Jameson v Professional Investment Services Pty Ltd

DECISION : The proceedings should not continue as a class action, but rather as the personal action of the current and any additional plaintiffs.

CATCHWORDS : PROCEDURE [90]- Supreme Court procedure- New South Wales- Procedure under rules of court- Parties- Representative orders- Persons having "the same interest" in proceedings- What constitutes- Plaintiff and other named persons claim defendant represented that monies loaned under an investment scheme would be guaranteed- Group seeks damages when investment fails- However, plaintiff could not prove same representation made to entire Group- Proceedings cannot be continued as class action.

ASIC Act 2001 (Cth) Civil Procedure Act 2005, s 56 Corporations Act 2001 (Cth), ss 766B(3), 945A, Part 6D.2, Part 7.1 Div 3, Part 7.6 Div 5 LEGISLATION CITED : Federal Court of Australia Act 1976 (Cth), ss 33C, 33N Supreme Court Rules 1970, Part 8 r 13(1) (repealed) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005, rr 7.4, 7.5(1)

Abdool v Anaheim Management Ltd (1994) 15 OR (3d) 39 Abdool v Anaheim Management Ltd (1995) 121 DLR (4th) 496 Bedford (Duke) v Ellis [1901] AC 1 Blank v Beroya Pty Ltd (1967) 92 WN (NSW) 24 Bright v Femcare Ltd (2002) 195 ALR 574 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 Byrne v Herbert [1966] 2 QB 121 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 ALR 58; 80 ALJR 1441 Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 Carnie v Esanda Finance Corporation Ltd (1996) 38 NSWLR 465 Carom v Bre-X Minerals Ltd (2001) 51 OR (3d) 236; 196 DLR (4th) 344 Chancey v May (1722) Prec Ch 592; 24 ER 265 CASES CITED : David Jones v Cory Bros & Co Ltd (1921) 56 LJ 302 Dorajay Pty Ltd v Aristocrat Leisure Ltd (2005) 147 FCR 394 Financial Industry Complaints Service Ltd v Deakin Financial Services Pty Ltd (2006) 60 ACSR 372 Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203 Hallows v Fernie (1868) LR 3 Ch App 467 Markt & Co Ltd v Knight Steamship Co Ltd [1910] 2 KB 1021 Nixon v Philip Morris (Australia) Ltd (1999) 95 FCR 453 O'Sullivan v Challenger Managed Investments Ltd [2007] NSWSC 383 P Dawson Nominees Pty Ltd v Multiplex Ltd (2007) 25 ACLC 1192 Prudential Assurance Co Ltd v Newman Industries Ltd [1981] Ch 229 Qantas Airways Ltd v Cameron (1996) 66 FCR 246 Rod Investments (Vic) Pty Ltd v Clark [2005] VSC 449 Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457 Wong v Silkfield Pty Ltd (1999) 199 CLR 255

PARTIES : Bruce Joel Jameson (in his own right and as representative for the persons in Schedule A) (P) Professional Investment Services Pty Ltd (D)

COUNSEL : A J Abadee (P) D P Robinson SC (D)

SOLICITORS : Slater & Gordon (P) Deacons (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

4892/06 - JAMESON v PROFESSIONAL INVESTMENT SERVICES PTY LTD JUDGMENT 1 HIS HONOUR: The background to the present application is that the plaintiff and the persons named in Schedule A to the statement of claim (together referred to as "The Group") each claim to have been investors in what appeared to be a money making scheme controlled by entities which can be referred to as "Westpoint". The investments failed and The Group seeks damages against the defendant, Professional Investment Services Pty Ltd ("PIS") basically for breach of statutory duty or under the Trade Practices Act 1974 (Cth). 2 The present application before me is an application to amend the statement of claim in a number of respects, viz:

(a) amend so that only the plaintiff, and not the group members, claims declaratory relief on behalf of himself that the defendant's conduct was unlawful under s 945A of the Corporations Act 2001 (Cth);

(b) amend so that the defendant is liable for loss or damage suffered by the plaintiff alone and not the group members;

(c) amend so as to add claims for certain other relief on his own behalf and on behalf of the group members, essentially as follows: (i) declarations that the conduct of the defendant in issuing promissory notes, which constitute financial products, to the plaintiff and group members constituted an issue of interests in the managed investment scheme, which was required to be registered; and (ii) declarations that the defendant's authorised representatives engaged in unlawful conduct by failing to give Product Disclosure Statements and by engaging in misleading or deceptive conduct in regard to the statements and guarantee representations made to the plaintiff and group members. 3 The plaintiff also proposes to add to the statement of claim detailed statements as to the loss or damage suffered by him alone (and not any loss or damage suffered by The Group) arising from the alleged unlawful conduct of the defendant and its authorised representatives. 4 Finally, the plaintiff seeks leave to amend Schedule A to the statement of claim by adding 30 new group members and removing one existing group member. All the new group members are expressly identified and have given consent for their identification. 5 The aim of these amendments is to bring about the situation where the present proceedings will determine the defendant's liability both to the plaintiff and The Group and also fix the quantum of any damages payable to the plaintiff (though not The Group). The members of The Group will then each bring their own actions in the District Court of NSW or in an interstate court to determine the quantum of their damages. 6 When the matter was argued last JuIy, the plaintiff proposed to amend the statement of claim "in an attempt to comply with the findings in [O'Sullivan v Challenger Managed Investments Ltd [2007] NSWSC 383 ("O'Sullivan")] and, in particular, the finding that the claims for damages by individual group members are unsuitable to be maintained in a representative proceeding under Part 7 rule 4 of the Uniform Civil Procedure Rules". I note this, though this proposal may have been affected by more recent changes to the relevant court rule. 7 The defendant has resisted the proposed amendments insofar as they allow for a class action on the question of liability on a number of grounds. Basically those grounds are that: (1) the plaintiff and The Group are not parties in the same interest; (2) there is no common question involved; (3) the plaintiff's solicitors are pursuing an impermissible tactic of running a limited representative action; and (4) it is usually contrary to modern litigation practices for declaratory proceedings to be used as a staging post or vehicle for other litigation. 8 After setting out the background facts, I will deal with each of the above contentions using the number system set out and then consider (5) whether the plaintiff in any case has a cause of action; and (6) the result of this application. 9 The application was heard by me on 17 July 2007, Mr A J Abadee of counsel appearing for the plaintiff and applicants and Mr D P Robinson SC appearing for the defendant. At the conclusion of the oral hearing, leave was given for Mr Abadee to supply further material which, in due course, he did. 10 The applicable Uniform Civil Procedure Rule is Part 7 rule 4. This has been amended since the matter was argued before me. I will apply the rule in its present form as to do otherwise would waste time in The Group merely commencing new proceedings. 11 Up until 9 November 2007, rule 7.4 relevantly provided that: "(1) This rule applies to any matter in which numerous persons have the same interest or same liability in any proceedings. (2) Unless the court orders otherwise, the proceedings may be commenced and carried on by or against any one or more persons as representing any one or more of them." 12 The amendment made in November 2007 means the rule now relevantly reads: "(1) Subject to subrule (5), this rule applies to any proceedings concerning:

(a) any matter in which: (i) numerous persons have claims against the same person, and (i) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances, and (iii) the claims of all those persons give rise to a substantially common issue of law or fact, or (b) any matter in which numerous persons have the same liability. (2) Proceedings to which this rule applies may be commenced and, unless the court orders otherwise, carried on by or against any one or more persons as representing any one or more of them. (2A) Any such proceedings may be commenced:

(a) whether or not the relief sought: (i) is, or includes, equitable relief, or (ii) consists of, or includes, damages, or (iii) includes claims for damages that would require individual assessment, or (iv) is the same for each represented person, and (b) whether or not the proceedings: (i) are concerned with separate contracts or transactions between the defendant in the proceedings and individual represented persons, or (ii) involve separate acts or omissions of the defendant done or omitted to be done in relation to individual represented persons. (3) … (4) … (4A) If it appears to the court that determination of the issue or issues common to all the represented persons will not finally determine the claims of all the represented persons, the court may give directions in relation to the determination of the remaining issues. (4B) Without limiting subrule (4A), the court may direct that notice be given to some or all of the represented persons in the proceedings in respect of any matter. (4C) A represented person, whether or not joined as a party, is taken to have brought proceedings on the day on which the person became a represented person on all of the person's causes of action that may be determined by judgment in the proceedings." 13 The rule now is in very similar words to s 33C of the Federal Court of Australia Act 1976 (Cth). 14 In a proceeding under s 33C in P Dawson Nominees Pty Ltd v Multiplex Ltd (2007) 25 ACLC 1192, 1195 [14], Finkelstein J said that three matters need to be shown for a valid class action viz: (1) numerosity; (2) connectivity; and (3) commonality. That is, (1) there must be numerous persons with claims against the same defendant; (2) those claims arise out of the same or similar circumstances; and (3) there is a substantial common issue of law or fact. 15 However, it must be noted that there is no direct equivalent to s 33N of the Federal Court of Australia Act in New South Wales. The overriding principles of the Civil Procedure Act 2005 are similar to some of the matters dealt with in s 33N, however, one cannot directly apply a decision on s 33N such as Bright v Femcare Ltd (2002) 195 ALR 574. 16 Rule 7.5(1) also needs to be considered. The text of that rule when considered by White J in O'Sullivan was corrupt. The rule was amended on 7 September 2007 to correct the text. Rule 7.5(1) now reads: "A judgment or order made in proceedings in which a party has, pursuant to rule 7.4, represented a number of persons binds all of those persons, but is not enforceable against any of those persons who is not a party except by leave of the court." 17 In O'Sullivan, White J treated the rule as if it read as it now does. 18 O'Sullivan has many similarities to the present one. The plaintiff there sought to sue on her own behalf and on behalf of many represented parties over alleged false and deceptive statements in a company prospectus. 19 White J held that r 7.5(1) meant that such a judgment or order is binding on all the represented persons [27]. His Honour said [48]-[49]: "Representative actions have been allowed where the represented persons have a common interest in obtaining declarations that the conduct of the defendant was unlawful, leaving it open to the represented persons subsequently to sue individually for damages, being entitled to rely upon the declaration as res judicata ( Jones v Cory Bros; Thomas v Great Mountain Collieries; Prudential Assurance Co v Newman Industries ). In my view, if the plaintiff and the represented persons have the same interest in the declaration which is sought, the proceedings have been properly commenced as representative proceedings, even though in order to obtain their several damages, the represented persons will ultimately have to become parties to proceedings brought either severally, or together pursuant to r 6.19." 20 His Honour considered that the rule required all the persons represented to be interested in and benefited by the relief sought. He pointed out that the "fact that the plaintiff and the represented persons will be seeking a monetary remedy does not mean that they do not have a legitimate basis for also claiming declaratory relief" [58]. He described such a declaration as "a prelude to individual claims" [58]. 21 His Honour found that the pleadings in the case before him did not fit that standard. However, he gave leave to Ms O'Sullivan to amend the statement of claim to plead facts common to all of the represented persons from which a claim for declaratory relief beneficial to them all could be maintained. 22 Because of the detailed consideration by White J in O'Sullivan, I do not need to repeat the analysis of the authorities which his Honour made. 23 The present proceedings were commenced by an originating process filed on 19 September 2006, in which the plaintiff is described as "Bruce Noel Jameson in his own right and as representative for the persons in schedule A". Schedule A contains a list of 22 represented persons/entities (The Group) who are expressly identified by their names and who have given their consent to be so identified in the proceedings. 24 As Mr Robinson has pointed out, this is the fourth time that the plaintiff has sought to recast the proceedings. Mr Robinson says that enough is enough and that the action should be dismissed and put out of its misery. 25 Mr Abadee's riposte to this is that the present application is to bring the proceedings into line with what was recently decided in O'Sullivan and that one cannot blame the plaintiff for not meeting its requirements prior to that decision being published. 26 There is no issue that the aspect of numerosity as defined above is made out. 27 It is common ground that the plaintiff and The Group all made investment loans to a company called Ann Street Mezzanine Pty Ltd (in liq) ("Ann Street Mezzanine") and that they received promissory notes from that company. 28 It is alleged that each investment was made after agents of the defendant made certain representations to the plaintiff and The Group that the loan monies advanced by the plaintiff and The Group to Ann Street Mezzanine were guaranteed by the Westpoint Group. 29 The plaintiff alleges that he and The Group made their investments following the recommendation of persons who were "authorised representatives" of Ann Street Mezzanine pursuant to Part 7.6, Div 5 of the Corporations Act. 30 It is common ground that the defendant did not issue a Product Disclosure Statement as was required by Pt 6D.2 of the Corporations Act. It is further common ground that such a Statement should have been provided. 31 The promissory notes issued to the plaintiff and group members are alleged to be "financial products" under Part 7.1, Div 3 of the Corporations Act. 32 The plaintiff and group members allege that they were "retail clients" and received the recommendations from the defendant's representatives as "personal advice" pursuant to s 766B(3) of the Corporations Act. 33 It is alleged that, if a product disclosure statement had been issued in accordance with the Corporations Act, it would have properly disclosed risks associated with holding promissory notes, including the fact that interests were being acquired by the proposed investors in an unregistered managed investment scheme which was liable to be wound up. 34 It has now been judicially determined that the promissory notes issued by Ann Street Mezzanine constituted an unregistered managed investment scheme liable to be wound up. This matter was not in contest in the present proceedings. 35 It is alleged that the plaintiff and group members were unaware of the above facts at the time of their respective investments in Ann Street Mezzanine. 36 The present application requires the Court to consider the purpose of the representative or class action in modern litigation and the impact of statutory provisions such as s 56 of the Civil Procedure Act which require the court to facilitate the just, quick and cheap resolution of issues in proceedings. 37 Representative actions have been available for centuries, but have only become prominent in commercial litigation during the 20th century. 38 The historical background to the present rule has been well documented in many leading cases on representative actions, the most significant of which are the Australian case of Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398, in particular the judgment of Toohey and Gaudron JJ, and the English decision in Prudential Assurance Co Ltd v Newman Industries Ltd [1981] Ch 229. 39 The central requirements, which were evident even as far back as Lord Eldon's judgments, are a common interest and a common grievance between all the represented persons/entities and the one who is representing them: Bedford (Duke) v Ellis [1901] AC 1 per Lord Macnaghten. 40 The overriding concern is the fair administration of justice. A situation where there will be "no coming at justice" on account of there being so many persons interested should, if possible, be avoided: Chancey v May (1722) Prec Ch 592; 24 ER 265. 41 The leading case on commercial representative actions for many years was the decision of the English Court of Appeal in Markt & Co Ltd v Knight Steamship Co Ltd [1910] 2 KB 1021. Although the rules of court and curial attitudes have changed considerably since 1910, there is still valuable material to be found in Markt on the subject of what can be described as people in the same interest in the one cause or matter. 42 Despite its fascination, I do not consider that there is much purpose in delving into the history of the development of the class action. What I need to consider is the status of such proceedings at the end of 2007 and the matters of opposition raised in the context of the facts of this case. I will thus seriatim deal with the numbered points noted above.

(1) Are the plaintiff and The Group are not parties in the same interest?

(2) Is there a common question? 43 These two matters can be considered together as they raise the same core principles. 44 In the present case, the first question is why should the proceedings not be commenced as representative proceedings under Part 7, rule 4 of the Uniform Civil Procedure Rules if the plaintiff has brought himself and The Group under that rule by way of satisfying the "same interest in the proceedings" test? 45 The High Court in Carnie established that in order to satisfy the "same interest" test it is sufficient if the claims for relief (here declaratory relief) by the plaintiff and represented persons/entities involve significant common questions of fact or law. 46 In the present case, the alleged common questions of fact or law have been set out by the plaintiff in the statement of claim. Essentially, they are that they all seek declarations by the court that the defendant and its authorised representatives have engaged in unlawful conduct pursuant to the ASIC Act 2001 (Cth), the Corporations Act and the Trade Practices Act. 47 The plaintiff says that such declarations, if made, will be beneficial to The Group in that the plaintiff and each group member can then proceed to establish their individual loss or damage as a result of that unlawful conduct. 48 Those group members will not have to undergo the expense of proving matters which are finally determined in the representative proceeding. 49 The gist of all the authorities is clearly commonality - a common interest, a common grievance, a common source of rights. 50 The leading Australian case of Carnie (supra) follows that line of authority. If the persons in the class can be sufficiently identified as belonging to that class by way of having a common interest and a common grievance in accordance with established principles in the case law, if the statement of claim has been properly formed, and the proceedings are otherwise in order, then the plaintiff and represented persons will have brought themselves within the rule for a valid representative action. 51 At least at first blush, it would appear that there is a commonality of interest in having the principal issues so determined. 52 Mr Robinson submits that there is a lack of commonality in the making of any representation concerning the parent guarantee by the Westpoint Group. He says there were "very different settings in which advice was delivered and the guarantee representations made". 53 Mr Abadee for the plaintiff submits that the "same interest" or "common interest" means a significant or substantial common interest in the resolution of any question of law or fact. 54 The common issues of law are, according to Mr Abadee:

(a) whether by reason of their investment the plaintiff and represented parties acquired interests in a "managed investment scheme" for the purposes of the Corporations Act ;

(b) whether such "managed investment scheme" was required to be registered under that Act;

(c) whether the promissory notes issued by Ann Street Mezzanine were "financial products" for the purposes of the Act; and

(d) whether the advice supplied by authorised representatives of the defendant was "financial product advice" and "personal advice" for the purposes of the Act. 55 The main common issues of fact are said to be:

(a) What were the features of the investment which made it a "managed investment scheme"?

(b) Was the alleged recommendation by the authorised representatives to the plaintiff and represented parties that they invest monies in Ann Street Mezzanine intended to influence each of them to make a decision in relation to their acquisition of promissory notes?

(c) In making such recommendation did the authorised representatives consider the objectives, financial situation and needs of one or more of the plaintiff or group members?

(d) Were the plaintiff and represented parties "retail clients" for the purposes of the Corporations Act ? 56 Mr Abadee says that any material factual differences in the claims of the group members as to statements being made to them by the defendant's authorised representatives, as pointed out by Mr Robinson, do not detract from the factual common interests listed above. 57 He puts that what happened was that the defendants had an information memorandum which those in charge of Westpoint issued to financial advisers generally and that the defendant merely adopted this for its advice to its customers so that the situation is closely akin to the case of a common prospectus. 58 In addition, Mr Abadee submits that the declaratory relief and relief by way of orders for damages and/or compensation which the plaintiff seeks is a common relief which is beneficial to all group members. Further, he says that the claims for relief on behalf of the group members are identical. 59 There are also alleged to be common questions of law arising including what a plaintiff must establish so as to show that he or she received "personal advice" and "financial product advice" from the defendant's authorised representatives in order to make out a case under s 766B of the Corporations Act. 60 It must be said, however, that at this stage of the proceedings, a number of the so-called common issues outlined by Mr Abadee are matters about which Mr Robinson says that there is no contest. Included amongst these are that the promissory notes were financial products. He also points to the decision of Finkelstein J in Financial Industry Complaints Service Ltd v Deakin Financial Services Pty Ltd (2006) 60 ACSR 372, which has already elucidated what is a "retail investor" and "investment advice". 61 As the academic writings on the topic demonstrate, it is a difficult matter for judgment where the alleged common action is based on a series of representations made to different people about a project. The prime reason is that so much depends, first, upon what exact words were used to each person to whom a representation was made and secondly, what effect those words had on that person. Clearly, even the same words addressed to a Birdsville camel trader and a Sydney stockbroker, may well invoke different reactions. 62 The ultimate factual issue in each individual case is whether the words in each case constituted a false or misleading or deceptive representation and whether, if they did, they were a cause of the investment decision. 63 Courts need to be careful in this class of case to see that there is not just one typical case, but rather, situations may fall into one of a number of categories. 64 The case will often be different where there is a written representation as opposed to an oral one. Again, as the High Court noted in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, 604 [36], one must distinguish between a misrepresentation directed at a class and one directed at an individual or a series of individuals. 65 In her book, "The Class Action" (Hart Publishing, Oxford & Portland Oregon, 2004), Rachael Mulheron, a Queensland solicitor and English academic says at p 174: "It has been judicially recognised that the very nature of the tort of misrepresentation and its elements gives rise to a whole host of individual issues that renders certification problematical … Individual issues such as a special relationship of proximity between the defendant author and the class member recipients of the statement, separate defences, individual loss and damage, reliance by individual class members upon the representation, the factual questions of who said what, when and to whom, all serve to present a complex scenario that even the statutory no-bar factors … cannot always overcome. However, the task of establishing the requisite commonality is difficult but not intended to be impossible." 66 Proceedings under the Trade Practices Act and similar legislation insofar as they involve questions of misleading or deceptive conduct are in the same plight as actions for misrepresentation. 67 Mulheron refers, in connection with her last mentioned statement, to the decision of Wilcox J in Nixon v Philip Morris (Australia) Ltd (1999) 95 FCR 453 esp at [127]. (This case went on appeal, but not on this point). 68 The Nixon case was a class action on behalf of people who had suffered health problems allegedly through smoking and who blamed inadequate warnings on cigarette packets. The defendant put that there could not be a class action because of the subjective elements involved as to whether each member of the class failed to stop smoking because of the lack of proper warning. 69 Wilcox J said at [126]-[127] p 486 that whilst that proposition had a superficial charm, a court's determination always involved assessment of a subjective element and that, if the proposition put by the defendant was too rigorously applied, the value of the concept of a class action would be defeated. His Honour made similar remarks in his earlier decision of Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457, 464. 70 That is a salutary warning, however, as Mulheron notes at p 174, there are a number of authorities, particularly Canadian cases, where it has been held that the fact that the group is not homogenous in commercial experience and that oral representations were made separately to various members at different times, was sufficient to disqualify the case from one with a common issue. 71 Mulheron says that the inherent nature of misrepresentation actions makes it difficult to find central facts capable of proof on a common basis. 72 Indeed, this has been so from early times; see eg Hallows v Fernie (1868) LR 3 Ch App 467, 471; Wong v Silkfield Pty Ltd (1999) 199 CLR 255, 262 [14] and cases there cited. 73 In Ontario in Abdool v Anaheim Management Ltd (1994) 15 OR (3d) 39, 49, Montgomery J said that American jurisprudence had shown that class actions in such cases were inappropriate because individual issues of fact and law will predominate over common issues. At p 51, he said: "As reliance is an essential element in an action for negligent misrepresentation, the traditional view has been that such actions do not raise common issues and are not ordinarily amenable to representative proceedings." 74 Montgomery J's decision was affirmed by a Divisional Court in (1995) 121 DLR (4th) 496, though the Divisional Court reiterated that it was possible for such cases to be certified as proper for a class action. 75 Again in Ontario in Carom v Bre-X Minerals Ltd (2001) 51 OR (3d) 236; 196 DLR (4th) 344, [8], the Court of Appeal observed that the most notable situation where courts have declined to let an action proceed as a class action related to claims grounded in allegations of misrepresentation. 76 Similar statements have been made in Australia by the Full Federal Court; Qantas Airways Ltd v Cameron (1996) 66 FCR 246, 289 (another case involving the effect of smoking on group members) per Lindgren J at 289 and Lehane J at 298. 77 With this background, I must turn to the particular facts of the present case. 78 The present is not a case where there was just a common written representation. In the present case, there were different things said to different people in circumstances where the status of the hearers differs. 79 Mr Robinson points to the affidavit of Brad Scale, dated 11 July 2007, where he deposes to the fact that PIS has over 1400 authorised representatives situated in various States. He says that, although these representatives receive supervision and guidance from PIS, they have a degree of independence so that what they actually say to customers will vary from representative to representative. 80 To illustrate this, Mr Scales refers in BS-1 p 182 to the advice offered to Koppen by Advisor Wright, to Webster by Advisor Rowe and to Cooper by Advisor Moodley. There are some differences in these advices. 81 I will not burden this document with the details which are to be found in Mr Robinson's written submissions which I will leave in the file. However, I noted that some statements include information about tax savings and others do not; some statements contain different information about tax; some statements provide information about the risk of capital loss, while others have no such information. 82 Mr Robinson's written submissions say that whilst it is possible that there may be cases where the same representation is made by different representatives to different people, this is not such a case. The particulars show material differences if one compares the cases of Koppen, Snow, Schaffer, Webster and Jameson. 83 Whilst all this is true, it must be said that there is one common thread running through most of the statements and that is mention of the guarantee provided by the Westpoint Group. 84 I am bound by the overriding principles of the Civil Procedure Act. In any event, even before that Act, I and most other judges have acted so as to ensure, as much as adjudicators are able to interfere with the preparation of cases for hearing, that the most efficient course is followed, so long as over efficiency does not lead to injustice to any party. 85 Part of that philosophy, and it is a philosophy which appears to me to have been taken up in the amendments to the rules, is that class actions have a proper place to play in the efficient conduct of litigation in this Court. 86 The judgment I have to make is case particular. 87 In this particular case, looking at the overall picture and the overriding principles, in my view the disparate factors in the cases involving the plaintiff and various members of The Group are sufficiently diverse not to permit a class action as a method of reducing the costs and complexities of resolving the dispute. 88 Furthermore, if I merely looked at the commonality, there is not in this particular case, on the material before me, sufficient to hold that there is commonality.

(3) The concept of a limited representative action 89 Almost all class actions in the past have been considered on the basis that all persons who are affected by the claim are joined in the action unless they elect to opt-out. 90 As I held in Carnie v Esanda Finance Corporation Ltd (1996) 38 NSWLR 465 when Carnie came back to the Supreme Court from the High Court, there may be circumstances where the interests of justice require that an opt-in approach be taken. It is clear that a representative action brought before the Supreme Court may be brought using the opt-in approach. 91 As I explained in Carnie at 469, the difference between the opt-in approach and the opt-out approach is this: "With opt-in, a person does not become one of the represented parties unless he or she makes a deliberate decision to be counted amongst those represented. With opt-out, the action proceeds as an action on behalf of all the persons claimed to be represented until a person decides that he or she does not want to be covered or alternatively, that he or she will participate as a party. With opt-out, the opting out can be at any stage of the procedure." 92 Generally speaking, in common law jurisdictions, the opt-out approach has been adopted. One basis for doing so is that it promotes the public interest by allowing persons with socio-economic disadvantages to be part of the proceeding primarily because they are shielded from exposure to costs. On this point, I agree with the comments made by Michael Legg, solicitor in his article "Institutional Investors and Shareholder Class Actions: The Law and Economics of Participation" (2007) 81 ALJ 478, 482-3. 93 The "opt-in" approach has been used in these proceedings whereby each group member has expressly chosen to be part of the proceedings by being identified in Schedule A to the statement of claim. Theoretically, under the opt-in approach, the group of represented persons is limited to those group members identified in Schedule A. 94 However, any persons or entities other than group members who may wish to bring the same action against the defendant must do so separately to this proceeding as they will not be included in The Group. 95 If this eventuates it will lead to a multiplicity of proceedings, which, strictly speaking, must be avoided wherever possible under the general common law doctrine of representative actions. 96 I should note that there is a difference between the opt-in procedure and a limited class action. As Mr Legg points out in footnote 58 on p 486 of his article, an opt-in class action involves notifying all persons affected and seeking their approval to opt-in, whereas in a limited class action, no such notification is made to "outsiders". However, the principles applicable to the two are very similar. 97 From a public policy perspective, the best way forward is that which offers the most efficient use of public resources in terms of being quick and inexpensive whilst at the same time offering the most efficient administration of justice to the parties and represented members. 98 I also held in Carnie that when a represented party may have an exposure to liability (for costs) in the action, an opt-in procedure should be adopted because no person so exposed should be affected to his or her detriment by the action without conscious choice: supra at 473. 99 That was the case in Carnie where Esanda had made it clear that if it were not for the representative proceedings it would not pursue claims against any other person in the group of represented persons in respect of their loan contracts with Esanda. At least 10 people from that group were potentially liable to pay Esanda a minimum of $10,000 each even if Mr and Mrs Carnie succeeded. 100 In the present case the plaintiff and group members have effectively chosen an approach similar to the opt-in approach and have chosen the path of litigation funding from a litigation funder to cover the question of liability for costs, which has been permissible since Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 ALR 58; 80 ALJR 1441. 101 The present problem was analysed by Stone J in the Federal Court in Dorajay Pty Ltd v Aristocrat Leisure Ltd (2005) 147 FCR 394. After considering detailed submissions and previous cases, her Honour ruled that a class action brought by clients of a particular solicitor alone was an abuse of the court's process and repugnant to the policy of the legislation. 102 In my respectful view, her Honour was quite correct in so ruling. Hansen J in the Victorian Supreme Court took the same view in Rod Investments (Vic) Pty Ltd v Clark [2005] VSC 449. 103 However, the Dorajay case has been the subject of serious criticism. I need only refer to the article by Cashman, "Class actions on behalf of clients" (2006) 80 ALJ 738 and by Murphy & Cameron, "Access to Justice and the Evolution of Class Action Litigation in Australia " (2006) 30 MULR 399, both of which are written from the plaintiffs' or funders' viewpoint. 104 In P Dawson Nominees Pty Ltd v Multiplex Ltd (supra), Finkelstein J indicated that he doubted the correctness of her Honour's decision and found no difficulty with a limited class action. 105 With all respect to his Honour, his consideration of the factors involved do not show the same balance as demonstrated by Stone J and, thus, whilst noting what he has said, I will follow the earlier more orthodox approach of Stone J. 106 In my view his Honour overemphasised the position of the funder in excluding "free-riders" [48] p 1201. The key focus must be on the overriding purpose of the statute. 107 Returning to the applications by the plaintiff in the present case, if the statement of claim is amended so that the plaintiff and group members have the same interest in the declaratory relief sought in the proceeding, such that the relief will be beneficial to them all, then it will have the effect of properly commencing a representative action in the Supreme Court. 108 In Carnie I said that if the trial of a representative action is going to involve delay, expense and prejudice over and above other ways of dealing with the proceedings, then the Court should probably order that the proceedings not be continued as a representative action pursuant to the old Part 8, rule 13(1) of the Supreme Court Rules 1970. 109 In this case, a representative action will to a certain extent avoid a multiplicity of proceedings by the group members by having the issues determined at one hearing. However, it will not avoid a multiplicity of proceedings which may be brought by other persons or entities who may have the same issues to raise against the defendant but who have not opted-in to the present proceedings. 110 This is so even if the group members then proceed to bring individual proceedings against the defendant for the determination of loss and damages because, if a declaration that the defendant is liable has already been made, then the significant hurdle of establishing liability will not need to be overcome at each subsequent proceeding between each group member and the defendant. 111 There is some advantage in a common declaration being made. 112 On this type of application, it is relevant to consider the alternative methods of procedure and to judge which is more likely to produce just, quick and cheap disposal of the issues. 113 If the members of The Group were to sue in individual actions in this Court, one or two actions could be heard together with separate questions being posed to decide common questions of law. The drawbacks would be that there would be a need to seek leave to appeal rather than there perhaps being an appeal as of right; the decision in the test cases only being persuasively binding in the other cases and the probability of no litigation funder being willing to back the proceedings. 114 However, these disadvantages must be set against the overriding principles and the fact that it will still be necessary to try the issue as to each claimant as to whether there was a misleading statement made to him or her and, if so, whether reliance has been established. 115 In my view, bearing in mind the wisdom from the past as to the difficulty of dealing with misrepresentation cases in a class action, I should not grant the leave to amend as sought.

(4) Declaratory Proceedings as a Staging Post for Other Litigation 116 Clearly, individual actions brought by each group member against the defendant will be considerably more expensive and a lot less efficient than having the issues which are the subject of the declaratory relief determined in one hearing. 117 Furthermore, the fact that a declaration made in representative proceedings may, in law, relate severally to a series of almost identical situations, does not appear to pose a problem: Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203, 245 [198] (decision reversed by High Court sub nom Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 ALR 58 without affecting that statement). 118 Traditionally, in the exercise of discretion, the declaratory action was not allowed to be used as a staging post in other litigation; see eg Byrne v Herbert [1966] 2 QB 121, 126; Blank v Beroya Pty Ltd (1967) 92 WN (NSW) 24. 119 However, in circumstances such as the present, a common declaratory action has been considered to be proper even though it will be followed by individual actions for damages relying on the res judicata in the declaratory action: Prudential Assurance Co Ltd v Newman Industries Ltd (supra 253) and see David Jones v Cory Bros & Co Ltd (1921) 56 LJ 302 which is fully digested by Vinelott J in the Prudential Assurance case. 120 Accordingly, I do not consider that the fact that the declaration will be a staging post to other actions in damages is a relevant factor for me to consider.

(5) Has the plaintiff a cause of action? 121 The issue here was that the plaintiff was a joint contracting party with another person. It is clear that he had to join the party who was a joint contracting party as a party to the proceedings. 122 The plaintiff has now sought to join that other person as a plaintiff. There is thus no reason why the plaintiff's action should not proceed.

(6) The result of this application 123 The above indicates that in this particular case, because of the lack of commonality of representation and reliance, the proceedings should not continue as a class action. They may, as amended by adding the additional plaintiff, proceed as their personal action. 124 It is appropriate to publish my reasons for this decision and then to stand the matter over to the new term so that short minutes may be brought in. I would note that I have really determined that the whole proceedings should not be dismissed at this stage: it would, I believe, follow that the plaintiff must pay the costs of the motion. 125 Unless some other time is arranged with my Associate, I will have the matter listed before me on 31 January 2008 at 9:30am.

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