Murphy v Overton Investments Pty Ltd

Judgment (11 paragraphs)

[1]

EX TEMPORE REASONS FOR JUDGMENT 1 The Applicant has brought proceedings under Part IVA of the Federal Court of Australia Act 1976 ("the Act") in which damages and other relief are sought from Overton Investments Pty Limited ("Overton"). The claims arise out of the relationship which exists between the Applicant and the other members of the prospective class on the one hand ("the residents"), and Overton on the other, concerning a retirement village known as "The Heritage Retirement Village" at Padstow Heights in south-west Sydney. The owner of the land and the manager of the retirement village is Overton. 2 In August 1996, Overton commenced proceedings in the Residential Tenancies Tribunal concerning a complaint that the various residents in the retirement village had failed to approve budgets for 1994 to 1997. In the course of those proceedings, Overton was ordered to provide the residents with copies of the audited financial statements and on 24 September 1996 in accordance with the Tribunal's orders, Overton supplied audited financial statements for the year ended 30 June 1996, showing an annual deficit of $123,987. On 4 October 1996, Overton demanded payment of the June 1996 shortfall from the residents. 3 On 11 December 1996, the Residential Tenancies Tribunal dismissed Overton's proceedings and held that it had no jurisdiction to make the orders that had been sought. On 10 January 1997, Overton started proceedings in the Local Court against 84 residents to recover the shortfall which was claimed in letters of demand which had been delivered in December 1996. 4 In response to those proceedings, the residents commenced proceedings in the Supreme Court of New South Wales and, on 27 February 1997, they obtained an injunction preventing Overton from proceeding with the Local Court proceedings. Those proceedings continued in the Supreme Court of New South Wales before Simos and Windeyer JJ. In those proceedings, Overton filed a cross-claim seeking the amounts which it had sought in the Local Court. 5 A defence was filed to that cross-claim. The defences raised matters of estoppel and other factual matters relating to misrepresentations allegedly made by or on behalf of Overton to the residents in connection with the negotiations that led to the grant of their tenancies of units within the village. A number of factual matters were referred to Mr Taylor SC for a report pursuant to Part 72 of the Supreme Court Rules. Mr Taylor reported in due course on a number of questions which were ultimately the subject of orders made by the Supreme Court. 6 In particular, on 23 April 1999 Windeyer J directed that all matters arising under certain paragraphs of the amended defence to the cross-claim, being the matters relating to estoppel and misrepresentations, be brought to trial by separate action by the residents and otherwise that judgments be entered on the cross-claim, without regard to such defences, but subject to any application for a stay. On the same day, Windeyer J directed that judgment be entered for Overton on the cross-claim against individual cross defendants for separate amounts set forth in a document which is annexed to the orders which he made on that day. 7 His Honour also ordered that proceedings for enforcement of the judgments against the cross defendants be stayed upon condition that the cross defendants pay to Overton 50% of the amount shown against the name of such cross-defendant in the document. Such payment was to be made within 21 days of the date of the order. His Honour further ordered that the stay continue until the conclusion of the Federal Court proceedings or earlier order of the Supreme Court. 8 Overton has now applied to the Court for orders as follows:

9 Overton has taken me in some detail to the history of the proceedings in the Supreme Court that led up to the orders made by Justice Windeyer on 23 April 1999. In substance, however, the relief which as I apprehend it is sought, is a determination that these proceedings should not be allowed to proceed as representative proceedings under Part IVA. 10 Section 33C(1) of the Act provides that: "where: (a) seven 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." 11 Section 33C(2) provides that such proceedings may be commenced notwithstanding that the relief includes equitable relief and consists of or includes damages or includes claims for damages that would require individual assessment. 12 The proceeding in this Court raises, in effect, four separate causes of action. The first is based on sections 82 and 87 of Trade Practices Act 1974 and alleges that certain conduct of Overton in connection with the negotiations which led up to grant of the leases to the residents was misleading or deceptive. Second, it is alleged that by reason of that conduct, Overton is estopped from demanding the contributions to outgoings which have been held by the Supreme Court to be payable under the leases. Third, it is alleged that the conduct in question constituted breach by Overton of an alleged duty of care said to be owed to the residents. Finally, relief is sought under the Contracts Review Act 1980 (NSW). 13 Section 33H of the Act provides that: "(1) an application commencing a representative proceeding, or a document filed in support of such an application, must in addition to any other matters required to be included: …………….. (c) specify the questions of law or fact common to the claims of the group members." The material filed to date does not, in my view, satisfy that requirement and, as I understand it, that proposition is accepted by council for the Applicants. 14 I invited counsel for the Applicant to indicate to me the substantial issue of law or fact, which it is contended, would be raised in the proceedings. By way of endeavouring to elicit a response to my question, I engaged in a fairly detailed examination of the statement of claim with counsel for the Applicant. One observation which can be made is that the pleading of what is, in effect, 80 separate cases, gives rise to difficulties in a single statement of claim. By way of example, paragraph 16(a) is in the following terms: "Shortly prior to the Individual Lessees entering into the said Individual Leases with Overton, Overton represented to each of the Individual Lessees that:

There then follow five allegations. 17 It may be that there will be no real dispute as to the truth of the matters, which were allegedly not disclosed as a result of the proceedings in the Supreme Court. However, paragraph 18 is subject to the same criticism, it seems to me, as can be directed to paragraph 16. It rolls up into two lines 80 different allegations in respect of different individuals. Those defects in the pleading of 16 and 18 require amendment if the matter is to proceed. In addition, there is no formal allegation of the facts which are presently set out as particulars to paragraph 18. As I have said, it may well be that there will be no real dispute as to those matters, but they are facts which should be pleaded before there can be an allegation that there was a failure to disclose those facts. 18 I have indicated to counsel for the Applicant that the present statement of claim should in my view be struck out, but that I would give leave for an amended statement of claim to be filed if the Applicant sought that leave. The Applicant has now applied for an adjournment of the hearing of the motion to enable an amended statement of claim to be filed to take account of the matters that were raised during the detailed analysis that took place in the course of argument. I have not endeavoured to set out, in what I am now saying, all of the matters raised but a record has been taken and, no doubt, if there is any difficulty with the matter, the parties can have regard to any transcription of what I have said in the course of argument. 19 Overton has indicated that if an adjournment is granted it should be on terms as to costs thrown away. Counsel for Overton also asked that I impose, as a term, a requirement that the Applicant seek a variation of the order made by Windeyer J on 23 April 1999 concerning payment of 50 per cent of the amounts found to be owing by the residents to Overton. I do not regard it as appropriate to impose such a term. It is clear in my view, from the orders that were made by Windeyer J, that he expected that the issues which had been raised by the defence to the cross-claim would be ventilated in separate proceedings. Whether they were to be 80-odd different proceedings or a single proceeding is not to the point. It is clear enough that his Honour intended that the residents be given the opportunity of ventilating those matters and that the payment of the amounts of the judgment be limited to 50 per cent pending the outcome of those proceedings. While there will be some delay as a consequence of the indulgence which I propose to grant to the Applicant, I do not consider that that delay warrants the term which has been proposed. 20 On the other hand, the need for amendment means that a great deal of today has been wasted. Accordingly, I consider that it is appropriate that the Applicant pay the costs thrown away by the adjournment. Of course, it would also be a term that the costs of any amendment be borne by the Applicant in any event. 21 The further term which Mr Slattery has asked me to impose is that Overton be given leave pursuant to order 62 rule 3(3) to tax a bill of the costs thrown away forthwith. Having regard to the history of the proceedings in the Supreme Court and the fact that the Applicant was in fact invited to litigate these issues in the Supreme Court, coupled with the fact that they have only at the moment paid 50 per cent of the amounts owing under the leases, I consider that it is appropriate to give such leave. 22 I should say that any amended statement of claim which is filed should be particularised in the manner which has been discussed in the course of argument. In addition it should also exhibit the degree of particularity that was mentioned by Drummond J in Connell v Nevada Financial Group Pty Limited (1996) 139 ALR 723 at 728 where his Honour said as follows: "It would generally be necessary for the applicants facing such a challenge to put in evidence setting out as precisely as possible the statements made that are said to contain each oral (or written) representation, if the pleading does not particularise the precise words said to contain the representation to each group member." 23 I consider that it is essential that the pleading identify in relation to each of the prospective claimants all of the matters which are said to give rise to the alleged representations. That would extend not only to the documents themselves, but to the circumstances in which the documents were furnished to each claimant coupled with any oral communication that is relied upon as giving rise to the representations. Paragraph 17 of the present statement of claim alleges oral representations. Those representations should be particularised in the way proposed by Drummond J. 24 I have raised with counsel for the Applicants the possibility of alternative procedures under Order 6, rather than reliance upon Part IVA. Order 6 rule 2 relevantly provides: "two or more persons may be joined as applicants […] in any proceeding: (a) where: (i) if a separate proceeding were brought by or against each of them […] some common question of law or of fact would arise in all the proceedings. ………….." 25 It may well be that Order 6 rule 2 could be satisfied so as to permit proceedings to be brought with all of the prospective claimants joined as applicants. The consequence, of course, would be that all of those Applicants would be at risk as to costs. Whether Order 6 rule 2 would be satisfied is a matter, no doubt, that counsel for the Applicant will take into account in determining whether or not to take up the leave to file an amended statement of claim. Alternatively, it may be that the proceedings will be reconstituted or possibly a second set of proceedings be commenced. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

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Judgment (11 paragraphs)

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