Peter Schanka & Ors v Employment National

… (ix) written statements delivered pursuant to s 49 of the Building Units and Group Titles Act 1980 were accurate; …" I am satisfied that it is reasonable, as suggested in the majority judgment, to read with this pleaded issue, as particulars of it, the matters set out in paragraphs 13(d), (e) and (f). It also appears that the issues raised in paragraphs 13(a)(ii), (iv), (vi) and (viii), (d), (e) and (f) are common to the claims of the eighteen identified group members. As the group is presently defined in the pleadings these issues cannot qualify as common issues within the meaning of s 33C(1)(c) but, as I shall indicate later, they are not without significance in determining whether the declaration sought by the appellant should be made. It is convenient to set out, at this stage, the whole of s 33C of the Act. It provides as follows:- "33C. (1) Subject to this Part, where: (a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of law or fact; a proceeding may be commenced by one or more of those persons as representing some or all of them. (2) A representative proceeding may be commenced: (a) whether or not the relief sought: (i) is, or includes, equitable relief; or (ii) consists of, or includes, damages; or (iii) includes claims for damages that would require individual assessment; or (iv) is the same for each person represented; and (b) whether or not the proceeding: (i) is concerned with separate contracts or transactions between the respondent in the proceeding and individual group members; or (ii) involves separate acts or omissions of the respondent done or omitted to be done in relation to individual group members." Put simply, the question for determination is whether the issue raised by paragraph 13(a)(ix), as further particularised, is relevantly "a substantial common issue of … fact" within the meaning of this section. With respect, I am not able to agree with the meaning attributed by my brethren to the word "substantial". I am satisfied that a common issue can be relevantly "substantial" even though its determination will not have "a major impact on the litigation". This formulation, as appears clearly from the majority judgment, is not far removed from the view expounded by Drummond J in Connell v Nevada Financial Group Pty Ltd (1996) 139 ALR 723. In that case, his Honour stated the opinion that a common issue could not be substantial if it was, in effect, in competition in the litigation with a large number of non-common issues. It will be observed that this view is not departed from in the majority judgment but it is accepted that it is not an exhaustive test of the substantiality of a common issue. Irrespective of the number and weight of non-common issues, a common issue can be "substantial" only if its resolution can be seen as largely dispositive of the group litigation. Whilst I accept that the word "substantial" is imprecise and requires a value judgment to be made, I am not persuaded that the ambit of that judgment should be so restricted. In Peter Schanka & Ors v Employment National (Administration) Pty Ltd (Federal Court of Australia, 9 September 1998, unreported) Moore J referred to the authorities which have gathered around this question and the related question arising under s 33N of the Act as to whether an order should be made that a proceeding no longer continue as a representative proceeding. His Honour referred to the cases and their effect in a passage which I respectfully adopt in these reasons:- "They commence with the judgment of French J in Zhang v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384 and the judgment of Wilcox J given a little less than two weeks later in Tropical Shine Holdings Pty Ltd (trading as KC Country) v Lake Gesture Pty Ltd (1993) 45 FCR 457. They also include the judgment of Einfeld J in Marks v GIO Australia Holdings Ltd (1996) 63 FCR 304, a Full Court in Qantas Airways Ltd v Cameron (1996) 66 FCR 246, Drummond J in Connell v Nevada Financial Group Pty Ltd (1996) 139 ALR 723, Spender J in Wong v Silkfield Pty Ltd [1998] ATPR 41-613, Kiefel J in Milfull v Teranora Lakes Country Club Ltd, unreported, 16 June 1998, and Lindgren J in Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd, unreported, 14 July 1998. Two principles emerge from these authorities. The first is that the fact that the individual circumstances of members of the group might have to be investigated does not preclude the maintenance of a representative proceeding concerning them. The second is that the suggestion of Drummond J in Connell v Nevada Financial Group Pty Ltd (supra) that a process of balancing common issues with non-common issues in ascertaining whether the proceedings should continue as a representative proceeding under Part IVA has not subsequently found broader judicial acceptance. It was an approach not accepted by both Spender J in Wong (supra) and Kiefel J in Milfull (supra) and by Wilcox J in extra judicial commentin an article in Australian Product Liability Reporter, vol 8, No 5, entitled "Representative Proceedings in the Federal Court of Australia: A Progress Report"." [Also in (1997) 15 Australian Bar Review 91] It is helpful to quote part of what Wilcox J said in this article in relation to the statutory requirement of "a substantial common issue of law or fact". Wilcox J said ((1997) 15 ABR at 93):- "The third requirement, 'a substantial common issue of law or fact', was recently considered by Drummond J in Connell v Nevada Financial Group Pty Ltd (Fed C of A, QG 135/95, Drummond J, 5 September 1996, unreported). His Honour discussed the meaning of 'substantial'. He noted the imprecision of the word, and its tendency to leave the relevant matter to the court's discretion, and said: "In my opinion section 33C(2) shows that a common issue can be a substantial one sufficient to satisfy s 33C(1)(c) even though the various group members' claims involve other issues of liability and damages unique to each of those claims. But the object of Part IVA would not be served if it was enough for there to be an issue common to each of the group members' claims that could not be dismissed as trivial or insubstantial, even though that common issue was, when compared with the other non-common issues raised in the various claims as to liability and damages, merely one of a number of issues which had to be resolved before each claim could be determined. If, in addition to the common issue (or issues), the determination of each group member's claim involves other non-common issues, the litigation of which will, in a practical sense, have a real impact on the nature and extent of the interlocutory steps likely to be involved in bringing the case to a state of readiness for trial and the nature and duration of the trial, then that common issue will not be "a substantial common issue" within s 33C(1)(c). I have difficulty with aspects of this passage. The issue posed by s 33C(1)(c) is whether the various claims give rise to a 'substantial common issue of law or fact'. 'Substantial' is imprecise; it is an adjective of degree requiring an element of evaluation. But it is difficult to see why it is necessary, or legitimate, to compare the substantiality of a common issue with the substantiality of any non-common issues. The words of the paragraph do not invite such a comparison; to take this course is to encourage respondents to raise artificial non-common issues." His Honour went on to consider what might be the position if substantial non-common issues tended to swamp a substantial common issue. He saw this as a possible reason for the proceedings being the subject of an order under s 33N discontinuing them as representative proceedings. His Honour made the comment, with which I respectfully agree, that the Court would do this "only after evaluating all the circumstances, including the case management tools available to the court, not by deciding that the action was incorrectly commenced". His Honour's views, as indicated in the passage from Moore J's judgment, have been accepted by Spender J in the judgment the subject of this appeal and Kiefel J in Terence John Milfull v Terranora Lakes Country Club Ltd & Ors (1998) ATPR 41-642 as providing the correct approach to the construction of s 33C(1)(c) of the Act. In my opinion, this approach militates against a view of the section's requiring that the relevant "common issue" should be a "major" one in the litigation. In my opinion, s 33C provides a very wide gateway for the commencement of representative proceedings. The representative party becomes entitled to commence a representative proceeding once the requirements of subss (1)(a), (b) and (c) are fulfilled. The width of that entitlement is emphasised by the provisions of subs (2). In effect, once the requirements of subs (1)(a) and (b) are met, as they are here, and a common issue arises, the only restriction on the width of the gateway is that the common issue should be "substantial". The fact that a representative proceeding once properly commenced under s 33C can be terminated by order of the Court under s 33N on the grounds (inter alia) that it will "not provide an efficient and effective means of dealing with the claims of group members" (33N(1)(c))or "it is otherwise inappropriate that the claims be pursued by means of a representative proceeding" (33N(1)(d)) does not, in my opinion, require that any restrictive view be taken of the meaning of the word "substantial". Section 33N only comes into play after the gateway has been passed and the proceedings commenced. In my view, the word "substantial" indicates no more than that the common issue should not be a merely trivial one but should be of weight and significance. It need not be a "major" issue. Once its existence is demonstrated then the representative party, having otherwise complied with s 33C, is entitled to commence the representative proceedings. The fact that they may later be terminated by order of the Court is not to the point. Kiefel J in Milfull made reference to s 33Q. I consider that it is also of relevance in this case. Much was made in argument of the multiplicity of issues that would be involved in the present proceedings. Reference was made to a "multitude of mini-trials". These arguments have been seen as persuasive in the majority judgment. For my part I do not find them persuasive. In my view, the existence of a number of non-common issues is contemplated by ss 33Q and 33R. They provide as follows:- "33Q. (1) If it appears to the Court that determination of the issue or issues common to all group members will not finally determine the claims of all group members, the Court may give directions in relation to the determination of the remaining issues. (2) In the case of issues common to the claims of some only of the group members, the directions given by the Court may include directions establishing a sub-group consisting of those group members and appointing a person to be the sub-group representative party on behalf of the sub-group members. (3) Where the Court appoints a person other than the representative party to be a sub-group representative party, that person, and not the representative party, is liable for costs associated with the determination of the issue or issues common to the sub-group members. 33R. (1) In giving directions under section 33Q, the Court may permit an individual group member to appear in the proceeding for the purpose of determining an issue that relates only to the claims of that member. (2) In such a case, the individual group member, and not the representative party, is liable for costs associated with the determination of the issue." I have referred to the fact that the eighteen identified members of the group in the present proceedings share common issues over and above that shared by all members of the group. It may well be that, in the case management of these proceedings, it would be appropriate that s 33Q be utilised and an appropriate sub-group established. Similarly, in respect of those group members, few in number, who share additional common issues, if a sub-group be deemed to be inappropriate, provision may be made for those issues to be determined in accordance with s 33R. Whatever may be the position, as the litigation proceeds, in relation to the non-common issues, I am satisfied that the identified common issue constituted by paragraph 13(ix) must properly be regarded as "substantial". The allegations made are serious. Significant and detrimental misrepresentations are claimed. They constitute a significant common issue sufficient to open the gateway of s 33C and to allow the commencement of these proceedings. In these circumstances, I am satisfied that it is not appropriate to make the declaration sought. In relation to the alternative order sought by the appellant, namely that the proceedings should now be discontinued pursuant to s 33N, I am in complete agreement with the decision of Spender J. It is too early to make any of the decisions called for by that section. Even if I had some doubt in this regard, I would not be disposed to disturb his Honour's decision. It was a decision made in exercise of a discretion and nothing has been shown to indicate that there was any miscarriage in its exercise. For these reasons I would dismiss this appeal with costs. I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.