Bray v F Hoffman-La Roche Ltd [2002] FCA 1405 | Case summary

"Section 56 confers a broad discretion on the Court which is to be exercised by reference to the particular circumstances arising in each case. Accordingly, the Court should be cautious about enunciating general rules that might fetter that discretion. However, in my view there is no reason why, in general, the fact that a proceeding is brought for the benefit of others under Pt IVA ought not to be a consideration which together with other considerations can favour the ordering of security. Indeed, s 33ZG(c)(v) provides that, except as otherwise provided by Pt IVA, nothing in the Part affects the operation of any law relating to security for costs. Consequently nothing in Pt IVA is to affect the operation of s 56 and O 28 in relation to security for costs or is to impede orders being made for security for costs in Pt IVA cases on the same basis as may be ordered in other cases. On the other hand it would be incongruous and anomalous for Parliament specially to confer a direct costs immunity under s 43(1A), inter alia to afford represented persons greater access to justice, and then for the courts indirectly to remove the effect of that immunity by making orders for security for costs on the basis that the applicant is bringing the proceedings for the benefit of others who ought to bear their share of the potential costs liability to other parties. In my view, in order to deal with that incongruity and anomaly the fact that an impecunious applicant is bringing a Pt IVA proceeding for the benefit of represented persons, whilst a relevant consideration in favour of granting security, ought not of itself be as significant a consideration as it might otherwise be in favour of the granting of security." 68 In general, the cases establish that a representative party, including an individual, may be ordered to provide security for costs if the circumstances justify or warrant the making of such an order. Such circumstances might exist where, for example, a "person of straw" had been deliberately selected to be a representative party in order to immunise from costs orders particular group members who have substantial means and for whose particular benefit the proceeding is being brought. 69 Only AAN Australia applied for security for costs although counsel for that respondent indicated that it was likely that the other Aventis companies would apply for security for costs in the event that those respondents are unsuccessful in their applications to set aside service of the proceeding upon them. AAN Australian contended that an order for security of costs should be made in the sum of $300,000-$400,000 although it foreshadowed that an application for further security would be made when the amount of all interlocutory costs and the costs of the trial were known. 70 AAN Australia claimed that the applicant was impecunious, she would be unlikely to pay any costs in the event that her claim failed and there were group members of considerable substance who were "standing behind" her and would benefit if the claim succeeded. The applicant accepts that she would not be able to meet a costs order of the magnitude suggested by AAN Australia. Her solicitors had advised the solicitors for AAN Australia of that matter stating that "they do not hold instructions from any group member(s) that they or any of them would be able to provide security". 71 The applicant and AAN Australia agreed to certain facts for the purposes of the application. The agreed facts establish that the applicant has net assets of $73,000 and her only current source of income is a Canadian invalid pension which amounts to $931.40 per month. 72 The difficulty confronting the submissions of AAN Australia is that the evidence does not establish, nor does it enable me to infer, that: · there are any particular persons of substance for whose benefit the proceeding has been brought who are "standing behind" the applicant; or that · the applicant was selected because she was a "person of straw" who could effectively immunise such persons from the cost risks they would face had they been applicants. 73 Further, as was observed by Wilcox J in Tobacco Control Coalition at [29], it would run counter to the general policy of Pt IVA to regard group members for whose benefit a representative proceeding is brought as "standing behind" an applicant in the sense that term is used in security for costs cases. See also Lindgren J in Ryan at 456. 74 While it is unclear as to who is financing the present litigation, it may well be that it is being funded by the applicant's solicitors, rather than by any particular group members. Thus, the present case is not one where the Court can be satisfied on the evidence presently before it that those who stand to benefit from the proceeding have selected an impecunious applicant to conduct the proceeding in order to immunise themselves from the risk of costs which would follow from the proceeding being unsuccessful. 75 Several factors have led me to conclude that, in the circumstances, it is inappropriate to make the order for security for costs sought by AAN Australia: · the individual applicant has made out a prima facie case for relief under the TPA; · the claims of the group members arise out of an unlawful price fixing cartel which has been admitted to; · public policy considerations weigh strongly against an order for security of costs that might impede or hinder the group members' claim for injunctive relief and for damages resulting from the cartel arrangement; · the kind of circumstances that might warrant an order for security for costs against an impecunious individual bringing a representative proceeding are absent in the present case. 76 Accordingly, I decline to accede to the application of AAN Australia for an order of security for costs. Conclusion 77 For the above reasons the challenge by the Australian subsidiaries to the proceeding continuing as representative proceeding has failed. While deficiencies in the applicant's pleadings justified aspects of that challenge, in substance, the contentions of the subsidiaries were largely based on a rigid and unrealistic application of ss 33C(1), 33H(1), 33M and 33N of the FCA. In that context it is apt to refer to the observations of the Full Court in Femcare at [75]: "It is hard to see why the requirements of the judicial process are to be interpreted so rigidly as to produce the consequence, as in Eisen v Carlisle, that the representative action is simply rendered impracticable in the very case in which it is needed. The rationale underlying the judicial process doctrine is the need to avoid bringing the administration of justice into disrepute or the infliction of injustice on individuals. Part IVA of the Federal Court Act aims to enhance access to justice by establishing procedures that enable legitimate common grievances to be remedied. These procedures provide advantages to group members whose claims would otherwise be without practical redress. …" 78 In my view the group members have a legitimate common grievance in relation to the cartel arrangements and Pt IVA affords to them procedures to remedy that grievance. If the group members were unable to access Pt IVA their grievances would be without practical redress. 79 The orders that are appropriate are: · the statement of claim be struck out; · the applicant have leave to file and deliver an amended application and a further amended statement of claim; · otherwise the motions of the Australian subsidiaries to be dismissed. 80 Although the applicant has succeeded in having the motions of the Australian subsidiaries for the stay or dismissal of the proceeding dismissed she has been unsuccessful in defending her application and her third statement of claim. In particular she has been required to redefine the group members. Indeed, the defects in the definition of group members and in the pleading are, in part, a reason why the Australian subsidiaries were able to mount their challenge to the proceedings continuing as a representative proceeding. In the circumstances, I have decided that the appropriate order is that the costs of the applicant and of the Australian subsidiaries in relation to those motions be their costs in the cause. AAN

Bray v F Hoffman-La Roche Ltd

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