King v AG Australia Holdings Limited

REASONS FOR RULING 1 This judgment deals with an issue which has arisen in a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth). The representative party is Mr King ("the applicant"). What is alleged is that the applicant and the members of the representative group were shareholders in AG Australia Holdings Limited (formerly GIO Australia Holdings Limited) ("GIO") when it was the subject of a hostile takeover bid. They did not sell their shares and the gist of the case maintained by the applicant is that by retaining the shares he and the members of the group suffered loss. That loss was caused by the misleading and deceptive conduct of the respondents (while that overly simplifies the allegations, it is an adequate description for present purposes). A significant element of the impugned conduct was a Part B statement issued in late 1998. A summary of the applicant's case (as then formulated) can be found in King v GIO Australia Ltd (2000) 100 FCR 209 at 215. Much of that case (but by no means all) is based on allegations that the respondents, including GIO, engaged in conduct in contravention of Part V of the Trade Practices Act 1974 (Cth) ("the TP Act"). 2 The proceeding was commenced on 31 August 1999. It was allocated to my docket and has been case managed by me since then. There have been many directions hearings at which directions and orders have been made to progress the matter towards trial. At a directions hearing on 21 November 2002 a question arose about fixing the matter for hearing, how common issues for determination at the hearing might be identified and what orders might be made concerning the conduct of the hearing. I directed that any notice of motion of the applicant concerning the conduct of the hearing be filed and served by 7 February 2003, to be made returnable on 14 February 2003. I made it clear at that directions hearing on 21 November 2002 that I would be hearing and determining issues raised in the notice of motion on 14 February 2003. On 6 February 2003 the applicant filed a notice of motion seeking that the matter be fixed for hearing in February 2004, the hearing be directed to determining common questions identified in an annexure to the notice of motion and orders concerning the filing of evidence prior to the hearing. 3 On 7 March 2003 I made orders in the proceeding, some of which concerned the conduct of the hearing, which was fixed to commence on 3 May 2004. Most of the orders were made in determining Mr King's notice of motion filed on 6 February 2003. Before the orders were made there were two directions hearings. The first was on Friday 14 February 2003. On that occasion I indicated I intended to make certain orders and invited the solicitors for the first respondent to prepare short minutes. These short minutes were circulated to the parties though they gave rise to further controversy. I listed the matter for a further directions hearing on 3 March 2003. On that occasion I was requested by a solicitor appearing for the fifth respondent to publish reasons for making some of the orders I foreshadowed I would make. 4 The areas of operation of the orders which were the subject of the request were twofold. The first area concerned orders allowing the applicant to put on expert evidence after the respondents had put on their evidence (save for expert evidence). The second concerned whether I should, at the hearing fixed to commence in May 2004, hear evidence from the applicant and a number of group members concerning reliance and determine finally the question of liability of any respondent in relation to those individuals. 5 As to the first issue, I concluded that the preferable course is to allow the applicant to put on his expert evidence after all the evidence from witnesses (other than experts) has been put on by the respondents. This would permit the experts upon which the applicant proposes to rely to be provided with assumptions which might be drawn from all the evidence, and not just assumptions from matters known to the applicant by the time evidence from his witnesses (other than expert evidence) was filed. This would obviate the need for a revision by the applicant's experts of their evidence when the facts upon which the respondents rely were revealed in their statements. In my opinion, it is, potentially, a more efficient and economic way of dealing with the expert evidence. In adopting this course I was effectively making an election in the exercise of a discretionary power between the course proposed by the applicant and the course proposed by some of the respondents. 6 In resisting the course proposed by the applicant, certain of respondents said they would be prejudiced. The prejudice pointed to by the fifth respondent (and other respondents) in following this course arose from an earlier intimation by the solicitors acting for the applicant that certain particulars sought by certain respondents some time ago would not be provided. Instead information which might otherwise be provided by particulars would be provided in reports of experts. By this means the particulars would be given. This was accepted by the respondents. I was told that this was particularly relevant in relation to an expert report or reports concerning corporate governance (the duties of directors and their breach) on which the applicant might rely. If the applicant's experts' reports were not made available at an early stage, the respondents would have to put on their evidence before they knew the full nature of the case against them. I accept that it is possible that because the respondents accepted that their request for particulars could be dealt with in this way, they may be prejudiced if the applicant's expert evidence is put on after they are required to put on evidence. However that potential prejudice can equally be dealt with, in my opinion, by allowing the respondents to make further application for particulars. I have accommodated this in the orders made by enabling the respondents to move the Court to seek further particulars, and I presently intend that any such motion will be determined and any resultant particulars provided well before the respondents are required to put on evidence. 7 The second matter concerns the proposal that I should, at the hearing, hear evidence from the applicant and a small group of individual shareholders (a sample) and determine whether all or any respondent is liable to all or any of them. In proposing this, it was relatively clear that both the fifth and other respondents who supported this approach had in mind that in determining whether any respondent had engaged in misleading or deceptive conduct (I use that as a shorthand expression of all the impugned conduct of that general character raised in the seventh further amended statement of claim which will be addressed at the trial having regard to the way the issues for determination have been formulated) I would have regard to whether, in fact, any individual had been misled or deceived. It is for the Court to determine whether conduct is misleading and deceptive, assessed objectively: Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202. In certain circumstances evidence of people said to have been misled or deceived might be relevant to that determination though in other circumstances the matter can be determined without such evidence being led. This general issue was discussed by the High Court inCampomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 at [98] and following. In the present matter, the fact that the proceeding is a representative proceeding is significant. More than twenty thousand group members are represented by the solicitors appearing for the applicant and the entire group may be somewhere in the vicinity of fifty thousand. 8 The proposal of the fifth respondent was made without any particulars concerning the manner in which the sample might be selected. The manner in which the sample was to be selected could have a critical bearing on the nature of the evidence given and, on the fifth respondent's thesis, a potentially critical influence on the determination of the question of whether the impugned conduct was misleading or deceptive. Indeed it is not a large step to say that the import of the submissions of the fifth respondent (and other respondents who took a similar position) is that the proceeding should not be a representative proceeding. That is, whether the conduct of the respondents was misleading or deceptive would have to be determined by reference to its effect on each member of the representative group as well as the applicant. However, the proceeding is a representative proceeding, and it was not suggested that the Court is bound the hear evidence from individuals as part of determining whether the impugned conduct was misleading or deceptive. I am not aware of any authority which would indicate I am. 9 The course I propose to follow is consistent with what I understand to be the scheme of Part IVA of the Act where, at least ordinarily, the Court would address common issues before moving to determine the claims of any particular individual including the representative party. It is not correct to say, as counsel for some respondents submitted (whose submissions were adopted by the solicitor for the fifth respondent) that if the applicant cannot prove reliance and damage the whole of the proceeding must fail. I should add that the course of selecting a limited number of shareholders was also opposed by some respondents (including cross respondents) as well as the applicant. 10 It is for these reasons I made the orders I did. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons herein of the Honourable Justice Moore.