Procedures in Representative Proceedings
54 Since historical practice plays an important part in questions of classification, it is useful to consider the procedures developed by the courts, before the enactment of legislation such as Part IVA of the Federal Court Act, to enable them to resolve grievances held by a number of people in common. In particular, the development of the representative procedure, first by the Court of Chancery and then by Rules of Court, sheds considerable light on the procedural requirements inherent in the judicial process.
55 In Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 ("Carnie"), the High Court gave a liberal interpretation to Part 8 r 13(1) of the Supreme Court Rules (NSW). That sub-rule provides as follows:
"[w]here numerous persons have the same interest in any proceedings the proceedings 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."
The Court held that numerous persons can have "the same interest" in proceedings notwithstanding that they have separate causes of action in contract or in tort: at 404, per Mason CJ, Deane and Dawson JJ; at 421-422, 426, per Toohey and Gaudron JJ.
56 As Toohey and Gaudron JJ pointed out (at 415), Part 8 r 13(1) of the Supreme Court Rules (NSW) is derived from English rules, which in turn were based on the practice of the Court of Chancery. The practice was described by Lord Macnaughten in Duke of Bedford v Ellis [1901] AC 1, at 8, in a well-known passage quoted by Toohey and Gaudron JJ:
"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."
57 There is nothing in this passage that suggests that the practice of the Court of Chancery, or the practice under Order XVI r 9 (the relevant rule in force in 1900), required represented parties to be individually notified of the representative proceeding taken on their behalf. On the contrary, Lord Macnaughten specifically held in Duke of Bedford v Ellis (above)that it was no barrier to a proceeding brought by plaintiffs on behalf of growers of fruit, flowers and vegetables within the meaning of the Covent Garden Market Act 1828 (UK) that the growers were such a fluctuating and indefinite body that it was impossible to tell who was or was not a grower. His Lordship said (at 11) that he was not:
"much impressed with that difficulty. It seems to me that the description of the persons apparently intended to be favoured by the Act is sufficient for all practical purposes. It may be difficult or impossible to compile a catalogue of growers. But there cannot, I think, be much difficulty in determining whether a particular person who claims a preferential right to a vacant stand in the market is a grower or not."
This language strongly suggests that it was not an essential part of the representative procedure that the members of the represented group be personally served with notice or otherwise receive individual notification of the proceedings. Certainly there is nothing in the report of the proceedings before Romer J or the Court of Appeal indicating that the represented group had received or were intended to receive individual notification of the proceedings: Ellis v Duke of Bedford [1899] 1 Ch 494.
58 In Carnie, McHugh J, at 429, traced the origin and scope of the representative action in Chancery, in terms later endorsed by the Court in Wong v Silkfield Pty Ltd (above), at 376-377. McHugh J, drawing on the analysis of Professor Yeazell (S C Yeazell, "From Group Litigation to Class Action, Part I" (1980) 27 UCLA L Rev 514), summarised the position as follows:
"The procedure of the representative action was 'invented by Chancery in the seventeenth century to cope with disputes between rural tenants and landlords, parishioners and parsons'. A reading of the cases in the eighteenth and nineteenth centuries indicates that the Court of Chancery often allowed the representative action to be used so that groups of individuals who had suffered similar wrongs could redress the economic harm which they had collectively suffered. In many cases, the Court allowed persons with the same or common interest to be joined in a representative action only because the defendant insisted that the suit was bad for want of parties and it was inconvenient to make all interested persons parties to the action. In some cases the represented parties had consented to and encouraged the plaintiff to bring the action as a representative action. But in other cases the Court allowed the plaintiff to represent persons with similar interests whether or not they consented or even knew of the action. This was particularly true of actions arising from the activities of joint stock companies and friendly societies. In that situation, as Yeazell points out, 'the represented must rely on the congruence of their interests with those of the representatives as the incentive for effective representation; the self-interest of the representative rather than the consent and supervision of the represented drives the active party'." (Fotnotes omitted and emphasis added.)
59 As McHugh J recognises in this passage, the representative procedure could be utilised in circumstances where the members of the represented class not only did not consent to the procedure but knew nothing of it. The authorities referred to by Professor Yeazell and McHugh J support the proposition that the representative procedure did not require individual notification to each of the group members. Indeed it is not clear that any form of notice to the group members was necessarily required.
60 Thus, in Hichens v Congreve (1828) 4 Russ 562, 38 ER 917, Lyndhurst LC permitted an action based on an alleged fraud by company promoters to be brought by a small number of shareholders on behalf of all shareholders. Lyndhurst LC had no doubt as to the utility of the procedure (ER at 922):
"It is said that there is nothing on the face of the bill which shews that the shareholders are so numerous, that they could not all be joined as parties without inconvenience. I think it does appear sufficiently, that, if all were joined, the number of complainants would be inconveniently great; first, because the shares are six thousand in number, and, secondly, because it appears by the act of parliament that there were then upwards of two hundred shareholders. It is clear, therefore, that justice would be unattainable, if all the shareholders were required to be parties to the suit.
It is said, each shareholder might file a bill to recover his proportion of the money. Such a course would produce enormous inconvenience. Are two hundred bills to be filed, in order to do justice in this matter? If justice can be done in one suit the Court will sustain such a proceeding; for to require all the shareholders to be parties, or to leave each shareholder to file a separate bill to redress his own wrong, would, in substance, be a denial of justice.
In the present case, it appears to me that justice may be done in one suit. All the shareholders stand in the same situation; the property has been taken out of their common fund; they are entitled to have that property brought back again for the benefit of the concern. When all parties stand in the same situation, and have one common right, and one common interest, in what respect can it be inconvenient that two, or three, or more, should sue in their own names for the benefit of all?"
61 It is clear that the Court was not aware of the precise number of shareholders in the company. There is nothing to suggest that the plaintiffs were required to notify, let alone serve individually, the general body of shareholders. Indeed, to impose such a requirement would have limited the utility of the procedure for the very situation in which it was required, namely, where the persons interested were too numerous to bring before the Court. Moreover, it was a requirement, as Lord Macnaughton said in Duke of Bedford v Ellis (above), that the relief sought was in its nature beneficial to all whom the plaintiff proposed to represent: see Daniell's Chancery Practice, 8th ed, 1914, vol 1, at 176.
62 Given that the rationale for the representative procedure was to enable justice to be done, it is not surprising that the procedure was permitted in a variety of circumstances. The represented groups found in reported decisions include not only shareholders, but the inhabitants of a parish, legatees and next of kin, tenants of a manor and many others: Daniell's Chancery Practice (above), vol 1, at 175-176. In short, as Megarry J said of the successor to O XVI r 9, the rules permitting representative procedures were treated as "a flexible tool of convenience in the administration of justice": John v Rees [1970] Ch 345, at 370.
63 The historical development and refinement of the representative action is difficult to reconcile with Femcare's submission that the judicial process requires, except in very unusual circumstances, individual notice to persons whose rights might be adversely affected by a representative proceeding. By 1900, the courts had devised flexible procedures for the resolution of common grievances held by members of a group. These procedures did not necessarily require individual notice to members of the represented group. The paramount consideration was the justice of the case, in particular the need to avoid the inconvenience associated with a large number of individual actions.
64 Femcare correctly pointed out that s 33ZB of the Federal Court Act explicitly provides that a judgment in a representative proceeding binds all group members other than those who have opted out under s 33J. To that extent Part IVA goes further than the old representative procedure. But in Carnie, Toohey and Gaudron JJ specifically accepted (at 423-424) that the principle of res judicata applies to a representative proceeding under Part 8 r 13(1) of the Supreme Court Rules (NSW) and equivalent provisions. Their Honours saw no prejudice to members of the represented group in being included, other than in the "obvious sense that they would be bound by a judgment acceding to or rejecting the claim for relief". As their Honours remarked earlier (at 423), the effect of an adverse decision is simply that the group member in any event has no such right as he or she claims. See also Zhang v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384 at 401-402, per French J; Naken v General Motors of Canada Ltd (1983) 144 DLR 385 (S Ct Can), at 406-407, per Estey J.
65 The historical developments reflect the fact that the courts, in this as in other areas, have been concerned to develop procedures designed to do justice. The representative procedure was designed to vindicate rights that otherwise could not be pursued, or could be pursued only with great inconvenience and expense. It recognised, at least implicitly, that there is a critical difference between proceedings seeking relief against a person and those seeking to vindicate rights he or she holds in common with others: see Phillips Petroleum Co v Shutts 472 US 797 (1985), at 808, per Rehnquist J. The price of providing a mechanism for the vindication of rights held in common with others may be departure to some extent from the procedures ordinarily applicable in litigation inter partes.