Kirby v Centro Properties Limited [2010] FCA 1115 | Case summary

Section 33C and the correctness of Philip Morris 4 The first basis on which PwC opposes the leave to amend sought by Kirby's motion in the CER proceeding, is that: The proposed amendments would have the effect that the matter was not properly constituted as a representative proceeding under Pt IVA [of the Federal Court Act]… [as]… the proposed amendments would have the effect that the VID 327 Proceeding failed to meet the threshold requirement under s 33C(1)(a)… 5 Section 33C(1) of the Federal Court Act 1976 (Cth) provides: 33C Commencement of proceeding (1) Subject to this Part, where: (a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of law or fact; a proceeding may be commenced by one or more of those persons as representing some or all of them. 6 As I understood it, Mr McHugh SC, who appeared before me with Mr Nixon of Counsel for PwC, contended primarily that the Court ought not to exercise its discretion to grant leave to amend so as to allow proceedings to be constituted in a manner in which they could not have been commenced. In advancing this submission, Mr McHugh referred to the High Court's explanation of s 33C in Wong v Silkfield (1999) 199 CLR 255, where, at 266, their Honours reasoned that section: is concerned with the commencement, not subsequent conduct, of litigation using the procedures provided in Pt IVA. In terms, s 33C(1) looks to the claims made by seven or more persons against the same person, being claims which are in respect of, or arise out of, the same, similar or related circumstances, and asks whether claims so understood give rise to a substantial common issue of law or fact. 7 Where there are two or more respondents, it was then submitted, there is a requirement that "each of the applicants and the group members have claims against each of the respondents", a requirement said to be supported by a body of authority, including Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 ("Philip Morris"), esp at 514, where Sackville J, with whom Spender and Hill JJ agreed, said that; [126] Thirdly, as the parties accepted, s 33C(1)(a) requires every applicant and represented party to have a claim against the one respondent or, if there is more than one, against all respondents. This conclusion follows from the language of s 33C(1)(a) itself and is consistent with the approach taken by the LRC in Grouped Proceedings. It is also consistent with the structure of the legislation. For example, s 33D(1)(a) (which provides that a person who has a sufficient interest to commence a proceeding on his or her own behalf against another person has a sufficient interest to commence a representative proceeding against that person on behalf of other persons referred to in s 33C(1)(a)) is clearly drafted on the assumption that all applicants and represented persons will have claims against the same person. [127] It follows that s 33C(1)(a) is not satisfied if some applicants and group members have claims against one respondent (or group of respondents) while other applicants and group members have claims against another respondent (or group of respondents). The requirement in s 33C(1)(b), that the claims of all group members are in respect of or arise out of the same, similar or related circumstances, is a necessary but not sufficient condition for the commencement of representative proceedings. Of course, if there are two sets of claims against two sets of respondents, it may well be that each can be the subject of representative proceedings. It may even be that directions can be made for them to be heard together: Ryan v Great Lakes Council (1997) 149 ALR 45 at 48, per Wilcox J. But they cannot both be the subject of the same representative proceedings. [Original emphasis] Particular emphasis was then placed on what Sackville J said, at 515: It is not permissible in a representative proceeding to plead a claim on behalf of some group members against one respondent and a separate claim on behalf of other group members against another respondent. "That", it was submitted in writing, "is precisely what the applicants purport to do by way of the [proposed amended pleading in the CER proceeding], bringing a claim against PwC Securities only on behalf of one of the applicants and an undefined 'some' of the group members". 8 I was then referred to the endorsement by another Full Court of this Court in King v GIO Australia Holdings Ltd [2000] FCA 1543, of what had been said in Philip Morris about the requirement that every applicant and group member have a claim against every respondent. However, Counsel for the applicants was at pains to point out, on the return of these motions, that the approach to s 33C taken by Sackville J in Philip Morris has not commanded universal assent. In Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 ("Bray"), the issue before the Full Court which is relevant for present purposes was whether injunctions sought by the applicant were sufficient to discharge the requirements of s 33C(1)(a), as the learned trial Judge had held in that case they were; (see Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1). In the Full Court, Carr J was prepared, in order to resolve the appeal, to assume that Philip Morris had been correctly decided on the point, and, consequently, upheld the trial Judge's reasoning: see at 343-4. However, at 344-6, his Honour made these observations obiter: [122] As I have held that each group member in this application has a relevant claim against all of the respondents, it is strictly not necessary for me to decide this question. However, I shall briefly express my views. The question is whether the decision in Philip Morris was wrong on this point. With respect, I think that it is clear (to the extent required) that it was wrongly decided on this point and should not be followed. I agree with Finkelstein J's reasons for not following it, but would add a few comments. [123] First, it should be noted that the applicants in Philip Morris accepted as a threshold requirement that their pleading had to allege facts that established that they and every member of the represented class had a claim against every respondent -- see Spender J at [3] and Sackville J at [108] and [126]. [124] Second, as Mr McArthur pointed out, the decision in Philip Morris at first instance on this point was based on a misunderstanding by Wilcox J about what he had decided in his earlier decision in Symington v Hoechst Schering Agrevo Pty Ltd (1997) 78 FCR 164. In Nixon v Philip Morris (Australia) Ltd (1999) 95 FCR 453, in part of a passage cited by Sackville J on appeal, Wilcox J relied upon his decision in Symington as being one in which he held that s 33C(1)(a): "... requires that the applicant, or each one of several applicants, and each group member must have a claim against each respondent; it is not sufficient for one applicant to make a claim against one respondent and another applicant or a group member to make a claim against some other respondent." [125] That is not what his Honour had held in Symington. In Symington, Mr and Mrs Symington, who were graziers, sued various respondents on behalf of themselves and other persons who suffered loss when their cattle ingested a pesticide supplied as an ingredient in different products by the various respondents. The applicants claimed that the particular product containing the pesticide which contaminated their cattle was that supplied to their neighbour by the first respondent. They conceded that they personally had no claim against the other six remaining respondents. Wilcox J held that as there was more than one respondent, the applicants had to have standing to sue each of them. As this was not so, he dismissed the applicants' claims as against the other six respondents. What his Honour held in Symington appears at 167, where, having referred to s 33D(1) as being designed to abrogate the common law rule that a person can only bring an action for damages on his or her own behalf, his Honour said this: "The first thing to note about the subsection [s 33D(1)] is that it refers to a person, referred to in paragraph 33C(1)(a), who has 'a sufficient interest to commence a proceeding on his or her own behalf'. That is, one of the seven or more persons who have claims against 'the same person' can bring a representative proceeding against that other person 'on behalf of' the other six or more persons referred to in that paragraph. As I interpret this provision, it means that where there is a group of seven or more persons, all of whom have claims against a particular person, then any one of those seven or more persons has a sufficient interest to commence a representative proceeding against that person on behalf of the other members of the group. I think it is clear that the applicant - that is to say, the representative party - must himself or herself have standing to sue the particular respondent and, where there is more than one respondent, each of them. It is not enough that the applicant has standing to sue one respondent and other people have claims against some other respondent which arise out of similar or related circumstances and give rise to a substantial common issue of law or fact." [126] His Honour did not have to decide in Symington that every group member must have a claim against every respondent. The problem was more basic than that. The problem was that Mr and Mrs Symington lack standing to sue the other six respondents. His Honour had reached a similar conclusion in similar circumstances in Ryan v Great Lakes Council (1997) 78 FCR 309. [127] As Professor V Morabito points out in an article entitled "Class Actions Against Multiple Respondents" (2002) 30 Federal Law Review 295 at 311-313, the problem identified in cases such as Symington and Ryan has been resolved in at least two subsequent proceedings quite simply. In Schneider v Hoechst Schering Agrevo Pty Ltd [2000] FCA 154 there were two respondents, namely, the manufacturer of a particular chemical herbicide and the retailer. The applicant had a claim against both respondents. He brought representative proceedings against the manufacturer on behalf of all affected farmers and also brought, in the one application, representative proceedings against the retailer on behalf of a sub-group of the represented parties, namely those who had purchased the chemical herbicide from the retailer. It would appear that not all of the represented persons had a claim against the retailer, but the matter proceeded to judgment. [128] Similarly, later in the Ryan proceedings, Mr Ryan was given leave to amend to join additional applicants, each of whom made a personal claim against a particular grower or distributor and was therefore competent to represent other group members who had claims against that grower or distributor -- see Ryan v Great Lakes Council (1999) 102 LGERA 123. Wilcox J subsequently delivered a judgment after trial and the matter went to a Full Court. As Lindgren J noted in Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 not all of the group members claimed against a particular grower or distributor of oysters. But that factor does not appear to have played any part in the outcome of the case. [129] In my view, such a course fits squarely with the language of s 33C(1) and at the same time satisfies the policy behind the introduction of Pt IVA. [130] There are sufficient procedural safeguards in s 33C(1)(b) and (c) to protect the integrity of the court's processes, ie that the claims arise out of the same, similar or related circumstances and give rise to a substantial common issue of law or fact. There are other procedural safeguards in Pt IVA to ensure that representative proceedings are not misused. For those reasons, were it necessary for me to decide the point, I would decline to follow Philip Morris to the extent that it is authority for the proposition that, where there is more than one respondent, every group member must have a claim against every respondent in a representative proceeding, on the basis that it was clearly wrong on that point. 9 Although Branson J was prepared to assume, for the purposes of the case then before the Full Court, the correctness of Philip Morris, she expressed some reservations about the conclusion reached in Philip Morris. At 359, her Honour said; [199] It was argued before this court by the applicant that Philip Morris was, to the above extent, clearly wrongly decided. Each of Carr and Finkelstein JJ has indicated that he accepts the above argument. I do not feel able to accept the argument that Philip Morris is, in this regard, clearly wrong. While the decision has attracted criticism, it reflects a construction of Pt IVA of the FCA which, in my view, is plainly open. I consider that Philip Morris should be followed by this court unless and until the High Court takes a different view of the proper construction of s 33C(1) of the FCA. [200] I should add that, notwithstanding my view that this court should follow Philip Morris, I would not reject the possibility that s 33C(1) allows an applicant who has a claim against more than one respondent to commencing a representative proceeding on behalf of more than one group (eg on behalf of two subgroups of members where within each subgroup each member has a claim against the same respondent or respondents). Perhaps less contentiously, I would also not reject the possibility of two proceedings commenced under s 33C being consolidated or ordered to be heard together. However, full argument was not addressed to the court on these possibilities, nor were they called in aid by the applicant. For these reasons I express no concluded view concerning them. [201] Like the primary judge, I therefore proceed on the basis that for this proceeding to continue as a representative proceeding under Pt IVA of the FCA, the applicant and every group member must have a claim against every respondent. On this basis it is necessary to give consideration whether the claim made by the applicant on her own behalf, and on behalf of the group members, against the respondents for relief under s 80 of the TPA is sufficient, as the primary judge found, to enable the proceeding to be brought as representative proceeding under Pt IVA of the FCA. 10 Unlike Carr and Branson JJ, Finkelstein J was not prepared to assume, in Bray, the correctness of Philip Morris. At 373-4, his Honour said; [248] It seems to me that if Philip Morris be correctly decided, we are heading back in the direction of 1852. This result, so it seems to me, is so undesirable that it should be avoided at all costs unless, of course, parliament has mandated it in clear and unambiguous language. I am of the very firm view that there is nothing in the language of s 33C(1), when considered in isolation or in its setting, which requires that result. It is as well to recall the words of the section. Section 33C(1)(a) provides that "subject to this Part, where seven or more persons have claims against the same person ... a proceeding may be commenced by one or more of those persons as representing some or all of them". It can immediately be acknowledged that a properly constituted representative proceeding must involve a group of seven or more persons each of whom has a claim or claims against one person. But that is all the section requires. It simply does not address the situation where some members of the group, say 10 out of a group of 15, also have claims (that is, causes of action) against some other person, being causes of action which satisfy both s 33C(1)(b) (each claim arises out of the same circumstances) and s 33C(1)(c) (each claim gives rise to common issues of law or fact). Is it necessary for the claims of this smaller group to be prosecuted in a separate proceeding or can they be joined in the proceeding brought by the larger group? I will not place a construction on s 33C which requires separate proceedings to be instituted. If it were impermissible to bring such an action, all the objectives of Pt IVA, the reduction of legal costs, the enhancement of access by individuals to legal remedies, the promotion of the efficient use of court resources, ensuring consistency in the determination of common issues, and making the law more enforceable and effective, would be undermined. 11 As appears from the extracts which I have set out from the Full Court's reasoning in Bray, the gravamen of the criticism levelled at the approach taken in Philip Morris is, first, that it is too restrictive, and, secondly, that it detracts from the purpose of Pt IVA. Although I acknowledge the force of what was said by the members of the Full Court in Bray, like other single Judges of the Court who have been faced with the conflict between the views expressed in Philip Morris and in Bray (see, for example, Johnstone v HIH Insurance Ltd [2004] FCA 190, per Tamberlin J, at [38]; Guglielmin v Trescowthick (No 2) (2005) 220 ALR 515, per Mansfield J, at 521-2, and, dealing with Pt 4A of the Supreme Court Act 1986 (Vic), Rod Investments (Vic) Pty Ltd v Clark (No 2) [2006] VSC 342, per Hansen J, at [15] ff, [31]-[36]), I regard what was said in Bray about the availability of s 33C as obiter dicta and therefore not binding on me. I am bound, however, to apply the principle enunciated by the earlier Full Court in Philip Morris unless and until, as Branson J said in Bray, the High Court decides otherwise. Like her Honour, I am unable to find any firm basis for the contention that Philip Morris is "plainly wrong"; even if I had been, I could not, sitting alone, decline to follow it. 12 Mr M B J Lee of Counsel for the Kirby applicants, after making brief submissions about the Philip Morris point, characterised it as "irrelevant". This contention had two limbs; first, that the "threshold requirements", as the criteria prescribed by s 33C(1) were called, have been "spent", in the sense that there is now a Pt IVA proceeding on foot; secondly, or in any case, in the CER proceedings, both applicants and all group members assert "claims" against all of the respondents. 13 The first limb of this argument as I have summarised it proceeds from the premise that, when s 33C(1) speaks of proceedings which "may be commenced", the paragraphs which describe the conditions for that commencement of proceedings apply only at the commencement, and, if they are then satisfied, "the threshold has been passed once and for all". 14 In my view, the requirements of s 33C, although operating at the "threshold", as the High Court observed in Wong v Silkfield Pty Ltd (supra), at 266, continue to enliven the proceedings as representative proceedings, although they do not govern their subsequent conduct. If this were not so, the requirement which the Full Court in Bray discerned as having been recognised in Philip Morris could readily be circumvented by confining the proceedings to one applicant representing seven or more persons all having claims against the same respondent and, later, amending the application to join another respondent, against whom only some of the group members have claims. Moreover, if it matters, the motion for leave to join PwC Securities as a respondent can properly be regarded as the commencement or at the "threshold" of the proceedings against that proposed respondent. 15 I also consider that the continuing operation of the threshold requirements erected by s 33C was recognised by Wilcox J in Symington v Hoechst Schering Agrevo Pty Ltd (1997) 78 FCR 164, where his Honour observed, at 166: In Tropical Shine Holdings Pty Limited v Lake Gesture Pty Limited (1993) 45 FCR 457, I considered the proper interpretation of para (a), in light of the fact that s 33H(2) of the Act provides that, in describing or otherwise identifying group members, it is not necessary to name them or specify their number. The problem was to reconcile the two provisions. Section 33C(1)(a) seemed to require an assertion of the existence of more than seven persons with claims, whereas s 33H(2) relieved the applicant from having to specify the number. At 462 I said: "I think the only way of making sense of section 33C(1)(a) is to interpret it as restricting the use of Part IVA to claims that, by their nature and assuming that they have substance, are shared by at least seven persons. I use the word 'shared' in the sense explained by pars (b) and (c), that is, that the claims of all the persons are in respect of, or arise out of, the same, similar or related circumstances and give rise to a substantial common issue of law or fact. Interpreted in this way, the paragraph fulfils the function of weeding out cases that should clearly not be brought as representative proceedings because it is obvious that less than seven people share the claim whilst preserving the principle embodied in s 33H." The application of this approach to the present case means it is not necessary for the applicants to specify the number of people who have claims against any particular respondent, but they must be able to satisfy the Court at some appropriate time that, by its nature and assuming it has substance, their claim against any particular respondent is shared with at least five other persons. [Emphasis added] 16 The claims made in paragraph 3(c)(i) and (ii) of the proposed amended application in the CER proceeding are confined to PwC Securities, as is the claim, as of right, against the same proposed additional respondent for statutory compensation under s 729 of the Corporations Act 2001 (Cth). The confined nature of the latter claim is made clear by paragraph 4 of the proposed amended application which seeks to join Nicholas Stott as "the Second Applicant" in addition to the original applicant, Kirby. Paragraph 4 recites: On the grounds listed in the second further amended statement of claim, the Second Applicant and those Group Members being the Relevant CSF Securityholders (as defined in paragraph 2 of the second further amended statement of claim) seek as against PWCS an order for statutory compensation under section 729 of the Corporations Act together with interest. 17 It also follows that some of the "questions of law or fact common between the claims of the applicants and Group Members" identified in paragraph 5 of the proposed amended application are not common to both of the applicants and all of the Group Members. For example, the questions of entitlement to the declarations sought in paragraph 3(c) of the proposed amended application are common only between the claims of one applicant, Mr Stott, and some Group Members as against PwC Securities. Similarly, the question of entitlement to compensation under s 729 of the Corporations Act is common only between the "Relevant CSF Securityholders" and PwC Securities. 18 In support of the second limb of his argument seeking leave to join PwC Securities, Mr Lee pointed out that the original applicant, Kirby, as well as Mr Stott, seeks declarations against PwC Securities which constitute the making of a "claim" against that proposed respondent within the meaning of s 33C(1)(a). 19 It is true that Lindgren J in Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd (1998) 84 FCR 512, at 523, made it clear that a "claim" in the relevant sense is not synonymous with "cause of action". His Honour there said; As to the meaning of "claims" in s 33C(1)(a), certain matters are tolerably clear. First, the claims must be claims recognised by the law. Second, s 33C(2)(a)(i) shows that a claim for discretionary equitable relief qualifies, and, therefore, that the "claims" to which s 33C(1)(a) refers are not confined to claims to relief as of right. Third, whatever the word "claims" in the provision denotes, they have an existence independent of, and antecedent to, the commencement of the proceeding, since it is only if seven or more persons have claims against the same person that a proceeding under Pt IVA may be commenced by one or more of them. Perhaps this signifies that it is not a sufficient condition of the existence of a claim that a claim has been "made", "asserted" or "threatened". Fourth, for obvious reasons, s 33C(1)(a) does not speak of a "right" or "entitlement" to relief - a matter which cannot be known until a final hearing. Fifth, it is not required that the persons who have the claims be aware that they have them, let alone that they have asserted them. [Original emphasis] 20 However, in my view, the "claim" which would be advanced by Mr Kirby against PwC Securities would not satisfy the positive requirements which Lindgren J identified in that passage. In the first place, a claim against another for a declaration which is not declaratory of some right or interest existing in the claimant is not a claim recognised by the law. Secondly, when his Honour noted that "the 'claims' to which s 33C(1) refers are not confined to claims for relief as of right", he was, I consider, adverting to the well-known distinction between relief as of right, i.e., founded in a cause of action, and relief which lies in the discretion of a court; see e.g. Guaranty Trust Company of New York v Hannay & Company [1915] 2 KB 536. Here, no basis has been pleaded on which a court could erect any exercise of a discretion favourable to Kirby against PwC Securities. As Lindgren J pointed out, it is not enough that such a claim has been "made" or "asserted" on behalf of Kirby. It is also important to bear in mind that in a passage in his reasons in ACCC v Giraffe World (supra) immediately preceding that set out at [19] above, Lindgren J observed; Notwithstanding the foregoing, I doubt that the ACCC is entitled to act as a representative party under Pt IVA where it has no interest of its "own" to protect and has only statutory standing to apply for a remedy which will protect a public interest. The reason is that I doubt that in such circumstances the ACCC has a "claim" against the respondent for the purposes of s 33C(1)(a) of the FCA Act. It is not without significance in this context that Finkelstein J in Bray, although rejecting the conclusion reached by the Full Court in Philip Morris, equated in the passage quoted at [10] above "claims" in s 33C with "causes of action". 21 In the light of my conclusion that the requirement identified in Philip Morris that every applicant and every group member have a claim against all respondents is a continuing one and not confined to the commencement of the proceedings, it follows that leave to add PwC Securities as a respondent in the CER proceeding should be refused.

Kirby v Centro Properties Limited

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