" But it seems to me that there is no reason whatever for so restricting the rule, which was only meant to apply the practice of the Court of Chancery to all divisions of the High Court. The old rule in the Court of Chancery was very simple and perfectly well understood. Under the old practice the Court required the presence of all parties interested in the matter in suit, in order that a final end might be made of the controversy. But when the parties were so numerous that you never could "come at justice," to use an expression in one of the older cases, if everybody interested was made a party, the rule was not allowed to stand in the way. It was originally a rule of convenience: for the sake of convenience it was relaxed. Given a common interest and a common grievance, a representative suit was in order if the relief sought was in its nature beneficial to all whom the plaintiff proposed to represent . " (Emphasis added.)
31 It was submitted for the plaintiff that later authorities, in particular, Carnie v Esanda Finance Corporation Ltd and the Court of Appeal's decision in Fostif Pty Ltd v Campbell's Cash & Carry Pty Ltd (2005) 63 NSWLR 203, have held that it is sufficient to establish that the plaintiff and the represented persons have the same interest in the proceedings if the claims for relief by each of them involve significant common questions of fact or law. Counsel for the plaintiff submitted that this principle was not disturbed by the decision of the High Court in Fostif Pty Ltd v Campbell's Cash & Carry Pty Ltd. Hence, it was said, Lord Macnaghten's requirement that the relief sought be of a nature beneficial to all whom the plaintiff proposed to represent was not a requirement which went beyond establishing the existence of a material issue of fact or law common to the claims of all of the plaintiff and persons to whom the plaintiff represented. This was said to follow from the judgment of Toohey and Gaudron JJ in Carnie v Esanda Finance Corporation Ltd at 421 and from the judgment of Mason CJ, Deane and Dawson JJ at 404. McHugh J (at 430), with whom Brennan J agreed (at 408) also said that the represented persons had the "same interest" in the proceedings if they had a "community of interest in the determination of some substantial issue of law or fact."
32 In Carnie, the plaintiffs sued for themselves and on behalf of all others who had entered into certain loan or credit sale contracts with the defendant which had been varied in ways which were said not to comply with the requirements of the Credit Act 1984 (NSW). The relief claimed included a declaration that no represented debtor was required to pay to the respondent any amount on account of credit charges in relation to such varied contracts. Toohey and Gaudron JJ said (at 421) that:
"There are many persons who have entered into variation agreements with the respondent. They have the "same interest" in testing those agreements against the Act to see if the method of calculating the amount owed was correct. If that method was not in accordance with the Act, then those persons have a common interest in obtaining the relief of being released from liability for the credit charges. That is, they have the same interest in these proceedings in the sense that there is a significant question common to all members of the class and they stand to be equally affected by the declaratory relief which the appellants seek."
33 Mason CJ, Deane and Dawson JJ agreed (at 403) with the reasons given by Toohey and Gaudron JJ for allowing the appeal, subject to the comments which followed. One of those comments was that:
" It may be [that the expression 'same interest'] extends to a significant common interest in the resolution of any question of law or fact arising in the relevant proceedings. " (At 404.)
34 Brennan J said (at 408) that:
" I respectfully agree with McHugh J that the test for determining whether an action is within the scope of Pt 8, r 13(1) is whether the plaintiff and the members of the represented class have a community of interest in the determination of some substantial issue of law or fact. "
35 In the Court of Appeal in Fostif, Mason P said at 243, [187], that the decision in Carnie did not support a requirement that it be possible to formulate some claim to relief that was beneficial to all plaintiffs. His Honour said that the true principle was stated by Brennan J in Carnie, namely, that the requirement for the represented persons to have the same interest in the proceeding did not necessarily require the same cause of action, nor an entitlement to have, or to share in, the same relief. His Honour said (at 245, [198]) that representative proceedings did not have to include a composite prayer for relief. Sheller and Hodgson JJA agreed with these reasons.
36 Counsel for the plaintiffs also referred to the judgment of Bryson J (as his Honour then was) in Shepherd v Australian and New Zealand Banking Group Ltd (1996) 20 ACSR 81 at 97-98 where his Honour accepted that in order to establish that represented persons have the same interest in proceedings, it was sufficient to demonstrate a "commonality of interest" in the principal matters to be determined in the proceedings.
37 Counsel for the plaintiff submitted that:
" 16. Although in Fostif in the High Court Callinan and Heydon JJ at [214] may have adopted narrower strands of the reasoning in Carnie , nothing else said in the High Court in Fostif undermined any of the reasoning summarised above. On the contrary, Gleeson CJ at [20] agreed with it; Gummow, Hayne and Crennan JJ at [50] strongly indicated that the test is whether there a question of fact or law, common to a number of claims, can be shown to exist, regardless of whether or not it may be simply resolved; and Kirby J at, e.g., [161] embraced the ' community of interest' approach.
17. Accordingly, the broad test laid down in the Court of Appeal in Fostif at the very least represents a persuasive precedent here. The unanimity underlying the decision makes it highly persuasive. Unless it is plainly wrong, it should be followed. "
38 As the plaintiffs' submissions acknowledged, in Fostif, Callinan and Heydon JJ plainly held that for the numerous persons to have the same interest in the proceedings, it was necessary that the relief sought be in the nature beneficial to all whom the plaintiff proposed to represent. When the summons was filed, the plaintiff, Fostif, was making a monetary claim for the moneys which it had paid the defendant. The monetary claim which it made was not beneficial to all the persons it purported to represent. Callinan and Heydon JJ held that the crucial factor in the outcome of Carnie v Esanda Finance Corporation Ltd was the claim made in that case for declaratory relief (at 115, [225]). However, their Honours said that in Fostif not only was no declaration sought, but it could not have been properly sought as any declaration would have been mere surplusage (at 115, [226]).
39 In Fostif, Gummow, Hayne and Crennan JJ held that the expression "the same interest" in the rule was not intended to have any narrower operation than the former Chancery practice where the practice was described by reference to the parties having a "common interest" (at 69, [45]). Their Honours said (at 70, [50]) that:
" … the bare fact that the claims made by those who are represented by the named plaintiff in a representative action arise out of separate contracts does not necessarily deny the existence of a common interest between the represented parties and the defendant. In this case, a common issue of fact and law could be found to exist in deciding which particular transactions undertaken by the parties fell within the principles decided in Roxborough . The appellants' submissions assumed that that inquiry would be very simple. That may or may not be so, but even if it is, the fact that an issue may be simply resolved does not deny its existence, and does not demonstrate that it is not an issue common to a number of claims arising out of separate contracts. "
40 However, I do not accept the plaintiff's submission that Gummow, Hayne and Crennan JJ indicated that the test was whether there was a question of fact or law common to a number of claims. Their Honours went on to say that Pt 8 r 13(1) required that, at the time proceedings were commenced, there be numerous persons having the same interest in the proceedings. The relief sought by the plaintiff in Fostif was judgment for a money sum for the plaintiff. The originating process contemplated that any persons who chose later to opt into the proceedings would be able to make like claims. Their Honours said (at [57]-[59]):
"[57] At the time the summons was issued there were persons, other than Fostif, whom it could be said would be 'affected' by a decision of the claim made by Fostif against Campbells. The most obvious persons 'affected' were any other persons who had bought tobacco products from Campbells by transactions relevantly identical to the transactions identified as having been made between Fostif and Campbells. But when the proceedings were instituted, Fostif made no claim on behalf of any of those other purchasers. Their participation in the proceedings, and any consequence for their rights, depended upon them choosing to join the proceedings. Deciding Fostif's claim would decide no issue between any of those other purchasers and Campbells unless or until those others chose to participate in the proceedings. The only effect that the decision of Fostif's claim would have would be its precedential value.
[58] At the time the summons was issued to commence the Fostif proceedings, there were no persons, other than Fostif , who had an interest in the proceedings which were instituted, as distinct from an interest in knowing which way the issues raised in those proceedings were decided. No other person had an interest in those proceedings because no order made or judgment given in the proceedings would bind that other person. No grant of declaratory relief was sought to resolve or determine any question ( Wong v Silkfield Pty Ltd (1999) 199 CLR 255 at 266-267, [27], 73 ALJR 1427) common to the 'numerous persons' alleged to have 'the same interest in the proceedings'. The summons is thus to be distinguished from the statement of claim in Carnie , where the plaintiffs claimed declarations for the common benefit of 'the represented debtors' ( Esanda Finance Corporation Ltd v Carnie (1992) 29 NSWLR 382 at 386). No doubt it was hoped that the procedures for 'opting-in', which the summonses contemplated would be followed after the proceedings had been instituted, would lead to there being numerous persons with the same interest, but that was a hope or expectation about future events.
[59] It may readily be accepted that, when the proceedings in Carnie were issued, it may have been difficult to list all of the persons whom the plaintiffs represented. And some who met the relevant criteria may later have sought exclusion from representation. In that sense, one could not say at the time the proceedings in Carnie were issued who the plaintiffs represented. But it was clear that there were numerous persons who were represented. By contrast, in the Fostif proceedings, where it was sought to represent only those from within the class of represented retailers who actively chose to be bound, it could not be said that there was any person, let alone numerous persons, whom the plaintiff would represent."
41 It appears to me to follow from the last two sentences of paragraph [57] and from paragraph [58] quoted above, that in Fostif, Gummow, Hayne and Crennan JJ accepted that the plaintiff and the represented persons had a common interest in the issues raised by the plaintiffs' claim. However, that was not enough to give them the same interest in the proceedings, because "no order made or judgment given in the proceedings would bind that other person". It was the combination of the fact that the class of represented persons was defined by reference to those who would later choose to "opt in", rather than by reference to matters that defined the class at the date the proceedings were instituted, and the fact that no relief was sought which would resolve or determine any question which was common to all such persons, which meant that the proceedings were not properly constituted as a representative action under Pt 8 r 13(1). In my view, the effect of the decision of the majority of the justices of the High Court in Fostif, and their reiteration of the principle stated in The Duke of Bedford v Ellis, is that it is not sufficient to show that the proceedings give rise to some question of law or fact in which all represented persons have a common interest. Rather, to show that all such persons have the same interest in the proceedings relief must be claimed which is "beneficial to all", that is, the relief claimed must be common to all.
42 In Wong v Silkfield Pty Ltd (1999) 199 CLR 255, the High Court described the Chancery practice involving representative actions as follows (at 261-262, [14]):
"[14] The strict application of the rule as to the presence of all necessary parties led, as the authorities referred to by McHugh J in Carnie ((1995) 182 CLR 398 at 427-429. See also the judgments of Chancellor Kent in Wendell v Van Rensselaer (1815) 1 Johns Ch 344 at 349-350 and of Story J in West v Randall (1820) 29 Fed Cas 718 at 721-722) show, to a relaxation. For example, a plaintiff might sue on behalf of himself and all the others of a class, of which he was one, on the allegation that they were too numerous all to be made parties (Daniell, The Practice of the High Court of Chancery , 5th ed (1871), vol 1, p 172). However, difficulties with this procedure arose where each of the members of the class had a distinct demand in equity. Thus, demurrers were allowed in respect of representative actions by shareholders who complained of misrepresentations in the prospectus upon which they had relied. This was because, whilst the prospectus may have been false, the case of each person deceived would be peculiar to himself and would depend upon its own circumstances ( Jones v Garcia del Rio (1823) 1 Turn & R 297 [37 ER 1113]; Croskey v Bank of Wales (1863) 4 Giff 314 at 330 [66 ER 726 at 732-733]; Hallows v Fernie (1868) LR 3 Ch App 467 at 471; Calvert, A Treatise Upon the Law Respecting Parties to Suits in Equity, 2nd ed (1847), pp 41-42; Spencer Bower, The Law Relating to Actionable Non-Disclosure (1915), pp 538-539; Kerr on Fraud and Mistake , 7th ed (1952), p 541; cf Beeching v Lloyd (1855) 3 Drew 227 [61 ER 890]). … "
43 In Lord Aberconway v Whetnall (1918) 87 LJCh 524, three plaintiffs who had subscribed money to a fund for the benefit of the defendant on the face of what was said to be a false representation, sued on their own behalves and purportedly as representatives of all other subscribers, to recover the money subscribed. Eve J held that although such subscribers as who wished to sue might be able to be joined together as co-plaintiffs, under the rule whose modern equivalent in this State is r 6.19, the action could not be maintained as a representative action. Eve J said (at 526):
" A dozen different reasons may have prompted favourable replies to the appeal, not one of which would have entitled the donor to a return of his contribution, if he had been a plaintiff in this action; and yet if the argument is sound that this is a proper representative action, such a one although he could not recover his money were he himself a plaintiff must still have his contribution returned to him because three other persons, who for this purpose I am content to assume can successfully maintain an action for the recovery of their money, have chosen to elect themselves as his representatives. The position is an impossible one. It may well be that all the contributors who claim to have their contributions returned could have joined in one action under rule 1 of Order XVI, but in such an action each individual would have to establish his own right to relief by proving the propositions I have already stated. This is really an attempt to obtain relief for over 200 individuals by proving the right of three of there thereto. Such an attempt cannot and ought not to succeed. This action, which, after all, is nothing more than an action to recover damages for misrepresentation, does not possess the essential conditions of a representative action, and in my opinion it is misconceived. "
44 His Lordship's observations point to a feature of representative actions which tends to be overlooked. That is, that the represented persons do not become parties by virtue of being represented. It is for this reason that they are not liable to pay the defendant's costs.
45 Counsel for the plaintiff disclaimed any suggestion that if the proceedings continued as representative proceedings under r 7.4, no damages could be awarded to the represented persons unless and until they established that they had relied upon the alleged misrepresentations, or that they otherwise established a causal relationship between their loss and the alleged misleading conduct of the defendant. This highlights the interrelationship between r 7.4 and r 6.19. I will return to that relationship later in these reasons.
46 In Prudential Assurance Co Ltd v Newman Industries Ltd [1981] 1 Ch 229, Vinelott J cited the passage I have quoted above from Lord Aberconway v Whetnall and said (at 251-252):
" Indeed in that case the claim by a plaintiff to sue in a representative capacity was absurd. The plaintiff could not, on behalf of all members of the class, claim to recover all subscriptions that had been made for it was an essential ingredient of the cause of action of any person seeking to recover that he had himself been deceived by a misrepresentation into making his subscription. This difficulty could not have been overcome by limiting the relief to a declaration that any subscriber who had been induced by a misrepresentation to contribute to the fund was entitled to recover because the declaration would have accomplished nothing. Each plaintiff would still have had to establish in separate proceedings that he had been so induced in order to rely on the judgment in the representative action.