for a long time": J S Lockhart, "Effective Case Management of Complex Commercial Litigation with Particular Reference to Trade Practices" in M. Richardson and P. Williams (eds), The Law and the Market (1995), at 172; Lord Woolf, Access to Justice: Interim Report to the Lord Chancellor on the Civil Justice System in England and Wales (June 1995), Ch 21; Access to Justice: Final Report (July 1996) Ch 12; for references to some of the literature, see J S Lockhart, "Handling Trade Practice Cases" (1994) 17 UNSWLJ 298, at 302, fn 6. It is perhaps premature to attempt to assess whether discovery in this case has "got out of hand". Much will depend upon the use made of discovered documents at the hearing: cf Arnotts Limited v Trade Practices Commission (1989) 24 FCR 313 (Fed Ct/FC), at 318. But it is not to be contemplated lightly that the cost of discovery to one party in the proceedings - even proceedings as complex as the present case - should exceed (as Mr Todd's evidence suggested) $3.5 million. Even when orders for discovery are made after a contested hearing, it may become apparent that the burden imposed by the orders is so great and so disproportionate to any contribution to a fair trial that the orders should be modified. It must be remembered that it is not only the parties but the Court which has an interest in ensuring that discovery does not get out of hand." BT (Australasia) Pty Ltd v State of New South Wales, (FCA/Sackville J, 29 August 1997, unreported), at 23-24. In my view these are the principles to be applied to the present application by the State. It is necessary to consider separately the State's discovery obligations arising in relation to the statement of claim and the first cross claim, since they are not identical. Having regard to the conclusion I have reached on the question of a representative order, the discovery issue must be approached on the basis that the Agencies are not parties to the statement of claim. The State has disclaimed any intention to seek a representative order in relation to the first cross claim. Discovery and the Statement of Claim When asked to identify how BTA would be prejudiced if discovery in relation to Agencies were to be limited as proposed by the State, Mr Lindsay identified, in particular, subpars 4(e) and (p) of the statement of claim. Subparagraph 4(e) alleges that the State represented to BTA that the network would service over 150,000 public sector employees of Government and would include connection of a minimum number of sites, telephones, PABX's, mobile radio services, data terminals and data lines. Subparagraph 4(p) alleges that the State represented that it and the Agencies were spending amounts of the order of $80-85 million per annum on telephone calls. Mr Lindsay said that those allegations, and the related allegations of falsity of the representations, were important to BTA's case. Discovery was said to be critical in demonstrating the falsity of the representations made by the State. I find it difficult to believe that full discovery from all Agencies is required to establish (if it be the fact) that the pleaded representations were made and were false. As a matter of commonsense, if the objective is to prove that the State and its Agencies, at a particular time, had fewer telecommunications requirements than represented, documents from about 170 of the Agencies (including the most important) should be sufficient to establish the position as a matter of probabilities. An analysis of the material provided in respect of about 170 Agencies, would at least establish whether any further material is genuinely required and, if so, the nature of the additional material required. But the matter does not rest there. As Mr Tobias pointed out, one of the documents relied on by BT is a letter from the New South Wales Chief Secretary to the Federal Minister for Transport and Communications dated 26 March 1992. That letter contains the following statement: "Thus, existing Government STD traffic (if between $10 million - $15 million per annum) would remain largely unchanged." There is no obvious reason why the statement in this document could not be tendered as an admission against the State. If the State wished to contest the accuracy of the statement in the letter, it would presumably need to adduce evidence to demonstrate its falsity. In any event, BT could use the letter as the basis for seeking a formal admission from the State as to the volume of traffic at a particular time. If the State refused to make the admission, a case might well be made out for requiring the State to specify precisely why it disputes the inference to be drawn from the letter and to identify the documents that support its position. The point I am making is that the use of general discovery in relation to Agencies, in order to make out a case of falsity of the representation alleged in subpars 4(e) and (p) is like taking a sledgehammer to crack a nut. There are likely to be other, far less costly and time consuming ways in which BT's legitimate forensic interests can be protected. It seems to me that discovery is not the only way - and certainly not the most efficient way - of obtaining the material required to make out the case pleaded in subpars 4(e) and (p) of the statement of claim (including the falsity of the representations). Mr Lindsay also argued that full discovery was required in order to ascertain the amount spent on telecommunications by the Agencies with Telstra, after the date of BT's termination of the TDN Agreement. This information is relevant to the issue of damages. If discovery on this issue is provided in respect of about 170 Agencies, the position will (presumably) be clear in relation to those Agencies. It may be that this information will suffice for the parties to agree as to the position for the remaining Agencies. If not, there are other ways in which (if it becomes relevant) the situation of the remaining Agencies can be explored. If necessary, an inquiry could be directed into that issue. If any event, I do not think that full discovery in respect of the remaining Agencies is necessary or appropriate to protect BT's legitimate interests in the proceedings. If the question of discovery in relation to Agencies rested solely on the conduct of the parties, there would be little or no justification for relieving the State of the burden it volunteered to accept. However, there are other factors to consider. These include the substantial cost and delays associated with the completion of full discovery by the State. They also include the need to ensure that this very large case is ready for trial at the (now) nominated time. Most importantly, I think that BT's legitimate interests and the conduct of a fair trial can be protected and preserved without the need for full discovery. If BT's interests are genuinely prejudiced by the absence of full discovery in relation to the Agencies, there are alternative means of ensuring that the prejudice is overcome. I stress that this is not an invitation to relitigate the same questions in another guise. I therefore conclude that discovery in relation to Agencies arising from the statement of claim should be limited substantially in the manner proposed by the State. I think that the State's proposal should be modified to include the additional seven Agencies referred to in BT's witness statements, but excluded from the State's proposed list of 162 Agencies. This makes a total of 169 Agencies. Discovery and the First Cross Claim As I have explained, the State has disclaimed any intention of cross claiming on behalf of the Agencies. The State has also, in par 94, limited its claim to damages and other relief to "in respect of" the 129 Agencies listed on the Schedule to the cross claim. Although the consequences of the introduction of par 94 were not debated in detail, it does not seem to me that this drafting device is a satisfactory means of confining the issues pleaded. While par 94 limits the State's claim for damages and other relief, it does not control the use of the expression "Agencies" throughout the cross claim. Thus, the cross claim makes allegations that are not confined to the Agencies in respect of which relief is claimed. For example, par 46 of the cross claim alleges that on and after 20 November 1992, BTA did not properly market the TDN to Agencies. Again, par 68G alleges that, in reliance on the Price Book Representations "Agencies acquired services from BTA". Presumably these paragraphs are intended to refer to Agencies other than the 129 listed in the Schedule. Although there is no strike out motion before me in relation to the cross claim, I cannot forbear from observing that I have considerable difficulty in understanding how the cross claim can legitimately plead a case in relation to all Agencies, yet limit the relief claimed in the manner contemplated by par 94. It seems to me that there is much to be said for requiring the State to limit its pleading to "Agencies" in the sense described in par 94. Whether or not the State's pleading is limited in this way, I do not think there is any prejudice to BT in restricting the State's discovery obligations in connection with cross claim to the 169 Agencies I have identified. Given that the relief claimed is only in respect of 129 identified Agencies, it is hard to see how BT's preparation of its defence to the cross claim will be prejudiced if the State is not required to make discovery for those Agencies in respect of which no relief is claimed (although, in fact, discovery will be made for an additional thirty-three Agencies). I therefore consider it appropriate to limit the State's discovery obligations in relation to the cross claim in the manner I have previously described. In acceding to the State's motion I have not overlooked the fact that Mr Lindsay proposed a modified regime for the State's discovery in relation to Agencies. For reasons explored in argument, I do not think that this proposal substantially reduces the State's discovery burden. Accordingly, it does little to address the problem of cost and delay which lie at the heart of the State's application. THE STATE'S STRIKE-OUT MOTION As I have noted, the State modified the relief sought in par 2 of its motion and now claims only that certain paragraphs of the statement of claim should be struck out (subject to its right to pursue dismissal or stay of the proceedings on the ground of BT's alleged improper purpose). Mr Tobias identified the paragraphs to be struck out as pars 1.2(b),(c) and 25A to 25Q. These paragraphs, which were introduced to the statement of claim by amendments in May 1997, have been reproduced or summarised earlier in the judgment. Presumably because the introduction of these paragraphs coincided with the introduction of pleading in par 1.2(c), and that the State is sued as representing itself and each Agency, they make allegations against the Agencies. Mr Lindsay placed no specific reliance upon pars 25A to 25Q in support of BT's claim to a representative order under FCR, O 6, r 13(2). If, as I have held, no representative order should be made in the proceedings, pars 25A to 25Q, insofar as they are intended to plead a case against the Agencies, are embarrassing. There is no point in pleading a case against the Agencies if no relief can be sought against them in these proceedings. Subparagraphs 1.2(b) and (c) should also be struck out, since that purpose is solely to lay the foundation for a representative order. If, however, BT intends to rely on pars 25A to 25Q to support its claim for a representative order, I think that it encounters similar difficulties to those already discussed. For example, par 25A pleads that the State and the Agencies were involved in Telstra's contravention of the FT Act. Paragraph 25B identifies particular facts and circumstances said to support this allegation, but none refers to actions by or on behalf of the Agencies. Paragraphs 25E and 25Fplead that the State and the Agencies owed BTA the obligations of a fiduciary for certain purposes. The only basis on which the Agencies are said to owe such obligations is that they had "special knowledge, peculiar to them" about the matters identified in par 25E(b)(i),(ii) and (iii), that is, the operation of the State and the Agencies, the relationship between the State and the Agencies (on the one hand) and Telstra (on the other); and the levels of telecommunications traffic volumes of the State and the Agencies. However, the special knowledge of each Agency is not identified, except in the most general terms. It could hardly be the case, for instance, that each Agency had the same "special knowledge" as all other Agencies; nor could it be the case that each Agency had special knowledge of the level of telecommunications traffic volumes for the State and all its Agencies (as distinct from its own traffic volumes). This form of pleading obscures the fact that the nature of the knowledge of each Agency of the matters identified in par 25E(b)(i),(ii) and (iii) is likely to differ from that of other Agencies. Paragraph 25K alleges that the State and the Agencies were privy to Telstra's breaches of fiduciary obligations, in that they participated in Telstra's breaches and knowingly assisted Telstra in its breaches. The particulars to par 25K do not identify how each Agency is said to have participated in the alleged breaches, nor do they identify the kind of knowing assistance each Agency is said to have provided to Telstra. Again, the likelihood is that the assistance (if any) provided by the Agencies differed from Agency to Agency and would need to be pleaded and proved. The estoppel claim is pleaded against the Agencies with a little more particularity (pars 25M to 25Q), but this portion of the statement of claim could not, of itself, justify a representative order being made. In the result, subpars 1.2(b) and (c) should be struck out. Paragraphs 25A to 25Q should be struck out, insofar as they purport to plead a claim against the Agencies. The convenient course is to strike out pars 25A to 25Q, with leave to BTA to replead those paragraphs, confined to pleading a case for relief against the State alone. Although Mr Tobias did not refer to par 38 of the statement, it follows from what I have said that the words "representing itself and the Agencies" should be struck out from subpars 38(a) and (c). OTHER PARAGRAPHS OF BT'S MOTION Flexi-Plan Schedules In par 2 of BT's notice of motion, BT seeks an order requiring the State and Telstra to prepare a schedule showing which Agencies have acquired Flexi-Plans from Telstra, or renewed Flexi-Plans since the commencement of the TDN Agreement. As Mr Bathurst pointed out, the orders for discovery by Telstra, made on 20 May 1996 and amended on 29 May 1996, provided expressly for discovery of documents related to the sale or renewal of Flexi-Plans. Thus Schedule 2, par 19 to the orders required Telstra to make discovery of documents referring to or evidencing: "19.4 the sale or attempted sale or renewal of any Flexi-plan or other discount plan to or with the Government or any NSWG Agency on or after 20 November 1992 and up to 1 August 1995, including any information provided to the Government or any NSWG Agency about the alleged benefits of any Flexi-plan [or] SPA [Telstra Strategic Partnership Agreement]...but limited at this stage to correspondence, Telstra memoranda, file notes, meeting notes, telephone notes and marketing material sent by Telstra to any NSWG Entity or NSWG Agency; ... 19.8 communications between Telstra and the Government..about: .... (b) the provision or possible provision by Telstra to the Government or NSWG Agencies of any services of a kind being provided by BTA to the Government or the NSWG Agencies". Mr Bathurst submitted that nothing had changed in the nature of BT's pleaded cases to warrant requiring Telstra to prepare a schedule (whether as the result of the administration of interrogatories or otherwise) on the matters that had been the subject of orders for discovery. Furthermore, the schedule proposed by BT was not limited to the Agencies in respect of which Telstra was required by the May 1996 orders to make discovery. (Those orders limited Telstra to discovery in relation to 168 Agencies and Entities.) Both Telstra and the State relied on the uncontradicted evidence of Mr Keller, the solicitor for Telstra. Mr Keller's affidavit establishes that: · Telstra did not create and does not hold a list of all Agencies to which Flexi-Plans were sold during the currency of the TDN Agreement; · to prepare such a list it would be necessary to review manually all monthly microfiche records relating to approximately 20,000 State accounts, an exercise he described as "massive"; and · in any event, any list so prepared is likely to be incomplete. Mr Keller's affidavit includes an offer to attempt to retrieve information using a particular Telstra database, subject to the payment of expenses. I should add that evidence was also given by Mr Leek, the Director of the Government Information Management Division ("GIMD"), to the effect that the GIMD does not have a complete list of Flexi-Plans. Mr Leek deposed that the preparation of a schedule would require an approach to every Agency and a manual examination of that Agency's records. Even then, the process could not be guaranteed to be complete. In these circumstances, I do not think it is appropriate that any order be made in terms of par 2 of BT's motion. Telstra should not be required to go beyond the discovery regime set up in May 1996, having regard to the difficulties to which Mr Keller has attested. It is more appropriate for Telstra's offer to make available its data base be pursued, if BT considers that the discovered documents are inadequate for its purposes. Nor should the State be required to prepare a list, having regard to the expense and delay that would inevitably be involved. I do not find it necessary to address the further argument put by the State and Telstra, namely, that par 4 of BT's motion is an attempt to engage in a "fishing expedition". While I think that there may well be some force to this submission, I need not rule on it. Schedule of Telecommunications Spending Subparagraphs 4(a) and (b) of BT's motion seek orders requiring the State to prepare a schedule of telecommunications spending for each Agency listed or referred to in Appendix K to the RFT, detailing the amount of spending on local calls, STD calls and point-to-point services for each of seven years, from 30 June 1990 to 30 June 1997. To some extent this aspect of the motion overlaps with the issues relating to discovery I have already addressed.

Bank of America National Trust and Savings Association v Taylor

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Judgment (13 paragraphs)

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