Whether the proceedings should continue as representative proceedings
21 Now that the general nature of the allegations and the causes of action have been broadly identified, it is possible to give more direct attention to the respondent's primary contention that the proceedings not continue as representative proceedings.
22 In part that contention was based on the argument that the amended statement of claim fails in material respects to satisfactorily identify real common issues based on the same or similar or related circumstances, as required by s 33C of the Act. The argument was illustrated and supported by particular reference to the allegedly disparate circumstances of those who entrusted money to Mr Oberg after he ceased to be an authorised representative and to whose circumstances only the action for breach of statutory duty and negligence can relate i.e. the third group identified above, compared to those whose claims are based also on allegedly misleading and deceptive representations (e.g. of 10% p.a. returns on short term investments) i.e. the first two groups identified above. Reference was made to the judgment of Drummond J in Connell v Nevada Financial Group Pty Ltd (1996) 139 ALR 723, especially at 731-732.
23 In response, the applicant referred to Wong v Silkfield Pty Ltd (1999) 199 CLR 255 ("Wong"), where the High Court regarded it as sufficient to identify a real or substantial issue in which group members had a common interest.
24 In the present case there is, in my view, a sufficient connection between the two categories of causes of action, and the interest of the group members in the results of Mr Oberg's conduct, that I would not on this ground direct that the proceedings not continue as representative proceedings. Neither would I, if they were to continue as representative proceedings, exclude members of the third group I indentified earlier, as I have already said.
25 However, there are more fundamental objections to the proceedings continuing as representative proceedings.
26 I referred earlier to the three conditions to be satisfied by group members. Counsel for the respondent drew my attention to two important judgments concerning the use of the third criterion.
27 In Dorajay Pty Ltd v Aristocrat Leisure Ltd (2005) 147 FCR 394 ("Dorajay"), Stone J held on two separate grounds that a definition of group members which depended upon them becoming clients of a particular solicitor was contrary to the arrangements for representative proceedings in Part IVA of the Act (see [125] and [126]). The first difficulty was that definition of the group by reference to instructing particular solicitors was seen as a mechanism to "opt in" to the proceedings. The second difficulty was that the definition of group members was seen to dictate who should represent group members.
28 In Multiplex Funds Management Ltd v P Dawson Nominees Pty Ltd (2007) 164 FCR 275 ("Multiplex Funds"), a Full Court considered the circumstances of a class identified by criteria which included "that all members had, at the commencement of the proceedings, entered into a litigation funding agreement". The Full Court distinguished Dorajay in part. Jacobson J (with whom French J, when his Honour was a judge of this Court, agreed) said at [142]-[144]:
142 Part IVA does not use the expression "opt in". But a group definition that allowed a person to take a positive step of "opting in" after the commencement of the proceeding would be inconsistent with one or more of ss 33C, 33H, 33J and 33K. Senior Counsel for Dawson accepted that a post-commencement right to opt in was not permissible. However, no such question arises in the present case because the third element of the definition restricts the class to persons who have entered into the funding agreement at the commencement of the proceeding.
143 Dorajay 147 FCR 394 is distinguishable because group membership could change after the commencement of the proceedings. Stone J found that the provision for group members to opt into the proceeding was contrary to the terms and policy of Pt IVA: see Dorajay 147 FCR 394 at [125]. However, the opting in that was allowed in that case extended to include persons who retained MBC after the date of commencement of the proceeding.
144 It seems to me that her Honour's reasons in Dorajay 147 FCR 394 at [125] are explicable in that way. …
29 Although Dorajay was distinguished, therefore, on the basis that in Multiplex Funds the class was closed at the time the proceedings were commenced, and no-one could "opt in", the Full Court upheld the position taken by Stone J in Dorajay that it was impermissible to allow "opting in".
30 One issue which requires resolution on the present application is whether the third criterion in the present proceedings, properly construed, operates as an "opt in" arrangement.
31 Counsel for the applicant submitted that the third criterion should be read as a reference to persons who had, at the date of commencement of the proceedings, directly appointed Maddocks Lawyers to act for them so that the reasoning in Multiplex Funds applied and the reasoning in Dorajay did not. However, there are difficulties about the attempt to construe the third criterion in that way.
32 One difficulty is that one of the persons identified as a group member by the amended statement of claim did not appoint Maddocks Lawyers to act until after the proceedings were commenced.
33 Furthermore, it seems to me to be clear that the language by which the group is defined at present allows the possibility of joining the group by appointing Maddocks Lawyers to act, even after the proceedings were commenced. I therefore do not accept the argument that the third criterion should be construed in the way suggested on behalf of the applicant, and it may be inferred that the applicant and his advisors did not act on that view when the group member was added who appointed Maddocks Lawyers only after the proceedings had commenced. Unlike the condition which was considered in Multiplex Funds, membership of the group was not confined to those who had appointed Maddocks Lawyers at the commencement of the proceeding. That is a fatal criticism of the proceedings as presently constituted.
34 Another circumstance to be taken into account is that the applicant (and, I was told, all other group members) have changed solicitors. Maddocks Lawyers are no longer appointed to act for them. On the view of the third criterion advanced on behalf of the applicant, the third criterion was nevertheless satisfied by all but one of the group members at the time the proceedings were commenced, even though Maddocks Lawyers no longer act. However, arguably, the condition required by the third criterion has now ceased to be satisfied. That criterion appears to me, on its face, to represent not only an entitling condition but one which was anticipated to remain of more than simply historical relevance and application. On that view, no member of the group now satisfies the third criterion.
35 Faced with these difficulties, counsel for the applicant made it plain at the hearing of the interlocutory application that, if necessary, the pleadings would be amended so that the third criterion satisfied the approach in Multiplex Funds - namely, it would be a criterion which identified the fact that members of the group had appointed Maddocks Lawyers as at the date of commencement of the proceeding. I take it that the applicant would also add to an amended version of the third criterion words to the effect "whether or not Maddocks Lawyers remain retained thereafter".
36 However, there are other considerations which make the suggestion insufficiently attractive in the context of the present case.
37 It is relevant to note that in Wong the High Court observed (at [29]) that one reason the entitlement to commence a representative proceeding should be broadly construed was the existence of the discretion under s 33N of the Act to terminate the representative character of the proceedings. In the present case, ss 33N(1)(b) and 33P(b) of the Act are particularly relevant.
38 Section 33N of the Act provides:
33N Order that proceeding not continue as representative proceeding where costs excessive etc.
(1) The Court may, on application by the respondent or of its own motion, order that a proceeding no longer continue under this Part where it is satisfied that it is in the interests of justice to do so because:
(a) the costs that would be incurred if the proceeding were to continue as a representative proceeding are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding; or
(b) all the relief sought can be obtained by means of a proceeding other than a representative proceeding under this Part; or
(c) the representative proceeding will not provide an efficient and effective means of dealing with the claims of group members; or
(d) it is otherwise inappropriate that the claims be pursued by means of a representative proceeding.
(2) If the Court dismisses an application under this section, the Court may order that no further application under this section be made by the respondent except with the leave of the Court.
(3) Leave for the purposes of subsection (2) may be granted subject to such conditions as to costs as the Court considers just.
39 Section 33P of the Act provides:
33P Consequences of order that proceeding not continue under this Part
Where the Court makes an order under section 33L, 33M or 33N that a proceeding no longer continue under this Part:
(a) the proceeding may be continued as a proceeding by the representative party on his or her own behalf against the respondent; and
(b) on the application of a person who was a group member for the purposes of the proceeding, the Court may order that the person be joined as an applicant in the proceeding.
40 It is apparent from the amended statement of claim that it will be necessary to examine the circumstances of each of the identified group members. Relief is sought based on individual calculations of loss. Each of the identified group members could seek relief in their own right. If the proceedings do not continue as representative proceedings, each may apply to be joined as an applicant in the present proceedings.
41 Some of the cases for relief are apparently weak in an evidentiary sense. The only significance that has been identified of the proceedings going forward as representative proceedings is that group members other than the applicant will be immunised from the possibility of a costs order in favour of the respondent if the case with respect to that group member does not succeed. That is not a matter which I regard as favouring continuation of the proceedings as representative proceedings.