19 Counsel for Tolly also referred to Bray where Branson J cited Giraffe and noted that although Lindgren J expressed a preference for the view stated above, his Honour had ultimately deferred to differing views expressed by O'Loughlin J and Branson J in two earlier cases[12]. Counsel for Tolly noted that in Bray Branson J distinguished the earlier cases of Golden Sphere and Chats House, her Honour concluding that "...persons who seek to invoke the same power in the court to make an order under the TPA in the public interest against a respondent or respondents are not 'persons [who] have claims' against that respondent or those respondents of the kind required by s 33C(1)"[13].
20 Counsel for Tolly accepted that the plaintiff's claim for a declaration was sufficient to give it standing to be the lead plaintiff[14]. However, he submitted that if the only claim common to the plaintiff and each group member was a claim for declaratory relief, they are not claims for the purposes of s 33C(1)(a). Otherwise, the operation of the section could be avoided by every group member seeking a declaration, and that is not contemplated.
21 Next, the defendants addressed the claims for damages by the plaintiff and group members. Attention focused on the plaintiff's pleading that "some or all" of the alleged representations were a cause of the plaintiff and the group members acquiring the relevant shares in the relevant period and thereby suffering loss. While the particulars make clear that the plaintiff pleads a case in damages against each defendant (in the sense that it alleges that it suffered loss in reliance on misleading conduct engaged in by each defendant) no such particulars are given in respect of any of the group members. Similarly, counsel for Tolly submitted that the pleading was defective as to causation in respect of the Tolly report because there was no allegation that anybody except the plaintiff actually read and relied upon the report said to contain misrepresentations. Thus, in the case of all defendants, any given group member claims against "some or all" of the defendants but it is not possible to determine from the pleading whether a given group member makes a claim against any particular defendant. There is a potential for each group member to have a claim for damages against one or some but not necessarily all of the defendants. Thus, the pleading does not demonstrate that the plaintiff and each group member has a claim against each defendant. Counsel referred to Johnstone v HIH Insurance Ltd[15] in which Tamberlin J said that "The clearest indication of this deficiency, in the present proceeding, is that the group members are defined as persons who have suffered loss as a result of the misleading and deceptive conduct of any or all of the respondents ... This takes the description outside the terms of s 33C(1)(a)". Counsel submitted that that is the precise effect of the pleading in the present case.
22 Counsel for Tolly submitted that even on the plaintiff's new group definition, the pleading failed to meet the requirements of s 33C(1)(a). If the group definition included those persons who suffered loss resulting from the conduct of any defendant, there would necessarily be group members who did not have a claim against each defendant. If, on the other hand, the group definition was read such that the group members were only those persons who suffered loss resulting from the conduct of every defendant, the group would be a very narrow class, yet the members of that class were not demonstrated by the pleading as it gave no particulars for each group member.
23 Counsel for Tolly added that even if there is no requirement that the plaintiff and each group member have a claim against each defendant, the plaintiff has nevertheless failed to show on the pleadings that, as against each defendant, the plaintiff and at least six other group members have a claim, as is contemplated by the reference to seven or more persons in s 33C(1)(a).
24 As to s 33C(1)(b), the defendants submitted that the claims of the plaintiff and the group members were not in respect of, and did not arise out of, the same, similar or related circumstances. Rather, they were claims that arose in respect of disparate representations made by different defendants to different potential investors over a period of four years. Counsel recognised that although "there is some relationship between the parties and the claims" and that the Court is required to make a practical judgment, at some point along the spectrum the claims, and the relationship between the claims, of the various group members would be too tenuous and remote for the purposes of s 33C(1)(b). In the present case the link between the group members was too weak. It was not sufficient to say that the claims were all related in that they concerned the same technology. Counsel referred to Leung v American International Assurance Co (Aust) Ltd[16] where Hill J said that "... it may be the case that the circumstances in which representations are made to each group member are so diverse that it could not be said that the making of representations, even in identical terms, arose out of circumstances that were related". Counsel submitted that this was the case here.
25 As to s 33C(1)(c), the defendants submitted that the claims of the group members did not give rise to a substantial common question of law or fact. And as there were multiple defendants, the questions must be common to the claims of the plaintiff and the group members against all the defendants; see Hunter Valley Community Investments Pty Ltd v Bell[17]. It was not satisfactory to use a very general question about technology. Rather, the case is about different representations made over time as to that technology. That is reflected in para 127 of the amended statement of claim where the 'common questions' listed are mainly individual matters rather than common questions. It is not apparent which of the alleged misrepresentations caused who to do what, which highlights that there is no commonality of fact and law in respect of the alleged group members. Counsel referred to Johnstone where Tamberlin J held[18] in relation to a claim involving different representations made at different points in time that, on the present state of the pleadings, it was impossible to determine whether there were substantial common questions of law or fact. His Honour said that "a person who bought shares shortly after the first media release and sold them one month later at a loss, would not have been affected by any representations that were made after they sold the shares". Counsel for Tolly made a similar point, namely that those who had sold their shares before later representations were made could not rely on later representations as causing their loss.
26 The defendants submitted that even if the plaintiff had satisfied the requirements of s 33C(1), the Court should nevertheless exercise its discretion under s 33N to order that the proceeding no longer continue as a group proceeding. A more efficacious way to proceed would be by individual proceedings by the claimants or by the group joining in a proceeding as plaintiffs under O 9. Counsel added that "...if there is a decision in one case on the quality of the technology, well one would imagine that it wouldn't be re-litigated". The individual issues in the case will swamp the common questions. This is a case by each plaintiff with its own peculiarities and there is not much to be gained by having any common issue determined even if it was possible to determine what the common issue was. Counsel for Tolly questioned the efficacy of the group proceeding in "determining the common questions without everyone being tied up in a much bigger case than a particular defendant might need to be, and in the circumstances where they may not be able to identify what the scope of their exposure is to the group or the quantum of any group". Overall, the case would constitute an undue vexation of the defendants, due to the disparity between the circumstances of the group members and the investigation of "non-common issues".
Plaintiff
27 Counsel for the plaintiff began her oral submissions by referring to the decision of the Full Court of the Federal Court in Bright v Femcare[19] where Finkelstein J commented[20] on what he saw as a "disturbing trend" in group proceedings, namely the bringing of numerous interlocutory applications which have the effect of delaying the litigation and bogging the parties down in what he described as "often academic or sterile arguments about pleadings, particulars, practices and procedures". Counsel referred to the enormous body of authority in the Federal Court concerning group proceedings[21] which, she submitted, this Court can and should cut through to the quick so as not to become "similarly tied up in interlocutory knots as has begun to occur in the Federal Court". Without overlooking the full detail of counsel's written and oral submissions, in essence the plaintiff submitted as follows.
28 First, the plaintiff contended that, applying s 33C(1)(a) as interpreted in Philip Morris, the plaintiff and every group member does have a claim against every defendant, whether they be claims for damages or claims for a declaration.
29 As to the claims for damages, counsel acknowledged the defendants' complaint that the pleading does not show which representations any given group member relied on and consequently caused loss, however, she submitted that "not only does your Honour not need to know that now, but that would be contrary to the way in which the representative process is intended to work". Counsel emphasised that the plaintiff's claim must be fully particularised, which had been done, and it was clear from the pleading what representations the plaintiff relied on. But it is not necessary to particularise the claim of each group member at this stage of the proceeding. This is not a claim by the group members. Rather, the plaintiff brings a claim which, when determined, has the effect of raising issue estoppels in respect of the group members once the common questions are determined. The group members are not co-plaintiffs or even parties to the proceeding and there is a strong presumption against requiring them to take any positive step in the action until after the common questions are determined. The pleading of group members' claims can persist at a high level of generality until the common questions are resolved and the need for individualised pleadings is confirmed. Sackville J observed in Philip Morris[22] that to require otherwise would deprive the representative process of much of its utility. Counsel particularly relied on the decision of Moore J in King[23] as being directly on point. She submitted that, as in that case, notwithstanding the pleading that the group members relied on "some or all" of the relevant representations, the application remained one in which claims are made by the plaintiff and each group member against each defendant.
30 Lest she be wrong on that point, counsel relied on the claims for declarations as satisfying the requirements of s 33C(1)(a) as interpreted in Philip Morris. As to this, she noted that the plaintiff, on its own behalf and on behalf of each group member, seeks a declaration against all defendants. The submission by Tolly that the claim for declaratory relief was not sufficient for the purposes of s 33C(1)(a) implied a restriction in s 33C not compelled by its terms or context. The legislature had imposed limitations on the types of claims that can be made using the Part 4A procedure, these limitations going to number, relatedness and commonality, not fine distinctions between a cause of action and an element of a prayer for relief or any public/private or legal/equitable dichotomy.
31 Next, in the event that the Court held that the test in Philip Morris was not satisfied either by the claims for damages or the claims for declarations, counsel submitted that the decision in Philip Morris should not be followed. Section 33C(1)(a) does not require that the plaintiff and every group member have a claim against every defendant when more than one defendant is joined to a group proceeding. While that was assumed in Philip Morris by virtue of counsel's concession in that case, a contrary view was expressed by the majority of the Full Court of the Federal Court in Bray. Although the comments in Bray were strictly obiter, they were made after full argument and in order to remove the uncertainty created by Philip Morris. There is no authority binding on this Court that requires each group member to have a claim against each defendant. Nor, properly construed, does Part 4A require it. The approach in Philip Morris undermines the objectives of Part 4A. It compels multiplicity of proceedings where the defendants have changed over time, even if the objectionable conduct was a continuum. Rejecting Philip Morris does not mean that proceedings will become unmanageable or prohibitively expensive. There are adequate safeguards in s 33C(1)(b) and (c) and in s 33N to ensure that group proceedings remain manageable.
32 Focusing on the legislation itself, s 33C(1) sets out the criteria which must be met before a group proceeding can be commenced. So long as the criteria are met against each defendant whom the plaintiff sues in a representative capacity (that is, the plaintiff and at least six other persons have claims against that defendant that otherwise satisfy s 33C(1)(b) and (c))), there is no basis for implying additional restrictions on the joinder of other defendants. Here, the plaintiff makes a claim for compensation against each defendant, which claim is shared by at least six persons, even if the six other persons are not the same as against each defendant. That is sufficient.
33 As to s 33C(1)(b) and (c), the claims of the plaintiff and every group member are in respect of, or arise out of, the same, similar or related circumstances and involve substantial common questions of law and fact. Each claim arises out of the acquisition or retention of shares in circumstances affected by representations made with a similar object and to a similar effect by a group of defendants presumably working together. Counsel relied on Williams v FAI Home Security Pty Ltd (No 2)[24] for the proposition that there may be differences in the circumstances of the representations provided that there is a substantial common issue of law and fact.
34 Counsel submitted that the trial of the plaintiff's claim will efficiently determine, among other things, whether the representations as to the novelty and qualities of APT were misleading and deceptive and, if so, whether any defendant had reasonable grounds for making such representations. The most obvious common questions were whether APT was a new technology and whether it actually worked. These are substantial questions requiring detailed expert evidence at trial. Their resolution will have significance for every group member's claim. To demonstrate the commonality of these questions and the fact that they arise from related circumstances, counsel submitted that if the Court concluded in the defendant's favour that the technology did all the things that were claimed for it, that would dispose of the plaintiff's case and also all of the other group members' claims. Conversely, if the question as to technology was answered in favour of the plaintiff, while there would be individual issues of reliance and causation for different group members, these issues would be dealt with after the common questions had been answered in respect of the plaintiff's claim. Counsel refuted the defendants' suggestion that the individual issues would swamp the common questions.
35 Further, if the Court were to consider making an order under s 33N that the proceeding not continue as a group proceeding, regard must be had to the ways in which group members may bring their claim forward in a proceeding. Counsel submitted that if it was ordered that the case not continue as a group proceeding, to bring the case by multiple plaintiffs would attract the rule of practice to the effect that multiple plaintiffs would not be permitted separate representation. In practical effect, the result would be the same as that obtaining before my last judgment, that is, multiple plaintiffs would be represented by the same lawyers. Further, the claims were not sufficiently related to allow the plaintiffs to bring the proceeding under the joinder rules.
Decision
36 I will assume that Philip Morris was correctly decided. This means that, as there are multiple defendants to the present proceeding, the plaintiff and each group member must have a claim against each defendant. But it is clear from the terms of the legislation, the authorities, and indeed the concession of counsel for the defendants that it is not necessary that the plaintiff and each group member have the same claim or claims as between themselves and as against the different defendants.
37 Before turning to consider the issue of claims, it is necessary to make some observations about the group definition. As to the identity of the group members, I note that there are two possibilities. On the present pleadings, the group members are the 127 persons and companies listed in the schedule to the amended statement of claim. It is proposed to amend that group definition by substituting as group members "... all persons who: (a) by themselves, their agents or trustees, at some time during the period between 26 October 2000 and 1 September 2004 acquired an interest in shares in Media World Communications Limited (ACN 061 727 642) (formerly Werrie Gold Limited) ("MWC"); and (b) suffered, or are trustees for persons who suffered, loss and damage by or resulting from the conduct of the Defendants referred to below". I can say at the outset that I reject the submission advanced by counsel for Tolly that the proposed group definition is ambiguous. In my view, the reference to "the conduct of the defendants" means conduct by any one or more of the defendants. Although as a matter of language it might be said that the word "defendants" implies that the conduct is that of all the defendants, as a matter of practical reality the plaintiff's proposal should not be read as limiting the group members to those persons who suffered loss resulting from the conduct of each defendant. That is plainly not the plaintiff's intention. It is apparent that the plaintiff wishes to define as group members those persons who acquired an interest in the relevant shares in the relevant period and suffered loss resulting from the conduct of any one or more of the defendants.
38 I now turn to consider whether the plaintiff and each group member has a claim for damages against each defendant. On the face of the amended statement of claim it is clear enough that the plaintiff itself pleads a claim in damages against every defendant, providing particulars as to its reliance on misrepresentations allegedly made by each defendant and the loss resulting thereby. As to the claims for damages made by the group members (against all defendants except Tolly), the pleading essentially does no more than allege at paragraphs 71 and 71A that "some or all" of the misrepresentations (of which there are 10 categories referred to earlier in the body of the pleading) were a cause of the group members acquiring the relevant shares (alternatively the misrepresentations were a cause of the acquisition price of the shares being artificially inflated), and by reason of these matters each group member suffered loss and damage. No particulars are provided as to the claims of the group members, it being said that particulars will be provided following the trial of common questions or otherwise as the Court may direct. It became clear during argument that the plaintiff's solicitors did not intend to particularise individual group members' claims at this stage of the proceeding. I interpolate that that was understandable in light of there being 127 group members, and if the plaintiff's new group definition is accepted, the group definition will be further expanded.
39 Similarly, as to the claims for damages made by the group members against Tolly, the plaintiff pleads and particularises its claim as to reliance on misrepresentations and negligent statements made in the Tolly Report, and misleading statements in the 2004 prospectus, and the loss thereby suffered. As to the group members' claims against Tolly, the pleading alleges that the relevant conduct by Tolly was a cause of each group member acquiring or retaining an interest in the relevant shares during the period from about September 2003 until September 2004, and by reason thereof each group member suffered loss. No particulars are provided in respect of the group members, it again being said that particulars will be provided following the trial of common questions or otherwise as the Court may direct.
40 What then is the consequence of the way in which the claims are pleaded? First, in the absence of particulars in respect of each group member's claims, one cannot determine conclusively that any given group member (whether taken from the list of 127 persons, or the expanded group definition) will ultimately recover damages from any given defendant. For example, suppose that a group member suffered loss as a result of acquiring shares in reliance only on the so-called APT representations pleaded in para 12. Such a scenario is clearly possible, as the pleading is that each group member relied on "some or all" of the pleaded representations. Yet the representations relied on by this group member were only made by the first, fourth, fifth, sixth and ninth defendants. The group member, having not relied on any of the other representations nor having read or been aware of any of the Tolly statements, would not be able to recover damages from the second, third, seventh and eighth defendants. Indeed it would seem that the "some or all" formula has been used precisely because, until further instructions are taken and particulars provided, it will not be known which representation each individual group member relied on. On the present pleadings, the plaintiff is effectively reserving the right of each group member to claim damages from each of the defendants. Whether or not each group member is ultimately successful against each defendant is another matter entirely.
41 As to the claims against Tolly, the situation is analogous although the "some or all" form of words is not used. Rather, a group member's entitlement to damages against Tolly depends on the individual group member being able to establish that it relied on the relevant statements by Tolly and thereby suffered loss in the relevant period of 2003 to 2004. In the example of the group member given above who relied only on the APT representations pleaded in para 12 and who never read or relied on any of the Tolly statements, he or she would be unable to establish that Tolly had caused his or her loss. I do not overlook the plaintiff's alternative pleading that some or all of the misrepresentations (and the Tolly statements) caused the plaintiff and each group member to pay money for shares whose true value was nil or negligible (if the falsity of the representations had been known to potential purchasers) thus resulting in loss. But even on the basis of this "false market" pleading, if the hypothetical group member referred to above acquired (worthless) shares in 2001, he or she had already suffered loss caused by the Clark parties. There would be no entitlement to damages against Tolly, as its conduct did not occur until 2003.
42 It follows that, however the pleading is viewed, there is a possibility that any given group member will ultimately not be able to recover damages from every defendant. But can it be said that the plaintiff and each group member do not have a claim for damages against each defendant?
43 This issue was considered by Moore J in King v GIO Holdings Australia Ltd[25]. In that case the applicant commenced a representative proceeding in the Federal Court on behalf of himself and certain GIO shareholders, seeking damages and declarations against GIO, an adviser to GIO, and nine directors of GIO. In essence, the plaintiff claimed that the respondents had engaged in misleading and deceptive conduct by recommending that shareholders reject an offer by AMP to buy GIO shares during a takeover bid. The group members were defined as all persons who owned GIO shares in the relevant period and who did not accept the takeover offer by reason of the conduct "of all or any of the respondents" and who suffered loss as a consequence[26]. The statement of claim included the following statement in particulars, namely that "the Applicant and the group members relied upon one or more of those representations by one or more of the Respondents"[27]. As to this pleading Moore J said[28]: