Neville Albert Marston & Anor v Statewide Independent Wholesalers Ltd; Ekaton Corporation Pty Ltd v Shahin Enterprises Pty Ltd; William Edwin Hall & Anor v British American Tobacco Australia Services Ltd; Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd, Joanne Margaret Gow & 2 Ors v Stuart Alexander & Co Pty Ltd, Garry George Adams & Anor v Philip Morris Limited, Arrilla Pty Ltd v ACN 001 259 301 Pty Ltd formerly Australian Independent Wholesalers Pty Ltd; Dale Leslie Berney v Australian Liquor Marketers Pty Ltd; Whelan & Hawking Pty Ltd v IGA Distribution - [2003] NSWSC 816 - NSWSC 2003 case summary

Judgment (224 paragraphs)

[1]

These proceedings are cognate with other litigation brought in this Court, the Federal Court and the High Court seeking the recovery of State and Territory taxes, styled as licence fees, on tobacco paid by retailers to wholesalers pursuant to legislation which the High Court held, in Ha v New South Wales (1997) 189 CLR 465, to be unconstitutional.

[2]

In the Roxborough litigation, in the Federal Court and the High Court, seven retailers recovered the licence fees they had paid to wholesalers. The wholesalers had not refunded the fees, nor had they passed them onto the State and Territory governments. Instead, they achieved windfall profits.

[3]

Subsequent to Roxborough, the major retailers of tobacco independently achieved compromises with their wholesalers to recover the fees they had paid, involving the repayment of substantial amounts of money. In connection with the compromise by Franklins with BATAS and Philip Morris, see per Hely J in Firmstones Pty Ltd v Davies [2003] FCA 113 at [51]-[53].

[4]

In further proceedings commenced in 2002, many thousands of (mostly) smaller retailers applied to recover the licence fees from the major wholesalers, British American Tobacco and Philip Morris. Those proceedings were organised and funded by two companies, the listed company Insolvency Management Fund Ltd ("IMF"), and Firmstones Pty Ltd ("Firmstones").

[5]

Those proceedings were settled prior to judgment. In the case of the proceedings organised by IMF, IMF announced to the stock exchange that British American Tobacco had agreed to pay 105% of the amount claimed in respect of the 9,500 retailers for whom it acted, of which IMF retained 30%. The other settlements were also substantial.

[6]

There are three differences between the present proceedings and the proceedings heard in 2002. The first is that additional wholesalers have been sued. The second is that the limitation period for bringing such proceedings has now expired. The third is that the proceedings are claimed to be representative proceedings on behalf of a class of retailers the identities of all of whose members are not known to the representative plaintiffs."

[7]

Each of the representative plaintiffs is a tobacco retailer located in an Australian State or in the Australian Capital Territory.

[8]

Each plaintiff sues each defendant in an action for moneys had and received to recover amounts paid by the plaintiff to the defendant during the period from 1 July 1997 to 5 August 1997, relying on the decision of the High Court in Roxborough v Rothmans of Pall Mall Ltd (2001) 208 CLR 516.

[9]

Until 5 August 1997 there existed in each Australian State and in the Australian Capital Territory a legislative scheme the effect of which was to impose a tax on the wholesale sale of tobacco products.

[10]

In an attempt to avoid the operation of section 90 of the Constitution (which made invalid any excise imposed by the States and Territories), that tax was imposed in the form of a "licence fee". The tax was imposed by each State and Territory pursuant to the licensing legislation and was payable to the relevant revenue authority. See generally Ha v New South Wales (1997) 189 CLR 465. The legislation was the Business Franchise Licences (Tobacco) Act 1987 (NSW) ("NSW Act"); Tobacco Products (Licensing) Act 1988 (Qld) ("Qld Act"); Business Franchise (Tobacco) Act 1974 (Vic) ("Vic Act"); Business Franchise (Tobacco) Act 1975 (WA) ("WA Act"); Tobacco Products Regulation Act 1997 (SA) ("SA Act"); Business Franchise (Tobacco & Petroleum Products) Act 1984 (ACT) ("ACT Act") and Tobacco Business Franchise Licences Act 1980 (Tas) ("Tas Act").

[11]

The essential features of each legislative scheme were to: · prohibit the sale of tobacco without a licence [Save that under the Qld Act there was no requirement to be licensed where tobacco was purchased from a licensee or had previously been purchased by another person from a licensee]; · provide for the grant on application of: - a wholesaler's (or group wholesaler's) licence; or - a retailer's (or group retailer's) licence (or, in the case of South Australia, a tobacco merchant's licence); · require those licences to be renewed monthly on or before the 27th day of each month; · provide for the "fees" to be paid for renewal of a wholesaler's licence to be a fixed amount together with an ad valorem amount of 100% of the wholesale list price of tobacco products sold by the wholesaler (or members of its group) during the previous calendar month; · provide for the "fees" to be paid for renewal of a retailer's licence to be a fixed amount together with an ad valorem amount of 100% of the wholesale list price of tobacco products sold by the retailer (or members of its group) during the previous calendar month but disregarding any such tobacco products purchased from another licensee; and · require each licensed wholesaler to issue an invoice for each wholesale sale showing:

[12]

its licence number; and - the amount of licence fee applicable to the tobacco products sold.

[13]

Thus, in the ordinary course, an amount equal to an additional 100% of the wholesale price was: · separately identified and added to the invoiced price of tobacco products sold at wholesale by a licensed wholesaler to a licensed retailer; · paid by the licensed retailer to the licensed wholesaler; and · subsequently paid by the licensed wholesaler to the relevant revenue authority as "licence fee" on or before the 27th day of the month following the calendar month in which the wholesale sale occurred.

[14]

In States other than New South Wales, provided a retailer bought tobacco products from a licenced wholesaler, the retailer would not face the prospect of having to pay the same amount again as "licence fee" upon the renewal of its own retailer's licence. This was by virtue of the requirement, in calculating the ad valorem amount of the licence fee for a retailer's licence, to disregard tobacco product purchased from a licensee.

[15]

In New South Wales and the Australian Capital Territory, the same requirement existed but it was subject to the qualification that tobacco products purchased from a licensee could only be disregarded if the licensee had actually paid or subjected itself to liability to pay licence fee in respect of those products. See NSW Act, s41(3), ACT Act, s28(13).

[16]

On 5 August 1997 the High Court held the ad valorem component of the licence fee to be invalid as contrary to section 90 of the Constitution in Ha v New South Wales.

[17]

During the period from 1 July 1997 to 5 August 1997: under the applicable State or Territory legislative regime (save for that operating in Queensland): · each plaintiff was a licensed retailer; and · each defendant was either a licensed wholesaler or a member of a group covered by a group wholesaler's licence; · each plaintiff purchased tobacco products from each defendant pursuant to an invoice which separately identified:

[18]

the total price of tobacco products sold; and - in respect of certain defendants, the amount of licence fee referable to the sale; and · each plaintiff paid the amount so identified including in every case a severable and separately identifiable amount referable to the tobacco licence fee to the defendant who had issued the invoice.

[19]

Were it not for the decision of the High Court on 5 August 1997, in the normal course the defendants (or a member of their group) could have been expected to have paid to the relevant State or Territory revenue authority upon renewal of their applicable wholesaler's licence or group wholesalers' licence: · on or before 27 August 1997 the amounts identified as being for licence fee on invoices for sales of tobacco products occurring during the calendar month of July 1997; · on or before 27 September 1997 the amounts identified as being for licence fee on invoices for sales of tobacco products occurring during the first five days of August 1997. In the result, following the decision of the High Court on 5 August 1997, each defendant (or the group of which it was a member) simply kept the amounts in para 19(c) that had been paid to them.

[20]

The figures obtained by Firmstones pursuant to requests under the Freedom of Information Act , are revealing. In New South Wales alone, amounts in excess of $90,000,000 would have been expected to have been remitted to the Office of State Revenue in each of July and August 1997. Yet only some $77,000,000 was remitted in July, and $18,000,000 in August 1997. The difference was retained by the wholesalers.

[21]

In Roxborough a group of seven retailers all located in New South Wales recovered from a tobacco wholesaler - one of the present defendants - in an action for moneys had and received, amounts identified in invoices as licence fee paid by those retailers to the wholesaler/defendant during the period from 1 July 1997 to 5 August 1997.

[22]

The action for money had and received was held to be available on the ground that money had been paid for a consideration that had failed.

[23]

As succinctly summarised by Palmer J in Cauvin v Philip Morris Ltd [2002] NSWSC 528 at [6]: "… the High Court held that because the amount of the invalid tax was separately stated in each sales invoice rendered by a wholesaler to a retailer, it was a separate and severable part of the purchase price for the products sold. The Court held that the consideration in respect of that part of the purchase price had failed because the legislation under which it was payable was invalid. Accordingly, so the Court held, the law imposed on the wholesalers an obligation to make restitution to the retailers of the amounts of tax which the retailers had paid for purchases from 1 July to 5 August 1997."

[24]

As more fully explained in the joint judgment of Gleeson CJ, Gaudron and Hayne JJ in Roxborough : "[11] There was a standard form of invoice issued by the [wholesaler] to the [retailers]. It specified, in relation to each type of product sold, the wholesale price per 1000 cigarettes, being the price specified in the third column of the price list which, after adjustment for discounts, (which no doubt reflected the bargaining strength of a particular retailer), went to make up an "invoice sale subtotal". It specified separately the amount of the "tobacco licence fee". The combined amount of the invoice sale subtotal and the tobacco licence fee was then shown at the foot of the invoice as "net total". The net total was the amount payable by the retailer. …

[25]

[12] The part of the net total paid to the [wholesaler] by reference to the tax was thus shown separately from the wholesale price of the products sold. The nature of the tax, and the method by which it was imposed and collected, explain why that was done. The tax was an ad valorem tax on goods. The value of the goods had to be distinct from the tax. The tax was to be passed on to the retailer, and was to form part of the cost to the retailer of the goods. But in the documents which formed part of the ordinary course of dealing between the [retailers] and the [wholesaler], and by reference to which their contractual rights and liabilities are to be determined, the parties distinguished between wholesale price, tax, and net total cost to the retailer.

[26]

[13] The amounts paid by the [retailers] to the [wholesaler] in respect of the tax represented a distinct part of the consideration for the tobacco products purchased by the appellants. They were treated by both parties to each relevant contract as separate from the wholesale price of the goods sold, that price constituting the value by reference to which the amount of the tax was determined. And the tax, being a tax on goods, was of such a nature that it was not intended to be borne ultimately by either the [retailers] or the [wholesaler]. The tax increased the exchange value of the tobacco products in the hands of the retailers, but the initial value by reference to which the Minister's determination as to the basis of the tax operated was a wholesale price exclusive of the tax component. While the wholesale price, exclusive of the tax, was arrived at by the operation of forces of supply and demand in the market for tobacco products, and reflected the negotiated agreement of the parties, the tax was imposed externally by government.

[27]

[16] Failure of consideration is not limited to non-performance of a contractual obligation, although it may include that. The authorities referred to by Deane J, in his discussion of the common law count for money had and received in Muschinski v Dodds [(1985) 160 CLR 583 at 619-620], show that the concept embraces payment for a purpose which has failed as, for example, where a condition has not been fulfilled, or a contemplated state of affairs has disappeared [See Birks, An Introduction to the Law of Restitution, 1985, p 223]. Deane J, referring to "the general equitable notions which find expression in the common law count", gave as an example "a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it" [(1985) 160 CLR 583 at 619-620]. In the case of money paid pursuant to a contract, it would involve too narrow a view of those "general equitable notions" to limit failure of consideration to failure of contractual performance. In the present case, the amount of the net total wholesale cost referable to the tax was, from one point of view, part of the money sum each [retailer] was obliged to pay to obtain delivery of the tobacco products. But there was more to it than that. The tax was a government imposition, in the form of a fee payable under a licensing scheme. The nature of the scheme was such that the licensed wholesaler, or, if not the wholesaler, then the licensed retailer, would pay the amount referable to particular tobacco products. The [wholesaler], anticipating liability for the fee, required the [retailers], when purchasing products by wholesale, to pay an amount equal to the fee. The [retailers], in turn, had an interest in the [wholesaler] paying the fee to the revenue authorities, for they were thereby relieved of a corresponding liability. There was a purpose involved in the making of the requirement that the appellants pay the amounts described as "tobacco licence fee", and in the compliance with that requirement. To describe those amounts as nothing more than an agreed part of the price (or, to use the language of the parties, cost) of the goods, is to ignore an important aspect of the facts.

[28]

[17] In a contract for the sale of goods, the total amount which the buyer is required to pay to the seller may be expressed as one indivisible sum, even though it is possible to identify components which were taken into account by the parties in arriving at a final agreed figure. The final figure itself may have been the result of negotiation, making it impossible to relate a cost component to any particular part of that figure. Or there may be other factors which prevent even a notional apportionment. But there are cases, of which the present is an example, where it is possible, both to identify that part of the final agreed sum which is attributable to a cost component, and to conclude that an alteration in circumstances, perhaps involving a failure to incur an expense, has resulted in a failure of a severable part of the consideration. Here, the buyers, the retailers, were required to bear, as a component of the total cost to them of the tobacco products, a part of the licence fees which the seller, the wholesaler, was expected to incur at a future time, and which was referable to the products being sold. It was in the common interests of the parties that the fees, when so incurred, would be paid to the revenue authorities by the seller, and it was the common intention of the parties (and the revenue authorities) that the cost of the goods would include the fees. In the events that happened, the anticipated licence fees were not incurred by the seller. The state of affairs, which was within the contemplation of the parties as the basis of their dealings, concerning tax liability, altered. And it did so in circumstances which permitted, and required, severance of part of the total amount paid for the goods.

[29]

[18] The case is not unlike that considered by the Court of Appeals of New York in Wayne County Produce Co v Duffy-Mott Co Inc [155 NE 669 (1927)]. A war tax of 10 per cent was imposed on cider. A manufacturer sold a quantity of cider by wholesale, at a certain price per gallon, less a stated discount, plus the tax. The total amount was paid to the manufacturer, and the manufacturer remitted the tax to the government. Later, it was ruled that the particular product sold was not taxable, and the manufacturer recovered the tax from the government. The purchaser claimed to recover from the manufacturer that part of the amount paid for the cider which was referable to the tax. The Court of Appeals upheld the claim. Cardozo CJ, who delivered the reasons of the Court, described the issue as being whether the money refunded to the manufacturer by the government was held "to the use of the plaintiff" [155 NE 669 (1927) at 669]. He went on to say [155 NE 669 (1927) at 669]: "This is not a case where the item of the tax is absorbed in a total or composite price to be paid at all events ... This is a case where the promise of the buyer is to pay a stated price, and to put the seller in funds for the payment of a tax besides. In such a case the failure of the tax reduces to an equivalent extent the obligation of the promise." [19] The same idea may be expressed by saying that, in the present case, the failure of the tax involved the failure of a severable part of the consideration for which the net total amounts shown on the invoices were paid."

[30]

To similar effect, Gummow J said: "[104] In the present case, there has been no failure in the performance by Rothmans of any promise it made. No question of repudiation by it of its contractual obligations arises. The question is that stated by Deane J in Muschinski set out earlier in these reasons. Is it unconscionable for Rothmans to enjoy the payments in respect of the tobacco licence fee, in circumstances in which it was not specifically intended or specially provided that Rothmans should so enjoy them? The answer should be in the affirmative. Here, "failure of consideration" identifies the failure to sustain itself of the state of affairs contemplated as a basis for the payments the appellants seek to recover [footnote omitted]." The plaintiffs submission as to the principle of law established in Roxborough and its application 9 The plaintiffs' submission is as follows:

[31]

The principle of law for which Roxborough stands is that an action for money had and received for failure of consideration lies in circumstances where the "consideration" for a particular payment has fallen away. The "consideration" is the mutually contemplated reason for the payment. It need not be contractual "consideration" in the sense of involving some promise on the part of the person to whom it is paid to use it in a particular way. It is sufficient that the mutually contemplated reason for the payment was that the payee would use the money paid in that way. If the amount paid is not used in the way mutually contemplated as the reason for the payment, it is not necessary to found recovery that there be found to have been a promise on the part of the person to so use it.

[32]

In applying that principle to the facts, the High Court in Roxborough found that the "consideration" for the payment by the tobacco retailers to the tobacco wholesaler of the amounts identified in the invoices as being in respect of licence fee was, to adopt the language of Cardozo J in Wayne County Produce "to put the seller in funds for the payment of tax". That finding was based on the separate identification in each invoice of an amount in respect of licence fee looked at against the background of the legislative scheme.

[33]

The plaintiffs submit that the principle in Roxborough also applies in relation to claims against those of the present defendants which did not separately itemise the licence fee in their invoices. The amounts referable to the licence fees payable under the legislation were ascertainable from inter alia : · determinations as to the calculation of value by the relevant Ministers pursuant to the legislation; · the manufacturer's and defendants' published price lists; and · the wholesale price list published during the relevant period in the "Australian Retail Tobacconist" (see Roxborough at [8], [9], [12] - [13])." Limitation Period 10 A question arises as to the date by which any proceedings became statute barred by the ordinary six-year limitation period. The plaintiffs contend that the six-year period began to run on 5 August 1997 upon the declaration by the High Court in Ha v The State of New South Wales on 5 August 1997 which would produce a cut-off date of 4 August 2003. As has already been pointed out, the amounts the subject of the proceedings in Roxborough were those which had been paid by the retailers to the wholesalers between 1 July 1997 and 5 August 1997. 11 Mr Macfarlan submitted that the likely cut off day was six years from 1 July 1997, namely 30 June 2003 which was the date when the several sets of proceedings now before the court were commenced. His submission was grounded upon the proposition that the legislation had always been unconstitutional and that the date of the High Court declaration played no particular part as a determinant of the commencement date of the causes of action. 12 The question does not require to be answered presently although it must be said that it seems to me likely that the position taken by Mr Macfarlan is the correct position. The two positions are only some 35 days apart. Additional facts 13 The affidavits of Mr Adrian Firmstone include details giving adjectival information as to how it has come about that the instant proceedings have been commenced. Firmstone Pty Ltd has no involvement in tobacco retailing but apparently became aware of an opportunity arising from the prospects of success in proceedings such as this at some stage in 2002. It conducted a marketing exercise details of which are in evidence.

[34]

[As a matter of convenience only, it seems unnecessary to be at pains during the judgment to draw any particular distinction between Mr Firmstone and his company Firmstone Pty Ltd which trades as Firmstone and Feil. References to the company are usually self-explanatory, often described as "Firmstone". References to Mr Firmstone are also usually clear and where the references are simply to "Firmstone" the reader may easily discern whether it is the company or Mr Firmstone or a combination of both which is referred to.] 14 The affidavits disclose the following matters: · that Mr Firmstone is the sole director of Firmstones Pty Ltd which trades as Firmstone and Feil Consultants [under cross-examination of Mr Firmstone the defendants established that he is ultimately the sole beneficial shareholder in Firmstones Pty Ltd]; · that Firmstone & Feil provide advice and assistance in relation to indirect tax matters, including with respect to the recovery for tobacco retailers of amounts referable to state tobacco licence fees paid by tobacco retailers to tobacco wholesalers; · that Firmstone & Feil has an arrangement with Horwath GST Pty Ltd ["Horwath"] to pursue state tobacco licence fee refunds on behalf of tobacco retailers who purchased tobacco products during the Relevant Period. This arrangement commenced in or about March 2002; · that Horwath is responsible for procuring tobacco retailers as clients such as by advertising and direct solicitation, and attending to all administrative matters such as maintenance of appropriate databases, communications with clients (including mailouts) and responding to client queries; · that Firmstone & Feil is responsible for overall project management as well as strategic and technical issues, appointment of legal representatives, funding any legal proceedings and all dealings with tobacco suppliers and government organisations; · that each party is to fund the costs incurred in their respective capacities, unless otherwise agreed; · that Firmstone's fee will be 331/3% of any tobacco licence fee refunds received by the plaintiffs, unless otherwise agreed; · that Horwath maintains a client computer database which contains information relating to each of Firmstone's client tobacco retailers and sets out particulars including; · client identification number allocated by Horwath; · contact name; · donor name; · donor type; · business name; · current address and contact details; · 1997 business name; · 1997 business address; · type of business; · suppliers from whom they purchased tobacco; · customer number allocated by the supplier; · purchases or estimated purchases of tobacco per supplier; · tobacco licence fee refund claim amount per supplier; · assessment of claim made by supplier; · amounts recovered and paid to each client; and · the status of a claim made to a supplier. · that Firmstone and Feil has retained Robert Richards and Associates as solicitors for this project and is prepared to act in relation to the representative proceedings for the represented retailers who sign an "Opt-in" Notice and agree to the terms and conditions set out below:

[35]

(a) Firmstone & Feil will pay all costs associated with the representative proceedings, including the cost of any appeals;

[36]

(b) Firmstone & Feil will meet all costs orders made against the plaintiffs (including the represented retailers) in the representative proceedings;

[37]

(c) Firmstone & Feil will receive 33 1/3 % of any amounts recovered by the plaintiffs (including the represented retailers) from the defendants;

[38]

(d) Firmstone & Feil will retain any amounts awarded as costs to contribute to the costs otherwise borne by Firmstone & Feil. · that the subject terms and conditions are set out in the package of materials which it is proposed to send to the represented retailers following discovery by the defendants of documents disclosing the names, addresses and details of the tobacco sale transactions during the relevant period engaged in by the represented retailers; · that the subject terms and conditions are similar to the terms and conditions of a company (Licence Fee Recovery Services Pty Ltd, known as Feesback) that acted to recover state tobacco licence fees in competition with Firmstone & Feil. 15 In the same affidavit Mr Firmstone deposes as follows:

[39]

"Firmstone & Feil presently has been retained by approximately 2100 persons or entities who fall within the class of represented retailers as defined in the representative proceedings on the terms and conditions referred to in paragraph 9 [Allowed as statement of subjective belief]. These tobacco retailers were identified through enquiries and advertising conducted by Horwath. However, based on my involvement in the recovery of amounts referable to state licence fees from tobacco wholesalers, I believe that there is a considerable number of additional persons and entities who comprise the class of represented retailers in the representative proceedings and who presently have not been given notice of the proceedings. Information and documents which disclose the names and addresses of the additional members of the class are in the possession of the defendants. In order to give all represented retailers an opportunity to elect whether to remain in the proceedings and to continue to be represented it is proposed, subject to approval by the Court, to apply for discovery from the defendants of documents which:

[40]

(a) disclose or record the names and addresses of the represented retailers to whom the defendants sold tobacco products during the Relevant Period; (b) comprise the invoices issued by the defendants to the represented retailers during the Relevant Period in respect of the sale of tobacco products; and (c) disclose or record in relation to each sale of tobacco products by the defendants to the represented retailers during the Relevant Period pursuant to invoices issued by the defendants: (i) the date of each invoice; (ii) the number appearing on each invoice; (iv) the total amount referable to the sale of tobacco products; (iv) the amount referable to the tobacco licence fee in respect of the sale of the tobacco products payable or possibly payable by the defendants under any of the Excise Acts as defined in paragraph 6 of section A "Nature of the Dispute" of the Summons; (d) records the payment by the represented retailers to the defendants of the amounts referred to in (c)(iii) and (c)(iv)." 16 Mr Firmstone also deposes as follows:

[41]

"Firmstone & Feil, in conjunction with Horwath, will, together with the plaintiff's solicitor in this matter, Robert Richards & Associates, be performing the tasks set out in (a) to (i) below in connection with the representative proceedings. Certain of the tasks referred to below have already been commenced:

[42]

(a) identifying the unnamed retailers represented by the plaintiffs in the representative proceedings. The principal method which the plaintiffs wish to use in order to identify the unnamed represented retailers is through discovery from the defendant as this information is in the possession of the defendant and not the plaintiff or Firmstone and Feil;

[43]

(b) subject to the directions of the Court, writing to both those retailers now known to Firmstone and Feil and who are our clients as well as to those unnamed retailers who we succeed in identifying in the future advising them that they are represented plaintiffs in the proceedings and asking them whether they wish to continue to be represented plaintiffs by signing the "Opt-in" notice in the form contained in annexure A;

[44]

[45]

(d) receiving "Opt-in" Notices from the represented plaintiffs, checking that the Notices have been correctly completed, and arranging any necessary amendments to the Notices;

[46]

(e) collating the properly completed Notices, compiling a list by matter of those represented plaintiffs who have opted to continue to be represented by the plaintiffs in the proceedings and forwarding those lists and the completed "Opt-in" Notices to the Court and to the solicitors for the relevant defendants in each of the proceedings;

[47]

(f) communicating progress in relation to the relevant proceedings to the represented plaintiffs as occasion warrants;

[48]

(g) assisting in the retrieval and collation of the documentary evidence in the proceedings. In this regard, based on my experience in similar proceedings to recover amounts referable to tobacco licence fees, I consider that the plaintiffs' case will be largely documentary and that the bulk of the pre-trial preparation will be concerned with collating and presenting the documentary material relating to payment by the plaintiffs of amounts referable to tobacco licence fees paid to the defendants and demonstrating that the circumstances of such payments were analogous or identical to those which existed in Roxborough ;

[49]

(h) communicating with members of the administrative and legal team assembled by Firmstone and Feil to conduct the proceedings; and

[50]

(i) conducting negotiations on behalf of represented tobacco retailers, including in relation to any settlement or other discussions with the defendants (or any of them) which may be necessary" 17 Mr Firmstone also deposes as follows:

[51]

"On or about end September 2002, F&F, on behalf of The Shell Company of Australia Limited ("Shell") and approximately 900 tobacco retailers, entered into an agreement with BATA to settle their tobacco licence fee refund claims and Deeds of Settlement and Release have subsequently been executed. The terms of the settlement are confidential.

[52]

On or about end September 2002, F&F, on behalf of approximately 900 tobacco retailers, entered into an agreement with PML to settle their tobacco licence fee refund claims and Deeds of Settlement and Release have subsequently been executed. The terms of settlement are confidential.

[53]

On or about mid October 2002, F&F on behalf of The Shell Company entered into an agreement with PML to settle certain of Shell's franchisees' tobacco licence fee refund claims and a Deed of Settlement and Release has subsequently been executed. The terms of the settlement are confidential.

[54]

On or about late June 2003, F&F on behalf of a small number of tobacco retailers entered into agreements with BATA and PML to settle the retailers' tobacco licence fee refund claims. No deeds have yet been executed in relation to those agreements. Other Settlements

[55]

On or about November 2001, I was informed by Mr Romano Nenna, then General Manager, Taxation, of Coles Myer Ltd ("Coles"), that Coles had settled its claims against BATA and PML for tobacco licence fee refunds.

[56]

On or about June 2002, I was informed by Mr Michael Scott, Indirect Taxation Manager of Woolworths Limited, that Woolworths settled its claims against BATA and PML for tobacco licence fee refunds.

[57]

I am aware from my own knowledge that Franklins settled its tobacco licence fee refund claims against BATA and PML.

[58]

From my reading of material in the public domain over the last 12 months, I believe that the aggregate of amounts collected by wholesalers of tobacco products and not remitted to the relevant State Revenue Office is in the range of $230 million to $250 million. For example, annexed hereto and marked D and E are two ALP News Statements dated 16 September 2002 and 23 September 2003 respectively in which the National ALP reports that an estimated $250 million is involved. In addition, in Cauvin v Philip Morris Limited [2002] NSWSC736, Windeyer J's judgment at paragraph 12 records that the plaintiff's statement of claim alleges a sum comprising of approximately $230 million is involved.

[59]

In about mid September 2002, I had a conversation with Robert Richards in words to the following effect: I said: "Our tobacco licence fee recovery project (of which you are aware because of your involvement with Franklins) has reached the stage where litigation is likely as we've not been successful in settling our clients' claims and I would like you to be the project's solicitor on our usual basis." He said: "I'd be happy to be the project solicitor on the usual basis "." [Affidavit of Mr Firmstone of 29 August 2003] [emphasis added] 18 Mr Firmstone also gave detailed evidence in his affidavit of 29 August 2003 of settlements achieved in retailers sets of proceedings in the past. In short Insolvency Management Fund Ltd [IMF] had reported that:

[60]

its 7,500 retailer clients had settled their claims against Phillip Morris Ltd;

[61]

its 1,000 retailers clients had settled their claims against British American Tobacco Australia on the basis of payments to be received of 105 percent of the claim of each retailer which would obtain 75 percent after IMF's Feil 30 percent;

[62]

the settlements in relation to its 9,500 tobacco retailers clients would result in income of $15 million. 19 During the cross-examination of Mr Firmstone he gave evidence as to the precise steps which had been taken in terms of such sparse contacts as had occurred with those persons who had already been retained by Firmstone. Typical of the materials sent to such persons are the documents in Exhibit PM1 which are annexed to this judgment as Appendix "B". 20 It became clear during the course of this cross-examination [which took place prior to the late procedural change] that although there was a possible exposure to costs on the part of the persons who became named plaintiffs and although that exposure was to be indemnified by Firmstone, Mr Firmstone had not himself taken any steps to contact those persons to ensure that this risk had been communicated to them. His evidence was simply that he had advised Mr Proud, a Firmstone and Feil employee, to advise those persons of what was involved. Nor had he taken any steps to ensure that such persons invited to become named plaintiffs were aware of the prospect that they may have to give evidence in Court. Nor did he specifically instruct Mr Proud to that effect. He gave the following evidence:

[63]

"Q. In general terms, what you communicate, or you have your firm communicate, to people who wish to be represented by your firm is that they haven't got anything to lose. That's the substance of it, isn't it? A. The letter says "no cost", correct

[64]

Q. Well, the question is asked in the letter "What have you got to lose?" A. Yes" [Transcript 48]…

[65]

"Q. But there is no communication of any risk or inconvenience at all to the person concerned, is there? A. No… " [Transcript 49] 21 Mr Proud gave evidence of his telephone conversations seeking to ascertain whether particular persons were prepared to become the lead plaintiffs. Those persons were informed generally as follows:

[66]

"What we are intending to do is to commence on behalf of our clients who have purchased from [the name of the relevant wholesaler was identified] a representative case to sue them for the tobacco licence fee that they paid. Under the proceedings that are planned all of our clients will be plaintiffs but they will represent the other clients. To begin with one of the retailers has to start the process by being the representative party on the summons. Eventually all of our clients will be named as parties to the summons , but someone has to go first. Are you prepared to be the lead Plaintiffs?" 22 Mr Firmstone gave evidence as to the reason why the present sets of proceedings were only commenced on arguably the last day of the limitation period. The reason was that Firmstone had hoped to settle prior to that. However the representative proceedings only came into Mr Firmstone's mind when the clock started to run out and when it was clear that they were not going to settle the various proceedings. He denied that it was his intention to wait before commencing the proceedings until the end of the limitation period so those retailers who wished to pursue a claim for recovery could only do so through his firm. His more precise evidence was that it had not been his intention initially to bring about that result but that it had occurred to him at some stage in the process, that is to say at least by May or June 2003. He had brought about the proceedings for the purpose of stopping the clock for Limitations Act purposes. [Transcript 51] 23 Firmstone have agreed with Horwath GST to a 50/50 split of the 331/3% fee on what is recovered for retailers. Firmstone's proposal is to also receive 331/3% of the interest component forming part of any judgment. 24 It is common ground that the evidence before the court established that notwithstanding an aggressive marketing campaign a very large number is thought by Firmstone to comprise the target opt-in group who have not to date indicated any interest in participating in any way in the proceedings. Retainer issues 25 There are a number of real concerns as it seems to me in terms of the retainer of Robert Richards & Associates in relation to these proceedings. The two relevant retainer letters are dated 6 April 2001 and 27 November 2002 [Exhibit PM 2/volume 5 of Exhibit PX page 1420]. Each of these letters is annexed to this judgment as Appendix "C". 26 The earlier letter from the solicitors to Firmstone refers to a meeting with Mr Firmstone of 4 April 2001 and to an understanding by Mr Richards that Firmstone acted for a number of clients who were then in dispute with the Taxation Office in respect of various sales tax matters. Those matters are identified. The letter then advises that Mr Firmstone had asked Mr Richards to assume responsibility for the carriage of those matters and that Mr Richards had agreed to assume that responsibility and had filed relevant notices of change of solicitor. The letter then includes the sentence:

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"Whilst you are acting for your client you have engaged me as principal and not as agent for your clients." 27 The letter goes on to state Mr Richards understanding that Mr Firmstone and his staff would provide assistance to Mr Richards in respect of the matters and that in particular: · you will be responsible for the day-to-day carriage of the matters. However you make copies of all documents (in respect of the matters) between yourself and your clients available to Mr Richards. You will inform me of all material oral communications between yourself and your clients; · you will liase with your clients. I will not directly liase with your clients; · you will provide sufficient staff to support any court hearings including attendance at court to assist Counsel and to liase with witnesses. 28 The letter advises that:

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"I understand that you have notified your clients as to my involvement in the matter and they have agreed to me representing them." 29 The letter of 27 November 2002 refers to the earlier letter and to the fact that Robert Richards and Associates since the date of the earlier letter had provided Firmstone with services in respect of other matters which because of their urgency were not subject to any written agreement. The letter confirmed that "you have engaged me on either your own behalf, on behalf of Firmstone's Pty Ltd or on behalf of your clients on-going (sic) basis in respect of other matters". There is a confirmation that any such future matters undertaken by Robert Richards would be undertaken on the same terms as those detailed in the earlier letter. 30 During the course of his cross-examination Mr Firmstone was taken to the statement in the letter of 6 April 2001 from Robert Richards & associates: "You will liaise with your clients. I will not directly liaise with your clients". His evidence was that he did not intend any such arrangement in relation to these sets of proceedings; that this had related to other matters and was not part of his current arrangements with Mr Richards. 31 However the evidence before the court as to the retainer arrangement is documentary and the fact that his recollection as he gave evidence in the witness box, was that he did not intend that to be and that it was not the current arrangement in relation to these sets of proceedings is far from satisfactory proof as to the present position. Significantly: (1) his affidavit evidence in referring to his conversation with Mr Richards of mid-September 2002 had set out the relevant portion of this conversation in which the request and acceptance was for Mr Richards firm to be the project's solicitor "on the/our usual basis" and (2) he failed to give any evidence as to what was the arrangement, if any, said to be in place in relation to these sets of proceedings. Nor did Mr Richards give evidence about this matter. In my view the court is entitled on such a significant matter to infer that the all important documentary retainer letters prove the terms of the retainer. Such a matter could not be left at large. 32 One of the problems which it seems to me inheres in this arrangement, is the agreement/undertaking by the solicitors that they would not directly liase with "your clients" [here this can only be regarded as a reference to the plaintiffs and the target opt-in group in relation to the present proceedings]. There is some ambiguity as to who are the clients of Robert Richards, the earlier letter referring to Firmstone as "acting for your client" and as having engaged Robert Richards as principal and not as agent "for your clients" and yet later in the same letter referring to an understanding that Firmstone had notified "your clients" as to Robert's Richards involvement in the matters and that they had agreed to Robert Richards "representing them". Quite probably this amounts to Robert Richards being retained both by Firmstone and by the plaintiffs and the target opt -in group in relation to the present proceedings. It seems that there were two groups of clients in mind when the retainer letter was drafted and sent. 33 In any event and insofar as the retainer letters concern Robert's Richards being retained to act on behalf of the plaintiffs and the target opt-in group, to my mind it is an extraordinary proposition that in this particular situation a firm of solicitors accepts a retainer upon the basis that they will not directly liase with their clients. Problems which come to mind in relation to such an arrangement would include the following: · Where a conflict-of-interest may arise as between interests of Firmstone and the interests of the plaintiffs or the target opt-in group it would seem inimical to the interests of the plaintiffs or the target opt-in group for the solicitor acting for both groups of parties to permit Firmstone alone to liase with the plaintiffs or the target opt-in group. Such a conflict-of-interest may conceivably arise for various reasons including, for example, an occasion when an offer may be made by a group of relevant defendants to settle proceedings on the basis of payment in kind rather than payment in cash. Whilst it is all very well to suggest that Firmstone would not be disadvantaged in that form of settlement and would take its share of the proceeds by way of 331/3% of the value of the payment in kind, all sorts of problems relating to how that value would be ascertained could obviously arise. Likewise when the questions of the actual mode of running the proceedings would arise, it would be in the interests of Firmstone to keep the expenditure on legal fees to a minimum whereas the interests of the plaintiffs and the target opt-in group may very well be to prepare the case comprehensively even though such expenditure on legal fees may be involved. This particular type of issue would likely concern whether each of the individual plaintiffs and the target opt-in group was to give evidence presumably by statement. I reject Mr Gageler's submission that the interests of Firmstone on the one hand and of the plaintiffs on the target opt-in group on the other hand are "exactly the same" or "coincident". · The well-known obligations of solicitors in relation to communicating to and dealing with their clients to ensure that the discovery processes are understood and complied with may very well be impeded where the solicitors have undertaken not to directly liase with the clients for or on behalf of whom they act. 34 It is not possible to generalise in relation to circumstances in which solicitors may make arrangements to deal with clients through agents, with integrity and probity and consistently with their professional obligations, including obligations to the Court. The court is here concerned with a very specific set of circumstances which throw up the particular problems already referred, to bearing in mind the significance of a firm of solicitors giving proper consideration to possible conflicts of interest which can sometimes arise where those arrangements are concerned. 35 The direct significance of these concerns go to a proper understanding of all parameters of the commercial transaction engaged in by Firmstone in terms of its promotion of these proceedings. Mr Firmstone under cross-examination agreed with the proposition that it was an accurate description of his involvement in the proceedings that they constituted a speculative investment by him in other persons litigation. [Transcript 72.45] Representative Proceedings 36 It is convenient to examine the earlier and then the more recent history in terms of the recognition of representative proceedings. Here again the Court has been much assisted by the submissions received from all parties many of which are simply adopted in what follows. · Representative proceedings have been recognised by the law for more than 8 centuries. Professor Yeazell, whose works were cited with approval by McHugh J in Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 at 428 and 429, wrote in From Medieval Group Litigation to the Modern Class Action (1987), p38: "About 1199, Martin, the rector of Barkway, sued the parishioners of Nuthamstead, a Hertfortshire village, in a suit involving his entitlement to certain offerings and theirs to daily services of mass [citation omitted]. He sued them neither as a corporation nor as individuals; the suit instead spoke of "the parishioners" as a group, with a few giving testimony apparently on behalf of all." · In the succeeding centuries, representative proceedings came to be recognised in chancery. With the enactment of Judicature legislation, the Rules of Procedure of the new Supreme Court of Judicature, which reflected Chancery practice, were extended to proceedings at common law and in equity. See Carnie at 415, where Toohey and Gaudron JJ observed that Pt 8 r 13 is the direct descendant of those English rules. · The more recent history is summarised by Lord Macnaghten in Duke of Bedford v Ellis [1901] AC 1 at 8: "The old rule in the Court of Chancery was very simple and perfectly well understood. Under the old practice the Court required the presence of all parties interested in the matter in suit, in order that a final end might be made of the controversy. But when the parties were so numerous that you never could 'come at justice,' to use an expression in one of the older cases, if everybody interested was made a party, the rule was not allowed to stand in the way. It was originally a rule of convenience; for the sake of convenience it was relaxed."

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· Parker's Practice in Equity (1930) stated (at 43): "The general rule of the Court of Chancery, apart from statutory modifications, was that all persons interested in the subject of a suit should be made parties. One or more plaintiffs, however, if belonging to a large class having a common interest in the relief sought, might sue on his or their own behalf and on behalf of the rest of the class, and one or more of a large class having a common interest in resisting a plaintiff's claim might be made the only defendant or defendants as representing the other members of the class, if in either case the class was so numerous as to render the joinder of all of its members impracticable or inconvenient. [citations omitted]. This practice is still in existence. The statement of claim should allege, in effect, that the suit is brought by or against (as the case may be) one or more persons as representing a class of persons too numerous to be joined individually." [citations omitted] · In Carnie at 429, McHugh J said, of the cases in the eighteenth and nineteenth centuries, that: "In many cases, the Court allowed persons with the same or common interest to be joined in a representative action only because the defendant insisted that the suit was bad for want of parties and it was inconvenient to make all interested persons parties to the action. In some cases the represented parties had consented to and encouraged the plaintiff to bring the action as a representative action. But in other cases the Court allowed the plaintiff to represent persons with similar interests whether or not they consented or even knew of the action."

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· Throughout their history, what was recognised was that: (a) proceedings could be commenced as representative proceedings (either by representative plaintiffs or against representative defendants); and

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(b) such proceedings were validly commenced and bound all represented parties, subject to the Court retaining a discretion to order that the proceeding not proceed as a representative proceeding. Threshold Issues 37 Amongst the plethora of submissions addressed to the Court by the several defendants it can be seen that there are certain threshold issues which go to the heart of: · whether the proceedings should be stayed as an abuse of process or dealt with by the court making an "otherwise order" under Part 8 rule 13 (1); and/or · whether or not the proceedings may be properly described as representative proceedings or permitted to proceed as representative proceedings within the meaning of Part 8 rule 13 (1). 38 Convenience dictates that these matters be addressed immediately. Champerty/Abuse of process 39 While champerty and maintenance are no longer crimes or civil wrongs (s 4 of the Maintenance, Champerty and Barratry Abolition Act 1993 (NSW) ["the New South Wales Abolition Act"]), the common law rule that a contract which is so characterised is contrary to public policy or otherwise illegal endures (see s 6 of that Act which expressly saves the application of "any other law as to the cases in which a contract is to be treated as contrary to public policy or as otherwise illegal"). Thus various statutory exceptions exist. See, for example, statutory powers of disposal given to a receiver to dispose of a company's cause of action under the Corporations Act 2001 (Cth): s 420(2)(b) and (g) of that Act. 40 Provisions similar to section 6 of the New South Wales Abolition Act are contained in section 32(2) of the Wrongs Act 1958 (Vic.) and section 11(3) of the Criminal Law Consolidation Act 1935 (S.A.). 41 The tort has not been abolished in Queensland (see Elfic Ltd v Macks (2001) 181 ALR 1), Western Australia, Tasmania or the Australian Capital Territory. 42 The relevant provisions in New South Wales, Victoria and South Australia mirror legislation in the United Kingdom to the same effect: sections 16 and 17 of the Criminal Law Act 1967. In Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 695, Lord Wilberforce said of those provisions:

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"Although ancient in origin, and so no doubt encrusted with disposable obsolescences, [champerty] has been given statutory recognition by the Criminal Law Act 1967, sections 13 and 14, which, while abolishing criminal and tortious liability for champerty, expressly preserves any rule of law as to the cases in which a contract involving champerty is to be treated as contrary to public policy and/or otherwise illegal." 43 The position in Australia is the same: Magic Menu Systems Pty Limited v AFA Facilitation Pty Limited (1997) 72 FCR 261 at 267-268; Re William Felton & Co. Pty Limited (1998) 145 FLR 211. The preservation of this principle of illegality necessarily involves the preservation of the public policy underlying that principle: Roux v Australian Broadcasting Commission [1992] 2 VR 577 at 605.9; Smits v Roach (2002) 55 NSWLR 166 at 188.5; Re: Movitor (1996) 64 FCR 380E. 44 Plainly enough the Court has jurisdiction to stay or dismiss proceedings where the proceedings constitute an abuse of process by reason of their champertous nature or because they savour of maintenance: Smits v Roach (2002) 55 NSWLR 166 at 181-188; Elfic Ltd v Macks (2001) 181 ALR 1 at 12 [special leave was refused by the High Court on 19 March 2002: (2002) 23(6) Leg Rep SL4]; Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 72 FCR 261 at 267-268; Re Tosich Constructions Pty Ltd; Ex parte Wily (1997) 143 ALR 18 at 31; Faryab v Smyth [1998] EWCA 3503; Stocznia Gdanska SA v Latreefers Inc (No 2) [2000] All ER (D) 148 and R (Factortame Ltd) v Secretary of State for Environment [2002] 4 All ER 97. 45 Maintenance consists of "improperly stirring up litigation and strife by giving aid to one party to bring or defend a claim without just cause or excuse": Re Trepca Mines Limited (No 2) [1963] 1 Ch 199 at 219. 46 Champerty is a particular kind of maintenance, namely maintenance of an action in consideration of a promise to give the maintainer a share of the proceeds or subject matter of the action: Trendtex v Credit Suisse [1982] AC 679 at 694 per Wilberforce LJ quoting Halsbury's Laws of England. Champerty is "one species of maintenance for which the common law rarely admits of any just cause or excuse": Re Trepca Mines Limited (No 2) [1963] 1 Ch 199 at 219. 47 The Full Court in Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 72 FCR 261 at 267-268 put the matter as follows:

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"Maintenance, which consisted of the assistance or encouragement of a party to an action in which the maintainor had no interest, was regarded by the English law, from an early time, as a crime punishable by fine or imprisonment. It later became recognised as a civil wrong. (See generally Blackstone's Commentaries (5th ed), Book IV, p 134.)

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Champerty was a species of maintenance, on terms that the maintainor and the plaintiff would share in the outcome of the action. It was especially feared because the champertor's financial stake in the litigation provided a strong temptation to suborn witnesses and pursue worthless claims (see Barratry, Maintenance and Champerty , New South Wales Law Reform Commission Discussion Paper 36, May 1994). These concerns have been reiterated in Re Trepca Mines Ltd (No 2) [1963] Ch 199, Trendtex Trading Corporation v Credit Suisse [1980] 1 QB 629 at 653 and in more recent cases, to which we shall refer.

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It may be said that public policy considerations shaped the attitude of the Courts towards agreements to maintain litigation. The concern early expressed was that the remedial processes of the law might be used as tool of oppression, as indeed they were by powerful nobles and officers (NSWLRC Discussion Paper, par 2.9 and see Blackstone , p 134). What maintained actions were thought likely to produce, and which was inimical to the public interest, altered over the course of time and with changing social conditions, as did the recognition of interests which were sufficient to justify interference in another's litigation by supporting it : see Hill v Archbold at 694; Trendtex ; Condliffe v Hislop [1996] 1 WLR 753 at 759; [1996] 1 All ER 431 at 437 and Roux v Australian Broadcasting Commission [1992] 2 VR 577 at 607 . It may now be observed, for example, that concerns expressed earlier this century, as to the potential for the maintenance of actions to give rise to an increase in litigation, might now be considered of lesser importance than the problems which face the ordinary litigant in funding litigation and gaining access to the Courts . In the latter respect, by the time Martell v Consett Iron Co Ltd [1955] Ch 363 came before Danckwerts J, his Honour was able to observe that support of legal proceedings based upon a bona fide common interest, financial or philosophical, must be permitted if the law itself was not to operate as oppressive. The Courts today, in our view, are likely to take an even wider view of what might be acceptable, particularly if procedural safeguards are present or able to be applied .

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There does not however seem to have been any detailed discussion or debate as to these matters and, relevant to this appeal, as to whether champerty will now be tolerated, and if so, on what conditions. We do not suggest that practices in the United States of America would necessarily, or even likely, be viewed as desirable. On the other hand, cases in the United Kingdom such as Grovewood Holdings plc v James Capel & Co Ltd [1995] Ch 80 and McFarlane v EE Caledonia Ltd (No 2) [1995] 1 WLR 366 proceed upon the basis that such agreements are prima facie unlawful. In any event, this appeal does not, for reasons to which we later refer, require the resolution of these larger questions.

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Both the offence and tort of maintenance, and of champerty, were abolished in the United Kingdom in 1967, shortly after judgment was delivered in Hill v Archbold and following a report to the Parliament by The Law Commission ( Proposals for Reform of the Law Relating to Maintenance and Champerty ) in 1966. They were abolished in Victoria in 1969, in South Australia in 1992 and in New South Wales in 1995 by the Maintenance and Champerty Abolition Act 1993 (NSW) . The latter legislation was intended to pave the way for the provision of contingency fees in that State. In Queensland solicitors are now permitted to fix their fees by an agreement which may stipulate for a percentage (s 23 of the Legal Practitioners Act 1995 (Qld) ). Maintenance and champerty however remain torts actionable in Queensland (see J C Scott Constructions v Mermaid Waters Tavern Pty Ltd [1984] 2 Qd R 413), although they were never included as offences in the Criminal Code Act 1899 (Qld) .

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It is plainly unsatisfactory that maintenance of litigation remains a civil wrong in some, but not all, states in Australia. Whether there remain valid reasons for the retention of the tort at common law has not been addressed, although it has long been considered obsolete and in Clyne v Bar Association (NSW) (1960) 104 CLR 186, the High Court suggested that it may be necessary to consider whether it ought now be so regarded. Mason CJ, in Halliday v Sacs Group Pty Ltd (1993) 67 ALJR 678 at 680-681 also appears to have assumed that the status of the tort was questionable.

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That is not to say, however, that the policy considerations which gave rise to the offence and tort have lost all significance today. The ability of the Courts to treat agreements for maintenance as contrary to public policy, and therefore illegal, remains unaffected by the statutory provisions : see Trendtex Trading at 653; McFarlane v EE Caledonia (No 2) at 370; Roux v ABC at 605; Giles v Thompson [1994] 1 AC 142. The giving of financial assistance to a litigant by a non-party will not however conclude the question as to whether it is unlawful on this ground (see Condliffe v Hislop ). Questions of public policy with which the Courts will be concerned, as Byrne J observed in Roux v ABC at 605, are those which have regard to litigation and its funding in the contemporary world.

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Trendtex , and the later cases to which we have just referred, were concerned with the question whether the Court ought lend its aid to the enforcement of champertous agreements. Questions will also likely arise for the Courts, where actions are funded by them, as to the integrity of its processes and in particular as to the uses to which they are being put, and as to the conduct of the maintained party and the maintainor with respect to the proceedings . In this connection it would be necessary to have regard to the provisions of the particular agreement." [emphasis added] 48 The recent decision Smits v Roach (2002) NSWLR 166 by McClellan J has provided a convenient and reasoned analysis in relation to champerty generally and as applicable in New South Wales. The above excerpt from the decision in Magic Menu Systems was cited by McClellan J as a useful summary of the present position in terms of what His Honour referred to as 'the modern dilemma' in terms of the law of maintenance and champerty, the policy questions raised by the cost and complexity of modern day litigation and the need for the law to respond to ensure that impecunious plaintiffs are not denied access to the courts. 49 Smits was specifically concerned with arrangements made in a retainer agreement between a firm of solicitors and a client which arrangements were held to have been champertous. The decision closely examined the 1993 amendments to the Legal Profession Act 1987 and the New South Wales Abolition Act. 50 The judgment includes the following:

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225 Champerty is a form of maintenance of which the essential elements are the maintenance of an action in consideration of a promise to give the maintainer a share in the proceeds of the action. (See Halsburys Laws of Australia 110-7135ff). As a consequence, a solicitor could not purchase the subject matter of any suit - it was "against the policy of the law". ( Denist v Freethy (1890) 24 QB 519 at 522). Maintenance, including champerty, was historically both punishable as an offence by the common law and gave rise to an action in tort.

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226 The common law provided that a legal practitioner who enters into a champertous arrangement, apart from committing an offence, and perhaps being guilty of professional misconduct, could not recover any fees either under the illegal agreement or otherwise. The position was stated by Atkin LJ in Wild v Simpson (1919) 2 KB 544 who emphasised the fact that the policy concern was not only with the relationship between the solicitor and the client but also with the wrong occasioned to the other party to the litigation . Atkin LJ said: "The view of the learned Chief Justice seems to me, with all respect, contrary to principle, and if the case is an authority for the proposition that a person employed on an express contract to do work for a remuneration that is illegal can, where the special contract fails for illegality, recover upon a quantum meruit, I think it is wrong and should be overruled. The result would be to make the law of champerty as between solicitor and client of very little effect. A solicitor would only have to bargain to receive the champertous sum in addition to his ordinary costs. He would never be in a worse position financially for the illegality. He could always recover as much as an innocent solicitor, and would take his chance of also recovering the fruits of the wrongdoing." 227 Wild v Simpson was applied more recently in Re Trepca Mines Ltd (No 2) [1963] 1 Ch 199.

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228 The principles in relation to the enforcement of illegal contracts in general are well known. They are referred to by Pearson LJ in Trepca Mines and discussed by Street CJ in DJE Constructions Pty Ltd v Maddocks (1982) 1 NSWLR 5 at 9. (See also AG Australia Holdings Limited v Burton & Anor [2002] NSWSC 170)…

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229 In Australia, the law in relation to maintenance was considered in the context of legal practitioners, in Clyne v NSW Bar Association (1960) 104 CLR 186 where the court, in passing, raised the question whether maintenance, as a crime at common law, ought to be considered obsolete.

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230 Whether a crime or only a civil wrong, the court made plain that although a solicitor may, from his own funds, maintain an action for a client who he or she believes to have a reasonable case, (the position was otherwise in the United Kingdom) the solicitor "must not in any case bargain with his client for an interest in the subject-matter of litigation, or (what is in substance the same thing) for remuneration proportionate to the amount which may be recovered by his client in a proceedings." (p 203)

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231 The Legal Profession Act 1987 was substantially amended in 1993. At the same time, the Maintenance and Champerty Abolition Act 1993 ("The Abolition Act") was enacted. Being part of the same legislative arrangements which were intended to modify the existing law, it must be assumed that the legislature intended that they operate in a complimentary and not discordant manner. The Abolition Act abolished the offence of maintenance (including champerty) and provided that an action in tort could no longer be sustained. As a consequence, a champertous arrangement is neither a crime nor a civil wrong...

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235 It must be emphasised that although s 189(1) states that a provision contrary to the statute is void, it is silent with respect to the impact of the common law on the enforceability of any part of an agreement which includes a champertous arrangement or any entitlement to recover on a quantum meruit basis…

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237 When enacting the Maintenance and Champerty Abolition Act , the Parliament expressly provided that it was not altering the existing law with respect to contracts, considerations of public policy and illegality. Section 6 of the Maintenance and Champerty Abolition Act provides: "This Act does not affect any rule of law as to the cases in which a contract is to be treated as contrary to public policy or as otherwise illegal, whether the contract was made before, or is made after, the commencement of this Act".

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238 As I have already indicated, the common law position explained by Atkin LJ in Wild v Simpson , is that a legal practitioner could not recover any costs or disbursements in respect of an arrangement with a client in respect of which a component was champertous. The retainer being contrary to public policy is illegal and recovery is not permissible even on a quantum meruit.

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239 Although providing that maintenance and champerty are no longer crimes or civil wrongs, s 6 leaves in place the common law rule with respect to the enforceability, or lack of it, of an arrangement tainted by champerty. Unless the common law has changed or it has been otherwise provided by statute, the common law will operate to render such a costs agreement unenforceable and leave the legal practitioner without remedy as to his or her costs.

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240 The law of maintenance and champerty and the policy questions raised by the cost and complexity of modern day litigation and the need for the law to respond to ensure that impecunious plaintiffs are not denied access to the courts, has been considered on a number of occasions in recent years. The law traditionally recognised the right of close associates to support another's litigation. See Thai Trading Co (a firm) v Taylor [1998] QB 781; Roux v Australian Broadcasting Commission [1992] 2 VR 577 at 605-607…

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249 As the decisions reviewed by Bryson J in Re William Felton & Co Pty Ltd (1998) 145 FLR 211 indicate, the law in Australia has sanctioned the funding of litigation in return for a share in the proceeds where the funder has a legitimate interest in the action . However, there has been no relaxation, which I can discern, in the rejection of arrangements which provide for legal practitioners to share generally, and in a manner unrelated to the costs actually incurred, in the financial outcome of the proceedings. It is one matter for a "litigation funder" as they are known, to bargain for a percentage of the proceeds but in my opinion, it is an entirely different matter for a legal practitioner, with the obligations thereby imposed, to enter into an arrangement which contemplates significant financial benefits beyond anything contemplated as costs, if the litigation succeeds…

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251 Anyone who has acted in major litigation has most likely experienced the pressure imposed by the client's desire to win on the maintenance by that practitioner of his or her professional and ethical obligations. When the parliament provided for limited contingency fees, it presumably balanced those concerns with the benefits to impecunious litigants. But I see no reason why the common law position should otherwise change. It is a common concern of those holding high office in the law that the professional and ethical obligations which practice as a lawyer imposes are being eroded to the dictates of commercial imperatives. (See Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357; Re A Firm of Solicitors [1992] 1 All ER 353 and Sir Gerard Brennan, Profession or Service Industry: the Choice, Australian Bar Association Conference (1996); Gleeson CJ, Are the Professions Worth Keeping? Address to Greek- Australian International Legal & Medical Conference - May 1999).

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252 The court should not lend itself to the possible further erosion of those ethical obligations by acknowledging a change in public policy in relation to the enforceability of champertous arrangements without the clearest indication by Parliament that it has occurred. In my opinion, to do so would be likely to seriously erode the confidence which this Court must have in the professional integrity of those who appear before it. The ultimate consequence would be to erode the confidence which the public has in the judicial system to resolve disputes. [emphasis added] 51 In Elfic Ltd v Macks [2001] 181 ALR 1 the Queensland Court of Appeal had occasion to deal with a particular funding arrangement. The judgment of McMurdo P at [67] includes the following:

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"The mere fact that proceedings are financed by third parties with no interest in the outcome other than repayment and profit from the litigation is not itself sufficient to invoke the jurisdiction of the court. Courts should be careful not to use that power to deny access to justice to a party who has sought to fund bona fide proceedings in a way which may be contrary to public policy unless that which has been done amounts to an abuse of the court's own process: Abraham v Thompson [1997] 4 All ER 362 at 372-4, Faryab v Smyth [1998] EWCA 3503 (28 August 1999) at [26] and most recently in Sa v Latreefers Inc [2000] EWCA 17 (9 February 2000) where the Court of Appeal of England and Wales noted: "There are many commonplace and unobjectionable circumstances in which modern litigation is funded by those who are not the nominal parties to it. Obvious examples of this are funding by insurers, trade unions or lawyers engaged on legitimate conditional fee arrangements. If an agreement of this general kind is held to be contrary to public policy, it may be unenforceable. That may have a variety of consequences. A claim which depends on the assignment of a bare right of action may fail because the assignment is ineffective. A person who has funded an action champertously may fail to enforce recovery of the agreed proportion of the spoils. A person who has secured a champertous agreement to fund his litigation may be unable to enforce payment of the agreed funds. But the fact that a funding agreement may be against public policy and therefore unenforceable as between the parties to it is by itself no reason for regarding the proceedings to which it relates or their conduct as an abuse. …the question whether the courts' process is affected or threatened by an agreement for the division of spoils is one to be considered in the light of the facts in each case. …

[96]

Abuse of the courts' process can take many forms and may include a combination of two or more strands of abuse which might not individually result in a stay . Trafficking in litigation is, by the very use of the word "trafficking", something which is objectionable and may amount to or contribute to an abuse of the process. We think that it is undesirable to try to define in different words what would constitute trafficking in litigation. It seems to us to connote unjustified buying and selling of rights to litigation where the purchaser has no proper reason to be concerned with the litigation. "Wanton and officious intermeddling with the disputes of others in which they [the funders] have no interest and where that assistance is without justification or excuse" may be a form of trafficking in litigation… A large mathematical disproportion between any pre-existing financial interest and the potential profit of funders may in particular cases contribute to a finding of abuse but is not bound to do so. [ Sa v Latreefers Inc [2000] EWCA 17 at [59] - [61]] 52 These observations it seems to me correctly state the overarching principle. I accept that the mere fact that proceedings are financed by third parties with no interest in the outcome other than repayment and profit from the litigation is not itself sufficient to invoke the jurisdiction of the court. Likewise very great care must be taken by the court not to use its power to deny access to justice to a party who has sought to fund bona fides proceedings unless that which has been done amounts to an abuse of the court's own process. The mere fact that a funding agreement may be against public policy and therefore unenforceable as between the parties to it is, by itself, no reason for regarding the proceedings to which it relates or the conduct of those parties as an abuse. 53 It is necessary to consider the material circumstances in which an agreement is made to determine whether it is contrary to public policy: Magic Menu Systems at 268; Freehill Hollingdale & Page v Bandwill Pty Ltd [2000] WASCA 150 at [25]. 54 One relevant question is whether the litigation funder has a "bona fide community of pecuniary interest or religion or principles or problems" Martell v Consett Iron Co Ltd [1955] 1 Ch 363 at 387 per Danckwerts J, or to put it another way a "legitimate interest...distinct from the benefit which he seeks to derive from it": Giles v Thompson [1994] 1 AC 142 at 163 55 The plaintiffs have submitted as follows:

[97]

"[T]he fact that these proceedings are funded by Firmstones Pty Ltd, in return for a percentage of any judgment obtained, is no reason for it to be stayed as in some way contrary to public policy.

[98]

First, these proceedings are the last proceedings to recover any licence fees obtained by tobacco wholesalers pursuant to unconstitutional statutes. The wholesalers will have a good limitation defence to any proceedings commenced in the future.

[99]

The one thing that is certain is that, if these proceedings are stayed, the defendant wholesalers will retain the licence fees thereby keeping the whole of the windfall gain they represent. These proceedings are the only means by which retailers who have not to date recovered those fees or a proportion of them from their wholesalers can have that issue adjudicated by a court.

[100]

Given the success that retailers have had to date, the represented plaintiffs in the present proceedings must be considered to have, at the least, a strongly arguable case. It is very much in the public interest that that case be permitted to go to trial." 56 The defendants draw particular attention, it seems to me correctly, to the following significant aspects of the funding arrangements with Firmstone:

[101]

(a) Firmstone & Feil has no interest in the litigation other than the prospect of recovering a percentage of any judgment;

[102]

(b) Firmstone & Feil is not merely funding the litigation: they have full carriage of the proceedings on behalf of all plaintiffs and the potential target opt-in group. There is the clearest potential for 'intervention' in the litigation: Elfic at paragraph 68; Re William Felton & Co at page 222. 57 The defendants further rely upon the proposition that there is no evidence that any of the plaintiffs lack resources to fund the litigation. To my mind this submission, although technically correct, does not do justice to the real world circumstance in which the court would infer that individual plaintiffs would at any material time be unlikely to be prepared to undertake the risks of litigation of this nature. 58 To my mind it is of signal significance to note that the present scheme in effect means that the retailers will be given the choice of joining the proceedings only at a fixed, non-negotiable price. Taken together with the problems concerning the court giving its assistance which are referred to below, and the other factors examined below, this matter may be said to play a substantive role as underpinning the decision in this judgment. 59 A feature of litigation funding arrangements is that a fee based on a percentage of the proceeds represents the outcome of a 'bargain' between the party and the litigation funder: Smits v Roach (2002) 55 NSWLR 166 at paragraph [249] per McClellan J. In this case, however, the represented retailers will be offered no opportunity to bargain. The fact that proceedings are now otherwise time-barred ensures that represented retailers have no opportunity to litigate their claims other than on Firmstone's terms. Holding 60 Ultimately I am persuaded that the proposed form and distribution of the 'Opt-In' notices will constitute trafficking in the retailers' litigation. The decision by Firmstone not to commence proceedings until the very end of the limitation period has in effect given it a monopoly over the means of access to recovery and has deprived the retailers of any bargaining power in respect of fees or otherwise. In simple terms Firmstone is now trafficking in the retailers' claims because it has, but they do not have, the means of pursuing them: it is now seeking to sell to the retailers, for the stipulated remuneration, the rights that it has to those claims. This is the reason why the arrangement proposed is tainted by champerty. 61 Further I accept that the rate of fees to be imposed by the Firmstone interests appears to be inordinately high and out of all proportion to the services to be provided. If, as the defendants estimate, the total number of represented retailers is 12,000-16,000 (paragraph 20(g) of the Affidavit of Mr. Kuhn sworn 22 August 2003 (the "Kuhn Affidavit")) and if the average claim were taken for argument's sake as $1,000 [The claims made by the Adams, Halls and Greys are $1,333.06, $4,714.94 and $5,112.16 respectively: see Schedule 2 to the summonses], the total judgment amount would be as much as $12-16,000,000, with Firmstone's fee being $4-5,000,000 plus recoverable costs. 62 Further and if interest were to be awarded for the period 1 July 1997 to date, those fees would increase by approximately 50%. 63 When one adds to these figures the fees referable to the conjoined proceedings against the other tobacco and petroleum companies, the magnitude of the fees to be charged is, I accept, truly extraordinary. The fact that other funders have received like returns has no relevance when the propriety of their arrangement has not been tested. 64 The present is a case where the opt-in proposal exhibits the hallmarks of the unjustified buying of rights to litigation. The abuse of the process of the court seen to be afoot is to be discerned from the whole of the complex made up of: · the nature and type of the approaches to the plaintiffs and the target opt-in group; · the evidence as to the lack of communication between the solicitors and the now plaintiffs; · the tenuous relationship between the plaintiffs and the solicitor on the record, and the nature of the tenuous relationship which the target opt-in group would have with the solicitor. That solicitor has been engaged by Firmstone "as a principal" and not "as agent for [Firmstone's] clients" and has no costs agreement with those clients. That solicitor is said to have no recourse for fees against those clients [although this does not seem to be documented otherwise than by the statement of engagement "as principal and not as agent for Firmstone's clients"]; · the evidence as to the contractual constraint upon any direct communication between the solicitors and the plaintiffs or the target opt-in group which may only take place by means of the conduit already referred to; · the ready acceptance by Mr Firmstone of the proposition that his involvement is in a speculative investment in other persons litigation; · the fact that Firmstone has absolutely no interest in the subject matter of the proceedings (outside of the agreements which it has procured); · the possibilities of a conflict of interest as between Firmstone and the plaintiffs/ the target opt-in group in relation to a number of matters; · the extraordinary amounts to be received from the proceeds of settlements and split as between the Firmstone interests and the Horwaths interests; · the circumstance that those proposed to be approached to 'Opt-In' are to be given a non-negotiable, once ever, opportunity to participate, for the reason that the limitations period has expired; · the fact that retailers who have entered into agreements with Firmstone are not fully aware of the consequences of what they are doing particularly in relation to adverse consequences of litigating.

[103]

none of the now plaintiffs nor the target opt-in group have received the benefit of such legal advice as has been obtained in relation to prospects of success in the proceedings;

[104]

none of the now plaintiffs nor the target opt-in group have received advice as to the possible steps which may inconvenience them in terms of the matters which are likely to have to be attended to in preparation for the hearing such as discovery and preparation of statements;

[105]

none of the now plaintiffs nor the target opt-in group have been informed of the possibility that they may be liable for costs in relation to the proceedings. To the contrary retailers have been induced to enter into the agreement on the basis that they will not suffer any costs order against them. [notwithstanding that the possibility of the target opt-in group being required to pay costs may be slender, this does not excuse those promoting the litigation from the necessity to ensure that those who are approached be fully informed of all matters material to their being in a position to make a decision]; · Firmstone has complete control over settlement of these proceedings. In the case of agreements based on pre October 2002 letters Firmstone has a complete discretion (Exhibit PX p 1440 to 1448). As from 1 October 2002, Firmstone has been authorised to settle without reference to the retailer on the basis of receiving the principal of the claim (Exhibit PX p 1481) or 75% of the claim (Exhibit PX p 1530). This control extends to the right to give instructions as to how the claims are to be moulded, what evidence to rely upon and similar matters; · the fact that there is of course no particular reason why it would be in the interests of Firmstone to apprise those to be approached of aspects of the 'opt-in' suggestion, which may disincline those approached to agree to participate - throwing up yet again a reason for the closest of scrutiny to be given to a promotional exercise where the promoter is engaging in no more and no less than a commercial venture; · the minimal amount of each retailers' likely dividend compared to the enormous return to Firmstone shows that the real motivation for the proceedings is the latter; · the evidence that particular retailer groups had negotiated a fee of less than 331/3 percent and in the case of Shell a sliding scale of fees ranging between 15 and 30 percent reflecting a past ability to negotiate significantly lower fees with those in a strong negotiating position, to be contraposed with the now situation where the limitation period having expired, only the 331/3% fee is to be offered; · there is the potential (and this is sufficient for present purposes) for decisions to be made by Firmstone contrary to the wishes of individual plaintiffs; · in effect Firmstone is now engaged in selling the right to join the proceedings; · the very clear opportunity of the funder to abusively influence the conduct of the proceedings. 65 Reference has earlier been made to the returns to Firmstone which is a central structural parameter of the arrangements it proposes. That concern reflects the proposition that "[t]he greater the share of the spoils that the provider of legal services [effectively here Firmstone] will receive, the greater the temptation to stray from the path of rectitude" (cf R (Factortame Ltd v Transport Secretary (No 8] [2002] 3 WLR 1104 at [85]. Notwithstanding the emphasis given above to the significance of the return to Firmstone, the Court readily accepts that anyone who provided services to tobacco retailers in the environment following the decision in Roxborough could in the main only expect to be paid out of recoveries in the litigation (cf R Factortame at [79]). It may be that there is authority for the proposition that a disproportionately high return to a litigation funder does not of itself constitute unlawful champerty: Buiscex Ltd v Panfida Foods Ltd (1998) 28 ACSR 357. However even if the emphasis given to the significance of the return to Firmstone be misplaced, the circumstance that Firmstone is capitalising upon, and seeks the Court's assistance to further, the monopoly to sell to the target opt-in group for the stipulated remuneration, the rights that Firmstone has effectively acquired [or the position which it has effectively achieved], colours its proposal as one presently constituting an abuse of process. 66 Access to the courts is a basic privilege of parties who have a proper legitimate interest in taking proceedings to establish their legal rights. That access may from time to time require assistance, funding or otherwise, from third parties. In examining whether that form of assistance in any particular case constitutes an abuse of the process of the court, all the circumstances require to be carefully examined. Where the interest of a funder is exposed in terms of the promotion of particular proceedings to the extent of advertising for participation of parties to be a represented class in proposed representative proceedings, it is possible that the whole of the facts matters and circumstances surrounding the commercial endeavour will survive an allegation of abuse of process. But in some cases those circumstances upon examination will throw up the conclusion that an abuse of the process of the court is afoot. For reasons given in the judgment this is one of those cases.

[106]

The assistance of the Court 67 There is a further, as it seems to me, extremely important and valid objection to the proposed arrangements. The continuation of the proceedings as representative proceedings depends upon Firmstone being able to take advantage of the Court's processes of discovery to facilitate the litigation by recruiting further class members. Whilst there is no inherent problem with the framing of orders in this regard [cf comments by Toohey and Gaudron JJ in Carnie, 182 CLR at 422] this is not a case in which such orders should be made. 68 In Fauteck v Montgomery Ward and Co 91 F.R.D.393 (1980) the United State District Court had occasion to deal with Civil Rule 22 which forbade communication with actual or potential class members not formal parties to the action without the prior approval of the court. The judgment, Decker J, includes the following:

[107]

"One of the 'abuses' of the class action device sought to be prevented by the rule is the solicitation of funds from class members to pay litigation expenses and fees: "To the parties solicited, solicitation may appear to be an authorised activity approved by the court, simply because of references to the title of the court, the style of the action, the name of the judge, and to official processes . Such unapproved solicitation may be of doubtful ethical propriety and may result in well founded dissatisfaction with the judicial management of the action" [excerpt from Part 1 para 1.41 of the Manual for Complex Litigation] [emphasis added] 69 Most particularly, the court should not lend its assistance to an 'opt-in' procedure where, by definition, parties approached to opt-in to the proceedings have no opportunity to negotiate the terms of arrangement being effectively approached on a 'take it or leave it' basis. The fact that this approach has been effectively forced upon Firmstone by reason of the now expiry of the relevant limitation period is neither here nor there. 70 It will be recalled that in Smits, McClellan J at [241] specifically adverted to questions likely to arise for the Courts where funding by outsiders was concerned, as to the integrity of its processes and in particular as to the issues to which they were being put. 71 I am satisfied that the Firmstone Interests are seen to be doing more than having committed merely to fund the proceedings. Standing back from all of the detail their proposal, if acceded to, would amount to doing no more and no less than trafficking in the tobacco retailers' claims by now dictating the non negotiable terms upon which the target opt-in group may access the only route to having their claims upheld. 72 The authorities support the proposition that litigation funding arrangements will be considered to be against public policy where they involve speculation or trafficking in litigation or where they are otherwise an abuse of the Court's process: Elfic at paragraph 65; Roux v ABC at page 606.5. The facts proven here support the finding which the Court makes that the subject litigation funding arrangements proposed by the opt-in procedure are against public policy as well as comprising an abuse of the court process. 73 There are other matters which it seems to me are of real concern in terms of the particular history and proposed way forward now exposed: · The approaches to the persons and companies in relation to the opt-in procedure have fallen short in a number of respects with the requirement to be entirely open and fair in explaining the possible risks of involvement in the proceedings. · Whilst the indemnity proffered by the Firmstone interests in relation to any exposure to pay costs appears at first blush to be attractive, no indication has been given or is proposed to be given of the risk that the Firmstone interests may not be in a position to discharge that indemnity. · The financial position of Firmstone and has not been exposed to those being approached. · Nor have the plaintiffs to date apprised those being approached of the possibilities that they may have to give evidence in the proceedings. The late procedural change 74 Reference has been made to the fact that towards the end of the hearing of the motions, Mr Gageler announced certain changes to the proposed procedures. The new proposal was to alter the form of the "Opt-In Notice" which, following the name of the entity or business owner, had heretofore commenced:

[108]

"consent to the representative proceedings no.s [to be completed] together with any appeal or further appeal from those proceedings ("the representative proceedings") being continued on his/her/their/its behalf and to being named as a plaintiff in the representative proceedings. " 75 The proposal was to now delete the italicised words. The naming of the opt-in group as plaintiffs was said to now be unnecessary and to have the downside of potentially exposing the persons to be named as plaintiffs to an order for costs. 76 A particular problem with this now proposed change and procedure concerns the evidence already given to the effect that the communications from Mr Proud to the intended plaintiffs advised them that eventually all the clients would be named as parties to the summons. Notwithstanding the indemnity as to costs which is offered by Firmstone, [that indemnity albeit supported by the now undertaking given to the court by Mr Firmstone], the indemnity can never be regarded as a complete safeguard.

[109]

[During the course of the plaintiffs address in reply the following undertakings were proffered: · An undertaking [Exhibit P 4] by Firmstone's Pty Ltd to the court: - to submit to such order as to costs in the proceedings as the court may make

[110]

to meet any order as to costs as may be made against the plaintiffs or any represented person · An undertaking [Exhibit P 5] by Mr Firmstone to the court to personally meet any shortfall in the payment of costs by Firmstone's Pty limited pursuant to its undertaking in Exhibit P 4 subject to a limited total aggregate amount in respect of all matters of $1 million] The Firmstone financial position 77 The accounts of Firmstone [Exhibit P 2] record net assets of $262,627 as at 30 June 2002. Receivables are listed at $863,902 comprising virtually the whole of the total assets. It is not plain from these accounts as to what are the "Accounts Receivable". Current work in progress is shown of $203,761 and there is a current account from Firmstone & Feil Trade Pty Ltd of $121,011. These figures do not give any assurance that the net assets of $262,627 comprise a figure which may be relied upon. 78 Further the dividends paid or proposed for 2002 were $1,449,192 of the $1,711,817 available for appropriation. The Job Profit and Loss Statement for 1 July 2002 up to 30 June 2003 records a net profit of $606,291.81. Whether these monies remain in the company and whether the company is subject to debts as a result of borrowings is a matter which is completely unknown. 79 Last year virtually the whole of the profits available were distributed by way dividend. I accept that one simply cannot be satisfied as to whether or not such profits, if any, as are made will not be distributed in precisely the same fashion. 80 One simply does not know the financial position of this company as at the present day. And of course one does not know the financial position of Mr Firmstone as at the present day. Class of persons to be represented to have "the same interest" 81 The plaintiffs' submissions then address the questions concerning whether the plaintiffs have the "same interest" within the meaning of Part 8 rule 13:

[111]

Roxborough was a test case. It settled the relevant common law principle.

[112]

In each case there are likely to be substantial common issues of law as to: · the application of the common law principle to the standard form trading arrangements of the defendant; · the relevance, if any, to the application of the common law principle of: - the subjective intentions or understandings of the parties; and - the absence in the case of some defendants of separate itemisation of tobacco franchise licence fee on invoices; and - the absence from the tobacco franchise legislation of other States of any equivalent of s 41(3) of the NSW Act; - the effect, if any, of ss 2 and 3 of the Recovery of Imposts Act 1963 (NSW) and equivalent legislation in other States and the Australian Capital Territory;

[113]

the availability of interest under s 94 of the Supreme Court Act 1970 (NSW).

[114]

There is thus the clearest basis for concluding that the plaintiffs have the "same interest" within the meaning of Pt 8 r 13: Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398; Wong v Silkfield Pty Ltd (1999) 199 CLR 255 at [11]-[17], [27]. It is not to the point that the final relief sought against each defendant is on behalf of the class members severally. So much follows from the statement of principle of McHugh J in Carnie at 427 (Brennan J agreeing at 408) and from the acceptance by all members of the High Court in Carnie that the view of Fletcher Moulton J in Markt & Co Ltd v Knight Steamship Co Ltd [1910] 2 KB 1021 at 1035 had been overtaken by subsequent developments particularly in Irish Shipping Ltd v Commercial Union Assurance Co Plc [1991] 2 QB 206 at 224-227 and Bank of America Trust & Savings Association v Taylor [1992] 1 Lloyd's Rep 484 at 494-495.

[115]

At this stage in the proceedings, there has been no discovery and no defences have been filed. Accordingly, the issues between the parties have not been defined, and the scope of factual differences has not been determined. It is premature for the Court to make a determination that the proceedings should not continue as representative proceedings. To the extent that such an order is sought on the basis of lack of commonality of issues, it is premature until the issues have been defined. 82 In what follows the Court adopts a number of the submissions by the defendants generally to the effect that there is insufficient commonality of interest demonstrated presently to permit of a finding that it is appropriate for the proceedings to be permitted to go forward as representative proceedings. 83 Part 8 rule 13(1) of the Supreme Court Rules provides:

[116]

"Where numerous persons have the same interest in any proceedings the proceedings may be commenced and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them". 84 The essential precondition to the commencement of representative proceedings pursuant to this rule is that all the persons whom the plaintiff purports to represent have the "same interest" in the proceedings. 85 In Carnie v Esanda Finance Corporation (1995) 182 CLR 398, the High Court considered whether the claim in that case could be brought as a representative proceeding. In that case, the plaintiff had entered into a "variation agreement" with the defendant which was regulated by the Credit Act 1984 (NSW). The variation agreement did not disclose certain matters required by the Act to be disclosed. The plaintiff sought a declaration from the Supreme Court of New South Wales that, as a result of the defendant's failure to comply with the Act, it was not liable to pay the credit charges and sought to bring the proceedings on behalf of all other persons who had entered into a similar variation agreement with the defendant. 86 Mason CJ, Deane and Dawson JJ at 405 stated that the obvious purpose of the rule was "to facilitate the administration of justice by enabling parties having the same interest to secure determination in one action rather than separate actions" [emphasis added]. They accepted that persons having separate causes of action in contract or tort "may have the 'same interest' in proceedings to enforce those causes of action". They stated:

[117]

"Once the existence of numerous parties and the requisite commonality of interest are ascertained, the rule is brought into operation subject only to the exercise of the court's power to order otherwise." 87 Toohey and Gaudron JJ, at 416, quoted with approval what they described as the "broad and liberal approach" of the House of Lords encapsulated in the following extract from the judgment of Lord Macnaghten (at [1901] AC 8):

[118]

"Given a common interest and a common grievance, a representative suit was in order if the relief sought was in its nature beneficial to all whom the plaintiff proposed to represent. " [Emphasis added] 88 At 420 - 421, their Honours stated:

[119]

"The authorities are clear that the fact that claims arise under separate contracts does not mean that the requirement for the same interest is defeated." [citations omitted] 89 At 421 their Honours made clear that the question raised by the rule was:

[120]

"Do numerous persons have the same interest in the action which the appellants have commenced? If they do not then that is the end of the matter. If they do, then the action is properly begun and, unless the Court otherwise orders, it may be continued." 90 Toohey and Gaudron JJ noted that the case had been argued on the basis of a proposed amendment to the statement of claim seeking a declaration which went no further than determining the meaning of the Act so far as it affected those concerned on matters in which they had a common interest, and further noted at 421 - 422:

[121]

"In that event those debtors who do not wish to take advantage of a favourable judgment would be under no obligation to do so… [the plaintiffs] have the same interest in these proceedings in the sense that there is a significant question common to all members of the class and they stand to be equally affected by the declaratory relief which the appellants seek.

[122]

Although each contract will be different in the details of the amounts involved, this will not eliminate the convenience of finding a right to a release which is common to all of them." And they continued at 424:

[123]

"The appellants have brought themselves within r 13(1). There are numerous other persons capable of being clearly defined who have the same interest in these proceedings in that they will be equally affected by the declaratory relief which the appellants seek." [emphasis added] 91 In the result:

[124]

(a) Toohey and Gaudron JJ (with whom, for these purposes, Mason CJ, Deane and Dawson JJ agreed) held that in order for person to have the "same interest" in proceedings, there must be a significant question common to all members of the class;

[125]

(b) Their Honours accepted that the requirement of "same interest" required that at least some of the relief sought must benefit all plaintiffs (see the above passages). 92 I accept as correct the defendants' submission that if it is not possible, at least, to formulate some claim to relief which is beneficial to all plaintiffs, then the plaintiffs do not have the "same interest" in proceedings. Turning to the present facts 93 Returning to Roxborough, it is sufficient for present purposes to summarise the material holding as determining that where certain retailers had paid wholesalers' invoices which set out the amount payable as a total of: (i) a specific amount in respect of licence fees; and (ii) a specific amount in respect of tobacco products, those retailers were entitled to recover from wholesalers, as a severable part of the consideration which had failed, the amount in (i) paid in respect of licence fees, where those amounts had not been paid by wholesalers to the government due to the ruling in Ha v State of New South Wales. 94 The present case, in substance, involves two elements: (a) the principle articulated in Rothmans ; and (b) the question whether, on the facts of each agreement between each retailer and each defendant, the Rothmans principle applies. 95 As to the first element, this is a binding principle of law. In reality, it is not an issue to be decided in the proceedings. 96 As to the second element, this is an issue of fact to be determined on the basis of the agreement between each retailer and the appropriate wholesaler. Accordingly, as to this element, retailers will not have the "same interest" in the proceedings so as to come within the rule. 97 The plaintiff purports to bring proceedings on behalf of themselves and all other persons (the "represented retailers") who:

[126]

i. during the whole or some part of the Relevant Period : (i) were retailers of tobacco products carrying on business in one or more of New South Wales, Queensland, Victoria, South Australia, Australian Capital Territory and Tasmania;

[127]

(ii) purchased tobacco products sold to them by the defendant; (iii) paid to the defendant the amount of the licence fee referable to the sales in (ii) as separately identifiable and severable parts of the consideration payable in respect of each sale ;

[128]

ii. have not recovered from the defendant an amount or amounts referable to the licence fees paid to the defendant as referred to in (a)(iii) or otherwise released or agreed to release the defendant from any liability or alleged liability to make payment to them of the amount in (a)(iii). 98 It is then pleaded (para 17(b)):

[129]

(a) By agreements made at or about the time of issue of each of the invoices referred to in paragraph 13:

[130]

(b) the plaintiffs agreed to pay to the defendant the amounts identified in the invoices as the total value of the tobacco products sold in consideration of the defendant's agreement to sell to the plaintiffs the tobacco products identified in the invoices; and

[131]

(c) the plaintiffs agreed to pay to the defendant the amounts referable to licence fees payable under the Act in respect of the sales of tobacco products in (a), separately and severally identifiable in the invoices in consideration and for the purpose of the defendant paying or becoming liable to pay the said amounts. 99 The relief sought is "judgment". 100 If the allegation in paragraph 17(b) is correct, the Roxborough principle will apply. But importantly, this does not mean that the plaintiffs have the same interest in the proceedings. An allegation, in a claim against an accountant for damages for professional negligence, that the accountant owed a duty of care in providing accounting advice could not mean that all persons to whom he had provided negligent accounting advice would have the same interest in those proceedings. 101 The following submissions from the parties for when Mr Insall appeared shortly summarise, it seems to me accurately, the problems with specific regard to relief:

[132]

The Plaintiffs cannot obtain any beneficial common relief in these proceedings.

[133]

The proposition for which Roxborough is authority is that where an agreement provided that a severable amount of the consideration payable was in respect of tobacco licence fees, and that part of the consideration failed, the retailer could claim that amount as money had and received.

[134]

In the present proceedings, there are two pertinent matters which show that no beneficial common relief can be sought: the represented class is described by reference to a conclusion of law, namely "all those persons who paid an amount of licence fee as a separately identifiable and severable amount of the consideration" which consideration has failed (see paragraph 2 of the Contentions).

[135]

It is clear, that the principle in Roxborough must apply to all such persons. In other words, these proceedings are brought on behalf of, and only on behalf of those persons who must win.

[136]

The key paragraph of the pleading is to like effect (see paragraph 17(b)):

[137]

By agreements made at or about the time of issue of each of the invoices referred to in paragraph 13, (a) … (b) the plaintiffs agreed to pay to the defendant the amounts referable to licence fees payable under the Act in respect of the sales of tobacco products in (a), separately and severally identifiable in the invoices in consideration and for the purpose of the defendant paying or becoming liable to pay the said amounts".

[138]

Any declarations based upon the pleading would be nonsensical, for example:

[139]

A declaration that the plaintiffs (that is, all those persons who paid an amount of licence fee as a separately identifiable and severable amount of the consideration) made the payment as a separately identifiable and severable amount of the consideration. [In other words, a totally circular declaration].

[140]

A declaration that the plaintiffs (ie persons who paid an amount of licence fee as a separately identifiable and severable amount of the consideration, which consideration has failed) are entitled to receive repayment of amounts paid. [In other words, as restatement of Roxborough ].

[141]

Accordingly, the relief sought is, in reality specific amounts payable in respect of each individual plaintiff.

[142]

The proceedings are not brought on behalf of a class of persons who, by reason of specific material facts, entered into an agreement of a particular type. The represented class is not defined that way and the pleading contains no such material facts. The reason for that is, no doubt, deliberate, because to do so would involve pleading the material facts which gave rise to each plaintiffs' contract. The pleading cannot be amended, because this would involve addition of plaintiffs, because there would be a different class of plaintiffs from those on whose behalf these proceedings have been brought. The limitation period has expired. 102 In Carnie, the issue raised by the plaintiff was not an established principle of law and thus the represented plaintiffs had an interest in the determination of the issue. 103 Critically, regard must be had to the contemplation of each plaintiff at the time the relevant payments were made. The claims are claims for money had and received based on a total failure of consideration.

[143]

104 A particularly helpful statement as to the meaning of "consideration" in the restitutionary action for money had and received on a total failure of consideration is that of Professor Birks, An Introduction to the Law of Restitution (Oxford, 1985) p 223:

[144]

"The link between 'consideration' and contracts makes it easy to suppose that 'total failure of consideration' must always refer to a failure in contractual reciprocation, whereas in fact that is only the most common species of the genus so described. In the law of restitution the word 'consideration' should be given the meaning with which it first came into the common law. A 'consideration' was once no more than a 'matter considered', and the consideration for doing something was the matter considered in forming the decision to do it. In short, the reason for the act, the state of affairs contemplated as its basis. Failure of the consideration for a payment should be understood in that sense. It means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself." 105 That passage was expressly approved by the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353:

[145]

"But we are not concerned in this case with what a hypothetical, experienced commercial person believed he or she was contracting for; in order to decide whether the appellants in this case have received consideration for payment of the additional moneys, we must ask what these particular appellants, in all the circumstances, thought they were receiving as consideration. In this context, consideration means the matter considered in forming the decision to do the act, "the state of affairs contemplated as the basis or reason for the payment"": at 382, per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ. 106 Similarly, in Roxborough, the passage quoted above from Professor Birks' work was expressly approved in the joint judgment of Gleeson CJ, Gaudron and Hayne JJ at [16], footnote 14; and the passage referred to above from David Securities was approved by Gummow J at [104], footnote 165. See to the same effect, Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 389 (McHugh J). 107 In Roxborough, the majority of the High Court regarded the payments made by reference to "tobacco licence fees" in that case as having been made on a total failure of consideration by reason of the failure of the purpose/reason/expectation/contemplated state of affairs for the payments not having been fulfilled: per Gleeson CJ, Gaudron and Hayne JJ at [4], [5], [16], [17]; per Gummow J at [54], [56], [60], [61], [104], [109]. 108 The plaintiffs claim that the monies paid to the defendants, identified in the invoices as "tobacco licence fee", were in consideration and for the purpose of the defendants (as wholesalers) paying or becoming liable to pay the amounts by way of licence fees. Their claim for restitution relies upon the High Court's finding in Roxborough that the payments by the retailers were for the purpose of putting the wholesalers in funds to meet a future liability. 109 However, as the passages above make clear, the existence of that purpose must be determined by reference to, inter alia, the state of mind of the claimant at the time when the payments were made. 110 Mr Gageler submitted that it was a misconception to analyse the cause of action identified in Roxborough as having turned on the existence of a subjective intention. The submission was that: · in Roxborough, the cause of action identified and acted upon by the High Court was a failure of a severable part of a contractually identified consideration; · a proper reading of the High Courts judgment was that it had applied an objective test; the very same objective test as may be applied to any other form of contract case; · the references to the intention of the parties and the mutual contemplation of the parties had to be read in that light. 111 My own view is as already set out. 112 In any event it seems clear that the decision in Roxborough cannot be read as negativing the proposition that in the context of either (1) a total failure of consideration or (2) a failure of a severable part of the consideration, the matter does not or may not fall for determination by examining what the tobacco retailers thought they were receiving as consideration. [consideration meaning the matter considered informing the decision to make the relevant payments] 113 Mr Gageler [transcript 150] conceded the possibility that although there may be a total failure of a subjectively identified consideration, the plaintiffs were not suing upon a cause of action for money had and received where the subjective reason for the payment had failed to materialise. I do not see this submission as any answer to the defendant's proposition that regard will require to be had to the contemplation of each plaintiff at the time the relevant payments were made. 114 In each of the previous proceedings evidence of the subjective state of mind of the claimants has been given and there is no reason to believe that the evidence in support of the present claims would not include evidence of the critically important matter of the state of mind of each and every claimant. 115 The experience of those proceedings is that retailers differ widely as to the reason(s) contemplated by them when making the payment described on the invoices as TLF. There is no way of telling in advance of cross examination which of the retailers had, as their contemplated reason, putting a wholesaler in funds in order that the wholesaler could in turn pay the relevant State or Territory government. 116 The present situation is analogous to that described by the High Court in Wong v Silkfield Pty Ltd (1999) 199 CLR 255 at 262; where representative actions brought on behalf of shareholders complaining of misrepresentations in a prospectus were demurrable because "whilst the prospectus may have been false, the case of each person deceived would be peculiar to himself and would depend upon its own circumstances" [citations omitted]. In Carnie, no individual differences between class members arose - the common and completely objective question was whether a standard form contract complied with legislative requirements. 117 I accept as correct the submission put by the defendants to the effect that the real issue in the present proceedings is whether, on the facts, there was an agreement to pay amounts in respect of licence fees as a severable part of the consideration. As this depends upon the facts of each case, the represented plaintiffs do not, by reason of this matter, have the "same interest" in the proceedings. 118 The defendants' make a further valid point, namely that the fact that this issue does not give rise to the "same interest" is disguised by the form of the pleading. Hence it is correct to observe that the plaintiffs in breach of the rules, have not pleaded the material facts said to constitute the agreement. They simply plead the conclusion that the plaintiffs agreed to pay the amount separately and severally identified as licence fees.

[146]

119 Each plaintiff should have pleaded the material facts said to constitute his or her agreement. This, I accept, would inevitably have demonstrated that each case turned upon its own facts, thus making representative proceedings inappropriate. 120 Nor is this a matter of theory. The plaintiff cannot assert that the terms of all contracts were identical. Each contract will depend upon the individual circumstances which prevailed. For example, in some cases the defendants issued price lists containing no reference to licence fees (Affidavit of Randall para 49). If a retailer received a price list and, by reference to that price list, placed an order for tobacco products, it could not be said that the retailer agreed to pay a severable amount in consideration of payment of licence fees. 121 The position may be different for other retailers if different price information was provided to them. In some cases, a specific discussion may have taken place between the retailer and an agent of the wholesaler as to the inclusion of licence fees. In this instance, it may be possible for the retailer to assert (notwithstanding the fact that no reference to licence fees appears on the invoice) that a payment was made in relation to licence fees. 122 As the defendants have submitted, there simply is no "same interest" in determining the questions of the terms of individual contracts. 123 Returning to principle, the following observation [made by Bull J.A. in Shaw v Real Estate Board of Greater Vancouver (1973) 36 D. L. R. (3d) 250 at 254], was said by Toohey and Gaudron JJ in Carnie [at 419] to be apposite to rule 13 (1), notwithstanding the use of "representative action" rather than "class action":

[147]

"It appears to me that the many passages uttered by Judges of high authority over the years really boil down to a simple proposition that a class action is appropriate where if the plaintiff wins, the other persons he purports to represent win too, and if he, because of that success, becomes entitled to relief whether or not in a fund or property, the others also become likewise entitled to that relief, having regard, always for different qualitative participations." The different legislative schemes 124 There is a further parameter of importance namely that the particular legislative scheme under consideration in Roxborough appears to have been unique to New South Wales and the ACT. In determining the consideration and purpose of the payments by the retailers to the wholesaler, the High Court in Roxborough based their finding upon a construction of the legislative scheme and, in particular, the provisions of subsection 41(3) of the Business Franchise Licences (Tobacco) Act 1987 (NSW). 125 The High Court held that, as a result of subsection 41(3), a retailer could only avoid ad valorem liability if the retailer purchased from a licensed wholesaler and the wholesaler renewed its licence for future periods by paying the ad valorem fee in respect of that tobacco. 126 Subsection 41(3) was unique to the NSW and ACT tobacco licensing schemes. In other jurisdictions:

[148]

(a) a retailer had no liability for any ad valorem licence fee provided they purchased tobacco from a licensed wholesaler;

[149]

(b) retailers had no concern whether the wholesaler renewed its licence for future periods;

[150]

(c) retailers had no interest in funding the wholesaler to meet the cost of continuing in business for future licence periods to the mutual benefit of both the retailer and the wholesaler;

[151]

(d) monies paid by retailers to wholesalers, despite being separately identified in the invoices, were not in consideration or for the purpose of the defendant paying a licence fee at some future date; and

[152]

(e) in the absence of an equivalent to subsection 41(3), a retailer had no interest or concern (in terms of their own liability) as to whether the wholesaler paid or became liable to pay any future licence fee. 127 A review of the High Court judgments in Roxborough reveals the importance that is placed upon subsection 41(3) in the finding that the seven retailers were entitled to succeed in their claims for money had and received. In particular Gummow J:

[153]

(a) observed that what was particularly important to the retailers' claims was their interest in ensuring that the wholesaler renewed its licence. The payments by the retailers to the wholesaler funded a liability that was to the mutual benefit of both the wholesaler and the retailer (at [54]);

[154]

(b) concluded that an important purpose for which the retailers agreed to pay the licence fee component was for the wholesaler to so act by paying its licence fee thereby ensuring the retailer would not have to bear any ad valorem amount. This conclusion is based upon the combined effect of sections 41(1)(c) and 41(3) ( at [56]). 128 As the defendants' submitted, Gummow J found that the retailers and wholesalers contracted not only for the supply of tobacco products but also with respect to the renewal of the wholesaler's licence and the funding for that to take place. The provisions of subsection 41(3) that created the potential for retailers to be liable for the ad valorem component were central to this conclusion at [109]:

[155]

" …The parties contracted not only for the supply of the tobacco products but also, in the light of the provisions of s 41 of the Act, with respect to the renewal of the wholesaler's licence and the funding for that to take place. Whilst that is understood, the very form of the transactions indicates that the payments made by the appellants can be "broken up"… " . 129 The majority in Roxborough (Gleeson CJ, Gaudron and Hayne JJ) expressly relied upon the statutory construction and the facts concerning the contractual arrangements set out in the reasons for judgment of Gummow J ( at [6]). 130 Their reliance upon subsection 41(3) is clear from various passages in their reasons for judgment. At [4] the majority found that there was a common expectation of wholesalers and retailers that the wholesalers would continue to maintain a licence and would pay or become liable to pay the ad valorem amount for that tobacco. This produced the result that the value of that tobacco could be disregarded in calculating the retailer's licence. These findings mirror the provisions of section 41. 131 The defendants submit and I accept that the critical question for the majority was whether the retailers or wholesaler had the superior claim to the monies paid: see [27]. That depended upon the circumstances or purpose of the payment that was to relieve the retailers of their obligations to pay ad valorem fees: see [23]. This was said to have failed: see [27]. It is a purpose that only arises as a result of subsection 41(3). 132 Callinan J's reliance upon subsection 41(3) is clear from his approval of the five points made by Gyles J in his dissenting judgment in the Full Court: see [195]. 133 I further accept that a proper construction of the licensing schemes does not necessarily lead to the conclusion that monies paid by retailers were in consideration and for the purpose of the wholesaler paying or becoming liable to pay the amounts by way of licence fees. A retailer had no liability for any ad valorem licence fee provided they purchased tobacco from a licensed wholesaler. Indeed in some jurisdictions (Victoria, Tasmania and South Australia), all that was required was the payment of a fixed fee. 134 Accordingly, the decision in Roxborough cannot be said by definition to support the plaintiffs' claim for restitution in states and territories other than NSW and the ACT. As the defendants have submitted, in those other states and territories it will clearly be necessary to consider not only the objective effect of the legislative scheme as an objective matter, but also the effect (if any) of the provisions of that scheme on the subjective contemplation of each of the retailers making a claim. 135 Further, each jurisdiction has a specific limitation period for the recovery of imposts. Claims will need to be considered in the context of the particular statute. 136 All of these considerations combine to underpin the court's decision that these proceedings cannot be permitted to go forward as representative proceedings. 137 The submission from the plaintiffs was that all that was necessary to found the conclusion that persons have the same interest is that there be one of perhaps many potential issues of fact or of law which they can be seen to have in common. Whilst this may be so it is of course always a question of judgment underpinning the proper exercise of the court's discretion to determine whether pursuant to Part 8, rule 13 an 'otherwise order' that particular proceedings not continue as representative proceedings should be made. In the course of the exercise of that discretion the nature of such issues of fact or of law as can be said to be common to claims made by a number of persons, requires to be weighed. In this case such an otherwise order is appropriate even where, as may be accepted, the causes of action will raise many common issues. The issue going to the contemplation of each plaintiff at the time of payment will not go away. Appropriate orders 138 A number of disparate and in some cases alternative reasons have been given for the making of orders that the proceedings not continue as representative proceedings. Where the reasons are grounded upon alternative bases, each of those bases supports the making an appropriate order. 139 Insofar as the proceedings seek to invoke the court procedures of discovery to facilitate the litigation the holding has been that the subject litigation funding arrangements proposed by the opt-in procedure are against public policy as well as comprising an abuse of the court process. This justifies the making of an "otherwise order" within Part 8 rule 13 (1). 140 For the reasons given above all of the persons whom plaintiffs propose to represent cannot be said to have the "same interest" in the proceedings. Here again the making of an "otherwise order" within Part 8 rule 13 (1) is appropriate. 141 An altogether disparate but proper ground for the Court's refusal to permit the proceedings to go forward as representative proceedings is to be found in the Overriding Purpose Rule. I refer here to a recent development in this State, which the Court is also entitled and indeed required to take closely into account. Part 1 of the Supreme Court Rules, as modified by Amendment No 337, elucidates the overall objectives of practices and procedures as specified in the Rules. 142 The overriding purpose of the Rules is to facilitate the "just, quick and cheap resolution of the real issues" in civil proceedings. The overriding purpose clause imposes an obligation on the court to give effect to the overriding purpose when it exercises any of its powers. The opt-in proposal would not be just to the defendants where the proposal is grounded upon the monopoly held by Firmstone which is about utilising that special position by marketing the rights to participate and by insisting upon non negotiable conditions in that regard. 143 The court has a discretion to stay proceedings which constitute an abuse of process. To my mind insofar as these proceedings are sought to be pursued as representative proceedings that discretion should be exercised by staying the proceedings and/or the making now of an "otherwise order" pursuant to Part 8 Rules 13. Whilst in many situations the commencement of representative proceedings plays a crucial role in permitting consumers an opportunity to have their legal rights determined when it can be done efficiently and effectively on their behalf by one person with the same community of interest as other consumers [cf McHugh J in Carnie at 429-430], this is not an appropriate case in which that community of interest is demonstrated. Further and for the reasons already given, to permit the proceedings to go forward as representative proceedings, far from facilitating the just, quick and cheap resolution of the real issues, would give rise to a procedural morass likely ultimately to be able to be resolved only by a disaggregation of the representative proceedings into separate proceedings. Discovery for the purpose of ascertaining identities of parties 144 Here again the Court has been much aided by the submissions of the parties. 145 The plaintiffs submissions were as follows:

[156]

"24. [D]scovery for the purpose of ascertaining identity of parties is a remedy well known to the law. In Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at [24]-[26], the Full Federal Court said: "Preliminary Discovery in Equity

[157]

The bill of discovery has a long history in equity, although its role in preliminary discovery seems largely to have fallen into disuse between the decision in Orr v Diaper (1876) 4 Ch D 92 and the revival of the procedure in Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133; cf Heimann v Commonwealth (1935) 54 CLR 126 (Evatt J), at 133.

[158]

As Young J explained in McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623, at 644, in the absence of a discovery process in common law courts, Chancery permitted a plaintiff to file a bill of discovery which claimed no relief except that the defendant provide the information sought. Bray, Principles and Practice of Discovery (1885) described the procedure as follows (at 611-612): "A bill of discovery must be filed in aid of some proceedings either pending or intended, and there must be allegations to that effect: a court of equity did not compel discovery for the mere gratification of curiosity: Cardale v Watkins [(1820)] 5 Madd 18. In a bill for discovery it was necessary for the plaintiff to show by his bill a case in which a court of equity would assume a jurisdiction for the mere purpose of compelling a discovery. This jurisdiction was exercised to assist the administration of justice in the prosecution or defence of some other suit either in the court itself or in some other court. The discovery must be material to some suit instituted or capable of being instituted. A party might file a bill of discovery before he commenced his action, where he required discovery in order to ascertain what form of action to bring...or in order to ascertain the proper person against whom to bring the action." [Some citations omitted.] As to the objections that a defendant could make to a bill of discovery, see Bray, at 614-617. See also Story, Commentaries on Equity Jurisprudence (1st English ed, 1884), ssss 1483 ff; Mitford, A Treatise on the Pleadings in Suits in the Court of Chancery by English Bill (5th ed 1847), at 64-67." There is thus no reason in principle why orders for discovery are not available to identify the persons from whom the defendant wholesalers obtained licence fees in the relevant period. In the circumstances of this case, the Court should order the defendants to give discovery in order efficiently to enable the distribution of opt-in notices so as to give retailers an informed opportunity to participate in this litigation.

[159]

Thirdly, the exercise of discretion pursuant to Pt 8 r 13 for the Court to "otherwise order" will be based, in large measure, on factual issues, including the extent to which there is commonality of interest and the anticipated manageability of the proceedings. The Court's discretion should not be exercised in a factual vacuum. Prior to any determination of the question whether the proceedings should not continue as representative proceedings, the Court should firstly order discovery and/or interrogatories so that the identity of the class members may be established.

[160]

This is the approach that applies in the United States of America in "class actions" under rule 23 of the Federal Rules of Civil Procedure. Thus, for example: · in Benning v WIT Capital Group Inc (1 November 2001, Supreme Court of Delaware) Veasey CJ, Berger and Steele JJ said at [3]: "While Rule 23 directs the trial court to make a determination on class certification as soon as practicable, this is not a mandate for the court to make that type of determination without the necessary facts before it. The trial court must allow the parties to conduct sufficient discovery before it determines whether or not a viable class exists"; · in Newton v Merrill Lynch, Pierce, Fenner & Smith 259 F 3d 154 (2001), the Court of Appeals for the Third Circuit said at 166: "Before deciding whether to allow a case to proceed as a class action, courts should make whatever factual and legal inquiries are necessary under Rule 23"; · in Kamm v California City Development Company 509 F 2d 205 (1975), Jameson J said at 210: "The propriety of a class action cannot be determined in some cases without discovery, as for example, where discovery is necessary to determine the existence of a class or set of subclasses. To deny discovery in a case of that nature would be an abuse of discretion"; · in Yaffee v Powers 454 F 2d 1362 (1972), the Court of Appeals for the First Circuit said: "To pronounce finally, prior to allowing any discovery, the non-existence of a class or set of subclasses, when their existence may depend on information wholly within the defendants' ken, seems precipitate and contrary to the pragmatic spirit of Rule 23. Evidence which might be forthcoming might well shed light on a final decision on this issue."

[161]

Thus, in the decision of the United States Supreme Court Eisen v Carlisle & Jacquelin 417 US 155 (1973), the class action was an alleged contravention of the Sherman Act by two brokers who had traded in excess of 99% of the "odd lot" parcels of shares in the period between May 1962 and June 1966 and who had imposed additional brokerage on each such trade. The class was all buyers and sellers of odd lots in that period. There were some six million individuals in the class, and the majority said (at 166): "that with reasonable effort some two million of these odd-lot investors could be identified by name and address. These two million traders dealt with brokerage firm who transmitted their odd-lot transactions to respondents Carlisle & Jacquelin and DeCoppet & Doremus via teltype. By comparing the odd-lot firms' computerized records of these teletype transactions and the general-services brokerage firms' computerized records of all customer names and addresses, the names and addresses of these two million odd-lot traders can be obtained."

[162]

It is plain from that conclusion (based on findings of fact set out by the primary judge in Eisen v Carlisle & Jacquelin 52 FRD 253 at 257 (1971)) that discovery was given as to the identity of the class. An aspect of that discovery was also the fact found by the trial judge that "the names and addresses of approximately two-thirds ie 4,000,000, cannot be identified with reasonable effort".

[163]

(Notwithstanding the inability to identify two-thirds of the class, the class action was permitted to proceed, but on terms that there be individual notification to each of the two million identifiable class members.)

[164]

Newberg on Class Actions (2nd ed) states at Vol 2 s7.08 that "When pertinent facts are directly contested, and when information concerning them is exclusively or primarily within the control of the defendants, the plaintiff may desire discovery of the defendants before initial class determination." One of the cases cited is Fauteck v Montgomery Ward & Co Inc 91 FRD 393 (1980), in which the defendants were ordered (at 398-399) to discover in electronic form their database of employees who formed the class in respect of which the plaintiff alleged there had been unlawful employment policies. Another employment discrimination class action, in which pre-certification discovery of employee information was ordered, is Roberts v National Detroit Corp 87 FRD 30 (1980) ("Where however, Plaintiffs seek objective material such as data or statistical information ... Defendant is ordered to reply [in answer to the interrogatories] or produce [in answer to the discovery request]" (at 32)).

[165]

At s8.08, Newberg deals with the post- Eisen decision of the United States Supreme Court in Oppenheimer Fund Inc v Sanders 437 US 340 (1978), which: "provided the Supreme Court with an opportunity to set guidelines within which district courts could assign class identification tasks and their attendant costs to the defendants under certain limited circumstances, at the pretrial stage of litigation." At 355-358 the Court approved earlier decisions holding that, where the effort on either litigant's part was substantially the same, the representative plaintiff should bear the cost of compiling lists of the names and addresses of absent class members, and then dealt with the circumstances when the defendant would be ordered to pay for the identification process.

[166]

Recently, in the July 2003 International Financial Law Review at 41-44, Debevoise and Orta have summarised "The typical course of a Rule 23(b)(3) class action case" as follows: "In a typical Rule 23(b)(3) class action, after the complaint is filed, the parties engage in discovery and briefing on the question of whether a class should be certified, including whether the requirements of Rule 23(a) and 23(b)(3) are met. This process usually involves months of written discovery and depositions followed by a briefing period and then argument before the court on whether a class action is the appropriate mechanism for resolving the claims of putative class members. The court has broad discretion in deciding whether to certify the class and has the power to reshape the class by, for example, limiting the size and scope of the potential class": "The class action threat to sovereign workouts", IFLR July 2003, 41 at 43.

[167]

There is no reason why the discovery sought in these proceedings ought be anything as arduous as that described above. More importantly, there is every reason to follow the principle in the United States decisions, namely, that the question whether the proceeding should proceed as a representative proceeding can only be determined after discovery has been given. In Carnie at 404, Mason CJ, Deane and Dawson JJ said that: "It would be unprofitable and difficult to make a precise comparison between a representative action under [Pt 8] r 13 and a class action under r 23 but we see no reason to doubt that the two rules cover much common ground." Fourthly, there is a growing recognition that representative proceedings afford one of the ways in which individual citizens and small businesses can vindicate rights of action against governments and powerful corporations. See eg the ALRC report Grouped Proceedings in the Federal Court , (no 46 1988) at [13]-[20]. More recently, Lord Woolf wrote in Access to Justice : "It is now generally recognised, by judges, practitioners and consumer representatives, that there is a need for a new approach both in relation to court procedures and legal aid. The new procedures should achieve the following objectives: (a) provide access to justice where large numbers of people have been affected by another's conduct, but individual loss is so small that it makes an individual action economically unviable ..."

[168]

That passage was referred to with approval by the Court of Appeal in Sayers v Merck SmithKline Beecham plc [2003] 3 All ER 631 at [2].

[169]

There is little reason to doubt that most of the plaintiffs would be unable or unwilling alone to commence proceedings to seek to recover the licence fees they paid." 146 The defendants' submissions in relation to discovery generally raised the same matters. The submissions put by Mr Jackman SC who appeared for the British American Tobacco Australia Ltd parties included the following in this respect:

[170]

The plaintiffs seek discovery, under Part 23, of the categories of documents set out in Schedule A to the plaintiffs' notices of motion. They can be broadly described as: · documents which record the identity of persons who may be in the class described by the plaintiffs in paragraph 2 of their summonses; · documents which evidence purchases of tobacco by those persons in respect of which those persons may seek to recover part of the purchase price; and · documents which will assist to determine the potential quantum of a class members' claim.

[171]

The defendants do not oppose the application for such discovery insofar as it concerns the plaintiffs (that is Mr and Mrs Hall). The defendants oppose the application insofar as it relates to other persons who may be members of the class.

[172]

Insofar as the documents concern other putative class members, the documents are sought for the purpose of enabling Firmstones to contact those persons: Firmstone affidavit sworn 8 August 2002, para 12.

[173]

Firmstones then propose to contact those persons and send them an "opt-in" notice inviting those persons to consent to these proceedings being continued on their behalf.. The defendants ought not be required to provide the discovery sought for the following reasons.

[174]

Part 23 rule 3 of the Supreme Court Rules limits the availability of discovery to documents which could rationally affect the assessment of the probability of the existence of a fact in issue: National Australia Bank v Idoport [2000] NSWCA 8 at [19 ].

[175]

Further, as a general rule, discovery can only be ordered as between parties to the action: James Nelson & Sons Ltd v Nelson Line (Liverpool) Ltd [1906] 2 KB 217 and who are formally at issue in the proceedings: Buxton & Lysaght Pty Ltd v Buxton [1977] 1 NSWLR 285 at 287.

[176]

The importance of the requirement that discovery be confined to matters which are actually in issue and between parties to a proceeding is reflected in the general rule of practice that a party will not be granted discovery before the close of pleadings other than in an exceptional case: Latec Finance Pty Ltd v Jury [1960] 77 WN (NSW) 674 at 676.

[177]

The documents sought cannot rationally affect the probability of the existence of any fact in issue between the named plaintiffs and the defendants. Indeed, the issues in dispute will not be defined until the pleadings and the class have closed; a point made by the plaintiffs in paragraph 33 of their overview written submissions.

[178]

The plaintiffs (or perhaps more correctly Firmstones) seek discovery not as to the issues which are in dispute, but for the purpose of determining the parties who will be making a claim. It follows from the "opt-in" procedure proposed by the Firmstones that, until persons have elected to "opt-in" to the proceedings and the class is closed, potential class members are not clients of Firmstone PL (since it is a condition of entry to the class that they agree to become clients of Firmstone PL), and not to be entitled to any benefit of the proceedings. There is no meaningful sense in which they can be said to be parties to the proceedings or to have joined issue with the defendants.

[179]

The documents sought have no relevance to the cases of the named plaintiffs. They know who they are. The documents are in fact sought for the purposes of the litigation funder rather than the named plaintiffs. Firmstones is certainly not a party to these proceedings and is therefore not entitled to any discovery.

[180]

Whilst exceptions to the general principles described above have developed, these exceptions operate to assist plaintiffs who seek to ascertain the identity of wrongdoers. See, for example, the preliminary discovery procedures in Part 3. There is no reason in principle to extend those principles to assist a plaintiff to identify other potential plaintiffs.

[181]

The plaintiffs in their overview submissions do not identify any case in which an order of the type sought has been made. Rather their argument appears to be that there is no reason in principle why such an order cannot be made. For the reasons set out above, there are solid reasons in principle why such an order should not be made. 147 There is a particular difficulty in terms of the form of the proposed discovery and interrogatories. This was highlighted on grounds of futility in the submissions of Mr Insall SC appearing for a number of the defendants in the IGA Distribution Group as follows:

[182]

The asserted basis for the application is set out in paragraph 12 of the affidavit of Mr Firmstone sworn 8 August 2002. In paragraph 12 he asserts: "Information and documents which disclose the names and addresses of the additional members of the class are in the possession of the defendants. In order to give all represented retailers an opportunity to elect whether to remain in the proceedings and to continue to be represented, it is proposed, subject to the approval by the Court, to apply for discovery [of the itemised documents]". The documents sought in the motion are all linked to the term "represented retailers" which is defined in Schedule A to mean the persons defined in paragraph 2 of the Plaintiffs' contentions in the Summons. That paragraph defines "represented retailers" as those persons who during the relevant period were retailers of tobacco products, purchased tobacco products from the Defendants and "paid to the defendant the amount of licence fee referable to the sales as separately identifiable and severable parts of the consideration payable in respect of each sale".

[183]

It is the Defendants' position that there are no retailers who purchased tobacco products during the relevant period who did pay to the Defendants "the amount of licence fee referable to the sales as separately identifiable and severable parts of the consideration payable in respect of each sale". In particular, unlike the position in Rothmans , (where the critical factor was the fact that wholesalers included, as part of the total price payable in relation to each tobacco product, a specific sum payable in respect of licence fees), all but one defendant issued invoices which contain no reference to licence fees at all.

[184]

If the order for discovery is made, the defendants will produce no documents. To do otherwise would be effectively to admit the plaintiffs' case (contrary to the true facts). 148 These submissions are of substance for the reason that the plaintiffs would not be entitled to require in the form of the proposed discovery or of the proposed questions by way of interrogation, that the defendants effectively be compelled to carry out a task which is imprecise. It would have been necessary to reformulate, if this was possible, the precise description of the documents sought to be identified. That reformulation could not leave it to the defendants to effectively answer a mixed question of fact and law in order to be able to comply with the court's order. 149 For the reasons given above it is strictly unnecessary for the court to deal with the closely argued question of the court's jurisdiction to make the orders for discovery or for answers to interrogatories sought by the plaintiffs. However in deference to the careful submissions it is appropriate to address the issue. 150 My own view is that this question requires to be approached in light of the matter commented upon in Carnie [cf Mason CJ, Deane, Dawson JJ at 404] concerning the absence of a detailed legislative prescription by statute or rule of court regulating the incidence of representative action:

[185]

"The absence of such a prescription does not enable a court to refuse to give effect to the provisions of the rule. Nor, more importantly, does the absence of such prescription provide a sufficient reason for narrowing the scope of the operation of the rule…without giving effect to the purpose of the rule in facilitating the administration of justice." 151 The purpose of the rule is to facilitate the administration of justice by enabling parties having the same interest to secure a determination in one action rather than in separate actions. 152 If one puts to one side the problems identified above in terms of champerty, abuse of process and the above described problems of form, had the plaintiffs been able to satisfy the court in terms of the "same interest" issue, I would have been of the view that the plaintiffs were entitled to mobilise discovery or interrogatories in terms of a court order that the relevant defendants provide the information necessary to be known to the plaintiffs in order to ascertain the members of the class. As Toohey and Gaudron JJ commented in Carnie [at 422] the situation here is one in which the defendants all have the means of knowing better than anyone else who were the members or likely to have been the members of the relevant class. I do not gainsay the proposition which was indeed conceded by the plaintiffs, that there is no material issue in these proceedings to which it could be suggested that this form of discovery of or orders for interrogatory is could go. However a combination of the following matters: · the inherent jurisdiction of the Supreme Court; · the overriding purpose rule; and · the lack of a detailed legislative prescription by statute or rule of court regulating the incidence of representative action with a consequential need for the court to give such directions as are necessary and appropriate to permit the representative action procedure to be more than an arid procedure; appear to me to provide a proper and sound foundation for the making in a proper case of discovery or interrogatory orders as here sought by the plaintiffs. 153 The court requires to stand back from each particular application of the rules in order to ensure that the discretions are appropriately exercised in the due administration of justice. Representative proceedings represent a class of their own. And the difficulties sometimes experienced in identifying the members of a class sought to be represented require to be recognised and dealt with, always bearing in mind the real-world situation that when the parties who do have the same interest are so numerous that one can never 'come at justice' if everyone interested was made a party, representative proceedings are by their nature beneficial furthering the interests of justice. Discretionary considerations 154 The defendants adduced evidence to support the proposition that they would encounter considerable difficulties in being ordered to furnish the discovery sought or to answer the interrogatories proposed. For obvious reasons it is unnecessary for the court to deal with this evidence adduced under cover of the proposition that the court in its discretion should refuse to make the orders sought. The proposed substitution as representative plaintiffs in the Adams proceedings [50074/03] 155 The Summons in the Adams proceedings names the first and second plaintiffs as Mr and Mrs Adams. At the time when the Summons in the Adams proceedings was filed Philip Morris Limited had already settled with those plaintiffs. Hence a discrete question was said to rise namely whether or not Mr and Mrs Grey may be substituted as the representative plaintiffs in these proceedings 50074/03. 156 The matter was argued in the absence of the parties being aware of the approach the court would take on the 'same issue' questions. The holding now being against the plaintiffs, the parties should be given an opportunity to further address on the substitution application. Pending that address, in what follows I approach the issue on the hypothetical basis that the proceedings when commenced, were properly commenced within the meaning of Part 8 Rule 13. 157 The written submissions by the plaintiffs put the matter as follows:

[186]

Pt 8 r 7 provides that proceedings shall not be defeated by reason of the misjoinder of a party or the non-joinder of any person as a party and that the Court may in any proceedings determine the issues or questions in dispute so far as they affect the rights and interests of the party.

[187]

Pt 8 r 8 provides for the joinder of persons as parties where the joinder is necessary to ensure that all matters in dispute in the proceedings may be effectually and completely determined and adjudicated upon. Pt 8 r 9 provides for the Court, on application by any party or of its own motion, to order that a party cease to be a party and to make orders for the further conduct of the proceedings where inter alia the party has ceased to be a proper or necessary party.

[188]

Pt 8 r 10 provides that the Court may make consequential orders for the addition, removal or re-arrangement of parties and may make orders for the further conduct of the proceedings where inter alia the interest of a party passes by assignment, transmission, devolution or otherwise to another person. The Court may make such orders on application by a party or by a person to whom the interest or liability passes or of its own motion. An amendment made pursuant to an order under Pt 8 r 10 shall, unless the Court otherwise orders, relate back to the date of filing the originating process: (SCR, Pt 8 r 11(4)).

[189]

Pt 8 r 11(1) provides that without limiting the generality of the powers of the Court under Pt 8 rr 8-10, orders under those rules for the further conduct of the proceedings may include orders relating to inter alia amendment and the substitution of one party for another party or a former party.

[190]

Pt 8 r 11(2) provides that where the Court orders that a party be substituted for another party or a former party, all things done in the proceedings before the making of the order shall, unless otherwise ordered, have effect in relation to the new party as those things had effect in relation to the old, but entry of appearance by the old party shall not dispense with entry of appearance by the new.

[191]

Pt 8 r 11(3) provides that where in any proceedings a party is added otherwise than pursuant to an order under Pt 8 r 10 or Pt 20 r 4(3) (see below) the date of commencement of the proceedings so far as concerns him shall be (in the case of a plaintiff) the date on which the amendment adding him as a party is made.

[192]

Pt 20 of the SCR deals with amendments to inter alia an originating process such as a Commercial List summons. Pt 20 r 1(1) provides that the Court may, at any stage of any proceedings, on application by any party or of its own motion, order that any document in the proceedings be amended, or order that any party have leave to amend any document in the proceedings, in either case in such manner as the Court thinks fit. Part 20 r 1(2) provides that all necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, or of correcting any defect or error in the proceedings, or of avoiding multiplicity of proceedings.

[193]

In the absence of any contrary order or provision (such as Pt 8 r 11(3) referred to above) an amendment is regarded as taking effect from the date of the original pleading or originating process, rather than from the date the amendment is actually made.

[194]

Pt 20 r 1(3A) provides that an order may be made, or leave may be granted, under Pt 20 r 1(1) notwithstanding that the effect of the amendment is, or would be, to add or substitute a cause of action arising after the commencement of the proceedings, but in such a case the date of commencement of the proceedings, so far as concerns that cause of action, shall, subject to Pt 20 r 4, be the date on which the amendment is made.

[195]

Section 81 of the Supreme Court Act provides that irregularities, including a failure to comply at any stage in the course of or in connection with any proceedings with the requirements of the Supreme Court Act or of the Rules shall be treated as an irregularity and shall not nullify the proceedings or steps taken or documents in the proceedings. The Court also has a discretion under s 81(1)(b) to exercise its powers to allow amendments and to make orders dealing with the proceedings generally. Section 81(1)(3) provides that the Court shall not set aside any proceedings or any step taken in any proceedings or inter alia any document in the proceedings on the ground of a procedural irregularity as described in s 81(1) on the application of any party unless the application is made within a reasonable time and before the applicant has taken any fresh step after becoming aware of the irregularity.

[196]

In order to determine which provision or provisions as summarised above apply when replacing the representative plaintiff in the proceedings it is necessary to characterise the procedural step which must be taken in relation to the summons and/or the proceedings generally. This question was considered by the English Court of Appeal in Moon v Atherton [1972] 2 QB 435 where the Court concluded that the necessary step was a formal amendment to the writ which involved inserting in the writ the name of the former unnamed plaintiff on whose behalf representative proceedings had been commenced, in place of the named plaintiff, under the equivalent English Court rule to SCR Part 20 r 1(1).

[197]

In Moon v Atherton a newly built block of 12 flats was leased in identical terms to the 12 tenants. They agreed to pay one-twelfth of any necessary structural repairs, including the roof. Serious defects developed in the roof. It cost £5,000 to repair it to which each tenant contributed his or her share. A representative action under RSC Order 15 r 12 (which was in substantially identical terms to Pt 8 r 13, SCR) was brought against the architect in the name of one of the tenants on behalf of herself and 10 others, the remaining (12th) tenant being unwilling to join in. Later, the named plaintiff together with nine of the eleven persons represented by her decided to discontinue the action because of the cost of the proceedings. The 11th (unnamed) person represented by the named plaintiff sought leave to be substituted as the person named as plaintiff in the writ by way of amendment to the writ under RSC Order 15 r 5 (the equivalent rule to Pt 20 r 1, SCR); or alternatively to be substituted as a party under RSC Order 15 r 6 (the equivalent rule to Pt 8 r 8, SCR).

[198]

Lord Denning MR (with whom Lord Justices Edmund Davies and Roskill agreed) said: "In a representative action, the one person who is named as plaintiff is, of course, a full party to the action. The others, who are not named, but whom she represents, are also parties to the action. They are all bound by the eventual decision in the case. They are not full parties because they are not liable individually for the costs. That was held by Eve J. in Price v Rhondda Urban District Council [1923] W.N. 228 but they are parties because they are bound by the result. What then is to happen when the named plaintiff decides to withdraw? It seems to me that then it is open to any one of those whom she represents to come forward and take the place of the named plaintiff. The case comes within Ord. 15, r. 6, which enables a party to be added whose presence is necessary. It also comes with Ord. 20, r. 5(1), which says: '… the court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct'. In those rules the word 'party' is used in the same sense as it is in the definition in section 225 of the Supreme Court of Judicature (Consolidation) Act 1925, which says that: 'Party' includes every person served with notice of or attending any proceedings, although not named on the record. So it includes one of the persons represented, even though not named in the writ. In my opinion those rules enable the court to amend these proceedings by inserting the name of Mrs Art instead of the named plaintiff. This is necessary in order to do justice. If it were not so, the named plaintiff might discontinue, or the defendant might settle with the named plaintiff, and then leave the other unnamed plaintiffs out in the cold. It might be too late for them to issue a new writ because of the statute of limitations. That cannot be right. It seems to me that if, in a representative action, the named party falls out for any reason, that court has ample power to substitute one of the unnamed parties as the plaintiff, and to bring him in as at the date of the issue of the original writ."

[199]

As was the case in Moon v Atherton , the unnamed plaintiffs in the tobacco retailer representative proceedings are bound by the result of the proceedings. The proposed "opt-in notice" to be sent to these persons is designed to allow them to indicate their consent to the representative proceedings being continued because they will be bound by the judgment. There is no equivalent definition of "party" in the SCR or Supreme Court Act to the definition contained in s225 of the Supreme Court of Judicature (Consolidation) Act 1925 referred to by Lord Denning in Moon v Atherton requiring that notice be given to such persons. It follows from principle that the unnamed plaintiffs in the representative proceedings are already "parties" to those proceedings.

[200]

Based on the reasoning in Moon v Atherton it follows that the Court should grant leave in the Adams proceedings to amend the summons pursuant to SCR, Pt 20 r 1(1) by inserting the name or names of the previously unnamed plaintiffs (Mr and Mrs Grey); or alternatively give leave to substitute the Greys for the named plaintiff pursuant to Part 8 rr 8, 9 and 11. Although Lord Denning in Moon v Atherton referred at one point in his judgment to "adding" a party, the correct analysis based on his reasoning is that the unnamed plaintiff who is already a party (and has commenced the action - see further below) is being substituted for the representative plaintiff.

[201]

In short: (a) the amendment to the summons amounts to the substitution of one party for a party or former party (SCR, Part 20 r 1(1) and Part 8 r 11(1)(d));

[202]

(b) the amendment dates back to the time of filing of the summons; and

[203]

(c) there is no party or cause of action being added which would bring into operation SCR Part 8 r 11(3) or Part 20 r 1(3A) which provide that unless certain other rules apply (see above) the amendment takes effect from the actual date on which it is made. 158 The parties for whom Mr Macfarlan appears to put the manner as follows in their written submissions:

[204]

There is no dispute that at the time the Adams Proceedings were commenced, Mr. and Mrs. Adams had settled their claim and did not have a cause of action against the defendant: Paragraphs 16-20 of the Affidavit of Mr. Proud sworn 11 August 2003.

[205]

Those proceedings should therefore be dismissed pursuant to Part 13 Rule 5 of the Supreme Court Rules. However, the plaintiffs seek orders substituting the Greys as plaintiffs in the Adams Proceedings.

[206]

The Court's power to order substitution of a party is contained in Part 8 Rule 11 of the Rules.

[207]

Part 8 Rule 11(3) provides that where the Court orders the substitution of a plaintiff, the date of commencement of proceedings (so far is it concerns that plaintiff) is taken to be the date of the order. In other words, a substituted plaintiff is not entitled to thereby defeat a defence under the Limitation Act.

[208]

The defendant's defence under the Limitation Act is clear, as it is now more than 6 years since the end of the period from 1 July 1997 to 5 August 1997 during which relevant payments are alleged to have been made (Affidavit of Mr. Firmstone sworn 8 August 2003 (the " Firmstone Affidavit ") paragraph 5). The substitution of plaintiffs would therefore be futile and should be refused.

[209]

The plaintiffs also seek orders pursuant to Part 20 Rule 1, which provides for amendment to pleadings. In certain circumstances, amendments may be made with effect from the date proceedings were commenced (as opposed to the date of amendment), however this is not such a case: Part 20 Rule 4(1).

[210]

That rule, which partially abrogates the common law position, is confined to orders made in the following circumstances:

[211]

(a) Where there has been a mistake in the name of a party but where that mistake was not such as to cause reasonable doubt as to the identity of the person intended to be made a party: Rule 4(3);

[212]

(b) Where a plaintiff becomes entitled to sue in any capacity: Rule 4(4); and

[213]

(c) Where the amendment adds a cause of action arising out of the same or substantially the same facts as already pleaded: Rule 4(5). 8. None of those rules applies in this case. If the amendment were to be granted pursuant to Part 20, as sought, the date of the amendment would therefore be governed by the common law rule in Weldon v Neal (1887) 19 QBD 394 and the date of the Grey's cause of action would therefore be the date of the order. On any view, that proceeding would be time-barred. An amendment to allow it to be pleaded would be futile and should therefore be refused.

[214]

The defendants therefore submit that the substitution of plaintiffs in the Adams Proceedings should be refused. It follows that those proceedings should be dismissed because the existing plaintiffs do not have a cause of action as they settled prior to the commencement of proceedings. Dealing with the issue 159 Clearly the plaintiffs contentions in describing the parties identify the plaintiffs as Mr and Mrs Adams who are said to bring the proceedings on behalf of themselves and all other persons who satisfy certain nominate criteria but excluding persons "who have agreed to release or have released the defendant from the alleged liability to make the subject payment". Equally clearly Part 8 rule 13 (1) where numerous persons have the same interest in proceedings, permits one or more of them to commence the proceedings as representing all or as representing all except one or more of them. 160 It is not suggested that the proceedings are a nullity so far as the claims by Mr and Mrs Adams are concerned. The proposition is that the defendants have a sound defence to those proceedings insofar as Mr and Mrs Adams claims are concerned. But the more significant issue is as to whether or not the proceedings when commenced, were properly commenced within the meaning of Part 8 rule 13 (1). 161 The plaintiffs first submission is that under Part 8 rule 13 (1) it was only necessary for the plaintiffs to have the same interest as members of the identified class. The proposition is that Mr Adams had that same interest because he had the very same cause of action albeit that there was a complete defence to that cause of action. In my view the submission should be rejected. 162 The plaintiffs' next submission was that even if the proceedings were not regularly commenced, the irregularity is not one which affects the representative nature of the proceedings. Reliance is placed upon Cameron v National Mutual Life Association of Australasia Limited (No.2) [1992] 1 Qd R 133, a decision of the Full Court of the Queensland Supreme Court. In Cameron a writ commencing representative proceedings was struck out by the Master below on the ground that it did not comply with Order 3 rule 10, the applicable rule authorising representative proceedings in the Queensland Supreme Court. An appeal against the Master's decision to Dowsett J was dismissed but Dowsett J gave leave to the persons who were in the class for whom the action was commenced at the time of commencement but who were not named as plaintiffs, to elect to be joined as plaintiffs in the action by filing a written consent in the registry. An appeal against the decision of Dowsett J was lodged to the Full Court.

[215]

163 McPherson SPJ considered that the critical question raised by the appeal was whether the action was, within the meaning of the Limitation of Actions Act 1974 (Qld), "brought" by the unnamed plaintiffs at the time the writ was issued; and held that the terms of Order 3 rule 10 (which were in a similar form to SCR, Pt 8 r 13) which provided that one or more numerous persons having the same interest in a cause "may sue … on behalf … of all persons so interested", applied to bringing an action and to doing so "on behalf of all persons … so interested". McPherson SPJ said, in relation to Order 3 rule 10:

[216]

"The rule, it will be seen, makes no distinction between named plaintiffs and unnamed plaintiffs. The action is brought by one or more persons on behalf of them all. In view of this, I do not think it possible to say that the action is brought by or on behalf of the named plaintiff or plaintiffs but not by or on behalf of those not named. In terms of the rule and of s 10(1) of the Limitation of Actions Act, the action is 'brought' on behalf of all of them. On that view of the matter the plaintiffs, both those named and those represented but not named, brought this action when the writ was sealed on 22 December 1988." 164 By reason of his finding as to the bringing of the action by the unnamed plaintiffs at the time the writ was filed and his conclusion that this was the critical question, McPherson SPJ did not consider it necessary to determine whether the unnamed plaintiffs were also "parties" to the original action. McPherson SPJ referred to the decision of Moon v Atherton and said it was authority for the course taken by Dowsett J. McPherson SPJ dismissed the appeal, holding that the failure of the writ to comply with the Rules was an irregularity which was cured by the order of Dowsett J giving the unnamed plaintiffs leave to be joined as named plaintiffs. McPherson SPJ said:

[217]

"The fact that under the Rules the action ought not to have been brought on their behalf does not mean that it was not so brought" (at 138). 165 Ryan and Moynihan JJ held that the unnamed plaintiffs were not parties to the proceedings at the time the action was brought. On this question, Ryan J distinguished Moon v Atherton because in that case, unlike in Cameron, the defendant did not apply to strike out the representative action at the initial stage and because the unnamed plaintiffs had not been served with notice of the proceedings. Ryan J dismissed the appeal on the basis that there were "special circumstances" which justified the order of Dowsett J permitting the addition of plaintiffs out of time. These circumstances comprised the awareness of the defendants since the time of issue of the writ that the claims referred to therein were purportedly being made against them on behalf of persons including the unnamed plaintiffs; and that the incorrect use by the plaintiffs of the representative procedure was an irregularity cured by the orders made by Dowsett J. Moynihan J generally disposed of the appeal on the same basis as McPherson SPJ. 166 The approach to construction of the Court Rules and s 10 of the Limitation of Actions Act 1974 (Qld) by McPherson SPJ in Cameron is I accept, persuasive and is applicable to the provisions of SCR, Pt 8 r 13 and the relevant limitations provisions. The relevant statutory limitations provisions uniformly use the expression "action brought" as per s 10 of the Limitation of Actions Act 1974 (Qld). The language used in Pt 8 r 13 which provides that one or more numerous persons having the same interest in proceedings may "commence proceedings as representing all or as representing all except one or more of them", is substantially similar to the provisions contained in Order 3 rule 10. There is no material difference between the respective expressions used in each set of Rules to describe the capacity in which the representative plaintiff brings the action for the others who have the same interest in the cause or proceeding. Order 3 rule 10 refers to suing "on behalf of" the unnamed plaintiffs. Part 8 rule 13 refers to commencing proceedings "representing" the unnamed plaintiffs. 167 On the assumed basis that the proceedings had been properly commenced within the meaning of Part 8 Rule 13, I would accept as correct the submission by the plaintiffs that based on Cameron, the issue of the summons in the representative proceedings would amount to the bringing of the action for money had and received by the named and unnamed plaintiffs for the purposes of both the applicable statute of limitations provisions and SCR, Part 8 rule 13. Short Minutes of Order 168 Towards the end of his oral submissions Mr Gageler addressed the possibility that albeit that the court would not sanction the proposed opt-in notice procedure qua the unknown plaintiffs, the court should fashion by case management procedure, a method whereby the named plaintiffs should be permitted to continue the proceedings as representative of the 2100 persons who: · had already appointed Firmstone as their agent; · had already agreed to the 33 percent fee. 169 None of the other parties squarely addressed this proposal which flies in the face of the basis upon which the named plaintiffs agreed to be 'lead' plaintiffs and could significantly erode their anticipated entitlement to share any exposure to costs with the opt-in group of putative plaintiffs. It may be that one of the matters to be taken into account concerns the precise dates and circumstances when the 2100 persons were approached and appointed Firmstone as their agent and agreed to the 33 percent fee. It is not an altogether simple task to unearth the relevant facts from the evidence presently before the Court, although it seems likely that these persons were approached at some stage after March 2002 when the arrangement with Horwath was apparently entered into. One does not know whether all or only some of them were approached and agreed to participate before the commencement of these proceedings nor as to whether all or only some of them were approached and agreed to participate between the commencement of the proceedings and the hearing of the motions on 3 September 2003. 170 During the cross-examination of Mr Firmstone he gave evidence that the advertising had occurred "around the middle of 2002 and has been going progressively since then". [Transcript 46] On the other hand, Mr Insall [Transcript 154] referred the court to the "Advertising Summary" [Exhibit PX 1412 et seq] where a list of advertisements only commences on 31 May 2003 and runs through to the end of July 2003. Further as at 24 July 2003 Robert Richards & Associates were apparently able to produce a list of the represented retailers of whom Firmstone was then aware. [Appendix D to the affidavit of Mr Firmstone of 8 August 2003] 171 The proposal appears to me to be simply another indicator of the manner in which the interests of one group of parties said to be represented by the solicitors on the record and said to likewise be clients of Firmstone, are seen to clearly conflict with the interests of the 2100 persons referred to above. 172 In any event it does seem appropriate that a proper opportunity should be given to the parties to address in relation to the proposal once they have had a proper opportunity to read the judgment. 173 Once the parties have had a proper opportunity to read this judgment, they will also be given an opportunity to address on relief. The effect of the reasons on the Adams proceedings may also be the subject of further address. 174 The proceedings will be stood over to a convenient date when costs may also be argued.

[218]

Objections to affidavit evidence 175 The Court reserved a decision upon a limited number of objections to the affidavit evidence. The rulings are as follows:

[219]

Affidavit of Mr Hugh Robert Scott of 28 August 2003

[220]

So much of paragraph 7 as commences "and outside the financial capacity". The section objected to is allowed.

[221]

Affidavit of Mr Hugh Robert Scott of 3 September 2003

[222]

I certify that paragraphs 1 - 175 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 11 September 2003

[223]

      Susan Piggott
      Associate

11 September 2003

[224]

Last Modified: 09/25/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

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Judgment (224 paragraphs)

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