Nathan v Macquarie Leasing; Fox v Westpac

1 Over several case management conferences, the parties have been unable to agree on a statement of the common issues in these proceedings, which are being heard together. Following consideration of written and oral submissions from the parties I have identified the issues in each proceeding and the common questions capable of arising in the representative proceeding for resolution at trial, and yesterday I made the necessary orders indicating that I would shortly publish my reasons. These are those reasons.

2 I will briefly state the principles applicable to the exercise I have undertaken:

(a) It is critical for the orderly conduct of group proceedings that prior to commencing the initial trial there is specificity about what common questions are being determined.[1]

(b) Deferral of this process impedes the efficient and fair conduct of the initial trial and invites later difficulties in identifying which findings determine common issues of law or fact to bind all group members having regard to the operation of s 33ZB of the Supreme Court Act 1986 (Vic).[2]

(c) On the other hand, it is accepted that orders identifying the common questions to be determined at an initial trial are interlocutory and may be revised and adapted.[3] It is common practice for an interlocutory list of common issues to be revisited and settled in relation to their precise terms in the context of all of the facts and circumstances revealed by the evidence, usually before final submissions are received.

(d) In Merck, the Full Federal Court recognised that where there is controversy about the common issues, it is desirable to structure the trial by identifying what might be the common issues for determination and if it becomes apparent from the evidence and the submissions (at trial) that the questions were not common, then they would not be determined.

(e) The exercise of identifying common questions in advance of trial is one of case management that should not be weighed down in technical argument and which does not preclude any party from raising in due course any point in favour of or against a common question, provided that it properly arises in the proceeding.[4]

(f) I agree with observations of some other judges that the fact that it might ultimately be determined that a disputed common question cannot be answered at the initial trial because it emerges during that trial that the answer requires consideration of fact and circumstances peculiar to individual group members is not a reason for not posing that common question in the first place.[5] Further, the fact that there is a possibility that a determination of a question may lead to answers that, in their application to each group member, are still fact‑specific, will not deny its character as a common question.[6]

(g) A flexible approach to this exercise is consistent with ss 7 and 10 of the Civil Procedure Act 2010 (Vic) given the substantial impact on court resources that occurs when group proceedings go to trial. It is desirable that the Court ensures that as many questions of law and fact having a degree of commonality as possible are decided, for the benefit of the trials at the second stage.[7]

(h) The Court has a valuable power to require the identification of issues in a proceeding under s 50 of the Civil Procedure Act.

3 The Supreme Court Act provides that, where a proposed common question does not arise directly out of the individual claim of a representative plaintiff, steps can be taken to appoint a subgroup representative party or otherwise establish a process of for taking evidence relevant to a particular issue to be received.[8] These processes have not been invoked.

4 Having stated the principles that I propose to apply, it is convenient to now note the parties' submissions.

5 The parties provided a number of versions of tables that set out the agreed and contested issues and common questions noting, on a paragraph‑by‑paragraph basis, their respective contentions for or against. In settling the lists of issues and common questions in each proceeding I have carefully considered these submissions and it may be assumed that where a party's statement of issue or identification of a common question has been accepted, rejected or redrafted, I have preferred the submission of the successful party in relation to that particular paragraph in the context provided by these reasons.

6 The Defendant in proceeding S ECI 2020 03924 (Macquarie) identified two overarching questions of principle.

7 First, Macquarie submitted that the plaintiffs have shifted emphasis to contending that MacLease (Macquarie's online loan origination platform) and the materials, training and assistance provided to dealers in respect of it was the operative cause of the dealers' unfair conduct, to support the contention that whether any dealer engaged in statutory unfair conduct could be determined as a common question in the initial trial. It submitted the plaintiffs made no allegation that MacLease or any materials, training and assistance caused Booran Motors to act in any way in dealing with the plaintiffs (Nathans).

8 Macquarie's second point of principle was that the plaintiffs' claim for statutory unfair conduct by Booran Motors could not be resolved by reference only to the content and operation of the Macquarie 'system'; the MacLease platform that it used, or any materials, training and assistance provided by Macquarie to Booran Motors. It submitted the claim of unfair conduct by Booran Motors necessarily depends on what Booran Motors said and did in its dealings with the Nathans; what the Nathans knew, understood and believed at the time; whether they were able to protect their own interests; whether they could have obtained a loan from another credit provider; whether they mistakenly believed that they were unable to do so; what they would have done up to the conduct, and so on. Macquarie submitted that the answers to such questions will not be found in MacLease or any training or materials provided by Macquarie to Booran Motors.

9 Likewise, the claim of misleading or deceptive conduct and the claim for unilateral mistake depend on the interaction between the Nathans (or a group member) and Booran Motors (or a dealer) and the answer to whether the consumer had a reasonable expectation of disclosure of certain matters or what the consumer knew or understood are questions that cannot be answered by reference only to Macquarie's system. Further, the position must be the same in respect of the Nathans' claim for rescission of their loan agreement and restitution based on mistaken beliefs relating to the flex commission paid by Macquarie.

10 Macquarie submitted that each pleaded claim depended on matters that are inherently individual to the Nathans which could not be determined in relation to all group members solely by reference to what appeared from MacLease or in materials, training and assistance provided by Macquarie.

11 The defendants in proceeding S ECI 2020 02946 (Westpac) adopted Macquarie's submissions, also submitting that there had been a fundamental shift from the pleaded case by the plaintiffs' present emphasis on a 'systems case' based on the use and deployment of Westpac's automated acceptance system for auto finance (Sovereign) and the use of standard loan documentation.

12 In summary, Westpac submitted that many of the plaintiffs' proposed common questions could not be answered since:

(a) The questions are predicated on the features of, or interactions with, individual group members.

(b) The questions are contingent on a finding that dealers engaged in unfair conduct viz‑à‑viz group members, which will turn on the circumstances of each individual group member.

(c) The questions relate to group members' entitlements to relief and claims for loss and damage when, again, whether a group member suffered loss and damage, and the proper merger of that loss depend on their individual circumstances.

(d) The questions invite the Court to determine whether group members relied on certain matters, held certain reasonable expectations, or held mistaken beliefs. These subjective states of mind cannot be determined on a common basis.

13 The plaintiffs urged me to reject these submissions, submitting that all the issues and questions formulated arise out of the pleadings. The plaintiffs contended that the list of issues is not only informed by the pleadings but also by Statements of Propositions, which I will come to. The plaintiffs submitted that Macquarie's objections not only mischaracterised the detail in the plaintiffs' Amended Statement of Claim but were also frequently answered by a substantially identical proposition in the Statements of Propositions. Further, the plaintiffs noted that the relevance of its 'systems case' based upon the operation of the online digital platform and the related documentary materials provided by the defendants to dealers has been plainly recognised by all parties, during discovery, as relevant to the issues in the proceeding. Such material would give content to the notion of materials, training and assistance and more fully define the 'system' that the plaintiffs say operated.

14 The plaintiffs submitted that it will be clear at trial that all dealers were seeking car loans for consumers, for each of them and the group members were subject to the same systems, processes and procedures put in place by the lenders with respect to their dealers. Each entered into the same standard form loan documentation, and the loan application for each was transmitted through the online platform. Significantly, the plaintiffs contended that the relevant material in relation to the operation of the loan application and approval system may, on the whole of the evidence adduced at trial, permit the drawing of relevant inferences. For example, there will likely be no suggestion that other dealers prepared and lodged car loan applications otherwise than through the online platform and in accordance with the processes and procedures put in place by the lender. It follows that the nature and effect of those systems, processes and procedures is a matter that is capable of being determined on a common basis. In other words, evidence of the systemic nature of the transactions may be sufficient to establish the elements of the pleaded causes of action. It is not practical to assess prior to trial whether a common question that could be resolved by an analysis of individual dealings might be capable of being answered based on evidence of the 'system' supported by available inferences.

15 Further, the plaintiffs submitted that on questions of reliance, reasonable expectation and like concepts that were emphasised by the defendants as necessarily involving idiosyncratic interactions between consumers and dealers, the defendants misconceived the statutory basis for the plaintiffs' causes of action. These submissions raised arguable contentions but were, in my view, properly matters to be resolved at trial, rather than on an interlocutory basis. That being so there is no point in reciting those submissions, or expressing a view on them, in these reasons. For present purposes, I note that if such submissions are sound, some of these questions are capable of being answered by reference to a system, as opposed to the circumstances of individual interaction, at least in part.

16 On consideration of the pleadings, the submissions and related documents, I prefer the plaintiffs' submissions on the two key points of principle.

17 Clearly, the first point of reference to determine the common issues is the pleadings. I considered the statement of claim in these cases to be unsatisfactorily structured in that they plead the claims of group members before identifying the issues raised between the representative plaintiff and the defendant. The pleadings appear to have been drawn for the purposes of mediation rather than for a trial. I have other criticisms. However, the defendants appear to have accepted the pleadings as they stand. Given this unusual structure and its acceptance by the parties, it is problematical to adopt an unduly restrictive or technical interpretation of the pleaded issues when identifying issues. To correct the focus for the initial trial, I directed that the parties prepare statements of the issues between the representative plaintiffs and the defendants pursuant to s 50 of the Civil Procedure Act in each proceeding as well as statements of the common issues for the purposes of Part 4A of the Supreme Court Act.

18 I have taken a generous view as to whether any particular issue is properly raised. In this context another unusual feature of this case can be noted. In an earlier case management conference, Nichols J, to manage large and complex issues about discovery in these proceedings directed that the parties prepare tender bundles and Statements of Propositions arising from the documents within those bundles. These Statements of Propositions have been referenced in the particulars of the plaintiffs' recently amended pleading and are on the Court file, available to aid in understanding these particulars. In the context of a case‑managed proceeding, it is appropriate to have regard to these Statements in assessing the dispute between the parties as to what are the common questions affecting group members.

19 I am satisfied that the 'systems' case advanced by the plaintiffs is found alleged in the pleadings, reinforced by the Statements of Propositions arising out of tender bundles and substantially incorporated into the pleadings by reference in particulars. These documents were ordered by the Court as part of case management of these proceedings and are available on the Court file. It is not inappropriate to have regard to them, as the parties plainly have, in understanding the full scope of the allegations made in the proceedings. Further, the defendants did not submit that they would be prejudiced in any material way by expansion of the common questions to include analysis of the relevant causes of action based on a 'systems' case and any necessary inferences that might ultimately be available.

20 The second matter that I accept to be well established is that questions of fact or law that might depend on circumstances peculiar to individual group members generally cannot be included to be the subject of findings binding on group members in a later trial, for obvious reasons. As will become apparent, such circumstances in these proceedings do not arise between the group members (as consumers) and the defendants, but rather between group members and dealers.

21 The defendants, not having raised the issue at any prior time in case management having regard to the unusual structure of the pleadings, now submit there are several issues arising in these proceedings that can only be answered by reference to all the circumstances of alleged non‑disclosure. They submit such issues can only be determined by reference to the individual circumstances of each alleged instance of non‑disclosure,[9] that is, the direct dealings between the consumer/group member and the dealer with whom they transacted, neither of whom is a party or a witness. While not disputing the principle, the plaintiffs in each proceeding contend that their case as pleaded is premised on the existence of a system based around digital automated web‑based loan origination platforms operated by the defendants through agreements and standard documentation (i.e. a system), through which the car dealers were required to submit applications for finance on behalf of consumers.

22 It is, I think, obvious that there will have been particular relevant circumstances in the interactions between each group member and dealers who then submit credit applications to the defendants' online loan origination platforms. In that sense there is merit in the submissions advanced by the defendants. It also appears plain that the course of conduct in relation to the placement of consumer loans with the defendants and the payment of a flex commission to a dealer will have substantial similarities for all consumers. There is plainly a system in the operation of the loan origination platforms that may have the capacity to drive conclusions about issues arising in the pleaded causes of action that otherwise would be resolved by examination of the circumstances of interaction between the parties to the dealing. A critical issue is whether the system will be enough to persuade me that I can make findings on the common questions now in dispute, bearing in mind that the plaintiffs submit that they are only putting a 'systems' case on behalf of group members.

23 One method of balancing the relevant considerations that will likely be useful may be to address questions of this kind as common issues in the proceeding on the basis of confining the plaintiffs to proving the allegations (for example, of unfairness, reliance or misleading conduct and like issues) by adopting the qualification first formulated by Gillard J in Johnson Tiles and adopted in other cases, including Asirifi‑Otchere v Swann Insurance (Aust) Pty Ltd (No 2).[10] This qualification is to provide that an issue is to be determined by consideration of the operation of the system leaving aside any fact relevant to the issues which are peculiar to a particular group member.

24 Having regard to the general principles applicable by reference to the Civil Procedure Act, the strength of the plaintiffs' submission that issues and common questions are capable of being identified as arising out of the pleadings and that issues which might otherwise be thought to be dependent upon individual dealings between consumer and dealer could be resolved by reference to systems, particularly having regard to inferences that may appropriately be drawn on all of the evidence in the case, I am satisfied that the defendants' submissions as to the proper scope of the common questions are unduly restrictive. As I have already stated, it is appropriate to seek to achieve the overarching purpose of civil litigation by taking a more generous, or expansive, view of the pleading that the defendants have submitted.

25 I have redrafted many issues to make clear that the relevant question is confined to being answered by reference to the systems and necessarily available inferences, and capable of being answered without regard to idiosyncratic consideration of individual transactions (for the common questions).

26 As noted as a matter of general principle, the statement of issues and the common questions can be revised and adjusted if necessary in light of the evidence at trial. Further, the defendants are not constrained from submitting at trial that any particular question simply cannot be resolved on the basis of an analysis of the systems in operation, divorced from evidence of individual dealings between the consumer and the dealers from whom they purchased motor vehicles. It is open to the parties to address at trial whether any individual common question identified as capable of being resolved at the trial should and can be answered on the evidence.

27 For these reasons I am satisfied that schedules of issues and common questions in each proceeding that are the subject of my order will meet the policy objectives outlined earlier in these reasons.

[1] Ethicon Sarl v Gill [2021] FCAFC 29; (2021) 288 FCR 338, [57]; AS v Minister for Immigration and Border Protection [2014] VSC 593, [64]. The Owners - Strata Plan No 87231 v 3A Composites GmbH (No 5) [2020] FCA 1576, [7]; Merck Sharp and Dohme (Australia) Pty Ltd v Peterson [2009] FCAFC 26; (2009) 355 ALR 20, [6]; Kim v Wang [2023] FCAFC 115; (2023) 298 FCR 337, [123].

[2] Strata Plan No 87231, [7]; Merck, [6]; Kim, [123].

[3] The Owners - Strata Plan 87231 v 3A Composites GmbH (No 7) [2024] FCA 788, [20]-[21]; Lloyd v Belconnen Lakeview Pty Ltd [2019] FCA 2177; (2019) 377 ALR 234, [377].

[4] Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 5) [2015] NSWSC 1771, [21].

[5] The Owners - Strata Plan 87231 v 3A Composites GmbH (No 7) [2024] FCA 788, [74].

[7] Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27, [42]; Rodriguez at [15]-[16]; Kamasaee v Commonwealth of Australia & Ors (No 10) [2017] VSC 272, [74]-[75].

[8] See ss 33Q, 33R and 33S of the Supreme Court Act.

[9] Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592, [37], [109]-[111].

[10] (2021) 148 ASCR 14, [36].