Plaintiff v Defendant

2 The plaintiff claims that he and the other group members were induced to participate in the program and to borrow money from AFD in reliance upon and induced by one or more representations for which AFD is liable. The plaintiff also claims that AFD failed to disclose to group members the fact that AFD did not pay to NII the entire amount borrowed by the group members, instead, it withheld certain amounts, called "holdbacks", for its own benefit.

3 In the current application, AFD argues that the court should exercise its discretion under s33N of the Act and order that the proceeding no longer continue as a group proceeding. It says that the "common issues" identified by the plaintiff are not suitable for determination in a group proceeding and the group structure is fundamentally flawed. It says that the real controversy in this case will involve the separate examination of hundreds, if not thousands, of individual transactions to ascertain which, if any, of the alleged representations were made by one or more of some 90 sales consultants, and to determine questions of individual reliance and damage.

4 The plaintiff does not dispute that the determination of some parts of the claim will ultimately involve the consideration of individual transactions and circumstances. But he argues that the utility of the part 4A regime has not been exhausted, as there are substantial questions, common to some or all group members, which would best be determined in a group proceeding, and to make the order sought by AFD would defeat the objectives behind that regime.

5 This proceeding was commenced in June 2004. Shortly thereafter, AFD issued a summons which sought to challenge the appropriateness of this proceeding being commenced or continuing, either in this court or as a group proceeding. In August 2005, I published reasons for decision ("Hall v AFD (No 1)")[1] in which I concluded, amongst other things, that the threshold requirements of s33C had been met, in that the claims of all group members at the time of commencement of the proceeding gave rise to at least one substantial common question of law or fact. I also dismissed AFD's first application under s33N, on the basis that it was premature. I indicated that, once pleadings had closed, an assessment could then be made as to whether and how to deal with the common questions and the individual questions. One possibility would be that declarations could be made in answer to the common questions and then, pursuant to s33N(1), it be ordered that the proceeding no longer continue as a group proceeding.

6 On 31 October 2005, AFD issued a summons which primarily sought orders that the proceeding be dismissed or stayed in relation to certain claims under the uniform consumer credit codes. The summons also sought an order pursuant to s33N that the proceeding not continue as a group proceeding.[2] On 13 December 2005, I dismissed the stay applications and granted the plaintiff leave to further amend his statement of claim. In so far as the summons sought an order pursuant to s33N, I adjourned it to a date to be fixed.

7 The plaintiff has filed and served five amended versions of his statement of claim.[3] The defendant has delivered a defence dated 16 September 2005 and an amended defence dated 23 August 2006.

8 I also provided the plaintiff with an opportunity to consider, prior to the hearing of the s33N application, whether there ought to be any sub-groups, particularly in respect of any claim to which the plaintiff is not a party. Junior counsel previously retained by the plaintiff advised the court that the plaintiff did not propose to seek the establishment of any sub-groups. It is now apparent from the submissions made by the plaintiff's senior counsel and new junior counsel that the possibility of sub-groups may need to be revisited.

9 Another matter affecting the timing of the hearing of the current s33N application has been a proceeding commenced in the Victorian Civil and Administrative Tribunal by the Director of Consumer Affairs Victoria against AFD. The Director sought declarations of contravention of the Consumer Credit (Victoria) Code ("the Victorian Code") and the imposition of civil penalties. The VCAT member found that an agreement had been entered into between NII and AFD in relation to holdbacks, and that AFD had breached ss 15(B), 15(C)(a), 15(D) and 15(E) of the Victorian Code in retaining the holdback amounts.[4] That decision has subsequently been the subject of the following appeals.

10 AFD obtained leave to appeal the VCAT decision to this court. On 17 December 2004, Kaye J upheld the tribunal member's finding in relation to s15B of the Victorian Code, but not the other alleged breaches.[5]

11 An appeal against Kaye J's judgment was heard by the Court of Appeal in April 2006. In the decision handed down on 20 November 2006,[6] the majority dismissed the appeal.[7] The s33N application was fixed for hearing before me a couple of weeks after the Court of Appeal decision.[8]

12 At the time of hearing the s33N application on 5 December 2006, the time for filing an application for special leave to appeal against the Court of Appeal decision had not expired. Although none of the decisions in the Consumer Affairs proceeding will be binding in this proceeding, AFD indicated that it may choose to amend its defence in the light of any High Court decision. At the conclusion of the hearing on 5 December 2006, AFD wanted further time to consider whether or not to seek special leave, and whether or not to seek to further amend its defence in the light of the Court of Appeal decision. Accordingly, the application was adjourned part-heard, for mention on 2 February 2007, to enable AFD to consider its position. Submissions in relation to the s33N application had otherwise concluded.

13 By letter dated 18 December 2006, AFD's solicitors informed the court that an application for special leave had been filed that day.[9] The letter also advised of the amendments which AFD would seek to make to its defence, if special leave was refused, or if special leave was granted but AFD's appeal was unsuccessful. However, AFD chose not to amend its current defence and to proceed with the s33N application on the basis of the allegations contained in that pleading.

14 In early February 2007, the plaintiff served a proposed third further amended statement of claim ("the proposed claim"). He seeks leave to file and serve the proposed claim and to rely on it for the purposes of the s33N application. AFD opposes the making of any amendments until after the determination of the s33N application. On 14 February 2007, the parties filed outlines of submissions on the question of leave to amend, and on 19 February 2007 I heard oral argument on that matter. I reserved my decision in relation to both the s33N and amendment applications.

15 I will start by considering the second further amended statement of claim dated 23 August 2006 ("the current claim"), before considering the proposed amendments.

16 NII was a company involved in the promotion, organisation and delivery of investment education seminars and courses, including the program, throughout Australia. Between 1 February 2002 and 25 November 2003, NII entered into agreements to provide the program to various individuals located throughout Australia, in return for the course fee ("the NII contracts").

17 The plaintiff's NII contract, which was entered into in June 2003, was partly written, partly oral and partly implied. The plaintiff's course fee was $15,000.

18 Before the plaintiff executed his NII contract, a servant or agent of NII made the following express oral representations to him ("the NII representations"):

(a) The program was "government-approved" or had been approved by the government;

(b) The program was "ASIC-approved" or had been approved by the Australian Securities and Investments Commission ("ASIC");

(c) The plaintiff and each other group member could withdraw from the program at any time and would receive an unconditional and full refund of any money they had paid in respect of the course fee.

19 The NII representations were made to the plaintiff in or around Sydney in June 2003. One or more of the NII representations was made to each group member before they executed their respective NII contract and was relevantly relied upon by them.

20 Each of the NII representations was a misrepresentation, in that:

(a) The program was not "government-approved" and had not been approved by the government;

(b) The program was not "ASIC-approved" or had not been approved by ASIC;

(c) Neither the plaintiff nor any other group member could withdraw from the program and receive a refund, because NII would not under any circumstances provide any refund to any group member.

21 The plaintiff and each group member has suffered loss and damage as a consequence of the NII representations being misrepresentations. The particulars of loss and damage include an allegation that the program was of no value to the plaintiff or group members.

22 The plaintiff and other group members also entered into individual loan agreements with AFD, pursuant to which AFD agreed to lend them the amount of the NII course fee ("the AFD credit contracts"). The AFD credit contracts were in writing and in a "substantially identical form" to the plaintiff's AFD credit contract.

23 Each AFD credit contract was a "credit contract" within the meaning of, and was therefore governed by, the relevant Consumer Credit Code applicable to each group member ("the Code"). AFD was a "linked credit provider" of NII, within the meaning of s117(1) of the Code and s73(14) of the Trade Practices Act 1974 ("TPA"). Further, each AFD credit contract was a "tied loan contract" within the meaning of s117(3) of the Code and s73(14) of the TPA. Accordingly, pursuant to s119 of the Code and s73(1) of the TPA, AFD is liable to the plaintiff and each group member for loss caused by the NII representations.

24 Further and alternatively, before or at the time that the plaintiff and each group member executed their NII contract and AFD credit contract, a servant or agent of NII orally represented to them that they could withdraw from the program at any time and would receive a full refund of any money they had paid to AFD pursuant to the AFD credit contract, and would not be liable to pay AFD any more money ("the AFD credit contract representation"). The plaintiff and each group member entered into their NII contract and AFD credit contract in reliance upon and induced by the AFD credit contract representation.

25 In making the AFD credit contract representation, NII engaged in misleading and deceptive conduct, contrary to s52 of the TPA, in that it was the standard policy and/or intended practice of AFD that if any group member withdrew from the program, or was not provided with the program, AFD would refuse to provide a refund and would demand payment of any principal and interest outstanding under the AFD credit contract. Pursuant to s118 of the Code, the plaintiff and each group member has the same right to recover damages from AFD as they would if AFD had made the representations.

26 Further and alternatively, there was an agreement, arrangement or understanding between AFD and NII that AFD would not advance to NII the entire amount of finance or credit borrowed by each group member ("the holdback agreement"). Instead, in the case of the plaintiff and all group members, AFD retained an amount referred to as an "interest-free holdback". In circumstances where the borrower did not meet AFD's lending guidelines, a further amount referred to as a "high-risk holdback" was also withheld. The existence and amount of the holdbacks were not disclosed to group members.

27 By reason of certain written statements made in each AFD credit contract, AFD expressly represented to the plaintiff and each group member that it would pay the whole of the loan amount to NII ("the express loan amount representation") and impliedly represented that it would retain none of the loan amount and would receive no financial benefit except for what are described as the AFD amounts ("the implied loan amount representations"). AFD failed to disclose that it would in fact retain the holdback amounts. In engaging in this holdback conduct, AFD engaged in misleading and deceptive conduct, contrary to s52 of the TPA. The plaintiff and group members are entitled to damages or to have their AFD credit contract set aside or varied, pursuant to s87 of the TPA.

28 Further and alternatively, by reason of the holdback agreement, the amount actually advanced by AFD to the plaintiff and group members is less than the amount referred to in the AFD credit contracts. In the circumstances, as a matter of contract law, AFD is only entitled to recover the amount paid by it on behalf of the plaintiff and group members to NII, plus interest.

29 There is a further claim in respect of the plaintiff and those group members who were, at the time of entering into their respective AFD credit contract, ordinarily resident in Queensland, New South Wales, Tasmania, the Northern Territory and the Australian Capital Territory ("the s70 group members").[10] It is pleaded that by reason of the allegations relating to the AFD credit contract representation and the holdback agreement, each of their respective AFD credit contracts was "unjust" and is liable to be re-opened pursuant to s70 of the Code.

30 Finally, there is a claim made in respect of some of the group members ("the no course group members"), to whom NII failed to provide some or all of the program, because it went into receivership in November 2003 and subsequently into liquidation. This is a breach of the NII contract by NII, entitling the group member to rescind the NII contract. Pursuant to s125 of the Code, each of the no course group members is entitled to terminate their AFD credit contract (being a linked credit contract) and to have an adjustment of rights under s128(b) of the Code. The plaintiff is not a no course group member.

31 Originally, the statement of claim included allegations that the holdbacks constituted "interest" within the meaning of the Code and should have been disclosed to the borrowers. It was alleged that, by entering into the holdback agreement with NII, and failing to disclose the interest and certain other information to borrowers, AFD contravened ss 15(B), 15(C)(a), 15(D) and 15(E) of the Code. These allegations, which cover the same ground as the Consumer Affairs proceeding, were deleted in March 2006, in the first of three pleadings which were all, confusingly, described as the second further amended statement of claim.

32 The plaintiff wishes to make the following amendments in the proposed claim.

33 The definition of the group members be amended, so as to remove any requirement that a group member must have entered into their NII contract pursuant to one or more of the NII representations. That leaves the definition of group members as all persons who:

(a) Entered into an NII contract between 1 February 2002 and 25 November 2003; and

(b) Borrowed the course fee from AFD by entering into an AFD credit contract.

34 There are consequential amendments to the pleadings concerning the NII representations, to make it clear that only some of the group members entered into their NII contracts as a result of the NII representations.

35 There are also amendments concerning the AFD credit contract representations, so as to make it clear that only some of the group members have a claim in respect of those representations.

36 The claim of the no course group members has been separated from other claims and pleaded more explicitly.

37 In relation to the holdback agreement, the plaintiff seeks a further declaration that AFD is obliged to repay the amount of any excess already paid by group members, and restitution of the amount of the excess.

38 In respect of the holdback conduct, the plaintiff also seeks to explicitly claim damages under ss82 and 87 of the TPA (although it was implicit in its current claim that it was doing so).

The Court may, on application by the defendant, order that a proceeding no longer continue under this Part if it is satisfied that it is in the interests of justice to do so because -

(a) the costs that would be incurred if the proceeding were to continue as a group proceeding are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding; or

(b) all the relief sought can be obtained by means of a proceeding other than a group proceeding; or

(c) the group proceeding will not provide an efficient and effective means of dealing with the claims of group members; or

(d) it is otherwise inappropriate that the claims be pursued by means of a group proceeding.

40 As was the case with the first s33N application, sub-sections (a) and (b) of s33N(1) may be disposed of quckly. There is still no evidence before me such as would enable me to make any finding as to the likely costs of a group proceeding compared with the costs of a large number of separate proceedings by individual group members. Nor has it been established that all the relief sought can be obtained by means of a proceeding other than a group proceeding.

41 AFD's argument focussed on sub-sections (c) and (d), which raise issues of efficiency and effectiveness, and the appropriateness of the claims being pursued by means of a group proceeding.

42 At the time of hearing the first s33N application, it appeared that the number of potential group members was slightly in excess of 2,300. As a result of subsequent events, including settlement of claims,[11] AFD estimates that this proceeding now concerns no more that about 1,500 AFD credit contracts. But, without knowing the terms of any settlements or releases, it is not possible to say whether some of those who have settled may still be potential group members. Of the remaining 1,500 AFD credit contracts, AFD says that almost 850 have been repaid in full by the borrower. However, that does not necessarily mean that the borrowers are not group members who may be entitled to some refund or damages. But, even if none of those 850 had a claim, there would still be a group of some 650 members, located throughout Australia.

43 It is also clear that the amount of each individual claim would be well within the jurisdiction of the local magistrates' court and/or the local tribunal exercising power under the Code. If dealt with as individual claims, there is no realistic prospect that a single court or tribunal, or a single judicial officer within particular courts or tribunals, would hear all the claims.

44 As I observed in Hall v AFD (No 1),[12] the fact that a proceeding will at some stage involve an examination of numerous individual contracts or transactions has not prevented courts from allowing common issues to be determined in a group proceeding. What is efficient, effective or appropriate will obviously vary from case to case, as the various authorities put forward by both sides illustrate.

45 I also noted the warning by the Full Federal Court in Bright v Femcare,[13] against exercising the court's power under s33N before the utility of the group proceeding regime had been exhausted by resolution of the common issues. As Finkelstein J commented:

Whether or not it is in the interests of justice to make such an order has to be weighed against the public interest in the administration of justice that favours class actions. That requires one to consider the principal objects of the class action procedure. They are: (1) to promote the efficient use of court time and the parties' resources by eliminating the need to separately try the same issue; (2) to provide a remedy in favour of persons who may not have the funds to bring a separate action, or who may not bring an action because the cost of litigation is disproportionate to the value of the claim; and (3) to protect defendants from multiple suits and the risk of inconsistent findings.[14]

46 Lindgren J noted that "ordinarily" one would expect that, in an attempt to give effect to the legislative intention, a means will be sought, by case management techniques, to enable a representative proceeding to continue to the stage of resolution of the substantial common issues, on the basis that after that stage is completed, an order under s33N or directions under s33Q will be made.[15]

47 Bright v Femcare, like this case, included claims of misrepresentation. Whilst accepting that there would inevitably be individual aspects to such a claim, the Full Court held that the utility of the group proceeding had not been exhausted. Indeed, even in relation to the question of reliance, which might be thought to be an archetypal individual question, Kiefel J made the following observation:

Questions of utility and efficiency will depend upon the nature and circumstances of a representative proceeding. In a case of misrepresentation, it may be thought that the nature of the misrepresentation itself might have something to say on the question of reliance, or that a determination as to the quality of the conduct in question was nevertheless of real benefit to the other claims. In any event, even though proof of causation might involve a considerable part of the evidence and substantial argument in each case, the possibility of other findings being useful is not foreclosed. It will be necessary to assess what might be proved by them.[16]

48 Similarly, in Dorajay Pty Ltd v Aristocrat Leisure Ltd[17] and Guglielmin v Trescowthick (No 2),[18] applications under s33N were unsuccessful, notwithstanding the significant individual elements of the misrepresentation claims, because the utility of the group proceeding had not been exhausted at the time of the applications.

Should this proceeding continue as a group proceeding?

49 AFD largely conducted its argument on the s33N application by reference to the common questions of law or fact posed by the plaintiff in paragraph 62 of his claim.[19] It argued that the questions were either trivial or not common, and therefore not suitable for determination in a group proceeding.

50 In fact, the common questions in paragraph 62 were originally asked for the purpose of satisfying ss33C and 33H of the Act. One of the requirements of s33C is that at the time of commencing the proceeding, the claims of all group members must give rise to "a substantial common question of law or fact." Section 33H(2)(c) requires the writ to specify the questions common to the claims of the group members.

51 Section 33N does not refer to, and is not limited by, the common questions identified at the time of commencement of the proceeding. Instead, it is concerned with the interests of justice and the practical utility of continuing the proceeding as a group proceeding. Section 33N(1)(c) concerns itself with whether the group proceeding will provide an efficient and effective means of dealing with the claims of group members and s33N(1)(d) deals more broadly with the appropriateness of pursuing the claims by means of a group proceeding. There may be utility in determining issues which are not common to the entire group, but only to some sub-groups.

52 I accept that group proceedings are not suitable for resolving claims which are fundamentally an investigation into individual circumstances. But, s33N is not to be approached as some sort of exercise in balancing the common issues against the individual issues, and seeing which is the heavier. Instead, the court should consider whether there are common issues which the group proceeding can effectively and efficiently determine, before deciding what to do with any remaining, individual issues.

53 In considering a s33N application, the court may have regard to issues raised in the claim which are common to some, but not all, group members, or to common issues raised in the defence. It is nevertheless convenient to commence with a consideration of the common questions identified in paragraph 62 of the claim.

54 AFD says that the first three questions in paragraph 62 of both the current and proposed claims are trivial and not disputed. They are as follows:

(a) Whether each group member's NII contract was a contract for the supply of services and therefore a sale contract within the meaning of s115 of the Code.

(b) Whether, pursuant to s16 of the Code, Part 7 of the Code applies to or in respect of each group member's NII contract.

(c) Whether each group member's credit arrangement for payment of the course fee was a tied loan contract within the meaning of s117(3) of the Code and s73(14) of the TPA.

55 These are not trivial questions, in that they form a necessary link in any finding that AFD is liable for relevant representations made by NII. If this proceeding were not to continue as a group proceeding, each court or tribunal who heard a claim involving a group member might have to consider these questions for itself. It would be inefficient and undesirable (in terms of the possibility of inconsistent decisions) to require these questions to be determined in perhaps hundreds of individual cases in magistrates' courts and tribunals around Australia.

56 In fact, AFD has always admitted these allegations in its defence. It says that it will not dispute these allegations in the future. If need be, AFD is prepared to give undertakings not to withdraw these admissions in any individual proceedings with group members. Given that concession, I would not permit this proceeding to continue as a group proceeding if these were the only three common questions.

57 However, because there are other common questions which can be dealt with efficiently and effectively in this group proceeding, there would be utility in making appropriate findings under s33Z of the Act in relation to questions 54 (a) to (c) above.

58 The question in paragraph 62(d) of the current claim is whether the AFD credit contract representation was false and misleading or likely to mislead, contrary to s52 of the TPA. AFD essentially denies this allegation.

59 The plaintiff wishes to delete this from the list of common questions in the proposed claim, to reflect the new allegation that the AFD credit contract representation was made to some, but not all, group members.

60 The ultimate determination of whether there have been breaches of s52 will require the examination of individual circumstances. However, one of the matters which question (d) does raise for consideration is whether it was "the standard policy and/or intended practice of AFD" that if any group member withdrew from the program, or was not provided with the program, AFD would refuse to refund any money paid pursuant to the AFD credit contract.

61 At the moment, AFD effectively admits that its policy was not to make a refund in those circumstances. Nevertheless, there would be practical utility in making such a finding in the group proceeding.

62 Question (e) of the current claim asks whether the program had any and, if so, what, value. This relates to the allegation (made in the particulars to loss and damage flowing from the NII representations) that the program was of no value to the plaintiff or group members. The defence simply denies the plea of loss and damage.

63 The plaintiff proposes to delete this question from the common questions in the proposed claim, to reflect the new allegation that the NII representations were made to some, but not all, group members.

64 AFD argues that there is nothing common about this question. It says that whether the course was of any value will depend on the individual circumstances of each group member, including their previous investment knowledge.

65 On the other hand, the plaintiff argues that the value of the program can be assessed objectively, for example, by expert evidence as to the value of the various written materials and oral presentations.

66 The decision as to whether the loss and damage of individual group members is to be assessed objectively or subjectively is, in itself, a question which could be effectively and efficiently determined in the group proceeding.

67 Question (f) in both the current and proposed claims asks whether AFD and NII had an agreement, arrangement or understanding that AFD would not advance to NII the whole of the amount borrowed by each group member pursuant to their respective AFD credit contracts in respect of their course fee, but would retain a percentage of that amount as follows:

(i) in respect of all AFD credit contracts, AFD would retain a percentage of the amount borrowed by each group member as an amount referred to by AFD as an "interest-free holdback"; and

(ii) in respect of some of the AFD credit contracts, AFD would also retain a percentage of the amount borrowed by those group members as an amount referred to by AFD as a "high-risk holdback".

68 This is a highly contentious question on the current pleadings. It is also common to all group members and will remain so if the amendments are allowed.

69 AFD's current defence denies the existence of the holdback agreement pleaded by the plaintiff. It asserts a different agreement or arrangement, pursuant to which the holdback amounts were simply withheld as an offset against moneys owing from NII to AFD. AFD advanced (and lost) a similar offset argument in the Consumer Affairs proceeding.

70 AFD says that if the High Court upholds the Court of Appeal decision in that proceeding, then it intends to amend its defence in this proceeding, to admit the holdback agreement alleged by the plaintiff.[20] If that happens, then this question would cease to be contentious. But, in that event, it would nevertheless be appropriate to consider making findings in relation to these matters under s33Z, so that all group members would have the benefit of such findings. On the other hand, if AFD does not amend its defence, this would remain a highly contentious common issue, which could effectively and efficiently be determined in the group proceeding.

Whether AFD made the express loan amount representation

71 Question (g) in both the current and proposed claims asks whether, by the payment statement in each AFD credit contract, AFD expressly represented to the plaintiff and each group member that the whole of the loan amount would be paid to NII.

72 AFD has admitted making the express loan amount representation to all group members. Nevertheless, there would be utility in making appropriate findings under s33Z of the Act in relation to this question.

Whether AFD made the implied loan amount representations

73 Question (h) in both the current and proposed claims asks whether, by the payment statements, AFD impliedly represented to the plaintiff and each group member that none of the loan amount would be retained by AFD, and the only financial benefits which AFD would receive in respect of the AFD contract would be the AFD amounts. AFD denies making the implied representation.

74 I agree with AFD that it may be necessary to consider each individual group member's situation (including what documents they received, any conversations they had, and their individual states of mind), in order to conclude whether the implied representation was in fact conveyed to that group member. Nevertheless, given that the allegation is that the representation arises from standard written documents provided to all group members, it may be (and I put it no higher than that) that there could be some utility in considering this in a group proceeding. For example, if the court held in the case of the plaintiff that the payment statements could not reasonably be read as conveying any such implication, that could have the practical (if not legal) consequence of removing the allegation from other group members' claims.

75 Paragraph 57A of the current and proposed claims pleads "the holdback silence", namely that AFD failed to disclose to group members the fact of the holdback agreement and holdback payments, and thereby failed to correct the express and implied loan representations. Question (j) in paragraph 62 asks whether AFD engaged in the holdback silence in respect of the plaintiff and each group member. This question is, and will after the proposed amendments remain. common to all group members.

76 AFD admits in its defence that it did not disclose the holdback agreement or any such agreement. Nevertheless, there would be utility in making appropriate findings under s33Z of the Act in relation to this question.

Whether the holdback conduct contravened s52

77 Question (k) in both the current and proposed claims asks whether the express and implied loan representations and holdback silence constituted conduct in breach of s52 of the TPA. AFD denies this allegation.

78 This is a highly contentious question, which affects all group members. In so far as it relies upon the implied loan representations, it raises the same considerations as discussed above.

79 The final question in paragraph 62 of both the current and proposed claims asks whether AFD is entitled to recover the holdback amounts from the plaintiff and group members. This relates to the claim that AFD is only entitled, as a matter of contract, to recover the amount actually paid by it to NII, being the NII course fee less the holdback payments. AFD denies this claim.

80 AFD says that the Court of Appeal decision, if upheld, would appear to preclude the group members from succeeding on this point. But, even if upheld, the Court of Appeal decision will not be binding on this point, based as it was on limited findings of fact in VCAT. Whether it would be followed in this case would depend, at least in part, on the evidence to be led in this proceeding and between these parties.

81 At present, this is a contentious issue which is common to all group members. There is obvious utility in determining this question in the group proceeding.

82 Although not pleaded in paragraph 62 of the claim as questions common to all group members, the plaintiff says that there are other allegations in the claim which ought to be determined in the group proceeding, because they affect sub-groups of members.

83 One example relates to the falsity of the NII representations. In so far as falsity is admitted, the group members with a claim based on the NII representations would benefit from a finding to that effect. In so far as falsity is disputed, there would be utility in considering the various factual allegations once and for all.

84 In answer to the claim that it is liable in respect of the NII representations, by reason of the relevant Code and TPA provisions mentioned earlier, AFD puts forward statutory defences, the key elements of which are:

(a) After due inquiry, before it became a linked credit provider of NII, AFD was satisfied that NII's reputation in respect of its financial standing and business conduct was good.

(b) After becoming a linked credit provider, but before entering into each AFD credit contract prior to 21 August 2003, AFD had no cause to suspect that the relevant group member might be entitled to recover an amount of loss and damage as a result of misrepresentation, breach of contract or failure of consideration.

(c) After becoming a linked credit provider but before entering into each AFD credit contract, AFD had no cause to suspect that NII might be unable to meet NII's liabilities as and when they fell due.

85 AFD concedes that paragraph 83(a) raises an issue which will be common to all group members making a claim in respect of the NII representations. Given the nature of the allegation, the documentary and oral evidence in relation to this issue may turn out to be substantial. There would be obvious benefits in making findings in the group proceeding as to what inquiries AFD made prior to becoming a linked credit provider, rather than agitating this in a multiplicity of individual proceedings.

86 AFD argues that whether AFD had cause to suspect the matters referred to in paragraphs 83 (b) and (c) can only be answered by considering the information known to AFD at the time of each individual credit contract. That does not mean that there would be no practical utility in considering these issues in the group proceeding. For example, it may be possible to determine the claims of the plaintiff and a small number of group members to whom the NII representations were made at different times in 2002-2003, and to consider what information as to NII's financial position was known to AFD at each of the relevant times.

87 AFD complains that it would be unfair to put it to the expense of establishing its defence before any prima facie case has been established against it. Certainly, if it were the case that there was otherwise no utility in continuing the claims of the plaintiff and group members as a group proceeding, I would not be minded to require a defendant to establish its defence in a group proceeding in advance of the establishment of individual liability. But that is not the case here, for the reasons expressed above.

88 Even on the current claim, AFD has not persuaded me either that the group proceeding will not provide an efficient and effective means of dealing with the claims of group members, or that it is otherwise inappropriate that the claims be pursued by means of a group proceeding. Nor would that conclusion be altered if leave were granted to deliver the proposed claim. For the reasons expressed above, I am satisfied that there is still considerable utility in this proceeding continuing as a group proceeding. To terminate the proceeding as a group proceeding at this stage would be to defeat the public interest which underlies the group proceeding regime. That is particularly so when regard is had to the number and quantum of individual claims, and the complexity of some of the factual and legal issues raised in this case.

89 After the completion of discovery, and the closing of the group membership through the opt-out process, it will be appropriate in pre-trial directions to determine which, if any, individual claims in addition to the plaintiff's should be tried initially, and to determine precisely which questions should be answered under s33Z. How the rest of the individual claims might best be resolved is a matter which can be determined thereafter.

90 I propose to allow the plaintiff's application for leave to deliver the proposed claim. No doubt it is a matter of some frustration to AFD, as well as to the court, that the plaintiff is seeking to make further amendments to its pleading. But, AFD has not pointed to any prejudice which might flow to it from the amendments, which cannot be compensated by an order for costs.

91 I propose to make orders in the following terms:

(2) The plaintiff have leave to file and serve the proposed claim.

92 I will hear from the parties on the question of costs and in relation to directions for the further conduct of this proceeding.

[1] [2005] VSC 306.

[2] Although AFD's summons only sought an order under s33N in relation to the NII credit representations and AFD credit representations, not the holdback claims, both sides argued the matter before me as if the summons sought to have the whole of the proceeding cease to be a group proceeding.

[3] Dated 16 August 2004, 16 August 2005, 23 March 2006, 2 August 2006 (but filed on 4 August 2006) and 23 August 2006.

[4] Director of Consumer Affairs Victoria v Australian Finance Direct Limited 23 July 2004 [No M115 of 2003].

[5] Australian Finance Direct Limited v Director of Consumer Affairs Victoria [2004] VSC 526.

[6] Australian Finance Direct Limited v Director of Consumer Affairs Victoria [2006] VSCA 245.

[7] Ashley and Neave JJA dismissed the appeal, Maxwell P dissented.

[8] AFD did not wish its s33N application to be determined prior to the Court of Appeal decision.

[9] Special leave was granted on 24 April 2007. The appeal has been listed for hearing on 2 August 2007. There is no evidence as to when the High Court's decision will be handed down thereafter.

[10] The s70 group members do not include persons ordinarily resident in a state, such as Victoria, in which the Code confers exclusive jurisdiction under s70 on a tribunal such as VCAT.

[11] Other reasons for the reduction in numbers include the bankruptcy of borrowers, and decisions of other courts or tribunals.

[13] Bright v Femcare Ltd [2002] FCAFC 243; (2002) 195 ALR 574.

[17] [2005] FCA 1483 per Stone J.

[18] [2005] FCA 138; (2005) 220 ALR 515 per Mansfield J.

[19] In the current claim, the plaintiff lists 12 questions said to be common to the claims of the plaintiff and all group members. The plaintiff seeks to reduce that to 10 common questions in the proposed claim.

[20] In making that statement, it is not suggesting that the High Court decision would involve findings of fact which would be binding in this proceeding. The Supreme Court and High Court decisions all involve questions of law, based on findings of fact made by VCAT on the limited evidence before it and in a proceeding to which group members were not parties. AFD would in fact be free to lead evidence in this proceeding which is different from or additional to that which it led at VCAT.