Plaintiffs v Defendants

For Australian Securities and Investment Commission

1 This group proceeding was commenced under pt 4A of the Supreme Court Act 1986 on 27 May 2010 on behalf of a group of investors in managed investment schemes operated by Great Southern Managers Australia Limited in 2005 and 2006. Fifteen related group proceedings were commenced in 2011 on behalf of investors in other schemes managed by Great Southern.

2 The particular schemes to which this proceeding relates are described in the statement of claim as the 2005 plantation scheme and the 2006 plantation scheme. The characteristics of the group, for the purpose of the proceeding, was confined to those who acquired an interest as a member in either scheme between prescribed dates, entered into a land and management agreement with Great Southern, and entered into a loan agreement with Great Southern Finance Pty Ltd to fund the payment of application fees; or, if selffunding, paid application fees in respect of either scheme.

3 The trial commenced on 29 October 2012 before Croft J and concluded on 24 October 2013. His Honour adjourned to consider his decision, and notified the parties shortly before 25 July 2014 of his intention to deliver judgment on that day. Judgment and the publication of reasons was interrupted, however, when the parties notified his Honour, a few days before his judgment was to be handed down, that a Deed of Settlement had been executed by all parties in each group proceeding. The Deed is dated 23 July 2014. Consequently, his Honour withheld publication of his reasons, although completed and ready for publication.

4 Under s 33V(1)of the Act, a group proceeding may not be settled or discontinued without the approval of the court. By summons dated 6 August 2014, the plaintiffs applied for approval, and for an order that would have all group members bound by the terms of settlement. Under the terms of the Deed, which is not expressed to have been made for or on behalf of group members, the parties intend that group members will be bound. The terms include an acknowledgment of the validity and enforceability of group member loan obligations, with an admission of liability to pay any loan balance. The owners of the debt under the loan agreements were parties to the proceeding.

5 At the commencement of the trial there existed a number of debt recovery proceedings brought by the owners of the debt, Bendigo and Adelaide Bank Limited, or a subsidiary, or Javelin Asset Management Pty Ltd. Some recovery proceedings were brought by counterclaim issued in a proceeding commenced by one of the lead plaintiffs. In addition, certain other clients of the plaintiffs' solicitors had instituted counterclaims in debt recovery proceedings commenced by the Bank or Javelin.

6 The scope of each counterclaim was not exposed or explained on this application. Under the Deed, each such proceeding is to be dismissed, if the settlement is approved, including a category of proceedings described as the 'Uplifted Proceedings', commenced in other courts. The plain intention of the Deed is to finally resolve all related litigation, in which the liability of group members to repay under their loan agreements was alleged or resisted, and bind group members to their obligations under their loan agreements.

7 For reasons that do not require elaboration at this time, the applications for approval are to be heard and determined by the trial judge, Justice Croft. That course was proposed by some parties, and agreed to, or not opposed, by others. The parties acknowledge and accept that should Croft J decline to approve the compromise, he may proceed to deliver his judgment and publish his reasons. Applications may also be made to his Honour to publish his reasons, without giving judgment, to inform the approval process.

8 There are more than 1,300 objectors to approval. Some are represented by solicitors and counsel. A significant number of objectors have formulated grounds on which they complain that the Deed, if approved, would operate unfairly to bind them to repay loans. Some of those who object to court approval have also applied under s 33KA, alternatively s 33ZF, to cease to be a group member. Section 33KA provides:

(1) On the application of a party to a group proceeding or of its own motion, the Court may at any time, whether before or after judgment, order -

(a) that a person cease to be a group member;

(b) that a person not become a group member.

(2) The Court may make an order under subsection (1) if of the opinion that -

(a) the person does not have sufficient connection with Australia to justify inclusion as a group member; or

(b) for any other reason it is just or expedient that the person should not be or should not become a group member.

(3) If the Court orders that a person cease to be a group member, then, if the Court so orders, the person must be taken never to have been a group member.

Section 33ZF provides:

In any proceeding (including an appeal) conducted under this Part the Court may, of its own motion or on application by a party, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

9 Applications were initiated by Clamenz Lawyers on behalf of Russell Cohalan, Douglas Mitchell and Cohalan & Mitchell Roofing Pty Ltd. Those three parties invested in 2005, 2006 and/or 2007 schemes. They were borrowers from the Bank. Each application was made by an undated Notice of Application, filed with the court under cover of a letter dated 26 September 2014. In their Notices of Application, the Clamenz Objectors sought an order pursuant to s 33KA(1) of the Act, alternatively s 33ZF, to cease to be a group member. Each notice helpfully set out the grounds for the application. I will refer to this group of applicants collectively as the Clamenz Objectors.

10 A second group, represented by ERA Legal, applied by summons dated 26 September 2014. There were 21 applicants, identified in a schedule to the summons. I will refer to this group collectively as the ERA Objectors. They invested in a variety of projects in 2006, 2007 and 2008.

11 The relief sought by the ERA Objectors was similar, but not identical, to that sought by the Clamenz Objectors. The ERA Objectors sought the following orders:

1. Pursuant to section 33KA(1) of the Supreme Court Act 1986 (Vic) (Act), alternatively section 33ZF of the Act, that the Group Member Applicants cease to be group members in this proceeding.
2. In the alternative to order 1, pursuant to section 33J(3) of the Supreme Court Act 1986 (Vic), the time for group members to opt out of the group proceedings be extended to 10 November 2014;
3. Pursuant to section 33ZF of the Supreme Court Act 1986 (Vic) (Act), for any group member who ceases to be a group member by virtue of orders made pursuant to orders 1 or 2 above, an order that any limitation period applicable to a group member which has been suspended by virtue of section 33ZE of the Act, recommences from the date the group member ceases to be a group member of the group proceedings.

12 While adopting the submissions made on behalf of the Clamenz Objectors, the ERA Objectors were concerned to avoid an immediate determination of their application to cease to be a group member. They sought an extension of time within which to opt out until after determination of the approval applications. Their intention was to defer any decision until they had an opportunity to consider the outcome of the approval application. There was no attempt by the Clamenz Objectors to defer the decision to opt out. A group member may apply for an extension of the opt-out period under s 33J(3) of the Act.

1. the Group Proceedings address certain common issues between the Lead Plaintiff, Group Members and Defendants;
2. the Applicant considers that it has a valid defence to any loan recovery proceeding including a defence based on representations that were made to it by an agent of the First Defendant and that is not a common issue between the parties;
3. the Applicants have not had the opportunity to raise, in this proceeding, noncommon issues because the proceeding has not reached the stage at which the common issues have been determined;
4. at the time of the optout process, the Lead Plaintiff, for and on behalf of the Group Members, sought orders in the Group Proceedings that the Loan Deeds were void and unenforceable that were predicated on common issues raised between the parties;
5. by the proposed settlement, the Lead Plaintiff, for and on behalf of the Group Members, proposes to acknowledge and admit the validity and enforceability of the Loan Deeds and surrender the right to bring or pursue a Claim against the BEN Parties or their Related Entities;
6. the proposal in paragraph 5 represents a fundamental change in in the proceeding relative to the course that was in contemplation at the time of the optout process because:

(a) matters which were formerly proposed to be disputed are not proposed to be admitted and made finally binding by agreement; and

(b) the proposed settlement would affect the ability of the Applicant to maintain any defences available to it that are not common issues between the parties to the Group Proceedings;

1. such defences would have been available to the Applicant even in the event of an adverse finding on the common issues in the Group Proceedings;
2. the Applicant made its decision not to optout in the expectation that the validity and enforceability of the Loan Deeds would be denied and litigated on the basis of the common issues;
3. the Applicant has not had the opportunity to determine whether it wishes to participate in a proceeding or agreement in which the validity and enforceability of the loans is to be conceded and issues particular to it are to be determined on the basis proposed;
4. in those circumstances, given the settlement now proposed, the Applicant does not wish to forego defences available to it and it is therefore just and expedient that it cease to be a group member; and
5. allowing the Applicant to cease to be a group member ensures minimal disruption to the overall litigation where it appears that many other group members are prepared to accept the change in position proposed in the Settlement Deed.

14 The Clamenz Objectors' application was supported by an affidavit of Daniel Christopher Clarke, solicitor, affirmed on 2 October 2014, written submissions and oral argument. Each Clamenz Objector had filed an objection to approval of the proposed settlement.

15 In about June 2009, the Bank had commenced a recovery proceeding in relation to loans made to the Clamenz Objectors. Schedule 5 to the Deed of Settlement contained a list of Uplifted Proceedings, which included a proceeding in which Russell Kevin Cohalan and Douglas Mitchell are recorded as debtors. The list does not make any reference to a proceeding brought by or against Cohalan & Mitchell Roofing Pty Ltd.

16 The Deed of Settlement recited that in each of the Uplifted Proceedings there was a counterclaim by the borrower. While the background recitals in the Deed make reference to a similarity between the allegations made in counterclaims filed in the 'M&K Counterclaim Proceedings', listed in schedule 1, nothing is said to explain the scope of any counterclaim. Clause 4.1.22 of the Deed provides:

Upon Settlement Approval:

4.1.22.1 the counterclaims in the Uplifted Proceedings will be dismissed with no order as to costs in so far as these proceedings involve:

(a) Claims against the BEN Parties;

(b) Claims against Javelin;

(c) Contribution Proceedings by GSMAL and or the Directors against the BEN Parties;

(d) Contribution Proceedings by GSMAL and or the Directors against Javelin;

(e) Contribution Proceedings by BEN Parties against GSMAL, its Related Entities and or the Directors;

(f) Contribution Proceedings by Javelin against GSMAL, its Related Entities and or the Directors; and

4.1.22 the Uplifted Proceedings will otherwise be stayed.

The BEN Parties are the Bendigo and Adelaide Bank Limited and related entities.

Each of the plaintiffs by counterclaim to the Uplifted Proceedings acknowledges and admits their liability to the BEN Parties to pay the Loan Balance under their Loan Deed.

18 There is no evidence that recovery proceedings have been commenced against the ERA Objectors.

19 On about 3 March 2012, and well before the commencement of the trial, the Clamenz Objectors received a notice from the plaintiffs' solicitors informing them of their right to opt out of the group proceeding. The ERA Objectors received a similar notice. While each notice was tailored to apply to a particular scheme or schemes, they were, in all material respects, identical. Relevant parts of the Opt Out Notice are set out below:

CLASS ACTIONS

INVESTORS IN GREAT SOUTHERN MANAGED INVESTMENT SCHEMES

This notice is sent to you by order of the Honourable Justice Croft made on 2 march 2012, and under the rules of the Supreme Court of Victoria which govern the conduct of representative proceedings (also known as 'class actions').

This notice is a very important legal document which may affect your legal rights. You should read it carefully. If you do not understand any part of it, you may wish to seek legal advice in relation to its contents.

Background

...

Further, the Plaintiffs seek orders that loans originally entered into with GSF and subsequently assigned to one or more of the Defendants identified at B, C, D, E and F or Schedule B ("GSF Loan"), alternatively originated by GSMAL as agent of ABL Nominees Pty Ltd (Defendant D in Schedule B) ("ABL Loan"), be declared void and that the Plaintiffs be reimbursed for any amounts paid (by way of principal and interest payments) to one or more of those Defendants. Column 7 of Schedule B identifies which Great Southern Group Proceedings cover GSF Loans, and which cover ABL Loans.

...

You are a Group Member

...

As a Group Member, unless you choose to opt out of the Great Southern Group Proceeding(s), one or more of the Great Southern Group Proceeding(s) will determine your rights, if any, to compensation or other relief.

...

Opt out

As a Group Member you have the right to exclude yourself (or 'opt out') from the Great Southern Group Proceeding(s) in which you are a Group Member. Where you are a Group Member in more than one class action, you may opt out of one or more of the class actions and stay a Group Member in the other(s).

In accordance with s. 33J(1) of the Supreme Court Act 1986 (Vic) ("the Act"), the Court has fixed 4.00pm on 27 April 2012 ("opt out date"), as the time and date by which you must opt out of the class action.

If you wish to opt out of the class action(s) and do NOT want to be part of one or more of the class action(s) of which you are a Group Member, you must send or deliver a written notice (in the form of the attached Schedule A) to the following address:

...

What happens if you do not OPT OUT

If you are a Group Member and do not give notice to opt out by 4.00pm on 27 April 2012, you will be taken to have not opted out. Accordingly, under Australian law, you will be bound by the outcome of the Great Southern Group Proceeding(s) which affects you and any settlement, judgment or determination made in it. If the Great Southern Group Proceeding(s) is unsuccessful, you will not be able to make claims in other proceedings in relation to the matters the subject of the Great southern Group Proceedings.

Legal advice

As a Group Member, you may wish to obtain your own legal advice.

...

If the Great Southern Group Proceedings are successful at trial, or, depending on the terms on any settlement, you will need to prove your individual loss and damage.

...

20 The Clamenz Objectors and the ERA Objectors chose not to opt out. They did not contend that the Opt Out Notice was misleading in any respect. They argued that a material change of circumstance had occurred by the inclusion of a term in the Deed which, if approved, would deny them the opportunity to raise new individual defences to repayment under their loan agreements. That is, the opportunity to resist repayment on grounds other than those traversed between the parties in the group proceeding.

21 Unfortunately, the issues before the court on the applications by the Clamenz Objectors and the ERA Objectors were not well defined. Doing the best I can, the following questions arise for consideration:

(1) Do the applicants have standing to apply for the relief sought by them under ss 33KA and 33KZ of the Act?

(2) Do the terms of the Deed, under which loan balances must be acknowledged and repaid, constitute a material or unfair departure from the scope of the issues for determination in the group proceeding?

(3) Should group members be taken to have understood that the proceeding would deal comprehensively with their liability under the loan agreement?

(4) A corresponding issue emerged, in the course of argument, concerning the extent to which the doctrine of res judicata, as restated in Port of Melbourne Authority v Anshun,[1] would, in the event of a judgment, have precluded group members from litigating individual defences to resist liability under the loan agreements. While there is no judgment, at least at this time, it remains a possibility. After all, there has been a trial in which the applicants have participated as group members. If the court declines to approve the settlement, judgment may follow. Following a judgment, would the applicants be precluded from raising new defences to resist claims under the loan agreements?

(5) A resolution of these questions may traverse factors that may be relevant to the application for approval. The objectors have a right to be heard on that application. Some will, no doubt, contend that the settlement should not be approved on the very grounds advanced in support of these applications. Should the opportunity for group members to object to the terms of the Deed be confined to a right to object to court approval under ss 33N of the Act?

22 In my opinion, the applicants have no right to invoke the powers conferred on the court under ss 33KA or 33ZF. That does not, however, deny the court the opportunity to exercise such powers, in appropriate circumstances, in the absence of a competent application. The power may be exercised on the application of a 'party', or of the court's own motion. On the other hand, group members are expressly authorised to apply for an extension of the opt out period.

23 In a pretrial judgment delivered by Croft J,[2] his Honour said:

It is uncontroversial in the present application that the Court has very broad powers under s 33KA and/or 33ZF to do whatever is appropriate and necessary in representative proceedings such as these: "to do whatever is appropriate or necessary in the interests of justice ...", to echo the words of Wilcox J in McMullin v ICI Australia Operations Pty Ltd.

Section 33KA gives the Court a discretion to order that a person cease to be a group member, which discretion is exercisable in "very wide" circumstances. The considerations to be reviewed in exercising the discretion are broad due to the width of the power under s 33KA. However, the overall consideration is the ascertainment of what is just and expedient in the circumstances of the case.

24 There are no prescribed circumstances in which these powers may be exercised, although some circumstances are readily apparent. For example, to maintain the integrity of the group by removing those who do not share an essential characteristic, or to prevent an abuse of process or unfairness.[3] The power is obviously designed to be exercised by the court in the management of a proceeding which, although a group proceeding, is conducted by parties within the construct of the adversarial system. The powers granted under ss 33KA and 33ZF are not intended, in my view, to be invoked by group members to avoid the binding effect of an adverse judgment or terms of settlement negotiated prior to judgment, once approved by the court.

25 Group members have an adequate opportunity, and mechanisms, to protect their rights and interests. Provided the opt out notice is adequate to explain their risks, and facilitate an informed decision, it is the most important and potent mechanism. As in the present circumstances, group members also have an opportunity to oppose court approval of a compromise.

26 The mere fact, however, that a group member makes an incompetent application under ss 33KA or 33ZF is no barrier to relief. After all, with notice of a complaint raising questions of fairness and justice, the court may act of its own motion. I will proceed on that basis.

27 Following receipt of notices of objection to the settlement, in which objectors contended they would be unfairly precluded from advancing any individual defences to their loan obligations, the solicitors for the Bank wrote to Clamenz Lawyers in the following terms:[4]

We refer to the notices of objection filed on behalf of your clients concerning the settlement deed relating to the Great Southern group proceedings.

Your clients have objected to the proposed settlement on the basis that it is not fair or reasonable that each of your clients 'should lose [its/his] right to conduct or defend proceedings that allow [it/him] to put forward and ask a court to take into account [its/his] particular circumstances.'

Your clients have not, however, provided any details of any such claims or defences which they assert are available to them.

In our clients' view, it is inappropriate for objections to be advanced on a hypothetical or theoretical basis. If your clients allege that they have claims or defences available to them on which they wish to rely, and that they will be precluded from raising those claims or defences in the event the proposed settlement is approved, they should provide details of those claims or defences.

We request that you provide details of any such claims or defences available to your clients on which they wish to rely in the event proceedings are commenced as soon as possible and, in any event, no later than the date by which objectors are to file any affidavit material and submissions, so that our clients have sufficient time to respond in advance of the settlement approval hearing.

A similar, although not identical letter, was sent to ERA Legal. In both letters, the solicitors sought details of claimed defences. No such details were forthcoming, or at least nothing beyond what is presently before the court.

28 Had the Clamenz Objectors raised individual defences to the Bank's claims in the recovery proceedings, they would surely have relied upon them on this application. Instead, Mr Clarke, of Clamenz Lawyers, set out what he described in his affidavit as the 'Clamenz Objectors' Individual Circumstances'. He referred to conduct of accountants, Trotman and Wright, of ATS Financial Services in Wodonga, in promoting the Great Southern schemes. He made reference to an annual conversation in which Mitchell and Cohalan would enquire of Trotman as to what would happen to their investments if Great Southern were to enter liquidation. Trotman or Wright is alleged to have said in response words to the effect that the schemes operated by Great Southern were 'rock solid' and were a 'no brainer'. There were other alleged representations made by Trotman, who Mitchell believed to be an agent of Great Southern, to the effect that the return on investment would be triple the amount of the investment.

29 These representations, if made out, would be properly characterised as going to the financial strength of Great Southern or the quality of the investment opportunity. They do not purport to relate directly to loan obligations. It would appear that the Clamenz Objectors wish to preserve their ability to contest the validity of the loans by relying on these representations. There was no other evidence to support an individual defence.

30 The broader complaint made by the Clamenz Objectors concerned what they described as a material change in the scope of the group proceeding to which they did not agree. That change was reflected in the terms of the Deed. They contended that had they known that their right to maintain individual defences to recovery proceedings might be restricted, they would have taken steps to opt out earlier, presumably before the opt out period closed. Now that they are aware of the proposed restriction, they ought to be removed as group members to avoid unfairness.

31 The Clamenz Objectors relied on certain statements in the Opt Out Notice to support their view of the narrow scope of the group proceeding, leaving open the opportunity to pursue individual defences in recovery proceedings. They contended that group proceedings did not purport to determine individual circumstances on which a right to recover may depend, such as questions of reliance. They argued that the formulation of common questions necessarily excluded from determination individual fact circumstances other than those concerning the lead plaintiffs. The Clamenz Objectors drew attention to the statement of common issues of fact and law. Insofar as the common questions touched upon the validity of the loan agreements, or an obligation to repay loans, the questions were concerned with deficiencies in product disclosure statements. They illustrated the point by reference to common questions (p), (r) and (s):

(p) Whether the PDS was defective within the meaning of s 1022A(1) of the Act.

(r) Whether each non selffunding Group Member (including Clarke, Murray and Drummond) are entitled to a declaration pursuant to s 1022C of the Act that the Loan Deeds are void.

(s) If so, what entitlement, if any, does each non selffunding Group Member have to repayment of money paid under the Loan Deeds.

32 The Clamenz Objectors' contention, that the scope of the group proceeding did not purport to resolve all questions concerning their obligation to repay loans, was an unduly narrow view of the pleading, and the intended scope of the group proceeding. For example, the plaintiffs relied upon allegations of misleading or deceptive conduct by silence, with broad claims of unconscionability based on conduct inducing group members to enter into loan agreements. Some such conduct concerned the viability of the schemes as an investment. I note that the 'individual defences' raised by the Clamenz Objectors, as potentially available to them, rely on statements made to them about the strength of Great Southern by their accountants.

33 The Bank submitted that had the Clamenz Objectors wished to advance a different case from that formulated by the lead plaintiffs, they were free to opt out before the commencement of the trial, and should have done so. Counsel for the Bank went so far as to contend that they were obliged to opt out, because the case they now wish to pursue is inconsistent with reliance on the PDS and other conduct alleged in the statement of claim. In other words, they should not properly be characterised as group members. But the fact remains, they did not opt out. They participated as group members throughout the trial, and continue to be group members. In my view the allegations made by the Clamenz Objectors against their accountants do not necessarily exclude them from the scope of the group as defined in the statement of claim.

34 The nature of individual fact circumstances relied upon by the Clamenz Objectors differ, in material respects, from those relied upon by the ERA Objectors. The ERA Objectors contended that if bound by the Deed, they would be denied the right to defend enforcement proceedings and plead any defence that would otherwise be available to them, but not pleaded in the statement of claim. In their written submissions, the ERA Objectors suggested that an objector may have an individual defence to an enforcement action based on the banker having failed to exercise reasonable care and diligence in accordance with its own lending practices. Alternatively, an issue may exist concerning the identity of the party that executed the loan agreement on behalf of the borrower. The ERA Objectors suggested that there may be statutory defences or crossclaims, such as one based on the Contracts Review Act 1980 (NSW), for those who have a connection with New South Wales. There was no elaboration and no evidence to support any such defence.

35 The applications made by the Clamenz Objectors and ERA Objectors was predicated on the assumption that, had the case proceeded to an adverse judgment, group members would retain the right to defend existing or potential recovery proceedings on grounds other than those explicitly litigated in the proceeding. The Clamenz Objectors contended that while other litigants may be prevented from relitigating related issues, by reason of the doctrine of res judicata, extended in Henderson v Henderson[5] and adopted by the High Court in Port of Melbourne Authority v Anshun Pty Ltd,[6] group members in a class action are in a special position.

36 This is not the first occasion on which a question arose in this proceeding concerning the ability of group members to prosecute defences to recovery proceedings going beyond the pleaded issues in the group proceeding. In August 2012, prior to the commencement of the trial, the Bank parties made application under ss 33KA and/or 33ZF of the Act that certain specified person cease to be members of relevant group proceedings. The application was refused. In brief reasons delivered on the day of the application,[7] Justice Croft said:

It is uncontroversial in the present application that the Court has very broad powers under s 33KA and/or 33ZF to do whatever is appropriate and necessary in representative proceedings such as these: "to do whatever is appropriate or necessary in the interests of justice ...", to echo the words of Wilcox J in McMullin v ICI Australia Operations Pty Ltd.[8]

Section 33KA gives the Court a discretion to order that a person cease to be a group member,[9] which discretion is exercisable in "very wide" circumstances.[10] The considerations to be reviewed in exercising the discretion are broad due to the width of the power under s 33KA.[11] However, the overall consideration is the ascertainment of what is just and expedient in the circumstances of the case.[12]

Where the maintenance of a member in a group proceeding gives rise to an abuse of process, the Court will exercise its powers under ss 33KA and/or 33ZF and make orders modifying the manner in which a group proceeding proceeds to ensure that it is carried on in a just and expedient manner and that justice is done. The principles in relation to abuse of process and Anshun estoppel,[13] principles applicable to proceedings in general, are also relevant in the present context. The Court's wide powers under ss 33KA and/or 33ZF, are compatible with and exercisable in circumstances consistent with the exercise of the Court's inherent jurisdiction to prevent abuses of process and ensure the administration of justice.[14]

The Bendigo and Adelaide Bank parties helpfully summarise some important authorities in relation to abuse of process and refer to the principles in relation to Anshun estoppel, with reference to Anshun's case and also, by way of example, Bryant v Commonwealth Bank of Australia[15] and Bright v Femcare Ltd.[16]

Having regard to the authorities, I accept the statement of the position and relevant principles, in the present context, in relation to abuse of process and Anshun estoppel as set out in the Bendigo and Adelaide Bank parties' submissions, particularly the following:

"12. In general terms, the Court's inherent jurisdiction to stay proceedings on the grounds of abuse of process extends to all those categories of case in which the processes and procedures of the Court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness.[17]

...

1. 14. A well recognised class of 'abuse of process' is where proceedings are instituted against a party in a second forum when there are proceedings against that party pending in another forum.[18] In those circumstances, the continuance of the second proceeding constitutes an abuse of the process of the first.[19]

1. 18. The principles in relation to Anshun estoppel are also relevant in these circumstances where the Listed Members have not opted out of the relevant group proceedings and seek to maintain claims in the individual proceedings that are additional or different to the claims in the group proceedings.

37 Respondents to the application before the trial judge were group members represented by ERA Legal, who also represent applicants in these applications. It was not suggested there was any overlap between the respondents to the Bank's application in August 2012 and the applicants now represented by ERA Legal. Nevertheless, the Bank makes the point that there was no ambiguity, prior to the commencement of the proceeding, as to the consequence for group members who did not opt out, or were not otherwise excluded. Counsel for group members represented by ERA Legal conceded before Croft J that,

we accept that in the absence of an order removing us from the class any judgment given in a proceeding will bind group members at the time the judgment is given and will determine the counter cross claims made by the group members in the other proceedings and I can say that we would accept that undoubtedly we'd be Anshun'd in being a part of the group proceeding and not bringing forward all our claims ...

On the basis of the principles and authorities to which reference has been made, I am of the opinion that it is more than likely that if any party, sought to pursue the individual proceedings involving issues determined by - or in the process of being determined by the Group Proceedings - the individual proceeding or proceedings would be stayed on the basis of abuse of process, Anshun estoppel or, perhaps, election depending on the particular circumstances. I do not accept that the comment by Lehane J in Bright v Fermcare[20] detracts from this position in the present circumstances - where the Group Proceedings will be heard and determined prior to the individual proceedings being pursued.

For these reasons, having regard to the likely extent of common issues as between the Group Proceedings and the individual proceedings, the cost and expense involved in agitating these issues in separate proceedings and the risk of the administration of justice being brought into disrepute as a result of inconsistent findings, it is more than highly desirable that this situation be avoided if possible. The provisions of the Civil Procedure Act directed to achieving expedition and cost effectiveness in litigation also militate against a multiplicity of proceedings.

A further consideration is that it is, in reality, the opponents of this application who bear the risk of not being able to agitate all aspects of their defences or counterclaims by electing to remain group members. The risk they run is that on determination of the Group Proceedings, they will not be permitted - on the basis of abuse of process, Anshun estoppel, election or perhaps on other bases - to pursue all or any aspects of their defences or counterclaims in the individual proceedings.[21]

39 The fact that in some group proceedings, 'matters peculiar to the claims of individual group members must subsequently be determined',[22] does not overcome the ordinary application of the broad rule of public policy that would prevent a group member from agitating, in another proceeding, separate claims that might properly have been brought forward in the group proceeding. In Zhang v Minister for Immigration, Local Government and Ethnic Affairs,[23] French J considered whether persons who sought review of decisions to refuse their refugee applications, and whose applications had been refused on a review, constituted a group of persons who had claims arising out of the same, similar or related circumstances so as to support a representative action on behalf of the members of the group. In doing so, his Honour considered the application of the defence of res judicata in group proceedings, referring to Canadian authority[24] and authorities and academic papers in the United States, concluding:[25]

The rule as to res judicata in Australia was restated by Fullagar J in Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 at 466 in a passage approved in the joint judgment of Gibbs CJ, Mason and Aickin JJ in Port of Melbourne Authority v Anshun (supra) at 587. Fullagar J had said:

"where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. The rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy ... "

The doctrine of res judicata is extended by the principle in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 at 115; [1843] EngR 917; 67 ER 313 at 319 cited in Anshun at 598:

"where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time."

40 In Oliver & Anor v Commonwealth Bank of Australia,[26] Perram J considered an application by the respondent bank that proceedings commenced by the applicants ought to be dismissed as an abuse of process. At the time the proceeding was commenced, the applicants were members of a class in a representative proceeding that dealt with substantially the same subject matter. Perram J said:[27]

'It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue': Henry v Henry. Consequently, it lies upon the party bringing the second action to show that is not so: Moore v Inglis per Mason J, citing the dissenting judgment of Lord Esher MR in The Christiansborg; Henry v Henry.

Representative proceedings give rise to complexities in this area because of the possibility that proceedings by the representatives, on the one hand, and separate proceedings brought by those represented, on the other, may infringe the above principle. In this Court representative proceedings operate on an 'opt-out' basis; that is, persons remain in the class of those represented unless they take the affirmative step of indicating they do not wish to be in that class: Federal Court of Australia Act 1976 (Cth), s 33J(2). Even though that is the case, however, class members are not parties to the proceeding unless they choose to be one of the nominated representative parties: s 33C(1); King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd); Courtney v Medtel Pty Ltd.

Consequently, the view in this Court is that the existence of proceedings by a class member (not being a representative party) at the same time as a representative proceeding in which that class member is represented is not necessarily an immediate abuse of process. In Johnson Tiles Pty Ltd v Esso Australia Ltd[28] per Merkel J, albeit in the context of competing representative proceedings, thought that at least at an early stage the Court should determine which of the proceedings should be permitted and it was not necessarily the case that the proceeding which was filed first should be the proceeding which would go forward. On the other hand, Lehane J thought that, after a party had failed to opt out of a representative proceeding, it was likely that the Court would prevent further pursuit of presently subsisting and overlapping ordinary proceedings: Bright v Femcare Ltd. Considerations of commonsense and these two decisions suggest, therefore, that it is prima facie vexatious and oppressive for a person who has not opted out of a representative proceeding (when the opt-out time has passed) to maintain ordinary proceedings against the same respondent dealing with substantially the same subject matter. I so conclude.

41 In Kirby v Centro Properties Ltd,[29] Finkelstein J had before him three representative actions brought against the Centro group to recover losses suffered as a consequence of a substantial fall in the price of securities. The applicants accused the group of making misleading statements about their respective financial positions, and of failing to make disclosure required by the ASX Listing Rules, thereby causing the price of the securities to be inflated. All three actions shared the same operative facts, although there were points of difference between them. The issue for determination was whether all three actions should be permitted to proceed. Finkelstein J expressed doubt as to whether a party against whom an issue was decided in one proceeding would be free to litigate the same issue in another, concluding:

But it is unlikely that any court would permit a party to relitigate a question or issue which has already been decided against him even though the other side cannot strictly satisfy the requirements of res judicata or issue estoppel.[30]

42 Finkelstein J went on to consider United States and Canadian authorities on 'nonmutual collateral estoppel', concluding that if not part of a general doctrine of issue estoppel in Australia, there was ample power under s 33ZF(1) of the Federal Court Act, or its inherent jurisdiction, to prevent an abuse of process. Though plainly obiter, his Honour said:

In the United States in Parklane Hosiery Co Inc v Shore, which was itself a class action case, the US Supreme Court held that the court has broad discretion to allow offensive, "non-mutual collateral estoppel"--that is, a plaintiff in a later action may, where it would promote judicial economy, consistency of result and would not otherwise be unfair, invoke issue estoppel against a defendant such as Centro to bar relitigation of an issue even if the plaintiff was not joined in the earlier action or in privity with a party to that action: Parklane at 329-31; see also V Morabito, "Defendant Class Actions and the Right to Opt Out: Lessons for Canada from the United States" (2004) 14 Duke J of Comp & Intl L 197, 228 (collecting the US and Canadian authorities on "non-mutual collateral estoppel" or inherent jurisdiction to bar re-litigation of issues especially as applied in class actions).

Moreover, even if the principle identified in Parklane is not a part of the general doctrine of issue estoppel in Australia, I would certainly consider adopting it at least in the limited context of class actions, either pursuant to the Court's authority under s 33ZF(1) of the Federal Court Act or possibly under the Court's inherent jurisdiction to prevent an abuse of process. With respect to the latter, see Saffron v Commissioner of Taxation, where the Full Court suggested that while the Parklane principle was not a part of issue estoppel jurisprudence under Anglo-Australian law, it appeared to perform the same function and yield the same result as would obtain under the Australian abuse of process doctrine.[31]

43 The applicants contended that the Anshun estoppel principle should not be applied with its full rigour in the present circumstances, because group proceedings contemplate the advancement of particular claims, peculiar to individual group members in a group proceeding, after the conclusion of the case advanced by the lead plaintiffs and answers to the common questions. The applicants contended that, just as individual group members may be required to advance particular circumstances relevant to reliance, they should be permitted to advance defences in a recovery proceeding that were not specifically addressed by a lead plaintiff in a group proceeding or otherwise the subject of a common question.

44 In Zhang, French J, referring to pt IVA of the Federal Court of Australia Act, said:[32]

The question of res judicata and the extended principle to which I have referred earlier remains. A judgment, once made on the common issue, is binding on all members of the group and on the Minister. That arises explicitly by virtue of s 33ZB(b). The question whether the extended principle of res judicata is capable of application to representative proceedings confined as these have been to a common issue of law or fact remains open. Section 33Q contemplates the hiving off of individual claims when the common determination does not finally determine the claims of all group members. That may support a view that the extended principle may operate when the claims are not hived off under that section. In a case in which the group members have not raised individual claims but have been defined into the group on their related circumstances and the common issue, it is necessary that care be taken to ensure that claims based on individual circumstances of which the Court knows nothing are not prejudiced. In my opinion, that concern may be dealt with by determining the common issue and giving judgment on that issue as required by s 33ZB. Thereafter, I am inclined to make an order under s 33N(1)(d) that the proceeding otherwise no longer continue under Pt IVA. While Mr Zhang's claim will be disposed of, the claims, if any, of other members of the group to set aside the decisions affecting them individually may be pursued by their individual applications. As this matter was not argued before me, I will allow the parties liberty to make submissions on the final form of the orders disposing of the proceedings.[33]

45 The applicants relied on the foregoing passage to advance the status of individual claims in group proceedings. It is, of course, necessary that care be taken to ensure that claims based on individual circumstances, of which the court knows nothing, are not prejudiced. The circumstances in Zhang were unusual. The common issue concerned the extent to which refugees were entitled to a particular standard of procedural fairness. The proceeding did not purport to determine the status of their applications.

46 In my opinion, the concern expressed by his Honour, that individual claims should be appropriately protected, is adequately achieved through the opt out process, provided the opt out notice is sufficient to define the scope of the proceeding and permit a meaningful decision. The notices were sufficient for that purpose. Had the applicants a viable basis to resist their obligations under the loan agreements, on grounds other than those pleaded in the group proceeding, they had an adequate informed opportunity to choose whether to opt out prior to the commencement of the trial, and ought to have done so. Nor was there any ambiguity about the prospect of settlement. ERA Legal was under no illusion as to their clients' prospects for maintaining individual defences while remaining a member of the group.

47 The applicants also relied on a passage from the judgment of Callinan J Mobil Oil Australia Pty Limited v Victoria,[34] which they interpreted as advancing a less rigid view of the application of the Anshun principle in group proceedings. The applicants' contention misunderstood the context. Callinan J was reciting for the plaintiff's argument, nothing more.

48 I note that in Courtney v Medtel Pty Ltd,[35] Sackville J made an order extending the date by which a category of group members were permitted to opt out of the proceeding following a settlement that was to be approved by the court. In that case his Honour concluded:

Fairness demands that the representatives of the deceased persons who died before the proceedings were commenced have an opportunity to make an informed judgment about whether they should opt out of the proceedings.[36]

The circumstances in Courtney v Medtel do not assist the applicants.

49 In my view there is material difference between the individual circumstances of a particular group member on a question of reliance to recover compensation, and what the applicants may be entitled to raise by way of a defence in recovery proceedings brought by the Bank. Individual circumstances, relevant to issues such as reliance, may be litigated following the conclusion of a group proceeding, including answers to common questions and perhaps the final resolution of all issues between the lead plaintiffs and the defendants. The resolution of such individual issues is a natural extension of the group proceeding, in which group members may be required to establish a basis for relief, or quantum.

50 While it is true that the proposed individual defences might theoretically be raised in existing proceedings that have been stayed, this group proceeding was unusual. It took the form of a collective defence to the Bank's rights of recovery under loan agreements. Existing and potential defences were subsumed in the group proceeding. That was the intended purpose of the group proceeding. The mere existence of a prior recovery proceeding brought by the Bank, or a counterclaim, does not assist the applicants.

51 The nature of the group proceeding was defensive. The plaintiffs alleged that the loan agreements were void and unenforceable. The Bank contended to the contrary. Group members had an opportunity to opt out of the proceeding, insofar as they might wish to maintain a different or novel defence. Upon judgment, group members would be bound by answers to the common questions, and thereafter precluded from litigating other defences to the obligations under the loan agreements.

52 It should have come as no surprise to group members to find, as a term of the Deed of Settlement, the Bank would insist on their right to recover under the loan agreements. Group members were advised of the possibility of a negotiated settlement prior to the opt out deadline. No doubt they hoped for a different and better outcome.

53 To permit a number of group members, dissatisfied with the terms of the Deed, to opt out would be inconsistent with the benefits they have enjoyed as group members throughout the trial. The term binding group members to repay loan obligations does not, in my view, constitute a material change in the scope of the group proceeding. Group members would be precluded from advancing new novel individual defences had the case proceeded to judgment. Thus, to include in the Deed a term precluding them from relitigating a challenge to loan obligations in the Deed, negotiated by the parties, cannot constitute a material change to the scope of the issues for final determination between the parties, nor was it inherently unfair.

54 The applicants have not pointed to any evidence that might support individual defences to the bankers' claims. There is nothing to indicate that any individual defence exists, let alone one that may have merit.

55 Finally, I am persuaded that the appropriate forum in which objections to the terms of the Deed ought to be raised is on the application for approval. The application under s 33V provides an adequate opportunity for the court to examine the fairness and reasonableness of the terms of the Deed for all group members, and for different classes or categories of persons. Accordingly, as a matter of discretion, I would decline to exercise the power to remove the applicants as group members.

56 The additional application by the ERA Objectors, to extend time, is opportunistic and unmeritorious. The ERA Objectors may oppose approval of the settlement, if so advised. To extend time for group members to opt out at this stage of the proceeding would undermine the utility of the proceeding, and the basis upon which the parties have conducted a lengthy and expensive trial.

57 The application by the Clamenz Objectors, to cease to be a group member, is refused. The application by the ERA Objectors, that time for group members to opt out be extended to a date following determination of the compromise application, is refused. The alternative application by the ERA Objectors, that they cease to be group members, is also refused.

[1] [1981] HCA 45; (1981) 147 CLR 589.

[2] Clarke v Great Southern Finance Pty Ltd (No 2) [2012] VSC 338 at [3]-[4] (citations omitted).

[3] Clarke v Great Southern Finance Pty Ltd (No 2) [2012] VSC 338; Courtney v Medtel Pty Ltd (No 5) [2004] FCA 1406.

[5] [1843] EngR 917; (1843) 3 HARE 100, 115.

[6] [1981] HCA 45; (1981) 147 CLR 589.

[7] [2012] VSC 338, [3]-[7].

[8] (1998) 84 FCR 1, 4.

[9] Mobil Oil Australia Pty Ltd v Victoria [2002] HCA 27; (2002) 211 CLR 1, [5] (Gleeson CJ).

[10] Mobil Oil Australia Pty Ltd v Victoria [2002] HCA 27; (2002) 211 CLR 1, [41] (Gaudron, Gummow & Hayne JJ).

[11] Rod Investments (Vic) Pty Ltd v Clark (No 3) [2007] VSC 306, [10] (Hansen J).

[12] Rod Investments (Vic) Pty Ltd v Clark (No 3) [2007] VSC 306, [15] (Hansen J).

[13] See Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589.

[14] See, as to abuse of process, Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378.

[15] [1995] FCA 1299; (1995) 57 FCR 287, 297 (Beaumont, Wilcox and Moore JJ).

[16] [2000] FCA 742; (2000) 175 ALR 50 (Lehane J).

[17] Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378, at 393 (Mason CJ, Deane and Dawson JJ).

[18] See Re AWB Limited No 10 [2009] VSC 566, at [264]-[284].

[19] See McHenry v Lewis (1882) 22 Ch D 397, at 399 (Jessel MR) and 408 (Bowen LJ who there referred to the "general principle that the court can and will interfere whenever there is vexation and oppression to prevent the administration of justice being perverted for an unjust end".); Moore v Inglis (1976) 9 ALR 509, 514 and, on appeal (1976) 51 ALJR 207; Henry v Henry [1996] HCA 51; (1996) 185 CLR 571, 591.

[20] [2000] FCA 742; (2000) 175 ALR 50 at 83, [101] where His Honour said:

'Given that the statement of claim is to be struck out I would not, pending repleading, make a direction for the filing or service of expert evidence: para 2C of Femcare's amended notice of motion. Nor would I order that the plaintiffs in the Queensland proceedings (para 3 of Femcare's amended notice of motion) be excluded from the definition of group members: the evidence given by Ms Culkoff, the solicitor for the applicant, made it clear, I think, that there is a degree of cooperation between her firm and the firm of solicitors acting for the plaintiffs in the Queensland proceedings, and I see no reason why (given also that process in the Queensland proceedings has not, apparently, yet been served on any defendant) this aspect of the matter should not be left until 'opt-out' notices have been given. It is highly likely, of course, that at that stage these proceedings would not be allowed to continue on behalf of group members who had not opted out but nevertheless sought to continue to pursue those Queensland proceedings. That, however, is not a decision which need be made now.'

[21] [2012] VSC 338, [16]-[18].

[22] Bright v Femcare (2000) FCA 742; 175 ALR 50, [55].

[23] [1993] FCA 489; (1993) 45 FCR 384.

[24] Naken v General Motors of Canada Ltd (1983) 144 DLR 385, 406-7.

[25] [1993] FCA 489; (1993) 45 FCR 384, 402.

[26] (No 2) [2012] FCA 755.

[27] (No 2) [2012] FCA 755, [1]-[3], (footnotes and citations omitted).

[28] [1999] FCA 56.

[29] [2008[ FCA 1505.

[30] [2008] FCA 1505, [16].

[31] [2008[ FCA 1505, [17]-[18] (citations and footnotes omitted).

[32] [1993] FCA 489; (1993) 45 FCR 384, 405.

[34] [2002] HCA 27; [2002] 211 CLR 1,[174].

[35] (No 5) [2004] FCA 1406; (No 4) [2004] FCA 1233.

[36] [2004] FCA 1406, [53].