REASONS FOR JUDGMENT
1 The applicant commenced a representative proceeding under s 33C of the Federal Court of Australia Act 1976 (Cth) ("the Act") claiming damages and other relief in respect of an international price fixing and market sharing arrangement by certain companies in the Hoffman-La Roche, Aventis and BASF groups of companies ("the cartel arrangement"). The cartel arrangement, which related to vitamin products manufactured and sold by parties to the cartel arrangement or their subsidiaries for human and animal consumption, gave rise to prosecutions in the United States, Canada and Europe and pecuniary penalty proceedings in Australia. A number of companies pleaded guilty to the charges or admitted liability.
2 As presently formulated the proceeding is brought on behalf of group members, who are defined as:
"…persons who between 5 March 1992 and 5 July 1999 purchased in Australia all or some of vitamins A, B1, B2, B5 (Pantothenic Acid), B6, B9 (folic acid), B12, C, E, Beta Carotene, Canthaxanthin, Astaxanthin …, either directly or indirectly by way of the purchase of foods, beverages, vitamin pills or capsules or other products which contained one or more class vitamins supplied by one or more of the respondents…"
3 The applicant claims that, as a consequence of the cartel arrangement, the respondents contravened s 45 of the Trade Practices Act 1974 (Cth) ("the TPA") by:
(a) making contracts, arrangements, and arriving at understandings (that is, the cartel arrangement) that contained an exclusionary provision (as defined in s 4D) and other provisions which had the purpose, or would have or be likely to have the effect, of substantially lessening competition in a market in Australia (ss 45(2)(a) and 45A);
(b) giving effect to such provisions (s 45(2)(b));
(c) aiding, abetting, counselling, or procuring the contraventions, being directly or indirectly, knowingly concerned in, or party to, the contraventions and conspiring with others to effect the contraventions (s 75B).
4 The applicant alleges that the cartel arrangement had the purpose and effect of:
· fixing, controlling or maintaining the prices for the vitamins described in [2] above ("the class action vitamins") in Australia;
· allocating particular purchasers in Australia of class action vitamins to particular suppliers within the three groups;
· preventing, restricting or limiting supply of the class action vitamins to purchasers in Australia.
5 The applicant claims declaratory relief, payment of damages to group members and injunctions in respect of the alleged contraventions. The damages and injunctions, which are the main forms of relief claimed, are claimed under Pt VI of the TPA (ss 82, 87 and 80). The declarations are claimed under Pt XII of the TPA (s 163A).
6 A number of significant interlocutory issues have been the subject of contest between the parties: see Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 and on appeal (2003) 200 ALR 607. In the result, the proceeding has continued as a representative proceeding under Pt IVA of the Act but the applicant has on three occasions amended her application and statement of claim.
7 Although the proceeding was commenced in 1999 it has yet to reach the stage where unconditional appearances have been entered, and defences have been delivered, by all respondents. Also, the opt out notice provided for by s 33X(1)(a) of the Act has yet to be given to group members.
8 One of the difficulties with the proceeding is the extraordinary width of the definition of the group members who comprise all persons who purchased vitamins or products containing vitamins in Australia in the period between 5 March 1992 and 5 July 1999. Further, the wide range of vitamin products that are the subject of the claims of group members and the complexity and duration of the cartel arrangement will result in the conduct of the proceeding being complex, difficult and expensive. The difficulties the applicant has experienced to date in relation to her pleadings are in no small part due to the complexity of the proceeding itself.
9 The applicant has now moved the Court for orders that three corporate applicants be substituted for the applicant as representative applicants in the proceeding and for leave to deliver a fourth amended application and a fourth amended statement of claim. It is unnecessary, for present purposes, to outline in detail the proposed amendments. In substance, the amendments will confine the claims to certain animal nutrition and health vitamins and will narrow the definition of group members to manufacturers, distributors and suppliers of those vitamins or pre-mix or other health or nutrition products or food which contain the vitamins, and producers of livestock who purchased stock feed containing vitamins, provided those group members expended at least $2,000 in respect of the relevant products. As the applicant does not fall within the newly defined group the substitution of the corporate representative parties is to ensure that the new representative applicants are members of the newly defined group. If the proposed amendments are made there will be a discontinuance of all of the claims for relief by most group members leaving extant only the claims, which are in respect of animal nutrition and health vitamins, made on behalf of the group members who fall within the newly defined class of group members.
10 When the nature and extent of the proposed amendments became apparent a question arose as to whether the applicant should endeavour to give notice of the application to group members who may be affected by the amendments prior to the hearing of the application for leave to make the amendments. The applicant obtained an adjournment of her motion to enable her solicitors to inform group members of the amendment application and its consequences. In the result, the solicitors for the applicant sent letters to 285 group members who had either instructed the solicitors to act for them in the proceeding or had registered themselves with the solicitors as members who might be, and wish to be treated as, group members. The solicitors also caused a notice to group members to be published in major daily newspapers throughout Australia.
11 Group members who were to be excluded from the representative proceeding by reason of the narrowing of the class were informed of their entitlement to commence a separate representative or individual proceeding if they wished to do so. The solicitors for the applicant received only a small number of queries in relation to the proposed amendments. However, it does not appear that any group members indicated to the solicitors that they wished to take any steps to oppose the proposed amendments.
12 The letters sent to group members and the notices published in the daily newspapers afforded an opportunity to group members who may be affected by the proposed amendments to raise the question of the amendments with the solicitors for the applicant and to appear before the Court on 1 December 2003 when the application for leave to make the amendments was due to come on for hearing.
13 When the matter came on for hearing on 1 December there was no appearance by any group members other than the applicant and the proposed substituted new representative applicants, who were represented by the same solicitors and counsel. The respondents, who all appeared and were represented by counsel, did not oppose the amendments but the foreign respondents reserved their right to contend that the Court has no jurisdiction over them. The foreign respondents also did not oppose an order that their conditional appearances become unconditional. Counsel for the Aventis respondents raised a number of issues concerning some of the proposed amendments insofar as they related to the Aventis respondents but accepted that, in the event the leave sought is granted, those issues were best left to be resolved, at least in the first instance, between counsel.
14 Under the Federal Court Rules the Court has a general discretion to make orders amending the parties to a proceeding (Order 6) and amending pleadings (Order 13). Ordinarily, a bona fide application for an amendment, which complies with the relevant rules, should be granted, subject to proper terms, unless the proposed amendment is futile or would cause substantial injustice which cannot be compensated for: see for example Advanced Switching Services Pty Limited v State Bank of New South Wales T/as Colonial State Bank (2001) 23 ATPR 41-848 at 43,486 [8].
15 However, special problems arise when an amendment is sought to be made on behalf of an applicant in a representative proceeding under Pt IVA of the Act which will adversely affect the interests of some group members. In the present case the applicant has been placed in a situation of potential conflict between her interest in procuring the amendment and her duty to the group members whose interests may be adversely affected by it. A similar problem arises for the legal representatives of the applicant who have an obligation to conduct the representative proceeding on behalf of the applicant in a way that is consistent with the interests of group members, irrespective of whether those persons are clients of the solicitors: see King v AG Australia Holdings Ltd (2002) 121 FCR 480 ("King v GIO") at 489 [27] per Moore J.
16 In Williams v FAI Home Security Pty Ltd (No 4) (2001) 180 ALR 459 ("Williams") at 466-467 [22]-[23] and 472 [41], Goldberg J considered the potential conflict of interest that arises where a representative party in a representative proceeding seeks to settle a proceeding by agreeing to limit or narrow the definition of the group so as to exclude some group members from the settlement. His Honour observed at 467 [23] and 472 [41] that it was inappropriate for the Court to approve such a settlement under s 33V of the Act without giving the opportunity to group members, who would be excluded from the group by reason of the settlement, to be heard in relation to the settlement.
17 Section 33V of the Act provides:
"(1) A representative proceeding may not be settled or discontinued without the approval of the Court.
(2) If the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court."
18 Subject to a contrary intention, s 33A defines a representative proceeding for the purposes of Pt IVA as a proceeding commenced under s 33C of the Act. As explained above the proposed amendments amount to a discontinuance of the proceeding in relation to all of the claims made and relief sought by those persons who will no longer be group members if the proposed amendments are made. However, senior counsel for the applicant submitted that s 33V has no application in the present case as it only is concerned with a settlement or discontinuance of the entire representative proceeding, rather than a settlement or discontinuance of part of the proceeding. In support of that submission the applicant has relied on decisions in relation to other sections in Pt IVA: see Community & Public Sector Union v Crown in Right of Victoria (1999) 90 IR 4 at 6 [18]-[19] and McMullin v ICI Australia Operations Pty Ltd (1996) 69 FCR 473 at 492.
19 However, Branson J in Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 ("Chats House") at 258 and, arguably, Moore J in King v GIO at 492-493 [40]-[42] accepted that s 33V(1) can apply where there was a settlement of substantive claims for relief of group members, notwithstanding the settlement may not have finally disposed of the entire representative proceeding.
20 More recently, in Courtney v Medtel Pty Ltd (2002) 122 FCR 168 at 181-182 [44]-[46] Sackville J made the following observations concerning Chats House and King v GIO:
"44. A convenient starting point is s 33V(1) of the Federal Court Act. As will be recalled, it provides that a 'representative proceeding may not be settled or discontinued without the approval of the Court'. A 'representative proceeding' is defined in s 33A to mean 'a proceeding commenced under section 33C'. The term 'proceeding' is in turn defined in s 4 to mean
'a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal'.
45. If the language of s 33V(1) of the Federal Court Act is given its ordinary meaning, it appears to be concerned, at least primarily, with the settlement or discontinuance of the entire representative proceeding. There is, however, authority to the effect that s 33V(1) has a broader scope. In Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250 (ACCC v Chats House), Branson J held that consent orders resolving claims made by the ACCC, as the representative party, against one of three respondents was caught by s 33V(1) and therefore required approval of the Court. Her Honour said this (at 258):
'The purpose to be served by s 33V(1) is obvious. It is appropriate for the Court to be satisfied that any settlement or discontinuance of representative proceedings has been undertaken in the interests of the group members as a whole, and not just in the interests of the applicant and the respondent. In my view, s 33V proscribes not only complete settlement of proceedings without the approval of the Court, but also settlement of claims against a joint respondent, or settlement of any substantive claim against a respondent'. (Emphasis added.)
In King v GIO, Moore J interpreted (at 493 [41]) the bolded words in this passage as referring to the settlement of one of a number of claims against a respondent of the type comprehended by s 33C of the Federal Court Act. His Honour thought that s 33V(1) might also apply where individual offers were made directly to and accepted by all group members, since this would have the practical effect of settling the representative proceedings: King v Gio at 493 [42]. But Moore J did not suggest that s 33V(1) applies to the settlement of claims of individual group members where the settlement does not effectively dispose of the proceedings. It is difficult to apply the language of s 33V(1) to the settlement of some individual claims of group members, at least where the settlement does not entirely resolve one category of claims comprehended by s 33C. Moreover, the legislative history of Part IVA tells against the suggestion that s 33V(1) is intended to apply to the settlement of the claims of individual group members without the involvement of the applicant. That suggestion is also difficult to reconcile with the specific requirement in s 33W, that a representative party requires the leave of the Court to settle his or her individual claims. Had Parliament intended the same requirement to apply to settlement of the individual claims of group members, it might have been expected to say so.
46. Determining the precise outer limits of s 33V(1) may pose some difficult issues. It is not, however, necessary to pursue them here."
21 The reason Sackville J decided that it was not necessary to define the outer limits of s 33V(1) in the case before him was that the question with which his Honour was concerned, namely whether settlement offers made directly by respondents to group members to settle individual claims would be invalid unless approved by the Court under s 33V(1), did not involve the settlement of any substantive claims against the respondents by the applicant on behalf of group members. Thus, the settlement was not a settlement of the representative proceeding for the purposes of s 33V(1).
22 An interpretation of s 33V that limited its application to settlement or discontinuance of the entire proceeding could produce anomalies. It is clear, as was observed by Branson J in Chats House, that the purpose of s 33V is that the Court be satisfied that the settlement or discontinuance is in the interests of the group members as a whole, and not just in the interests of the applicant and the respondents. That purpose could easily be undermined if the Court's approval were only required where there was a settlement or discontinuance of an entire proceeding. On the applicant's interpretation, if any single claim remained then the Court's approval would not be required to the settlement or discontinuance by an applicant as a representative party, notwithstanding that the settlement or discontinuance may have been in respect of the entirety of the claims for relief made in the proceeding by most of the group members. I can conceive of no good reason why the legislature would require approval only where there was a settlement or discontinuance of the entirety of the proceeding and not where there has been a settlement or discontinuance by the representative party of the claims of many, if not all, group members.
23 In my view there are good reasons for interpreting s 33V to give effect to its purpose by requiring approval of the Court, at least where the substantive claims of certain categories of group members have been settled or discontinued by the representative party, notwithstanding that there may remain extant some claims for relief by other categories of group members. In such a case the settlement or discontinuance by the applicant of the substantive claims brought under s 33C on behalf of some categories of group members will have resulted in the settlement or discontinuance of the representative proceeding, in so far as it relates to the claims of those group members. In substance, that is what the applicant is seeking to achieve in the present case.
24 It is unnecessary for me to finally resolve the construction of s 33V as, irrespective of whether that section applies, the applicant requires leave to amend the application to alter the description of the group members and to amend the statement of claim. Alteration of the description of the group is provided for by s 33K of the Act:
"Causes of action accruing after commencement of representative
proceeding
(1) The Court may at any stage of a representative proceeding, on application made by the representative party, give leave to amend the application commencing the representative proceeding so as to alter the description of the group.
(2) The description of the group may be altered so as to include a person:
(a) whose cause of action accrued after the commencement of the representative proceeding but before such date as the Court fixes when giving leave; and
(b) who would have been included in the group, or, with the consent of the person would have been included in the group, if the cause of action had accrued before the commencement of the proceeding.
(3) The date mentioned in paragraph (2)(a) may be the date on which leave is given or another date before or after that date.
(4) Where the Court gives leave under subsection (1), it may also make any other orders it thinks just, including an order relating to the giving of notice to persons who, as a result of the amendment, will be included in the group and the date before which such persons may opt out of the proceeding."
25 The heading of s 33K suggests that it is only concerned with an alteration to the description of the group to include persons whose causes of action have accrued after commencement of the proceeding. However, s 13(3) of the Acts Interpretation Act 1901 (Cth) provides that a heading of a section of an Act is not to be taken to be part of the Act. Thus, when the heading of the section is disregarded, it is clear that s 33K(1) empowers the Court to grant leave in respect of any amendment to the description of the group once a proceeding has been commenced.
26 The specific provisions in ss 33K(2) and (3), to a lesser extent, s 33K(4), are concerned with the particular category of alteration that involves persons whose causes of action accrued after the commencement of the representative proceeding. As was pointed out by counsel for the applicant:
"Section 33K(2) was enacted prior to the adoption (effective from 14 December 2001) of O 13 rule 2(7) of the Rules. It was obviously intended to provide the specific extension of power necessary to overcome the 'Rule in Eshelby's Case' which, at the time of the enactment of Part IVA, would otherwise have applied to prevent amendments of the type to which s 33K(2) refers. In light of the subsequent adoption of O 13 r 2(7), it is probably correct that s 33K(2) is now redundant. Once this background to s 33K(2) is understood, however, it is clear that it had a specific purpose and provides no basis for reading down the clear words of s 33K(1)."
27 Thus, s 33K(2) and (3) appear to be a consequence of the perceived requirement for specific statutory authorisation for the inclusion of persons, as parties or represented persons, whose causes of action had arisen after the commencement of a proceeding. Accordingly, there is no reason to read s 33K(1) down to the situation contemplated by ss 33K(2), (3) and (4).
28 In any event, even if the leave sought did not fall within s 33K, leave of the Court would, nonetheless, be required for the amendment of the parties under O 6 and for the amendment of the Statement of Claim under O 13.
29 In the present case, whether approval is required under s 33V or leave is required under s 33K or under O 6 and O 13, a court would be concerned to ensure that an appropriate case is made out for the grant of approval or leave having regard to all the circumstances of the case. In determining whether an appropriate case has been made out in the present case I can see no reason for applying different criteria depending on whether the application is for approval or leave.
30 A circumstance that is of special significance in the present case is that group members who may be adversely affected by the amendments have been given an opportunity to be heard. The steps taken by the solicitors for the applicant to inform group members of the proposed amendments are, in the circumstances, an appropriate way of seeking to inform group members of the proposed amendments and to afford them an opportunity to be heard. Of course, in the unusual circumstances of the present case, it is probable that most group members will not have become aware of the advertisements but it may equally be said that, as there has not yet been an opt out notice under s 33X(1)(a), most group members are probably unaware of the proceeding that has been brought on their behalf.
31 The main issue is whether the applicants have made out a case to justify the approval or leave they seek. In that regard, albeit with great reluctance, senior counsel for the applicant filed an affidavit by the applicant's solicitor which exhibited a memorandum prepared by two of the applicant's solicitors which explains why the amendments are being sought. The memorandum was prepared for the purpose of being submitted to the Court in support of the amendment application but it does appear to set out the detail of some privileged communications.
32 Senior counsel for the applicant sought an order under s 50 of the Act that the Memorandum be treated as a confidential document and only be available for inspection by the Court or Court officers. I was not satisfied that an appropriate case had been made out under s 50 for such an order but, as the submissions concerning that matter were limited and there was no opposition on the part of the respondents to the Memorandum being relied upon by the Court without the respondents being given a copy of it, I indicated to senior counsel for the applicant that I was prepared to make an order that the Memorandum be retained in a sealed envelope and not be available for inspection without leave of the Court. Thus, if any person with an interest in inspecting the Memorandum wishes to do so, application can be made for leave to inspect the Memorandum in which case the solicitors for the applicant will have notice of the application and the questions of confidentiality and s 50 can be considered at that stage. However, I also indicated that, plainly, no confidentiality will attach to any parts of the Memorandum that are referred to in my reasons for judgment.
33 The Memorandum explains the logistical and other difficulties confronting the solicitors for the applicant in relation to prosecuting the proceeding, as presently formulated, to trial. The Memorandum's conclusions are, in general, as follows:
· there is a serious risk of the applicant losing on some of the claims, particularly in relation to human-use vitamins;
· a reformulation of the case so as to minimise the risk of losing on some claims, and potentially having to pay costs in relation to those claims, is reasonable and appropriate;
· the amendments being sought are in the interests of the applicant and the group members as an applicant could seek an order that successful group members reimburse it in respect of costs payable as a result of an adverse costs order;
· the complexities and difficulties of proof and establishing loss in respect of the claims in respect of human-use and some animal-use vitamins and other difficult factual and legal questions concerning those claims make it reasonable and appropriate to excise claims in respect of those vitamins from the proceeding;
· the United States experience in respect of claims by individual consumers, which suggested the total "loss" suffered by an individual consumer was likely to be small, made it reasonable to excise the claims of any consumers from the proceeding and to also exclude small claims by commercial purchasers;
· as the present applicant is an end consumer of human vitamins it was appropriate for group members who are substantial purchasers of animal vitamins to be substituted as the representative parties.
34 In summary, the Memorandum explains why it is prudent and reasonable for the proceeding to now be confined to claims in respect of certain only of the animal-use vitamins and for group members to be confined to commercial users of those vitamins who have expended at least $2,000 in respect of them.
35 It is unnecessary for me to outline the detail of the Memorandum other than to state that I am satisfied that the application for leave to amend the application and the statement of claim is bona fide, is made on reasonable grounds and that the Memorandum makes out a reasonable case in favour of allowing the proposed amendments. While there might be some criticism of the applicant for having commenced the proceeding and prosecuted it to the present stage on the basis of claims as broad as those that have been pursued, I accept that the change of view by the applicant's solicitors as to the scope of the proceeding is, in part, due to a number of events have occurred since the commencement of the proceeding.
36 Further, as an opt out notice has not yet been given to group members it is unlikely that there are many persons who are relying on the proceedings to protect their interests, other than those who have communicated with the solicitors for the applicant. Those particular group members have been given an opportunity to be heard but have not come forward to oppose the amendments.
37 The amendment of the claims will not have the effect of preventing any persons who wish to pursue their own claims, or commence another representative proceeding, from doing so. The discontinuance will not create a res judicata: see O 22 r 7; Visy Board Pty Ltd v Attorney-General (Cth) (1984) 2 FCR 113 at 165 and 181; Lower v Comcare (2002) 124 FCR 498 at 501 [11]. Insofar as any limitation period is concerned s 33ZE suspends the period that applies to the claims of group members upon the commencement of the proceeding and the period will not begin to run until there has been a discontinuance: see s 33ZE(2).
38 In the circumstances, whether the test be one for approval under s 33V or for the grant of leave under s 33K or O 6 and O 13, I am satisfied that, for the reasons set out above, the applicant has discharged her onus to satisfy that test and it is appropriate to grant the leave sought. As the applicant has sought approval in the event that s 33V applied it is appropriate to make an order that, insofar as s 33V applies to the amendments, the approval required by that section be granted.
39 Accordingly, for the above reasons, it is appropriate to order that:
· leave be granted for Agribusiness Products Pty Ltd (ACN 008 052 373), Lienert Australia Pty Ltd (ACN 008 293 007) and Brisbane Export Corporation Pty Ltd (ACN 010 345 150) to be substituted for the applicant, Ms Bray, as the representative applicants in this proceeding;
· the new representative applicants be granted leave to file and serve a further amended application and a further amended statement of claim;
· insofar as there has been a discontinuance of the representative proceeding by reason of the amendments to the application and the statement of claim approval for that discontinuance is granted;
· all conditional appearances that have been filed and served are to become unconditional;
· the time by which any respondent, which has not filed and served an appearance is to file and serve an appearance, be extended;
· the applicant pay the respondents' costs of this application, including reserved costs as well as costs thrown away by reason of the further amendment of the application and the statement of claim (which costs include the consideration of all previous versions of the fourth amended application and the fourth amended statement of claim).