King v GIO Australia Holdings Limited

REASONS FOR JUDGMENT 1 The background to this representative proceeding is set out in an earlier judgment of 12 May 2000: see [2000] FCA 617. The applicant has moved the Court for orders that notice be given to group members under s 33X of the Federal Court of Australia Act 1976 (Cth) ("the Act"). This judgment concerns the form that notice should take and ancillary questions including whether the pleadings should be available on the internet. 2 A draft notice advanced by the applicant has been considered and commented on by the respondents and, in the result, there is a measure of agreement about what form the notice should take. There are, however, a limited number of areas where there remains an issue about what the notice should say. I will turn to consider each of those areas shortly. 3 However, the starting point in considering the contents of the notice is the statutory purpose for which it is given. Section 33X(1)(a) requires that notice be given to group members of the commencement of the proceeding and the right of the group members to opt out. Sub-section (6) of that section requires that notice be given as soon as practicable after the happening of the event to which the notice relates. In so far as notice concerns the commencement of the proceeding (and the right to opt out) then the notice must be given as soon as practicable after the proceeding has commenced. This, in my opinion, tends to indicate that the focus of the notice (without presently drawing the distinction between the giving of notice and the means of doing so: see Femcare Ltd v Bright (2000) 100 FCR 331 at 347-349) would be on circumstances existing at or comparatively shortly after the proceeding was commenced. Section 33Y requires that the form and content of the notice be approved by the Court which must also, by order, specify who is to give the notice and the way in which it is to be given. Sub-sections (4) and (5) contemplate that the notice may be given by means of press advertisement, radio or television broadcast though not given personally to each group member unless that is reasonably practicable and not unduly expensive. 4 The central purpose of the notice presently under consideration is to inform group members of the right to opt out conferred by s 33J, when that right must be exercised and the consequences of exercising or not exercising the right. A necessary incident of satisfying that purpose would be to inform group members of the nature of the proceedings. However while the terms of the notice must be readily comprehensible and clear, it is important, in my opinion, to ensure that the central purpose is not obscured by matters of detail. 5 I turn now to consider the contentious issues concerning the contents of the notice. It is convenient to refer, in order, to the paragraphs of the notice that I have approved which is annexed to these reasons. The first issue concerns whether there should be a summary of the representations and conduct of the respondents (as set out in brackets in the fourth paragraph) and, if so, what the summary should contain. A summary was proffered by the applicant to meet criticisms of several of the respondents of the original draft. The fifth respondent now objects (in supplementary written submissions) to the summary though did not do so (in those terms) at the hearing on 17 November 2000 when these issues were first ventilated. 6 I should add that the case management of these proceedings will be made substantially more difficult if parties fail to put fully their position when they have the opportunity to do so or later alter their position for no apparent good reason. While I will endeavour to case manage these proceedings with appropriate flexibility I also have to ensure that they do not become unmanageable. If positions are not put or alter then there is the risk that other parties will be denied an effective opportunity to respond. The cost and inconvenience of giving others the opportunity to respond would, I hope, be obvious to all involved. 7 I am satisfied it is appropriate that there be some attempt to encapsulate in a few words the essence of the applicant's case and for this reason the words in brackets in the fourth paragraph have been included. The applicant proposed, additionally, in the summary in the brackets the words: "and the confidence with which the Respondents held views they expressed". In my opinion, these words are unnecessary to identify the essence of the applicant's case and are a controversial gloss on the pleadings and should not be included. The fifth respondent proposed that there be no reference to "things that were said" in the penultimate sentence of the fourth paragraph and restricting the scope of the sentence to the Part B Statement. As the applicant correctly points out the pleaded case is not so restricted and, in my opinion, the formulation by the applicant (reflected in the notice I have approved) is an appropriate one. 8 The fifth respondent took issue with the use of the internet and any procedure of providing access to any pleadings by means of the internet (or indeed any access to those documents at all by group members because they are not parties to the proceedings). I will later deal with the use of the internet and more generally the question of access to the most recent version of the application and statement of claim. 9 The next issue concerned the description of the group. The characteristics of a group member are identified in paras (a) to (e) at the conclusion of the first page of the notice. The applicant submitted that para (e) should simply read: "have a claim against the Respondents" and opposed the inclusion of the words "each of" proposed by some respondents or the words "all (or alternatively, any)" proposed by other respondents. As a result of amendments to the application and statement of claim which arose during the hearing of an appeal by a Full Court: see King v GIO Holdings Ltd [2000] FCA 1543, from an earlier judgment I gave, the members of the group were described as, inter alia, persons who by reason of the pleaded conduct of "all (or alternatively, any)" of the respondents suffered loss. The reason for this formulation, and in particular the explanation for the words in brackets, was described by the Full Court (pars 6-8): The alternative "any" means that a person is a group member if he or she, as a matter of fact, suffered loss as a result of the conduct of any respondent. This is necessary to cover the situation of a group member who, although claiming against all respondents, only suffered loss by reason of the conduct of one of the respondents. That person is still to be regarded as a group member and, accordingly, is bound by the result. The fact that a person is ultimately adjudged to be entitled to succeed against only one respondent, does not mean that person makes a claim against only that respondent. There is a world of difference between a claim and success on the claim……. In the case of each cause of action, the claim is made by the applicant and each group member against each respondent. 10 It was submitted by the applicant that the inclusion of any adjectival qualification of the words "the Respondents" was undesirable and inappropriate and might lead to substantial injustice. That was, as I understood the argument, because recipients of the notice might have to turn their minds to whether they had a claim against each respondent in circumstances where, for example, they may not have heard of the individual directors. Moreover, it was submitted, the answer to the question of whether they had a claim against each respondent is a complicated question of law. For my part, I doubt that the inclusion of words of qualification will have the effect that concerns the applicant. Ultimately, however, the notice should state as precisely as possible (but with the objective of doing so simply and in plain English) what are the characteristics that make a person a group member. One is that they have a claim against all respondents. While, in a sense, this is stated if the characteristic is described as the person "hav[ing] a claim against the Respondents", it is more clearly stated, in a way that is readily understandable, by adding the word "all". By not including that word recipients of the notice might be led to believe that they were a group member if they had a claim against any one or only some of the respondents. They may, to their detriment, act on this belief and assume their interests were being pursued by the applicant in these proceedings. Even if this is only a remote possibility, it should be accommodated, in my opinion, by the inclusion of the word "all" in par(e) of the description of the characteristics of a group member. It reflects the outcome of the proceedings before the Full Court. It is unnecessary, in my opinion, to add the words "(or alternatively, any)" which really concern a legal issue relating to the pleadings that might not be readily understood by a recipient of the notice. 11 The fifth respondent suggested that the information concerning the sending of an opt out notice should follow the information about the consequences of not opting out. I do not think anything really turns on whether the information remains where the applicant proposed or where the fifth respondent proposed. In some minor way it is perhaps more logical to tell a person of the right to opt out, how it can be exercised, and then the consequences of not exercising it. In any event, the general format in other notices of the type presently under consideration, used in other representative proceedings in this Court generally appears to follow the format proposed by the applicant. There is probably some sense in creating a measure of uniformity (unless in a particular case uniformity would tend to defeat the statutory purpose of the notice) in the format used in notices approved by the Court in proceedings under Part IVA. 12 The draft notice advanced by the applicant provided for the opt out notice to be sent either to the Federal Court or Maurice Blackburn Cashman. At the hearing on 17 November 2000 I indicated some support for this proposal. That was because it might relieve the Court of the task of at least initially collating and recording the notices and identifying those people who had opted out. Some respondents raised the question of whether, if notices were to be sent to Maurice Blackburn Cashman, there should be a regime in place dealing with opt out notices received by that firm. The regime would ensure all opt out notices were accounted for and ultimately the identities of all persons who have opted out were known and could be ascertained by the respondents and the Court. Some respondents simply maintained their opposition to the notion that the notices could be sent to Maurice Blackburn Cashman at all. 13 It is at least implicit in O 73 r 6 of the Federal Court Rules that an opt out notice be filed in a District Registry of the Court: see Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250 at 256. The proposal of the applicant that opt out notices could be sent to Maurice Blackburn Cashman would result in that firm being a conduit for this to happen. However, I have concluded, on reflection, that it is inappropriate for opt out notices to be sent to Maurice Blackburn Cashman. In the scheme created by Part IVA , the filing of the opt out notice and the date on which it is filed is of fundamental legal significance to the person who filed it. It is inappropriate to approve a scheme that may result in some uncertainty about when, or indeed whether, a particular opt out notice was filed particularly where the uncertainty might arise from the conduct of the solicitors acting for the applicant and group members who have not opted out. While I do not suggest that Maurice Blackburn Cashman would not comply with any direction given about how notices they received should be dealt with, the mere fact of their involvement adds an unnecessary step in the procedure contemplated by the rules and a step that may render less certain when and if a particular opt out notice was filed. 14 Another issue arising in the proceedings was whether, and if so in what terms, the notice approved by the Court should refer to the liability of a group member to pay legal costs. This related to both the potential liability of a group member to meet the costs of his or her representation at various points in the proceedings (which would depend on how issues in the proceedings were resolved) and also the potential liability of a person who was, or had been, a group member to pay the costs of the respondents. One formulation was advanced by the applicant which incorporated some modifications proposed by certain respondents. However several respondents submitted variously that the notice should specify the charge out rates contained in the fee agreement offered by Maurice Blackburn Cashman, state that the agreement proposed a premium above the normal charge out rates of that firm and state that unless a successful application is made by an individual group member to be represented personally or by lawyers other than that firm, then the group member would need to retain that firm if the individual work for that group member was to be performed at all. 15 If the notice is to say anything about costs then it should outline as simply as possible what the potential liability of a group member is in relation to costs which should probably also involve a discussion about how a group member might be represented if, at a point in the proceedings, proof of individual reliance and loss is necessary. While some of the formulations advanced by the respondents attempt to do this, they are, in my opinion, unnecessarily complicated. 16 It is not unduly difficult to explain simply what the position is for that part of the proceedings in which the applicant seeks to establish that the respondents engaged in conduct which was negligent, misleading or deceptive or otherwise prove liability in a general sense. However any explanation becomes substantially more complicated in describing what the position would be if the applicant was successful in establishing these matters. It would probably be desirable to describe what would happen, at or following that point, if a group member wished to be represented by a firm other that Maurice Blackburn Cashman (whether because the member does not agree to the terms of the fee agreement or otherwise). However it is inappropriate to rehearse whether effective steps could then be taken by such a person to be represented by another firm or anticipate what orders, if any, might be made by the Court which, either directly or indirectly, would permit this to happen (exercising, for example, powers under s 33Q or s 33R). 17 Whether , at this point, a person who remains a group member wishes to retain Maurice Blackburn Cashman (if they have not earlier done so) or another firm if the opportunity arises, is ultimately a matter for the group member. However the present difficulty is whether all these matters can be simply explained in the notice now under consideration. To do so would require reference to the fee agreement offered by Maurice Blackburn Cashman. I do not presently discern any fundamental difficulty with the fee agreement though in making this observation I should not be taken to be approving any particular feature of the agreement. I should also make clear that I agree with the views expressed by Merkel J in Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] 94 FCR 167 about the role and responsibility of the Court in monitoring and supervising fee arrangements in proceedings such as these and the role of solicitors appearing for applicants in such proceedings. 18 The fee agreement is a lengthy document which contains many features. The danger in endeavouring to summarise the essence of the fee agreement is that the summary may highlight either attractive or unattractive features (or both). Attempting to create a balanced summary may involve reference to detail that destroys the summary's utility. I have made several attempts to do so as part of describing the position a group member may be in at a point, if it is ever reached, where individual reliance and loss must be proved. However each attempt has resulted in a summary that is either too complex or fails to deal, in a simple and straightforward way, with the various combinations and permutations that could arise. I have ultimately decided that the notice should not endeavour to explain to a recipient what the consequences are of not opting out other than the important legal consequence of the group member being bound by the judgment. I have, at the conclusion of the approved notice, repeated (and I hope emphasised) the legal significance of the notice and the desirability of a recipient getting advice if that is what the recipient was minded to do. 19 The applicant has indicated he is prepared to send the notice to all persons recorded as shareholders in the first respondent on the members register on 25 August 1998 and who did not accept the takeover offer by 5 January 1999 by ordinary post on or before 26 January 2001 to the address appearing on the register. No party suggested that this means of notifying people who are likely to be members of the group was inappropriate or that some additional means of notification should be adopted. I am satisfied that this is an appropriate means and is practicable and not unduly expensive. 20 The last matter that must be addressed is the use of the internet. The applicant originally proposed using the Maurice Blackburn Cashman web site as a means of providing access to the most recent application and statement of claim. That was at a point when the draft notice advanced by the applicant did not endeavour to summarise the nature of the claims made in the proceedings. The notice I have approved contains a summary of the claims though it is, of necessity, a superficial one. I cannot anticipate whether, and the extent to which, people who are presently being treated as group members will obtain advice before making a decision whether to opt out or not. If there are people who do seek advice then it is desirable, in my opinion, that they have access to the most recent application and statement of claim. One reason why those advising them may wish to see these documents would be to ascertain whether they are, in fact, members of the group. Another reason, perhaps remotely, would be to ascertain whether the person had additional or different claims against any or all of the respondents. Ready access to the documents (probably at least for many people and/or their advisers) can be provided through the internet. 21 Various parties suggested the pleadings should be available for inspection at the various Federal Court Registries throughout the Commonwealth. Given the various estimates of the number of possible members of the group (of the order of 60,000 people) and that it cannot be assumed that all members would have ready access to the internet, this suggestion appears to me to be a sensible one. By making the statement of claim and the application accessible to group members (and anyone who may be providing them with advice about whether to opt out) a more fully informed decision can be made. It is probably correct that group members are not parties for the purposes of asserting a right to inspect the Court file. However I propose to make a direction that will enable group members to inspect the most recent version of the application and the statement of claim at a Registry of the Court. 22 As to the use of the internet, objection was taken to the use of the Maurice Blackburn Cashman web site because it contains promotional material extraneous to these proceedings. Its use was not pressed. However several respondents raised, as a possibility, the use of a web site provided by the Federal Court. This is a practical alternative that enables ready and widespread access to the most recent application and statement of claim. Steps will be taken to ensure that the Court is able to provide a web site which contains those documents. The respondents submitted that the site should also contain the defences though the fifth respondent opposed not only the application and statement of claim being made available on the internet or, indeed, at all but also his defence. The inclusion of the defences on the internet was opposed by the applicant. It may be that in due course other documents, including the defences, or even general information about the proceedings should be posted on the web site. However at this time it is appropriate, in my opinion, that the recipients of the notice sent out under ss 33X and 33Y be provided with access only to the most recent application and statement of claim. I presently do not see what relevance the defences would be to a recipient of the notice who has to decide whether or not to opt out. As just discussed the application and statement of claim might be relevant and it is for this reason I reject the submission of the fifth respondent that they not be made available at all. At this stage it is sufficient, in my opinion, for the recipient to be told that the proceedings are defended. The approved notice does this. 23 In the orders and directions I am giving, I have provided for liberty to apply within 24 hours of making the orders and directions. I am doing so because the precise terms of the orders and directions have not been addressed by the parties. Sending out the notice to the large number of people involved is likely to be a major logistical exercise. If the draft notice is deficient for any reason and/or the orders do not comprehend all that must be addressed, the exercise may be compromised. Accordingly if any party perceives any deficiencies in the notice (other than as to the matters of principle I have dealt with in these reasons) and/or the orders and directions, the liberty to apply should be exercised. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.