First Plaintiff v Defendants

2 The summons is opposed by Bendigo and Adelaide Bank Limited (ACN 068 049 178) ("the Respondent"), the second defendant in this group proceeding.

3 This proceeding, commenced in August 2011, is one of a number of group proceedings commenced on behalf of investors in schemes managed by Great Southern Managers Australia Limited (Receivers and Managers Appointed) (in liquidation) (ACN 083 825 405), the first defendant to these proceedings. The principal claim in this and the other group proceedings (together "the group proceedings") was that the product disclosure statements relating to the schemes were in contravention of Pt 7.9 of the Corporations Act 2001 (Cth).

4 Prior to judgment being delivered in the group proceedings, the parties entered into a deed of settlement dated 23 July 2014 ("Deed of Settlement"). The Deed of Settlement was conditional upon approval by the Court. It included a term at clause 4.1.4 that each of the lead plaintiffs for and on behalf of themselves and all group members acknowledge and admit the validity and enforceability of the lead plaintiffs' loan deeds and the group members' loan deeds. On 11 December 2014, I made orders approving the Deed of Settlement.[2]

5 By a writ filed on 24 May 2017, the Respondent seeks to enforce the Deed of Settlement against the Applicant ("the enforcement proceedings").[3] Only on 6 July 2017, when the Applicant was served in Singapore with the writ and statement of claim with respect to the enforcement proceedings, did the Applicant become aware of the group proceedings.[4]

6 The Applicant bases his primary submission on s 33J(3) of the Act, which provides the following (in the context of the entire section):

33J Right of group member to opt out

(1) The Court must fix a date before which a group member may opt out of a group proceeding.

(2) A group member may opt out of the group proceeding

(3) The Court, on the application of a group member, the plaintiff or the defendant, may extend the period within which a group member may opt out of the group proceeding.

(4) Except with the leave of the Court, the trial of a group proceeding must not commence earlier than the date before which a group member may opt out of the proceeding.

(5) Unless the Court otherwise orders, a person who has opted out of a group proceeding must be taken never to have been a group member.

(6) The Court, on the application of a person who has opted out of a group proceeding, may reinstate that person as a group member on such terms as the Court thinks fit.

If granted an extension to the period within which he may opt out of these group proceedings, the Applicant indicates that he would opt out.[5]

7 The Applicant's alternative submission is based on s 33KA(1) of the Act:

33KA Court powers concerning group membership

(1) On the application of a party to a group proceeding or of its own motion, the Court may at any time, whether before or after judgment, order -

(a) that a person cease to be a group member;

(b) that a person not become a group member.

(2) The Court may make an order under subsection (1) if of the opinion that -

(a) the person does not have sufficient connection with Australia to justify inclusion as a group member; or

(b) for any other reason it is just or expedient that the person should not be or should not become a group member.

(3) If the Court orders that a person cease to be a group member, then, if the Court so orders, the person must

8 For the reasons that follow I have come to the view that in the present circumstances, where cessation of group membership is sought more than three years after the settlement of the relevant group proceeding, that it is inappropriate to extend the period within which that group member can opt out of the proceedings, however; on the basis of this group member's insufficient connection with Australia, I am of the opinion that the Court should, by its own motion, order that the Applicant cease to be a group member.

9 The facts which give rise to the present application are unusual and the first of their kind to come to light in respect of the present group proceeding.[6] The Respondent does not cavil with the evidence that the Applicant only learned of the group proceedings on 6 July 2017.[7] Instead, the Respondent submits the Applicant is "the author of his own misfortune".[8] The Respondent refers to the fact, which the Applicant concedes, that he did not update his contact details or inform the Great Southern Scheme in which he invested[9] when he moved to from Australia to Singapore in September 2011.[10]

10 The effect of the Applicant's move to Singapore, also with which the Respondent does not cavil, is the almost complete severance of the Applicant's ties to Australia. The Applicant describes this as follows:[11]

1. ... In September 2011, I moved to Singapore for work and have lived there ever since. At no time since I moved to Singapore have I owned any property in Australia, operated any business in Australia or had any address in Australia through which I could be contacted. I do remain in contact with some family and friends in Australia, but otherwise have no connections with Australia.
2. Since September 2011, the only times I have returned to Australia are as follows:

(a) Around Christmas time each year, I fly from Singapore to the Gold Coast where I visit my parents in Tweed Heads for a period of around two weeks, before returning to Singapore.

(b) Between 17 April 2017 and 20 April 2017 I travelled to Melbourne, Brisbane and Sydney as part of my role with my employer, Johnson Controls, for the purpose of conducting integration training for sales representatives of my employer who were based in each location. I effectively spent a day in each location for the sole purpose of conducting this training.

1. I do not have any current plans to live in Australia or operate any business in Australia in the future.

11 In my opinion this evidence has significant bearing on the question of the Applicant's connection to Australia. The Respondent clearly is unable to challenge this evidence directly, and is left only to submit that: the Applicant knew he had obligations with respect to the loan he took out and investments he made in Australia;[12] the Applicant knew he had defaulted and made late repayments with respect to the loan beginning, in the evidence of the Respondent, in February 2009;[13] the bank had made telephone calls to the Applicant, to which he evidently responded, in some instances, by making another repayment;[14] and the Applicant left the country having ceased to make repayments in December 2009[15] and having been notified of the collapse of the scheme in which he invested by the Australian Taxation Office on 16 August 2010.[16]

12 The problem for the Respondent is that the legislature has only really directed the Court to exercise its power on the basis of the group member's connection with Australia,[17] presumably on the basis of facts best known to the group member themselves - as is clearly the case on the present facts.

13 On 2 March 2012 I ordered that opt out notices with respect to the Great Southern group proceedings be sent to all group members at their addresses held by the scheme registers, and notices also be advertised in newspapers specified in every state and territory on Friday 30 March 2012.[18] Those orders were made pursuant to s 33Y(2) of the Act, which gives effect, relevantly, to s 33X(1)(a), which provides:

33X When notice to be given

(1) Notice must be given to group members of the following matters in relation to a group proceeding -

(a) the commencement of the proceeding and the right of the group members to opt out of the proceeding before a specified date, being the date fixed under section 33J(1);

...

...

Of course, on the uncontroverted evidence of the Applicant above, the opt out notice was never received by him in any form.

14 The failure of a group member to receive the opt out notice itself has no specific effect under Part 4A of the Act. And it is true, as the Respondent submits, that the parties to the group proceedings complied with the orders of the Court with respect to giving group members notice of the group proceeding and its proposed settlement.[19] With respect to the equivalent provision of Part IVA of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"), s 33Y, the purpose of opt out notification has been said, "to ensure that group members can make an informed decision concerning their rights".[20] Furthermore, as observed by Hedigan J in the context of another group proceeding, "notice is fundamental to the opt out procedure because it is notice that empowers the court to regard the recipients as bound."[21] In Femcare Ltd v Bright,[22] Black CJ, Sackville and Emmett JJ nevertheless held:[23]

It is undoubtedly true, as Femcare submitted, that the combined effect of s 33Y(5) and (8) is that a group member may not be given or receive 'notice ... personally' of the commencement of the representative proceeding yet will be bound by an adverse (or favourable) outcome. Of course, that group member may well learn of the representative proceeding nonetheless, either because he or she receives some other form of notice or the proceeding comes to his or her attention by other means. But there is at least a possibility that some group members will be bound by the outcome of a representative proceeding without ever knowing that it has been commenced or conducted on their behalf.

15 The Federal Court Act allows for the position there described - the benefit or detriment of a group proceeding could conceivably befall a group member without their knowledge. This is in contrast to the Victorian legislation. The provisions of Part 4A of the Act are very closely modelled on the Part IVA of the Federal Court Act, with many provisions being identical, including s 33J and the notice provisions at ss 33X and 33Y. Section 33KA is an outlier in this respect - it is unique to the Victorian legislation. More importantly for the present purposes, it also appears to protect, in some circumstances, the wholly unknowing group member, "at any time, whether before or after judgment".[24] In Clarke v Great Southern Finance Pty Ltd (in liq) ("Clarke"),[25] Judd J considered an application by several groups of objectors ("the Clarke objectors") to the Deed of Settlement to avoid group membership (ahead of my decision on the grant of approval) via either s 33KA or the Court's broad, general power to make orders under s 33ZF. Judd J observed:[26]

There are no prescribed circumstances in which these powers may be exercised, although some circumstances are readily apparent. For example, to maintain the integrity of the group by removing those who do not share an essential characteristic, or to prevent an abuse of process or unfairness. The power is obviously designed to be exercised by the court in the management of a proceeding which, although a group proceeding, is conducted by parties within the construct of the adversarial system. The powers granted under ss 33KA and 33ZF are not intended, in my view, to be invoked by group members to avoid the binding effect of an adverse judgment or terms of settlement negotiated prior to judgment, once approved by the court.

(Citations omitted.)

16 In the submissions of the Respondent, the Applicant is asking the Court to exercise its power under s 33KA for precisely the same purpose that Judd J found that power was not intended: to avoid the binding settlement approved by the Court.[27] I cannot accept that submission. The Clarke objectors had notice of the proceedings and had a meaningful opportunity prior to trial to decide whether to opt out. While their participation in the group proceedings fell short of being parties to those proceedings (as is the peculiar nature of the group member under Part 4A and group proceedings legislation generally), the applications were filed by the Clarke objectors' legal representatives grouped according to the objections raised. The Clarke objectors' applications themselves demonstrate those group members' active participation in the proceedings. More to the point, the Clarke objectors did not fall within a ground enumerated at s 33KA(2). All of these features distinguish the present Applicant from the Clarke objectors to the Deed of Settlement, but the most important distinguishing feature is certainly the Applicant's lacking connection to Australia, which the drafters of Part 4A expressly singled out for the Court to turn its mind to in s 33KA(2)(a).

17 The explanatory memorandum to the bill which would introduce Part 4A to the Act[28] does not offer much insight into the provenance or intended effect of the provision:[29]

Section 33KA allows the Court to order that a person cease to be, or not become, a group member where the person does not have sufficient connection with Australia or for any other just or expedient reason. This provision is intended to reflect common law principles regarding the Court's capacity to exercise jurisdiction over the parties and subject matter or proceedings.

18 The second reading speech itself[30] is silent on s 33KA. The provision is, however, referred to in the ensuing Parliamentary debates.[31]

19 In the Legislative Assembly debates of 21 November 2000, the Member for Berwick envisaged some of the pitfalls of the "incredibly indefinite" process for which the bill provided.[32] The Honourable Member reflected on the issues surrounding group membership, opt out procedure and notice, in a hypothetical where a successful class action on behalf of consumers who had purchased exploding fridges ends in an order that the group members each receive $1000 - a scenario in which such an order would be unworkable, given that all potential group members could not even then necessarily be identified:[33]

What happens to the people who never saw the advertisement? A cause of action has been determined, by which definition they are members of and are therefore party to. However, the first time they hear about it is, say, five years later - in case of time limits - when they return from South Africa, having been on a volunteer program to dig wells. They come back to Australia suddenly to find that they want to sue the company because the thing blew up in their faces. However, they find that the action has already been and gone and there is no money left. Although they are members of the action it is a case of res judicata - they cannot sue over the same thing twice - so they cannot run an action against the company. Will that be able to happen?

The honourable member for Kew has looked into the matter and kindly directed to my attention proposed section 33KA of the Supreme Court Act, which allows a person to make an application to be taken out of the group. It is his view - I am not sure that I agree, but he is usually right so I probably should - that that can be done after a judgment is given. So a person who comes back to Australia from South Africa will have to make an application to be taken out of the group before he can then bring his action.

20 This is not a product liability or mass tort class action. Nor is this a class action where the plaintiffs have been successful. This application does, however, flow from a scenario analogous to the group member digging wells in South Africa, where notice of the right to opt out could not and did not reach the group member, whom the power at s 33KA appears to have been intended to serve.

21 The concern in the Legislative Assembly appears to have been that damages awarded in a successful class action could be exhausted before all group members become aware of its outcome, in which case s 33KA could be applied to enable them to pursue a damages claim themselves; unburdened by group membership, res judicata and the expiry of a limitation period.[34] In this unsuccessful group proceeding, the right the Applicant asserts - to advance his own defences, unburdened by group membership and its consequences for those who chose not to opt out - should be protected by s 33KA in the same way.

22 Section 33KA appears to have been drafted with circumstances at least similar to the Applicant's in mind. While the exercise of neither s 33J nor s 33KA is subject to an express time limit, reading the provisions of Part 4A together the legislature seems to have intended that s 33J should apply to group members opting out prior to the beginning of trial,[35] s 33K (headed "[c]auses of action accruing after commencement") should apply when group membership becomes apparent during the course of trial, and s 33KA should apply to instances such as those in the present application.

23 For the preceding reasons, I grant the application under s 33KA(1)(a) on the Court's own motion, and do not hesitate to do so despite the Applicant only having express standing to bring an application under s 33J(3).[36]

24 The parties are to bring orders to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties further on this issue.

GREAT SOUTHERN MANAGERS AUSTRALIA LIMITED (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION)

BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178)

ABL NOMINEES PTY LTD (ACN 106 756 521) IN ITS CAPACITY AS TRUSTEE OF THE LIGHTHOUSE TRUST NO 12

[1] The parties have proceeded on the basis that the Applicant is a group member, and I shall proceed on this basis as well.

[2] Clarke (as trustee of the Clarke Family Trust) & Ors v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) & Ors [2014] VSC 516.

[3] Bendigo and Adelaide Bank Limited v Garry James Parker S CI 2017 01972.

[4] Garry James Parker's Outline of Submissions (9 July 2018), [10]; Affidavit of Garry James Parker (8 June 2018), [6]; see also below [10].

[6] Transcript, 1, 15-7; it should be noted that while Bendigo and Adelaide Bank v Quine [2018] VSC 272 concerned a defendant who is a permanent resident of England, unlike the Applicant, Mr Quine entered only a conditional appearance and was not a group member of any group proceedings.

[7] Garry James Parker's Outline of Submissions (9 July 2018), [10]; Affidavit of Garry James Parker (7 June 2018), [6].

[8] Transcript, 38; Bendigo and Adelaide Bank Limited's Outline of Submissions (9 July 2018), [28]-[29].

[9] The evidence relied upon by the Respondent is a loan application signed by the Applicant for a loan from ABL Nominees Ltd to invest in four woodlots in the 2008 Great Southern High Value Timber Managed Investment Scheme: Exhibit SFS-2 to the Affidavit of Stephen Flamer-Smith (29 June 2018).

[11] Affidavit of Garry James Parker (7 June 2018), [6]-[8].

[13] Affidavit of Stephen Flamer-Smith (29 June 2018), [19].

[15] See loan account records of Garry James Parker, Exhibit SFS-6 to the Affidavit of Stephen Flamer-Smith (29 June 2018).

[16] Affidavit of Garry James Parker (7 June 2018), [13]; see also Transcript, 4, 8, 12.

[17] The alternative basis - "for any other reason it is just and expedient" - provides little direction in practice: see Supreme Court Act 1986, ss 33KA(2)(a) and (b).

[18] Orders made by the Honourable Justice Croft (2 March 2012).

[19] Bendigo and Adelaide Bank Limited's Outline of Submissions (9 July 2018), [28].

[20] King v GIO Australia Holdings Ltd [2001] FCA 270, [15].

[21] Gagarimabu v The Broken Hill Proprietary Co Ltd [2001] VSC 304, [9].

[22] [2000] FCA 512; (2000) 172 ALR 713.

[23] Femcare Ltd v Bright [2000] FCA 512; (2000) 172 ALR 713 at 729, [71].

[24] Supreme Court Act 1986, s 33KA(1).

[25] [2014] VSC 569.

[26] Clarke v Great Southern Finance Pty Ltd (in liq) [2014] VSC 569, [24].

[27] Bendigo and Adelaide Bank Limited's Outline of Submissions (9 July 2018), [27].

[28] Courts and Tribunals Legislation (Miscellaneous Amendments) Bill 2000.

[29] Explanatory Memorandum, Courts and Tribunals Legislation (Miscellaneous Amendments) Bill 2000, 6.

[30] Victoria, Parliamentary Debates, Legislative Council, 4 October 2000, 429-32 (Marsha Thomson, Minister for Small Business).

[31] Interpretation of Legislation Act 1984 s 35(b)(ii).

[32] Victoria, Parliamentary Debates, Legislative Assembly, 21 November 2000, 1768 (Robert Dean).

[33] Victoria, Parliamentary Debates, Legislative Assembly, 21 November 2000, 1768-9 (Robert Dean).

[34] With respect to limitation period issues see Supreme Court Act 1986 s 33ZE; and also Damian Grave, Ken Adams and Jason Betts, Class Actions in Australia (Thomson Reuters, 2nd ed, 2012) 323, [8.520].

[35] This is strongly implied in my view by s 33J(4) of the Supreme Court Act 1986.

[36] Cf Supreme Court Act 1986 s 33KA(1); see also Transcript, 25-9, 44-5.