King v AG Australia Holdings Ltd

Background 4 The representative proceeding was commenced by Mr King on 31 August 1999. His solicitors are the firm Maurice Blackburn Cashman ("MBC"). The representative group was identified in the pleadings (as modified by subsequent amendments): "The group members to whom this proceeding relates ('the group members') are all persons who owned shares in GIO continuously between 25 August 1998 and 4 January 1999 ('the relevant period') and who did not accept the takeover offers for those shares made by AMP Insurance Investment Holdings Pty Ltd ("AMP") on 25 August 1998 (and varied on 9 December 1998) by reason of the conduct alleged in this Seventh Further Amended Statement of Claim of all (or alternatively, any) of the Respondents and who suffered loss as a consequence, but the group members do not include: (a) Grant Samuel or any body corporate related to GIO or Grant Samuel (within the meaning of s.50 of the Corporations Law); (b) any related entity of GIO or Grant Samuel (within the meaning of s.9 of the Corporations Law); (c) any proprietary company of which any of the Directors is a director or shareholder, or the beneficiary of any trust of which any such Director or corporation is the trustee; and (d) AMP Ltd and any related body corporate of AMP Ltd (within the meaning of s.50 of the Corporations Law) or any director thereof." 5 Since the proceeding commenced, 21,646 former GIO shareholders ("the MBC clients") have signed fee and retainer agreements with MBC and a further 5,638 ("the MBC potential clients") have registered an interest with that firm. The number of shareholders who might have constituted the representative group when the proceeding was commenced totalled 67,224 ("the total shareholder group"). In early 2001, notices were sent to members of the group pursuant to s 33X(1)(a) concerning their right to opt out of the proceeding. Since then in excess of 17,800 shareholders have opted out. Accordingly, of the total shareholder group, there are approximately 50,000 (GIO puts the number at 49,399) who have not opted out ("the representative group"). 6 In the notice sent pursuant to s 33X(1)(a), a group member was described in the following way:

"You are a group member if you: (a) owned shares in GIO continuously between 25 August 1998 and 4 January 1999; and (b) did not accept the takeover offer for those shares made to you by AMP on 25 August 1998 and varied on 9 December 1998; and (c) did not accept the takeover offer by reason of the various representations and conduct of the Respondents detailed in the Statement of Claim; and (d) suffered a loss as a consequence; and (e) have a claim against all the Respondents." 7 Some recipients of this notice, who were part of the total shareholder group, may have considered they were not group members because they did not satisfy one or all of the conditions of group membership set out in pars (c), (d) and (e) of the description in the notice. Those recipients who took this view may well have also considered it was unnecessary to complete and return an opt out notice. Some recipients of the notice may, for example, have known that nothing had been said to them by the respondents during the hostile takeover that caused them to retain their shares. There may be large institutional shareholders who took independent advice which were in this position. There may be small shareholders who retained their shares for quite idiosyncratic reasons who were also in this position. For these reasons no opt out notice may have been returned. While at the moment, these are essentially matters of speculation (subject to the evidence referred to in the next paragraph), it may be, at least as a matter of fact, that not all members of the representative group believe or assert they have a cause of action (of the type pleaded by Mr King) against the respondents. Other members of the total shareholder group who did not opt out and are not MBC clients or MBC potential clients, may well have conscientiously addressed the notice and considered themselves members of the group having regard to the description in the notice and, for this reason, did not opt out. 8 GIO called evidence from Mr Jakob Vujcic who is an in-house lawyer retained by GIO to manage this proceeding. From documents in GIO's possession he was able to identify (though his searches were incomplete) four classes of shareholders who retained their shares and, at the very least arguably, are not members of the representative group (in the sense that they do not have and/or do not assert they have a claim against GIO). The first group comprised shareholders who attempted to accept the offer but their acceptance was received after the cut-off date (85 people are in this group). The second group comprised shareholders who did not accept the takeover offer by reason of concerns about the impact of capital gains tax (8 people are in this group). The third group are foreign nationals that may not have been eligible to participate as a result of various tax and/or foreign law implications (7 people are in this group). The last group comprised those who did not have any intention of accepting the offer to acquire their shares and are unlikely to have accepted the offer irrespective of statements by GIO concerning the offer (correspondence tendered by GIO from 24 people might warrant an inference that they are in this group). 9 GIO wishes to contact members of the representative group who are not MBC clients (for convenience only, "the unrepresented shareholders"- although, some may have retained lawyers). However it does not know the identity of the unrepresented shareholders. That is because it does not know the names of the shareholders who are MBC clients or MBC potential clients. Plainly enough, the identity of the unrepresented shareholders can be ascertained by GIO by referring to the list of MBC clients and a list of members of the representative group. GIO knows the identity of members of the representative group as it knows who its shareholders were who made up the total shareholder group and it also knows the identity of those who have opted out. 10 By a notice of motion filed 3 April 2002, GIO seeks orders requiring MBC to provide it with a list of MBC clients and a list of MBC potential clients ("the client lists"). The orders sought required MBC, and not Mr King, to produce the lists. I mention this only to note that no issue is taken about the form of the order. The firm is not a party to the proceeding though it has not sought to disguise the fact that it is underwriting the costs of the litigation brought by Mr King which, to date, amount to almost 5 million dollars. The application was heard as a contested matter on 17 and 18 June 2002. However during the hearing it was apparent that Mr King and/or MBC did not resist providing the client lists as long as a regime was in place, which conditioned communications between GIO and the unrepresented shareholders. An aspect of the debate at the hearing became whether there should be such a regime, and, if so, how it to would operate. This, in turn, raised several other issues. The first concerned the role of MBC in the proceedings and, in particular, the nature of the relationship between MBC and the unrepresented shareholders. The second concerned the manner in which, and the terms on which GIO, might seek to settle the claim of an individual unrepresented shareholder or even the individual claim of all members of the representative group.

Production of client lists 11 I should set out the submissions of GIO in support of the provision of the client lists. For reasons which will be apparent shortly, it will not be necessary to address them all in detail. It submitted that a common feature of litigation is that a defendant knows the identity of the plaintiff or plaintiffs to bring the claim against it. GIO accepted that because of s 33H(2) of the Act, it is unnecessary to name group members in the originating process. It also accepted that the Court of Chancery permitted representative suits to proceed even if all parties to the suit could not be named where, for example, the plaintiffs were a fluctuating and indefinite body: Duke of Bedford v Ellis [1901] AC 1 at 11. However, the identity of each unrepresented shareholder in this matter was ascertainable (for reasons earlier given). 12 GIO wished to ascertain which of the representative group were "actively prosecuting" the proceeding and would consider approaching all or some of them with a view to reaching a compromise of their claims. Mr Burns, a partner in the firm Ebsworth & Ebsworth which acts for GIO in this proceeding, gave evidence that the possibility of GIO directly contacting all members of the representative group (without the involvement of Ebsworth & Ebsworth) was a matter that had already been considered. GIO submitted that parties who have solicitors acting for them may, if they are sui juris, compromise an action without the intervention of their solicitors. Reference was made to several authorities. 13 The first was Sullivan v Pearson; ex parte Morrison (1864) LR 4 QB 153. In that matter a represented but indigent plaintiff successfully sued a represented defendant for personal injuries suffered as a result of the defendant's servant's negligence. The plaintiff secured a verdict for Ł25. At that point the plaintiff's attorney claimed to be owed Ł100 for costs and disbursements and informed the defendant's attorney, asserting a lien over the damages. The defendant obtained a rule nisi to set aside the verdict as being against the evidence. The plaintiff and the defendant, without the involvement of their attorneys, then settled the action for Ł10 "in settlement of the action for personal injury and solicitor's charges...". The plaintiff's attorney then sued the defendant for the costs. Blackburn J gave the leading judgment. His Lordship accepted that had judgment been entered, the attorney would have had a lien on the proceeds of the judgment and would be entitled to "have its proceeds passed through his hands". In that (and other) circumstances where an arrangement was made preventing the attorney from the benefit of his lien, the attorney could secure payment from the parties to the arrangement. In that matter, however, doubt attended the verdict and, in effect, the litigation had not been resolved. In those circumstances it had been open to the parties to settle as they did and the attorney had no claim on the defendant for his costs. 14 The next authority referred to was The Hope (1883) 8 PD 144. Two seamen brought an action for their wages against the owners of a vessel. Both the plaintiffs and the defendants retained solicitors. Three days after the proceedings were commenced, the parties settled. The plaintiffs left the country without paying their solicitors. The plaintiffs' solicitors sought an order from a registrar of the Court in which the proceedings had been commenced, requiring the defendants to pay the plaintiffs' taxed costs to the solicitors. An order was made but the defendants successfully appealed. The leading judgment in the Court of Appeal was given by Brett MR. His Lordship observed that the plaintiffs' solicitors were only entitled to an order for their costs against the defendants, if the plaintiffs and the defendants entered into the compromise with the intention of depriving the solicitors of their lien. There was no evidence of such an intention. Lindley LJ noted that "(t)here is no rule that parties may not compromise an action without the intervention of their solicitors. They must, however, do so honestly, and not intend to cheat the solicitors of their proper charges". 15 The last authority referred to on this question was Arthur J.S.Hall v Simons [1999] 3 WLR 873. The facts and issues in that matter are largely irrelevant. It is sufficient to note that the Court of Appeal observed (at 888) that, in a context where the parties were represented, adult parties of sound mind may ordinarily settle proceedings by an agreement made wholly out of court. 16 GIO submitted it would gain other advantages from knowing the identity of group members in addition to being able to explore settlement. It could commence investigations with a view to testing the evidence of any group member who might later be required to give evidence. GIO could distinguish between institutional investors, retail investors with a number of shares in a number of listed companies and experienced in sharemarket investment and finally, retail investors who only held shares in GIO. In his evidence, Mr Burns expanded on the advantages. A defence could be prepared by, amongst other things, issuing appropriate subpoenas, interviewing witnesses and undertaking further investigations into the particular circumstances of individual group members. GIO could also assess its maximum potential liability and its prospects of succeeding on issues of reliance and causation in respect of particular group members. 17 Reference was made to the judgment of Bryson J in Shepherd v Australian and New Zealand Banking Group Ltd (1996) 20 ACSR 81 at 100-101 where his Honour indicated it was appropriate to ascertain how many claimants there truly were and what cases they might maintain when determining, as a matter of discretion, whether proceedings should be permitted to continue as representative proceedings under Part 8 rule 13(1) of the Supreme Court Rules. In addition, the interests of defendants were to be considered and a procedure involving representative proceedings should not be imposed on a defendant over claims for small sums or interests of small value which "a reasonable person should accept in the flow of life's advantages and misfortunes". His Honour also said: "The Court should only decide that some person who has not clearly stated his position should be involved in proceedings where it is impractical to obtain a decision from that person for some reason such as minority or incapacity, or where there is an overwhelming probability that such a person would wish to be involved. If it is possible to consult them, the Court should not make any paternalistic assumption about its capacity to decide on behalf of others that proceedings are to be brought on their behalf." 18 In that matter an issue arose whether proceedings, commenced by individuals who had engaged a company (then in liquidation) to supply and erect kit homes and garages, could be maintained as representative proceedings. They sought to sue "deemed" directors to recover deposits paid. The plaintiffs purported to do so on their own behalf and on behalf of others in representative proceedings. However, his Honour concluded the plaintiffs had no cause of action and, accordingly, it was ultimately unnecessary to decide whether the proceedings should continue as representative proceedings. 19 GIO submitted that if Pt IVA operated to prevent it from settling claims of individual members of the representative group or prevented it from knowing the name and address of each group member who had an active interest in the proceedings so that it might investigate their circumstances and prepare its defence against their claim, then the Part was invalid. Reference was made to Nicholas v The Queen (1998) 193 CLR 173 at 209; Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 121-2; Harris v Caladine (1991) 172 CLR 84 at 150; Re Nolan; ex parte Young (1991) 172 CLR 460; Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 27. 20 It is convenient, at this point, to consider three issues which arise if the client lists are provided to GIO which, as noted earlier, Mr King and MBC do not resist in principle.

Regime for communication - role of Maurice Blackburn Cashman 21 On the assumption that the client lists are provided to GIO, a question arises about whether GIO and/or its solicitors can communicate with unrepresented shareholders without MBC involvement. GIO indicated (though as its secondary position) that it was prepared to send MBC a copy of any written communication with a member of the representative group at the time the communication was sent. This, however, would not apply to any offer of settlement. Offers of settlement are discussed later in these reasons and I put that issue to one side for the moment. GIO rejected any suggestion that it should be precluded from communicating by means other than writing. GIO accepted it would not communicate with members of the representative group on questions of liability as they concerned the common issues. It left open the possibility of communication in relation to issues concerning only individual liability (such as causation and reliance). GIO also accepted that its solicitors should not communicate with MBC clients though, as noted earlier, Mr Burns adverted to the possibility of GIO directly communicating with individual members of the representative group (even if MBC clients). 22 This regime was not acceptable to MBC. I will, at this point in the judgment, refer to the position adopted by MBC and not refer to Mr King though the submissions made, were made on his behalf. As noted earlier, the orders sought concern MBC and no attempt was made to distinguish between MBC and Mr King other than in relation to offers of settlement. MBC's position was that any communication with the representative group should be in writing only. Before any letter was sent, a copy should be sent to MBC and its agreement sought. If there was a dispute about the matter (I assume about either the contents of the letter or whether the letter should be sent at all), the Court should resolve the dispute. MBC initially resisted the suggestion that offers of settlement could be made by GIO directly to individual members of the representative group but later indicated that if they were, it might be appropriate, at least in relation to unrepresented shareholders, for a component of the settlement figure (assuming settlement) to be retained to cover costs. Again this is a matter I discuss shortly. 23 Part IVA contains features not found in conventional litigation. Section 33C enables one or a number of people who have common claims (loosely described) to commence proceedings representing people having the common claims. It is not necessary for people on whose behalf a representative proceeding is brought to consent: see s 33E, though the opportunity must be given to those people to opt out of proceeding: see s 33J. There is no requirement that the applicant (or applicants) who is the representative party be legally represented. However there are provisions, concerning the adequacy of the representation by the representative party, that authorise the Court to substitute another member of the group as the representative party: see s 33T. 24 The relationship between the solicitors of the representative party and members of the representative group was referred to by Wilcox J in McMullin v ICI Australia Operations Pty Ltd (Wilcox J, 27 November 1997, Unreported). His Honour said the solicitors had a fiduciary duty to both their clients and the various group members. 25 Similar comments about the role of the solicitors for the representative party were made by Finkelstein J in Lopez v Star World Enterprises Pty Ltd [1999] FCA 104 at [15]-[16]. His Honour was considering whether to approve a settlement under s 33V and the role of the representative party's solicitors in that process. His Honour said: "With regard to the application under s 33V, my principal task is to assess whether the compromise is a fair and reasonable compromise of the claims made on behalf of the group members. I am not so much concerned with the position of Mr Lopez who, after all, has solicitors and counsel to advise him as to how his interests will best be served in the litigation. The group members are not protected in this way. It is true that any group member may opt out of the proceeding to avoid his or her rights being affected in any way (whether adversely or beneficially) by the outcome of this litigation. But, I have no doubt that many members of this group (and no doubt members of other large groups who are represented in proceedings in the court) will remain as represented parties (that is not opt out of the proceeding) without a real appreciation of what that entails. In particular, it is likely that many group members will not understand that any judgment given in a representative proceeding will be binding upon them: see s 33ZB. Even if the group members are provided with a summary of the law relating to matters such as issue estoppel and res judicata, it is unlikely to be instructive to most of them. Accordingly, the task of the court in considering an application under s 33V is indeed an onerous one especially where the application is not opposed. It is a task in which the court inevitably must rely heavily on the solicitor retained by, and counsel who appears for, the applicant to put before it all matters relevant to the court's consideration of the matter. In this regard there would be few cases where the court can properly exercise its power under s 33V without evidence from the solicitor supported by counsel that the proposed compromise is in the interests of the group members. I appreciate that, on occasion, this will place the solicitor and counsel in a difficult position. The interests of their client will not always be coincident with the interests of the members of the group. But, in my view, that is no more than a necessary consequence of their client instituting a representative action." 26 The relationship between the representative party and those represented was referred to more generally by Brennan J in Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 at 408. 27 Plainly MBC has an obligation to conduct the representative proceeding on behalf of Mr King in a way consistent with the interests of members of the representative group whether MBC clients or not. However that firm does not have a solicitor client relationship with the unrepresented shareholders and, as a matter of principle, could not resist Ebsworth & Ebsworth communicating with members of that group for legitimate forensic reasons. I accept that those reasons might include asking questions to ascertain whether any particular unrepresented shareholder viewed themselves as satisfying conditions of group membership and asking questions concerning reliance. Mr Murphy, who is a partner of MBC and has been involved in the conduct of the proceeding in this Court on behalf of Mr King, accepted in cross examination that GIO's interest would be better served it if it could communicate now with unrepresented group members concerning questions of reliance. 28 However, as a matter of case management given the size of the representative group, it is desirable that, prima facie, the Court be in a position to exercise some control over any communication and it is also in the interests of the administration of justice more generally. As Brennan J observed in Carnie v Esanda Finance Corporation Ltd (supra) at 408: "….it is precisely because of the flexible utility of the representative action that judicial control of its conduct is important, to ensure not only that the litigation as between the plaintiff and defendant is efficiently disposed of but also that the interests of those who are absent but represented are not prejudiced by the conduct of the litigation on their behalf." These observations were referred to with approval by Gleeson CJ in Mobil Oil Australia Pty Ltd v Victoria [2002] HCA 27 at [21]. 29 Questions of timing may also be relevant to whether GIO should communicate with unrepresented shareholders. At the moment, no orders have been sought concerning the separate trial of common issues concerning liability. It is relatively clear that MBC presently assumes that the matter will proceed in this way. It is a course that has, as I presently perceive the issues raised in the proceeding generally, much to commend it. However it is equally clear, having regard to the evidence of Mr Burns, that the assumption is now not shared by Ebsworth & Ebsworth. Moreover it is not an issue about which any party has had an opportunity to make submissions. Nor have I had the opportunity to form a considered view on the question by reference to such submissions. I should note, however, that the assumption on which Ebsworth & Ebsworth is now apparently operating has not always been the position of its client. The following appears in a decision of a Full Court in this matter concerning the notice advising of the right to opt out: see [2001] FCA 270 at [6]: "It was common ground on the application for leave to appeal that the representative proceedings will be conducted in two stages. At the first stage the applicant will endeavour to prove that the respondents engaged in misleading and deceptive conduct or breached their respective duties of care. If the applicant succeeds in the first stage of the proceedings it will be necessary to move to the second stage, unless the proceedings are settled (see ss 33V and 33W). At the second stage each group member will have to establish the elements of his or her individual cause of action. This will involve, for example, proof that the group member relied on the respondents' misleading and deceptive conduct in not accepting AMP's offer and that he or she suffered loss by reason of the respondents' conduct." 30 Nonetheless, what communications might be appropriate and when they might reasonably be undertaken may be influenced by the course the proceeding takes in the near future. If there is a separate trial on common questions concerning liability, there may be some communications which might be better left until after those issues have been resolved, assuming their resolution does not conclude the proceedings. There may be some communications that it would be appropriate take place now. If there is no separate trial on common questions concerning liability then it may be necessary to approach the question of what communications could take place now on a different basis. 31 The following is an illustration of why, in my opinion, communication should, prima facie, involve the Court. A situation could arise where Ebsworth & Ebsworth wrote to unrepresented shareholders inviting them to indicate whether they relied on the pleaded conduct and, if so, seeking particulars. The correspondence might be in terms that MBC considered were inimical to the interests of MBC clients and, perhaps additionally, the interests of unrepresented shareholders. Such a situation might result in responsive correspondence from MBC to unrepresented shareholders at least some of whom, if not many, could be left in a position of uncertainty or even confusion. 32 In my opinion, these issues are best dealt with by requiring Ebsworth & Ebsworth and/or GIO to forward to MBC a draft of any correspondence proposed to be send to unrepresented shareholders ten days before the date it is to be sent. If the correspondence was controversial MBC could approach the Court seeking directions about the correspondence and, if it ultimately became necessary, an order could be made restraining Ebsworth & Ebsworth and/or GIO from sending the correspondence before it was considered by the Court. In my opinion, the Court has power to impose such a regime under s 33ZF. It is unnecessary, at this stage, to consider the question of whether GIO should be able to communicate with group members other than in writing. That issue can be considered when GIO proposed to correspond in a way that might bring about communication other than in writing, if what is proposed is controversial and the liberty to apply is exercised. However, I will, for the moment, limit GIO's capacity to communicate to written communication. 33 While this conclusion effectively enlivens the challenge by GIO to the validity of Pt IVA, that issue has been resolved, for my purposes, by the decision of the Full Court in Femcare Ltd v Bright (2000) 100 FCR 331 which I am bound to follow. In my opinion, the particular matters pointed to by GIO are, in substance, a subset of the more general matters relied on, unsuccessfully, by the appellant in Femcare Ltd v Bright.

Regime for communication-offers of settlement generally 34 GIO seeks the opportunity to communicate with at least the unrepresented shareholders (though, as noted earlier, it also raised the possibility of communicating directly with all members of the representative group) with a view to settling individual claims. The general import of GIO's submission was to the following effect. The combined effect of Mr King commencing this proceeding and a significant number of individuals in the total shareholder group not opting out, is that GIO is facing claims, pursued in the proceeding, by almost 50,000 individuals. The course GIO wishes to follow involves, as I understand it, making offers of settlement which, if accepted, would result in an individual executing a deed of release. Perhaps some additional legal mechanisms will be conceived. However it is a course which is not intended to have any individual settlement sanctioned by the Court or perhaps even made public. One issue that immediately arises is whether this course is precluded, expressly or impliedly, by s 33V or Pt IVA more generally or should be prevented or limited by an order made under that Part. 35 The issue of the Court's role in the settlement of a representative proceeding was considered by Branson J in Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250. Her Honour said (at 258): "Section 33V(1) of the Federal Court Act provides as follows: 'A representative proceeding may not be settled or discontinued without the approval of the Court.' The purpose intended to be served by s33V(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, s33V 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. It was contended on behalf of the applicant that by approving the making of the consent order of 26 September 1996 in terms which included the above paragraphs, the Court impliedly gave its approval to the settlement purported to be achieved by the consent orders and the agreement which it noted. Nothing in the Court record suggests that the terms of s33V of the Federal Court Act were drawn to the attention of the judge who made the order of 26 September 1996, or that it was otherwise drawn to his attention that his approval of a settlement in terms of the agreement which he noted was required. In my view no approval can be implied from the terms of the order of 26 September 1996. Unless and until the approval of the Court is sought and obtained in respect of the settlement agreement reached between the applicant and the third respondent, such agreement will, in my view, be without legal effect in these proceedings." [Emphasis added] 36 Counsel for GIO appeared to submit in written submissions filed before the hearing, that s 33V prevented settlement with individual group members without Court approval and this was one feature of Part IVA that led to its invalidity. However during the hearing it was submitted on behalf of GIO that the reach of s 33V was more limited and a settlement with an individual group member did not require Court approval. Counsel for Mr King submitted it was difficult to see how s 33V prevented the settlement of one individual group member's claim as the section speaks of "settlement of a representative proceeding". Thus there appeared to be little, if any, difference between the parties on the reach of the section. 37 However, it is an important issue and I should be satisfied that this construction of the section is correct: see Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 at 366 par 13 per Brennan CJ. Part IVA was enacted after the Law Reform Commission published Report No. 46 on "Grouped Proceedings in the Federal Court" in 1988, though the legislative scheme proposed by the Commission was modified by Parliament. The Commission recommended (par [218]) that Court approval should be required if the principal applicant sought to settle a group member's proceeding and that "a group member should be able, at any stage before judgment is given, without leave, to settle the group member's proceeding". This was reflected in cl 28(5)(b) of the draft Bill proposed by the Commission. However this recommendation was made in the context of a proposed statutory scheme which contemplated the Court being seized of proceedings brought by the "principal applicant" on his or her own behalf and proceedings brought by the "principal applicant" on behalf of each group member described as a "group member's proceeding". It is fairly clear, as I read the Report, that it was proposed a group member would be a party to a proceeding before the Court which, like any other proceeding, could (at least in principle) be settled. 38 However the model developed by the Commission was not reflected, in its entirety, in Pt IVA. Indeed in the second reading speech, it was acknowledged that the Government had "not adopted the Commission's 'grouped proceedings' approach" (Australia, Senate 1991, Parliamentary Debates (Hansard), Thursday 12 September 1991, at 1447). Thus Pt IVA does not, in terms, provide for a discrete proceeding, susceptible of settlement, concerning the claims of each group member. 39 It is sometimes said that group members are, in the context of Pt IVA, not parties to the proceeding for the purposes of costs or otherwise: see the observations of Merkel J in Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) 166 ALR 731 at [31] and Gaudron, Gummow and Hayne JJ in Mobil Oil Australia Pty Ltd v Victoria (supra) at [50]. That is not to say, of course, that a group member who has not opted out might not be bound by the judgment in the represented proceeding. Section 33ZB contemplates they will be. 40 However s 33V concerns the settlement of the "representative proceeding" which is defined in s 33A as meaning "a proceeding commenced under section 33C". That latter section concerns a proceeding commenced by one or more of the people who have claims against the same person. In my opinion, s 33V is directed to the settlement or discontinuance of that proceeding. That is, there can be no settlement or discontinuance of the representative proceeding without Court approval. Section 33V(2) confers on the Court the power to make orders to ensure that there is a just distribution to group members of any money paid under a settlement of that proceeding. This provision is consistent with the section being concerned, at least in part, with settlement of the proceeding in some aggregated or global way similar to an award of damages in an aggregate amount as provided by s 33Z(1)(f) and (3). Nonetheless a settlement of the representative proceeding might be on terms that agreed sums be paid to particular group members or sub-groups of group members. 41 This construction of s 33V gains some further support from s 33W which, in contrast, speaks of the settlement of an individual claim (of the representative party) for which leave must be sought. It is probable that when Branson J spoke, in the preceding passage, of "any substantive claim against a respondent", her Honour had in mind "a claim" maintained by the representative party on behalf of the representative group which might be one of a number of claims of the type comprehended by s 33C. It is to be recalled that the word "proceeding" is given a fairly wide meaning in s 4 of the Act and, consistent with that definition, could include part of a proceeding: see, for example, a discussion of the meaning of "proceeding " in an earlier judgment in this matter [2001] FCA 1773 at [11] and [12]. That is, the expression "representative proceeding" could include an element in, or part of, such a proceeding. 42 The construction adopted by Branson J is consistent with what I understand to be the purpose of s 33V, namely to ensure, by Court scrutiny, that a settlement acceptable to a representative party accommodates the interests and circumstances of group members having regard, inter alia, to issues raised in the proceedings and, if issues have been determined (such as liability) the results of that determination. While, as discussed earlier, the terms of s 33V concern only the settlement of the representative proceeding, and GIO's proposal involves settlement of individual claims, the proposal could, if given effect to in particular way, have the effect of settling the whole of the representative proceeding itself. If, for example, GIO itself directly made an offer of settlement to all group members and Mr King (as noted earlier, a matter canvassed in the evidence of Mr Burns) and they all accepted the offer and signed releases, it could effectively settle the representative proceeding without Court involvement and in spite of s 33V. Even in this example, Court approval might be required in relation to the settlement with Mr King: see s 33W. However if offers to all group members were accepted, GIO may well have achieved indirectly what is prohibited directly by s 33V. If so, the section might be construed so to preclude the achievement of the prohibited conduct by indirect means: see Australian Building Construction Employees' and Builders Labourers' Federation v Master Builders' Association of New South Wales (1986) 18 FCR 18 at 27 per Beaumont J. I should add, parenthetically, that it would be an unusual situation where an offer likely to be accepted by all group members would be viewed by the Court as one for which approval should not be given. 43 It may be thought that the objectives sought to be achieved by s 33V could have no relevance to a settlement agreed to by an individual group members whose decision (other than in relation to costs) would not impact, at least in any direct sense, on the interests of other members of the representative group. But the nature of representative proceedings are such that individual group members may well be unaware of the issues raised, their legal significance, whether and on what terms issues had already been resolved and what might be, at any particular point in the proceedings, a reasonable basis for settling. While some group members may wish to settle for reasons which do not involve consideration of these matters, the proposal advanced by GIO, although in very general terms, would, in the absence of any Court direction or control, potentially effectively deny all individual group members (other than MBC clients) the opportunity of considering them. The observations of Brennan J in Carnie v Esanda Finance Corporation Ltd (supra) at 408 bear repeating at this point: "….it is precisely because of the flexible utility of the representative action that judicial control of its conduct is important, to ensure not only that the litigation as between the plaintiff and defendant is efficiently disposed of but also that the interests of those who are absent but represented are not prejudiced by the conduct of the litigation on their behalf." 44 Accordingly, while I will make an order requiring MBC to provide GIO with the client lists, I will also make a direction, pursuant to s 33ZF, that subject to further order, no offer of settlement be sent to any group member without the leave of the Court. In framing the direction in this way I am leaving open the possibility that GIO may wish to argue that the direction should not operate in relation to a particular communication concerning settlement. I have in mind that an application that the operation of the order be modified or limited would not be the same as an application for the grant of leave. The former may entail a submission that, as a matter of principle and not by reference to the particular terms of the communication, GIO should, in particular circumstances and for identified reasons, be able to communicate with group members or particular sub-groups. Otherwise leave would have to be sought and granted by reference to the terms of any particular communication. 45 It will be possible, in the context of any application for leave or any application to vary the order, to assess the reach of the implied prohibition, if any, referred to earlier, in the context of what is actually been sought to be done by GIO. It will also be possible, in that context, to assess whether what is proposed might adversely impact on the interests of unrepresented shareholders or, on the other hand, sufficiently protect them. Section 33V, in terms, concerns the approval of a settlement, which presupposes offer, acceptance and agreement. However, for reasons discussed earlier in the context of communications with members of the representative group more generally, there is a real potential for confusion and uncertainty if an offer was made by GIO and accepted but was in terms which might not ultimately receive Court approval. For this reason I have adopted a regime which, at least initially, operates on offers of settlement and not settlements. 46 I should mention that this Court has had recourse to American authorities concerning class actions in giving content to the Pt IVA: see e.g. Williams v FAI Home Security Pty Ltd (No 4) [2000] FCA 1925 especially at [19] notwithstanding significant differences between the scheme in that Part and methods of litigating group or class issues in the United States. I am aware of American authorities, to which counsel for Mr King has referred, concerning settlement with members of a class without proper legal advice: see Re General Motors Corporation Engine Interchange Litigation 594 F.2d 1106 (7th Cir 1979). It may be that any offer of settlement that GIO is given leave to make, may have to refer to legal advice. However that is a matter that can be considered if leave is sought. 47 While this conclusion again enlivens the challenge by GIO to the validity of Pt IVA, that issue has, in my opinion, been resolved by the decision of the Full Court in Femcare Ltd v Bright.

Regime for communication-offers of settlement and costs 48 A specific issue concerning GIO communicating with individual unrepresented shareholders on the question of settlement was the relevance, if any, of the costs incurred by MBC acting for Mr King. In view of the conclusion I have just reached, it is strictly unnecessary to deal with this question at this point. However it is probably desirable I say something about the matter now in view of the issues raised during the interlocutory hearing and the possibility that GIO might seek to make an offer of settlement to group members. 49 The Act contains several specific provisions concerning costs in representative proceedings. Section 43(1A) prohibits an order for costs against a person on whose behalf a proceeding has been commenced (other than the representative party) unless authorised by either s 33Q or s 33R. Section 33R makes provision for the determination of issues which are not common to the entire representative group by the Court to establish, by direction, sub-groups. In such a situation the representative of the sub-group, and not the representative of the entire group, may be made liable for costs. An extension of this principle is found in s 33R which enables an individual group member to appear, when issues not common to the entire group have to be determined, and there is an issue which relates only to the claims of that member. In those circumstances the individual group member may be made liable for costs associated with the determination of the issue. 50 Section 43(1A) was introduced by Act No 143 of 1992, some six months after the enactment of Part IVA (including ss 33Q and 33R). The following was said of the provision in the second reading speech: [Section 43A] make(s) it clear that a person represented in a representative proceeding …… cannot be ordered to pay costs except in special circumstances. This amendment reaffirms a long line of judicial authority which was said to be wrong in a recent judgment of the Supreme Court of Victoria in respect of statutory provisions in that State dealing with the power of that court to award costs. The amendment will remove any doubts that may have been created by that decision for proceedings of this kind. (Australia, House of Representatives 1992, Parliamentary Debates (Hansard), Wednesday 14 October 1992, at 2157) 51 The judgment referred to was Burns Philp & Co Ltd v Bhagat [1993] 1 VR 203. In that matter the Appeal Division of the Supreme Court of Victoria concluded, in relation to a representative proceedings brought under ss 34 and 35 of the Supreme Court Act 1986 (Vic) ("Supreme Court Act") or Order 18 of the Supreme Court Rules, there was no implied limitation on the power to award costs conferred by s 24(1) of that Act. The respondent to the appeal, MrBhagat ("the representative plaintiff") commenced proceedings with the consent and on behalf of 14 people who, like the representative plaintiff, were unit holders in six trusts which were the subject of the litigation. Ultimately 12,000 people agreed to be represented by the representative plaintiff. A preliminary determination was sought concerning the potential liability of the represented parties to pay the defendants' costs. The trial judge concluded they could not be made liable but the Appeal Division concluded they could. While strictly the issue did not arise (as the Appeal Division concluded), the issue of liability was considered by Brooking J (with whom Fullager and Tadgell JJ agreed) in a comprehensive judgment in which his Honour canvassed the authorities at length and in detail. 52 However while the judgment apparently giving rise to the introduction of subs (1A) into s 43, concerned liability to pay the defendant's costs, the subsection is not, in terms, limited to payment of the respondent's costs in a proceeding under Pt IVA in the event that the proceeding or part of it was determined in the respondent's favour. The power to award costs conferred by s 43 is not to be viewed narrowly. A recent example of the wide application of the section is found in Gore v Justice Corporation Pty Ltd [2002] FCA 354: see also the observations of Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 88-89. It cannot be assumed that s 43, before the introduction of subs (1A), did not confer power to order members of the representative group to contribute to the costs of the represented party and that subs (1A) was intended to deny the power. However these are matters that need not be considered further. 53 If the Court has no power to order group members to contribute to the costs of the represented party, Part IVA nonetheless deals with this issue. Section 33ZJ enables the representative party (or sub-group representative party) to apply to the Court for an order authorising the payment of some of the representative party's costs out of the damages awarded if the costs reasonably incurred by the representative party were likely to exceed the costs recoverable by that person from the respondent. What the Act does not address is the possibility of members of the representative group contributing to the costs of the representative party when the members of the representative group have recovered damages or compensation from a respondent in a settlement. As noted earlier, the position of the representative party who wishes to settle his or her individual claim is dealt with by s 33W. Before settling, the representative party must obtain the leave of the Court. When giving leave, the Court has power under s 33W(5) to impose conditions as to costs. If the representative proceeding is settled, the Court can make "such orders as are just with respect to the distribution of any money". 54 There are now a number of authorities addressing how costs should be dealt with in representative proceedings both when settlements are reached and otherwise. A convenient starting point is the judgment of Wilcox J in McMullin v ICI Australia Operations Pty Ltd (supra). In that matter judgment was given awarding damages to the representative parties and six members of the representative group. The entitlement of several other members of the representative group to damages (or their assessment) had not been determined. Counsel for the representative parties sought that their costs be paid by the respondents on an indemnity basis. Counsel for the respondents resisted any order for costs being made at that time because an offer had been made to the representative parties to settle the claims of the representative parties and members of the representative group. It was submitted that when all damages were assessed, the amount awarded may be less than the amount offered. In those circumstances the respondents might not be liable for any costs. As to this argument his Honour said: "[Counsel for the respondent's] approach [of relying on an earlier rejected offer of settlement to resist a costs order] is familiar in civil litigation. Prior to the incurring of major costs, a respondent often makes an offer to the applicant, "without prejudice except as to costs". The idea is that, if the applicant ends up with a less beneficial result, the respondent may be able to resist an adverse order for costs - or even conceivably obtain a favourable order - by establishing the applicant has not succeeded in beating the offer. There is no problem about that approach in ordinary litigation, but I think it presents a major problem in relation to a representative proceeding under Part IVA of the Federal Court of Australia Act 1976, especially where there are unidentified group members. Section 33V(1) of the Act provides: 'A representative proceeding may not be settled or discontinued without the approval of the Court.' If the offer made to [the representative parties] last March had attracted them, and they had applied for approval of the settlement, or discontinuance of the proceeding in order to give effect to the terms of the offer, I would have been unable to deal with the application until I had information regarding the identity of the group members and the likely value of their claims. I would not have been prepared to approve a monetary settlement without having some idea whether this represented fair value, from the point of view of group members; in other words, whether the amount that individual group members would receive reasonably reflected the hazards of their claims. Counsel for the applicants would not have been able to provide the necessary information without proceeding with the case. [Counsel for the respondent] says the effect of such an approach is serious, from a respondent's point of view. Respondents will be deprived of a major method of resolving litigation, the making of sensible pre-trial offers. I appreciate the point. However, if respondents in representative proceedings are prepared to take a realistic approach, ways remain for them to reduce the extent of the litigation and their potential costs liability. For example, there may be cases where it seems the claim is likely to succeed in relation to liability. In such a case a respondent might think it worthwhile admitting liability, thereby saving the costs of a hearing on liability, and leaving only the determination of individual damages claims. Alternatively, a respondent might offer to compromise liability by suggesting to the representative party that a discount of a given percentage should be applied to all assessments of damages. At a later stage, if offers were made, in a specific amount, in respect of individual group members' damages and the offers were not exceeded in the result, there would be a substantial argument for not awarding the applicant the costs of the hearing at which the damages were assessed." 55 It can be seen that while a rejected offer to settle the entire proceeding might not give respondents quite the same comfort as in ordinary litigation when issues of costs are considered, his Honour suggests respondents can protect their position on the question of costs in other ways. This includes making offers of settlement to individual group members after liability is admitted. Plainly enough, it was unnecessary for his Honour to address whether a respondent can offer to settle individual claims before liability is resolved (by determination or concession) and, if so, what bearing the offer, if rejected, may ultimately have on the question of costs. 56 In Qantas Airways Ltd v Cameron (No 3) (1996) 148 ALR 378 a quite different issue arose concerning the question of costs. The Full Court had to consider how costs should be dealt with in circumstances where representative proceedings had been brought by the representative party on her own behalf and on behalf of nine other people and she failed to establish liability in relation to herself and eight of the group but succeeded in relation to one individual. The representative party unsuccessfully argued that no costs order should be made against her as the litigation was public interest litigation. However the respondent accepted that it was liable to pay some of the representative party's costs in view of her success in relation to the one individual in the group. As the representative party was otherwise liable to pay the respondent's costs, the Full Court decided to order her to pay three-quarters of the respondent's costs. The Full Court appears to have accepted that the respondent correctly conceded that it was obliged to pay the representative party some of her costs because of her success in relation to one member of the group. Indeed that concession, in part, appears to have founded the order discounting (by one quarter) the costs the representative party had to pay the respondent (the Full Court also said the discount reflected the representative party's achievement in partially clarifying what the nature of an international airline's duty of care to its passengers was in relation to environmental tobacco smoke). While the matter did not receive detailed consideration by the Full Court, its approach supports the proposition that a representative party bringing a representative proceeding is entitled to its costs on some rateable basis for success in relation to any member of the representative group. 57 The issue of the liability of an individual group member for the costs of maintaining the representative proceeding arose before Merkel J in Johnson Tiles Pty Ltd v Esso Australia Ltd (supra). In that matter, notices informing members of the representative group that they could opt out made no mention of the question of costs. Whether they should be mentioned, had been ventilated before Merkel J. His Honour approved the notice on a false assumption about the terms of the proposed fee agreement between the solicitors acting for the representative parties and group members. Under the agreement, if a class member's claim was successful, the class member was liable for individual costs and disbursements including in relation to their particular claim as well as for a "reasonably" apportioned share of the services rendered to the class as a whole. On the question of the liability of individual group members for costs, his Honour said: "In the usual course group members are entitled to have the group proceeding conducted by the representative party on their behalf without being liable for legal costs merely because they are a group member. However, if it is proposed that group members are to become liable for the legal costs and disbursements incurred by the solicitors acting for the representative party, without the prior approval or supervision of the Court in respect of those costs, then it seems to me that, to enable an informed decision whether to opt out, the opt out notice should adequately inform the group members of that prospective liability." and later said: "As ss 43(1A), 33A, 33C and 33ZJ demonstrate, group members are not parties to a proceeding for the purposes of costs or otherwise. Accordingly, there is a real question as to whether the fees to be charged to them under the 'No Win No Fee' agreement will be recoverable by them from the respondents if the group claim succeeds. In my view it is not an answer to the above difficulties to claim that such matters can be sorted out by the Court in due course in respect of a settlement under s 33V or after a judgment for damages under s 33ZJ. The problem with such an answer is that the liability under the fee agreements has not been made subject to Court order, approval or supervision." His Honour also said: "The applicants' solicitors filed extensive submissions seeking to explain why it was both necessary and appropriate for them to have 'No Fee No Win' agreements to ensure that they are fairly and adequately rewarded for costs incurred in representative proceedings. The submissions concluded: 'For the future conduct of proceedings under Part IVA it is important that the Court should not rule against fee agreements generally, and fee agreements which provide for a lawful uplift specifically. It is difficult to imagine a litigant who could take on the might of Esso single-handed. It is difficult to imagine a solicitor who would run the action 'no-win no-fee' if it faced even the possibility of being out of pocket by millions of dollars even if the action succeeded. If the provisions of Part IVA are to be workable in a practical way, it is necessary to face the fact that all class members must, one way or another, share the solicitor-client differential where the action succeeds. Any uncertainty about that matter would discourage use of Part IVA, especially in proceedings with large classes and complex issues. The fee agreements are a legitimate way of reducing that uncertainty.' I have no difficulty in accepting that Pt IVA could lose much of its utility if solicitors acting for representative parties are not able to be fairly and adequately reimbursed in respect of the costs they incur in a representative proceeding where they are reliant on a "successful outcome" for payment of their fees. I also accept that under Victorian law solicitors can properly be rewarded by their clients for the cost risks they undertake by entering into conditional costs agreements that can include an uplift fee, being a premium not exceeding 25% of the costs and disbursements incurred by the solicitors. Such arrangements have been accepted more generally as not being champertous or improper: see Bevan Ashford v Geoff Yeandle (Contractors) Ltd [1999] Ch 239 at 250-252. However, it does not follow that group members ought to be liable for costs incurred in a representative proceeding, other than out of the amounts awarded on judgment by the Court or as a result of the Court's approval of a settlement prior to judgment. When a solicitor makes a decision to commence a representative proceeding under Pt IVA on behalf of a representative party, it is appropriate for the solicitor to enter into an appropriate fee arrangement with the representative party. In the usual course such an arrangement would be regarded as a private contractual matter between the solicitor and the representative party provided that the arrangement: · is in accordance with law and is otherwise a proper and ethical arrangement for the solicitor to enter into; · does not unfairly or unreasonably prejudice the rights or interests of group members. · Sections 23, 33V, 33ZJ and 33ZF of the Act and the Court's supervisory jurisdiction, as discussed in Woolf v Snipe, ensure the Court has ample jurisdiction and power to make orders that fairly and adequately reward solicitors for costs incurred in relation to a representative proceeding. However, to the extent a fee agreement with group members is regarded as appropriate or necessary the Court's supervisory jurisdiction might be attracted for the reasons already given. Whether it is attracted in a particular case will depend on the circumstances of the case." 58 His Honour ultimately accepted an undertaking that the solicitors for the representative parties would not give effect to or enforce the fee agreement and would not demand or accept payment of costs or disbursements under the agreements other than pursuant to an order or direction of the Court. For a discussion about the legal costs of the representative party in the context of a settlement intended to limit the representative group to those retaining the solicitor acting for the representative party, see the judgment of Goldberg J in Williams v FAI Home Security Pty Ltd (No 4) (supra). 59 If there are individual settlements, the benefit derived by any unrepresented shareholder from a settlement would have flowed, in part, from the prosecution of the representative proceeding by Mr King effectively underwritten by MBC. It may ultimately be appropriate to ensure that any unrepresented shareholder who does settle, contributes to the costs of prosecuting the representative proceeding. If they do not, there is the real possibility that remaining members of the representative group will have to bear, proportionally, a greater share of the costs of maintaining the proceeding in the event that the proceeding is ultimately settled on some collective basis either before or after the adjudication of any issues. If an individual shareholder who settles has to contribute to the costs of prosecuting the representative proceeding, it would be analogous to the process contemplated by s 33ZJ. 60 That is not to say, however, that unrepresented shareholders should necessarily be required to contribute to the costs. On one view, a firm in the position of MBC should, if the proceedings are resolved in favour of the representative group, receive no more than any party and party costs that might be awarded or agreed and those costs recoverable under the fee agreements with MBC clients, assuming no issue arises about the appropriateness of those agreements. Many of the relevant issues and overseas practices are canvassed in Federal Class Actions, Contingency Fees, Rules Governing Litigation Costs, (1995) 21 Mon LR No 2 p 231. However it is unnecessary to express even a tentative view about these various matters. It is sufficient to ensure that any final resolution of these issues if and when they arise can, as a practical matter, be given effect to by Court direction (or, perhaps, agreement). In my opinion, if offers of settlement are ultimately made by GIO to unrepresented shareholders, it would be appropriate to consider establishing (and I presently think it probably would be appropriate), by direction of the Court, a scheme in which some portion of any amount offered to settle a particular individual claim was reserved so that the Court could, if settlement was effected, later consider whether all or any of the sum should be applied to satisfy the solicitor client costs of Mr King as the representative party. How, precisely, that might be achieved if, as a matter of principle, it should be, can be addressed when the issue arises. One issue that may need to be considered would be the effect of the notice advising members of the total shareholder group they can opt out. That notice said that "(y)ou will not be liable for (MBC's) legal fees merely by remaining a group member."

The subpoena for the clients' instructions 61 Another issue raised by GIO's notice of motion filed on 3 April 2002, concerns a subpoena proposed to be issued by GIO. Apart from the client lists already discussed, GIO sought in the subpoena: All documents held or created by Maurice Blackburn Cashman recording instructions by former shareholders of the First Respondent as to whether and in what way(s) they were misled by representations made by the First Respondent as referred to by Bernard Murphy in paragraph 10 of his affidavit sworn 1 March 2002 in Supreme Court of New South Wales Proceedings No.1640 of 2002 62 The proceedings in the Supreme Court referred to in this paragraph of the subpoena, were instituted by GIO against MBC and a Mr Burton, who had earlier been employed by GIO. Mr Burton had been interviewed by MBC and had provided the firm with documents concerning GIO's business though the documents were later returned to GIO. MBC had been preparing a witness statement of Mr Burton to use in this proceeding. GIO successfully argued that Mr Burton had breached his confidentiality agreement with GIO and MBC had been involved in the breach. Injunctive relief was granted. 63 In the course of defending those proceedings, MBC read an affidavit sworn by Mr Murphy. In his affidavit, he said: "10. Maurice Blackburn Cashman has entered into fee and retainer agreements with 21,646 former shareholders of GIO who have instructed us that they were misled by the representations made by GIO. A further 5,638 former shareholders have registered with Maurice Blackburn Cashman and have also advised us that they were misled by the representations made by GIO. As solicitors for the class of former shareholders who allege they were misled, Maurice Blackburn Cashman is also required to protect the interests of a further 23,000 former shareholders who are members of the class and who have not opted out of the class-action." [Emphasis added] 64 GIO submitted that this statement, and in particular the emphasised passages, involved a disclosure of the substance of the instructions MBC has received and legal professional privilege attaching to those instructions, has been waived. Reference was made to the judgment of Rolfe J in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 40 NSWLR 12 concerning what might constitute the disclosure of the substance of a privileged communication. It was submitted GIO was therefore entitled to subpoena (and have access to) any documents which set out those instructions. GIO indicated, and MBC did not dispute, that it was appropriate in the present circumstances to resolve this question before any documents were produced and access was sought and opposed. 65 MBC resisted the production of the documents and submitted legal professional privilege had not been waived. The statement made by Mr Murphy was in the context of a section of an affidavit setting out the background in which Mr Burton made contact with, and was interviewed by, MBC. It was submitted the passage in the paragraph did no more than state the basis of liability and is in accordance with the description of the group set out in the application and statement of claim. Moreover there was no unfairness in refusing to disclose detailed instructions from group members. Reference was made to Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475. 66 I have some reservations whether it can be said that the substance of the privileged communications between MBC and those who have given that firm instructions is revealed by Mr Murphy simply saying they "instructed us they were misled by the communications ". The test appears to be a quantitative one which asks whether there has been a sufficient disclosure to warrant loss of the privilege: see BT Australasia Pty Ltd v State of New South Wales (1998) 153 ALR 722 at 743; Hoad v Nationwide News Pty Ltd (1998) 19 WAR 468; and Barry v James Hardie & Co Pty Ltd (2001) 21 NSWCCR 348. But even if the paragraph did reveal the substance of the communications, it does not follow that there has been an implied or imputed waiver. In determining whether there has been waiver of this character, questions of fairness arise. As the Full Court said in Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360 at 371: "Maurice's case and Goldberg v Ng made plain that whether fairness demands an end to the privilege and consequential disclosure will depend upon the circumstances of the case, in the context of the litigation between the parties and bearing in mind that privilege is considered a substantive doctrine of the common law. Consideration will usually then be required not only of the extent of the disclosure, but also of the use to which it has been put, especially in so far as it has affected the other party, and to the possible effect if privilege is maintained of the balance. In Maurice's case Gibbs CJ, Mason and Brennan JJ referred to the possibility of inaccurate perceptions being created by the balance of the communication remaining protected (482, 487-8). In particular as Gibbs CJ (481-2) and Dawson J (497) observed, it would be unfair to allow a party to use part of a document and claim privilege as to the remainder where it dealt with a single subject matter." 67 The Full Court's conclusion on the applicable law in this area (the interaction between the Evidence Act 1995 (Cth) and the common law) was held to be incorrect by the High Court effectively in two judgments given on 21 December 1999. However the above summary of the applicable principles concerning implied waiver is in accord with the reasons for judgment of the majority of High Court in one of the two judgments, namely Mann v Carnell (1999) 201 CLR 1. However as Gleeson CJ, Gaudron, Gummow and Callinan JJ said in Mann v Carnell (at 13) "what brings about the waiver is the inconsistency, which the courts, when necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large". 68 In the present case no forensic advantage was sought to be gained (or gained) by MBC, let alone Mr King or other MBC clients, by the specific but limited reference to instructions in par 10 and the non-disclosure of the details of those instructions. The reference was plainly nothing more than part of the account Mr Murphy gave of the background in which MBC came to interview Mr Burton. In my opinion, there was no implied waiver of the privileged communication between MBC and its clients constituted by the instructions those clients gave that firm.

Leave to use documents in contempt proceedings 69 In its notice of motion filed 12 June 2002, GIO sought leave to use two documents filed in this Court in contempt proceedings it is contemplating bringing in the Supreme Court of New South Wales. The documents were a notice of motion filed by Mr King on 28 May 2002 and an affidavit sworn by Mr Murphy on 30 May 2002 and filed on 3 June 2002. As noted earlier, GIO successfully brought proceedings in the Supreme Court enforcing a confidentiality agreement with Mr Burton. Mr King's notice of motion sought, inter alia, an order that Mr Burton be examined pursuant to s 46 of the Act. As I presently apprehend the application, it is to enable Mr Burton's evidence to be taken before any trial in which other evidence would be given. The affidavit of Mr Murphy was in support of the application and set out the background leading to the orders of the Supreme Court and the practical effect of the constraints arising from the orders on the hearing and determination of the representative proceeding in this Court. The affidavit was filed but not read. 70 One of the orders made by the Supreme Court was: "7. Bernard Murphy and any other of the second defendants [MBC], their servants or agents who conferred with the first defendant [Mr Burton] or received instructions or documents or materials from him in the period from 28 November 2000 to date in the course of the preparation of proceedings No. N955 of 1999 in the Federal Court of Australia [this representative preceding] be restrained from giving or receiving instructions or otherwise providing any legal services to the applicants [sic] in proceedings No. N955 of 1999 in the Federal Court of Australia, being services: (a) in connection with any calling of, or any testimony sought to be obtained from the first defendant [Mr Burton] (b) in connection with the calling of, or the testimony sought to be obtained from any other witness intended to be called by the said applicants whose instructions or, in the case of expert witnesses, assumptions, contain material derived from any communication between the first and second defendants, not being material which consists only of material within the Burton Exceptions or the Additional Exception." 71 GIO also submitted that there has been breach of not only order 7 but also order 3 which concerns, in substance, the use of information in this proceeding obtained from or through Mr Burton. It would, at this stage, be inappropriate to express anything but the most preliminary view about the scope of the order. The parties have not had the opportunity to make full submissions about its scope and it is unnecessary to determine what it is. However GIO contended that the bringing of the notice of motion of 28 May 2002 and the swearing and filing of the affidavit of Mr Murphy in support of the motion, breached order 7 and thus constitutes a contempt of the Supreme Court. GIO referred, in relation to further contravention of order 7, to statements made by Mr Murphy in his affidavit about conversations with Mr Burton's solicitor. GIO wishes to use the two documents in contempt proceedings. It seeks the leave of this Court to do so, though it submits that it is unnecessary to obtain leave before using the documents in the way it proposes. 72 Accordingly, a convenient starting point is to consider whether leave is necessary. Both GIO and MBC relied on the judgment of Wilcox J in Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 to support the proposition that leave was not required, on the one hand, or was, on the other. In that matter his Honour gave leave to a bank to use a witness statement in proceedings in the Supreme Court of New South Wales in which the bank was a defendant. The bank had not been a party to the proceedings in the Federal Court (which had been transferred from the Supreme Court). The witness statement had been prepared pursuant to a direction for witnesses' statements to be exchanged before trial. The statement was never tendered. Wilcox J. discussed both whether leave was necessary and, if so, principles that might be applied in considering whether to grant leave. 73 On the question of whether leave was necessary Wilcox J referred, with approval, to the judgment of McPherson J in Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509 concerning whether witness statements prepared in one proceeding could be used, without leave, for another purpose. In that case the other purpose was media reporting. The party who prepared the witness statement, the defendant, had served the statement on the plaintiff. The obligation to serve the statement flowed from an order by the trial judge enlivening a Practice Direction that required witness statements to be served no later than six weeks prior the trial. The defendant sought to restrain the plaintiff and others from using the statement other than in the proceedings for which it was prepared. McPherson J granted an injunction. His Honour stated the applicable principle broadly, namely that a document furnished in legal proceedings for one purpose may not legitimately be used for another. No question of the Court giving leave arose in that matter. While his Honour did note that the defendant had given the witness statement to the plaintiff pursuant to the Practice Direction, his Honour's conclusion did not appear to be based solely on the implied undertaking not to use documents and/or information furnished through a process of compulsion in legal proceedings for a collateral purpose. The principle, concerning the implied undertaking relating to documents obtained in legal proceedings through compulsion, is well-established and some of the more recent debate has involved whether the principle has relevance to proceedings or processes not involving a court: see Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 which GIO relied on in this matter. 74 There are two authorities of which I am aware in which leave was sought and granted to use pleadings in other proceedings though in neither instance was there any discussion about why leave was necessary: see Australian Competition and Consumer Commission v Telstra Corporation Ltd (2000) 96 FCR 317 and Ainsworth v Burdin [1999] NSWSC 793 (the need for leave was doubted). In this matter the notice of motion can probably be treated as of the same character as pleadings. There are several cases dealing with witness statements and affidavits: as to affidavits see e.g. First Netcom Pty Ltd v Telstra Corporation Ltd [2000] FCA 1542. 75 I am satisfied leave is necessary, in principle, to use both the notice of motion and affidavit of Mr Murphy in contempt proceedings in the Supreme Court. To obtain the orders he sought, Mr King was required, by O 19 r 1 of the Federal Court Rules, to file a notice of motion and an affidavit in support (I put to one side applications which might be made orally and applications for which no notice of motion is necessary). I see no material difference in principle between a requirement in the rules of a court to create, file and serve a document and a court order applying a practice direction requiring witness statements to be served: see also Akins v Abigroup Ltd (1998) 43 NSWLR 539 especially at 550-552. They both compel a party to create and serve a document or documents if the party wishes to conduct proceedings in a particular way. In one instance it is to secure an order, in the other it is to call a witness. Both acts are voluntary in the sense that the failure to perform them would not result in a sanction or penalty (unlike discovery and interrogatories) other than, potentially, the inability to seek an order or to call the witness. However each is a step viewed by a party as a necessary one and taken to prosecute litigation in accordance with rules determined by a Court which require specified steps to be taken. A conclusion that leave is necessary to use the notice of motion and the affidavit may be viewed as widening the class of document to which an implied undertaking attaches, where the undertaking was developed to afford protection to discovered documents. In the context of discovered documents the form of the compulsion was clear. However the class has already been extended to witness statements and affidavits where the nature of the compulsion is different. Perhaps ultimately the broader approach of McPherson J provides the appropriate touchstone limiting, without the leave of the Court, the use of documents furnished in legal proceedings for purposes outside those proceedings. 76 Plainly enough, the character of the document, and in particular whether it contains information that would not otherwise have been disclosed, would have a bearing on whether leave should be given. Indeed a notice of motion is a document held by the Registry of this Court that can be inspected without leave by a non-party (as is a pleading): see O 46 r 6(2), though not copied without permission: see O 46 r 6(6). Ordinarily, one would expect that leave would readily be given to use a notice of motion or a pleading in other proceedings or for some other bona fide purpose. This may explain why in Australian Competition and Consumer Commission v Telstra Corporation Ltd (supra) the parties consented to the grant leave for the use of the pleading. Different considerations arise in relation to affidavits where the nature of the information contained in it and the use to which the person seeking leave wishes to make of the document, are almost certain to be relevant. 77 It is necessary to refer to two additional basis on which GIO submitted leave was not necessary. The first was that it wished to use the notice of motion and affidavit "in relation to the litigation in which they are disclosed". Reference was made to a passage in the judgment of Mason CJ in Esso Australia Resources Ltd v Plowman (supra) (at 32.5) and discussion of the passage in later authorities: Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 142 ALR 198 at 203 and Bell Group Ltd v Westpac Banking Corporation (1998) 166 ALR 699 at 704-705. The short answer to this submission, in my opinion, is that GIO does not seek to use the notice of motion and affidavit in relation to this proceeding. It wishes to use the documents in contempt proceedings concerning orders made in the Supreme Court between it and other parties (which did not include the applicant in this Court, Mr King) vindicating its rights under a contract with Mr Burton. While there is an obvious relationship between the parties in the Supreme Court and the subject matter of those proceedings and the conduct of the representative proceeding in this Court, the existence of that relationship does not, in my opinion, create a nexus of the type contended for by GIO. The proceeding in this Court, to use the expression adopted by the Full Court in Bell Group Ltd v Westpac Banking Corporation (at 705) is "a different proceeding" to the one in which GIO wishes to use the documents. 78 Lastly, GIO submitted that the notice of motion and affidavit in support were referred to extensively in open Court on 3 June 2002 and their contents were thereby disclosed for the purposes of O 15 r 18. I am prepared to proceed on the basis that this rule is intended to apply not only to documents produced on discovery but any document to which an implied undertaking might attach: see Chapmans Ltd v Australian Stock Exchange (Tamberlin J, 25 August 1995, Unreported) but cf Eltran Pty Ltd v Westpac Banking Corporation (1990) 25 FCR 322 and also Singh (Tejendra) v Christie (1993) Times, 11 November (referred to in Borrie & Lowe: The Law of Contempt, 3rd ed p 596). I accept that counsel for Mr King did refer to the contents of both the notice of motion and the affidavit (principally at transcript p 23) at the hearing on 3 June 2002. However, in my opinion, the contents of the affidavit of Mr Murphy were referred to only in the most summary way and its contents were not disclosed. The same cannot be said of the notice of motion. Its contents were disclosed when counsel for Mr King summarised the orders sought. Accordingly GIO is, by O 15 r 18, relieved of any implied undertaking not to use the notice of motion for a collateral purpose. However for reasons I shortly explain, it presently appears to me to be undesirable that it be used in the way proposed. If necessary I will hear submissions as to whether orders should be made restraining its use. 79 I should mention one submission made by MBC. It was, as I understood it, to the effect that anything said or done in this proceeding (or at least during hearings in this proceeding) was conduct in respect of which no contempt proceedings could be brought. Reference was made to Cabassi v Vila (1940) 64 CLR 130 and Giannarelli& v Wraith (1988) 165 CLR 543 and other authorities concerning the "immunity" of counsel and witnesses in legal proceedings. However, whatever is the reach of the immunity, it does not preclude the bringing of proceedings for contempt of court. So much is apparent from what was said by Deane and Dawson JJ (at 582) and Gaudron J (at 594) in Jamieson v The Queen (1993) 177 CLR 574. It is likely their Honours had in mind contempt proceedings brought in the Court in which the immunity would otherwise have arisen. That is, where proceedings for contempt of Court are brought in the Court in which the evidence was given by a witness or a statement made by counsel which, itself, was said to constitute the contempt. However the observations of the High Court in Jamieson v The Queen serve to illustrate what the rationale for the immunity is and what are the boundaries within which it operates. It is to serve the interests of the administration of justice: see Mann v O'Neill (1997) 191 CLR 204 especially at 213. In my opinion, it cannot be said that the interests of the administration justice are served by treating the immunity as operating on conduct in this proceeding which, as GIO contends, is in breach of orders of the Supreme Court which were plainly made to constrain or limit the conduct of Mr Murphy and MBC in this proceeding. 80 I turn now to consider whether, as a matter of discretion, GIO should be given leave to use the affidavit in the way proposed. The position I confront is a most unusual one. GIO has obtained orders in the Supreme Court which have a significant practical impact on at least an aspect of this proceeding. It is large and complex commercial litigation now involving many parties and involving potentially large sums if Mr King succeeds both on his own behalf and on behalf of all or even a significant number of the members of the representative group who might ultimately be able to establish reliance and damages. If Mr King fails, the costs alone are likely to be enormous. Case management of the proceeding is not straightforward. 81 Counsel for GIO has submitted that the issue of whether the filing of the notice of motion of 28 May 2002 and the pursuit of the application is in breach of the orders of the Supreme Court, can be raised in defence of the notice of motion itself: see Riddick v Thames Board Mills Ltd (1977) 1 QB 881 where use of a document in breach of an undertaking (analogous, for present purposes, to an order) provided a complete defence to a civil action. My present view is that this is correct. Counsel for GIO has indicated the issue will be raised. Thus there is the potential that two Courts could be hearing, perhaps simultaneously, the same issue, namely whether the filing of the notice of motion and the pursuit of the application are in breach of the orders of the Supreme Court. I doubt that it is necessary to descend into detail to illustrate the undesirability of this situation. 82 The orders made by the Supreme Court are before this Court and can as readily be construed in this proceeding as in the Supreme Court. I accept that any decision in this Court involving a conclusion that the orders were breached will not bring about, directly, the punishment of Mr Murphy or anyone else who may have breached them. I should note that as soon as the allegation was made that the swearing and filing of the affidavit was in breach of the orders, the affidavit was effectively withdrawn. However, if the notice of motion is dismissed because the application was in breach of the orders of the Supreme Court there would have been the vindication of that Court's orders in the sense that the prohibited conduct will have not borne fruit. GIO's rights, as determined by the Supreme Court, would remain protected by that Court's orders. Moreover this Court would have power to order Mr Murphy or MBC to pay personally any costs (and, if necessary, on an indemnity basis and taxable forthwith) occasioned by the pursuit of an application that was in breach of an order of a superior court of record. This Court could also refer the matter to the appropriate professional disciplinary body. 83 In my opinion, it is desirable and in the interests of the administration of justice, that the case management of this proceeding, including determining issues concerning what MBC can and cannot do having regard to the orders of the Supreme Court, remain in this Court if the issues properly arise in this Court. Accordingly, I propose to refuse, at this time, GIO leave to use the affidavit sworn by Mr Murphy. Insofar as the notice of motion of Mr King filed 28 May 2002 is concerned, leave is not necessary having regard to the view I have taken of the effect of O 15 r 18 though I will, if necessary, entertain further submissions in relation to that document. 84 If the filing of the notice of motion and the pursuit of the application is in breach of the orders of the Supreme Court then it is probable that the swearing and filing of the affidavit is also in breach of those orders and conversations Mr Murphy had with Mr Burton's solicitor were similarly in breach of those orders. However, the orders might operate in a way where the former was not constrained but the latter was. That is, the notice of motion could be filed and the application pursued but the affidavit could not be sworn and filed nor could Mr Murphy converse with Mr Burton solicitor in the way he deposed. It is therefore possible that a conclusion might be reached in this proceeding that the making and pursuit of the application was not in contempt which might leave unresolved the question of whether the swearing and filing of the affidavit, and/or the conversations deposed to, were in breach of the orders. I propose to accommodate this possibility by making the order refusing leave, subject to further order. That is, GIO can renew its application at a later date if necessary. Moreover it may possibly be (though I accept it is unlikely) that this Court could exercise jurisdiction in relation to contempt of another superior court of record: see John Fairfax & Sons Pty Ltd v McRae (1955) 93 CLR 351 but see also Sidebottom v Giuliano [1999] 95 FCR 255 and Re Colina; ex parte Torney (1999) 200 CLR 386 concerning the jurisdiction of a federal court to punish a contempt.

Conclusion 85 For the preceding reasons I propose to order that MBC provide GIO with a list identifying the names and addresses of people or corporations who have signed fee and retainer agreements with MBC and a list identifying the names and addresses of people or corporations who have registered an interest with MBC. I also propose to order that GIO forward to MBC a draft of any correspondence it proposes to send to individuals in the representative group ten days before the proposed date of sending it. Subject to further order, I will order that no offer of settlement be sent to any group member by GIO without the leave of the Court. In relation to the notice of motion of the first respondent filed 12 June 2002 leave will be refused to use the affidavit. In relation to correspondence GIO wishes to send to members of the representative group (other than offers of settlement), the parties have liberty to apply on two days notice.

I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Counsel for the applicant: Mr. Julian Burnside QC, Dr K Hanscombe

Solicitor for the applicant: Maurice Blackburn Cashman

Counsel for the first respondent: Mr T. Bathurst, Mr I M Jackman, Matthew Tyson

Solicitor for the first respondent Ebsworth & Ebsworth

Date of Hearing: 17 & 18 June 2002