Regent Holdings Pty Ltd v State of Victoria & Anor [2012] VSCA 221

1 This is an application for leave to appeal against orders made by the judge in charge of the Abalone class action, that 14 class members provide particulars and discovery of documents relating to quantum ('the impugned orders'). The parties requested that, in the event the court considered that leave should be granted, the court also determine the appeal.

2 The Abalone class action is brought by the applicant ('Regent Holdings') against the first respondent ('the State') and the second respondent ('SOM'), on its own behalf and on behalf of a closed class of 194 group members associated with 44 Abalone Fishery Access Licenses ('AFALs') and quota holders, 40 AFAL divers, and four Abalone Receivers and corporations associated with each of those sub-groups entitled to the economic benefit of such AFAL's, quota units or nominations. (collectively 'the Group'). It is contended that the State and SOM negligently allowed the release of a herpes-like virus, abalone viral ganglioneuritis, from an abalone aquaculture farm operated by SOM near Port Fairy and thereby caused each of the class members to suffer loss and damage.

3 The action has been brought in accordance with Part 4A of the Supreme Court Act 1986 and, in keeping with ordinary practice in Part 4A proceedings, Regent Holdings' claim and the common issues of fact and law raised by it are to be tried first beginning on 4 February 2013.

4 The outcome of the trial should determine Regent Holdings' claim in respect of liability and quantum and should also determine a number of issues relating to the respondents' liability to Group members. But it will not deal with the quantum of Group members' claims.

5 Some time ago, it was ordered that the action be referred to mediation to be concluded by 14 November 2012.[1] Evidently, the judge made the impugned orders to facilitate the mediation. As his Honour put it in the course of argument below, the particulars and discovery orders will enable the State to make sensible decisions in settlement discussions.

6 The applicant complains that the impugned orders are wrong in principle and productive of substantial injustice. It also contends that the application raises a question of general public importance of whether and to what extent group members in Part 4A proceedings should be required to provide particulars and make discovery in relation to the quanta of their claims.

Interlocutory matter of practice and procedure

7 An applicant for leave to appeal against an interlocutory order in a matter of practice and procedure faces a high hurdle, and especially so where the order is made by judge in charge of a managed proceeding. As Ormiston and Coldrey JJ explained in Bailey v Farrow Mortgage Services Pty Ltd (in liquidation):[2]

an applicant for leave to appeal from an interlocutory order must show, first, that either the order made below was manifestly wrong or (as is more frequently asserted) attended with sufficient doubt to warrant its being reconsidered on appeal and, secondly, that substantial injustice is likely to be caused to the applicant if leave were refused...[3]

...

It is arguable whether an application pursuant to r29.08[4] involves the exercise of a discretion, but an appeal from an order making or refusing an order under that rule raises the same or similar considerations as were adverted to by Sir Frederick Jordan, CJ in In re The Will of Gilbert[5] in the passage quoted and approved by the High Court in the Adam P Brown Male Fashions Case.[6] In other words, whether or not questions of discretion are raised, appeals relating to interlocutory points of practice or procedure are not to be encouraged, not merely from the viewpoint of speeding the cause, but also having regard to considerations relating to the efficient and fair administration of justice generally. In ordinary proceedings there is always an appeal as of right from a Master to a Judge and in managed lists, such as the Commercial List, it is important that the Judge is able to resolve points of practice such as those relating to discovery, in a summary way so as to enable cases in the List to be tried as soon as practicable. That is the reason why in the Commercial List power to deal with such matters is given in the first instance to a Judge hearing Directions, rather than requiring each application to be heard first by a Master. Similar considerations apply to other lists...[7]

8 The applicant contends that it clears the hurdle on the basis of the following four considerations:

1. First, the applicant says, the judge proceeded on the basis of wrong principle by conceiving of orders for group members to provide particulars and discovery as to quantum, in advance of the trial of the representative party's claim, as now being 'standard practice'.

2. Secondly, the applicant says, the judge erred by making the impugned orders for the purpose of facilitating the mediation, and thereby improperly involved himself in the essentially consensual process of mediation and settlement.

3. Thirdly, the applicant says, the judge erred in failing to have regard to factors which materially distinguish this case from Thomas v Powercor Australia Limited (Ruling No 1)[8] (in which J Forrest J made not dissimilar orders for discovery against the members of a defined sub-set of a group).

4. Fourthly, the applicant says, the judge erred in concluding that the impugned orders could be complied with in the space of about a week by the solicitors for Regent Holdings writing a letter to each affected Group member and getting back a folder of documents from the member.

9 In supplementary further written submissions, some of those contentions were re-characterised as arguments that the judge had taken into account irrelevant considerations or failed to take into account relevant considerations or had erred in the weight he ascribed to the need for group discovery for the purposes of the mediation. Essentially, however, the arguments remained the same. We shall deal with them in turn.

10 Beginning with standard practice, counsel for the applicant submitted that, so far from it being standard to order that group members provide particulars and discovery as to quantum before the determination of a representative party's claim, it is generally accepted that a group member ought not be required to take any step in a class action until after determination of the representative party's claim. To adopt any other practice, counsel submitted, would confound the ethos of Part 4A proceedings that group members need not take any positive step in the prosecution of a representative party's claim in order to gain whatever benefit its prosecution may bring.

11 We do not accept that submission. It appears to be based on a misconception of the following statement of Gaudron, Gummow and Hayne JJ in Mobil Oil Australia Pty Ltd v State of Victoria:[9]

The position of the plaintiffs in the proceeding may be contrasted with those whom they represent - the group members. Subject to some exceptions that do not matter for present purposes, the consent of a person to be a group member is not required. Group members may neither know of the commencement of the proceeding nor wish that it be brought or prosecuted, although Pt 4A does provide for notice to be given to group members of (among other things) the commencement of the proceeding.

The Supreme Court may dispense with the giving of that notice if the relief sought in the proceeding does not include a claim for damages and, if notice is to be given, it may be given by press advertisement, radio or television broadcast or any other means. Unless the Supreme Court is satisfied that it is reasonably practicable, and not unduly expensive, to do so the court may not order that notice of the proceeding is to be given personally to group members. There is, therefore, a real possibility that some group members would remain 'perfectly ignorant of the proceedings, and of what is really going on'. That is, some of those who would benefit from success in the proceeding (but thereby lose the opportunity to pursue their individual claim in some way, or to some effect, different from the group proceeding) may have their rights affected without their knowing or consenting to that being done.

So much follows from the fact that Pt 4A provides for what is sometimes called an 'opt out', rather than an 'opt in', procedure. That is, persons who are group members may opt out of the proceeding and, if they do, they are taken never to have been a group member (unless the court otherwise orders).50 Group members, however, need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring.

Provision is made for the court to fix a date before which a group member may opt out51 and, except with the leave of the court, trial of the proceeding may not begin before that date. The court, on the application of a party to the proceeding, or of its own motion, may at any time, before or after judgment, order that a person cease to be, or not become, a group member. The circumstances in which the court may make such an order are stated in very wide terms. It may do so if it is of the opinion that the person does not have 'sufficient connection with Australia to justify inclusion as a group member', or that for any other reason it is 'just or expedient' that the person should not be or become a group member. And if a person who is a group member does not opt out, either before or after judgment, a judgment given in the proceeding binds that person along with all other persons who are group members at the time judgment is given.

12 With respect, that statement does not mean that it is of the essence of a Part 4A proceeding that group members not be required to take any positive step before common questions of liability have been resolved. Read in context, and understood against the background of the case with which the High Court was concerned, it means no more than that there are some Part 4A actions in which that is likely to be so. This case illustrates that there will be circumstances in which group members may be asked to take some step before common questions of liability are resolved.

13 More precisely, if one is concerned with a Part 4A action of the kind with which the High Court was concerned in Mobil, it stands to reason that there may be group members who neither know of the commencement of the proceeding nor wish it to be brought, or thereby have their rights affected without their knowing or consenting to that being done. The idea that group members need take no positive step in the prosecution of a representative's claim to judgment is to be understood in that sense. One would not ordinarily expect a judge in such a case to make orders for group discovery of the kind which have been made in this case.

14 On the other hand, in a case like the present, where the Group is limited and in effect closed; all members of the Group are represented by the one firm of solicitors; and the litigation is maintained by a single litigation funder for the benefit of the representative party and Group members alike, the prosecution of the representative party's claim is more akin to a joint enterprise in which the representative party and the Group members are engaged together with a view to maximising recovery. In such a case, it is not inappropriate for a judge to make procedural orders consummate with that paradigm.

15 Of course, so to say does not imply that class members ought generally be required to provide particulars and make complete or even substantial discovery in advance of the determination of a representative party's claim. Each case turns on its own facts and circumstances. But where, as here, it is proposed to mediate the whole class action in advance of the trial of the representative party's claim, it makes sense to order such particulars and discovery as will provide the defendants with sufficient information to formulate rational settlement offers.

National Australia Bank Ltd v Pathway Investments Pty Ltd

16 The applicant placed particular reliance on the recent decision of this court in National Australia Bank Ltd v Pathway Investments Pty Ltd.[10] Much was made by counsel for the applicant of observations of Bell AJA in that case to the effect that discovery orders are not ordinarily made against group members unless there are compelling reasons justifying the need for such orders. That statement would be too broad if it were directed to all class actions. We doubt that it should be so understood, however; for his Honour recognised that there are cases in which the nature of group proceedings is to be given less weight. As we have explained in these reasons, this case is one of them.

17 Counsel for the applicant emphasised Bell AJA's remark that the nature of group proceedings, and what his Honour apparently conceived to be the essentially passive role which group members ought ordinarily play in class proceedings, cannot stand in the way of discovery which is 'demonstrably necessary for the fair and just determination of a defendant's case'. In counsel's submission, that dictum was tantamount to a statement of principle that group members ought only ever be required to give discovery if it be demonstrably necessary for the determination of a representative party's claim.

18 We reject the submission. There is no such principle and there is no authority for it. Each case turns on its own facts and circumstances and calls for an exercise in judicial judgment, bordering on an exercise in discretion, tempered to those facts and circumstances. As we have said, to the extent that any of Bell AJA's remarks about the propriety of group discovery in class actions formed part of the ratio of his Honour's decision, they were directed to a different case involving different facts and circumstances. He had no need to consider, and accordingly said nothing about, the propriety of group discovery for the purposes of a mediation calculated to resolve a proceeding as to both liability and quantum on a closed class-wide basis in advance of the trial of the representative party's claim.

19 Care should be taken to avoid reading judgments on fact specific interlocutory issues of practice and procedure as if they were determinative of precepts and principles of general application. A fortiori, when one is concerned with interlocutory orders for discovery. Peruvian Guano[11] and Mulley v Manifold[12] aside, there are only a handful of discovery authorities of general application. National Australia Bank v Pathway is not one of them.

Propriety of ordering discovery for mediation

20 Contrary to the applicant's contentions, it is not improper for a judge to make orders for particulars and discovery calculated to facilitate mediation. We take to be self-evident that it is desirable that proceedings be settled;[13] and, in Victoria, Chapter 2 of the Civil Procedure Act 2010 obligates courts and litigants alike to strive to achieve that end. The kinds of orders for particulars and discovery which the judge made in this case are well within the ambit of s 33ZF of the Supreme Court Act 1986 and s 9 of the Civil Procedure Act 2010.

21 Counsel for the applicant invoked observations of Finkelstein J in P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2)[14] as in some way opposed to that conclusion. But, with respect, we do not read his Honour's observations in that fashion. The case before him turned on its own facts and circumstances. A mediation was already well advanced when the respondent sought an order for discovery of the funding agreement. His Honour expressed concern that to accede to the application at that stage of the mediation might do more harm than good. As his Honour explained, he based that assessment on what he perceived to be his inability to determine the stage which negotiations had reached by that point. More significantly for present purposes, however, his Honour added that he would be prepared to make the order sought if the mediator reported to the court that he thought it would assist.

22 Counsel for the applicant argued that the mediation generally and particularly in this case ought be conducted in a 'without prejudice environment', and that for a judge to make orders for particulars and discovery of the kind in contention was to risk undermining the consensual process which mediation entails.

23 We do not accept that submission. Of course, mediation should be conducted without prejudice. But that does not mean that is should be conducted in ignorance. Court ordered mediation is not a game of bluff and bluster in which one party is free to mislead another to conclude that a claim is worth more than it is. It is designed to be an exercise in rational bargaining between relatively well-informed parties aimed at providing just compensation for worthy claims. The more accurate and complete the available information as to quantum, the more likely that rational settlements will be achieved. Where a party seeks the court's assistance to obtain further information which ex facie will facilitate a court directed mediation process, cogent submissions are required to demonstrate that the provision of that assistance will undermine the process.

24 In Thomas v Powercorp Australia Limited (Ruling No 1)[15] J Forrest J said:

Contrary to the submissions made on behalf of Mr Thomas, it is patently contrary to the purpose and intent of the CPA for a court to sit by passively and allow a case to proceed to what may be a lengthy trial of Mr Thomas' claim on liability and quantum, without ensuring that there is adequate information available to both Mr Thomas and Powercor to achieve resolution, not only of Mr Thomas' claim but also of the claims of the group members. In my experience this is not a novel proposition. Often in group proceedings the solicitors for the representative plaintiff provide particulars and, where necessary, supporting documentation relevant to the quantum of group members' claims. The initial bulldog approach adopted by Mr Thomas' lawyers is outmoded and runs contrary to the provisions of the CPA. This is a case in which the court should exercise its powers to ensure that there is adequate material available to Powercor to enable it to form a considered view as to the likely resolution of the group's claim.

[50] Before I turn to the manner in which the court should exercise its powers, I will deal with three issues raised by counsel for Mr Thomas.

[51] Firstly, the contention that since the group members are not parties to the proceeding, there is doubt about the court's power to make orders as to discovery or particulars of loss concerning these members. This submission is incorrect.

[52] Such powers are clearly given to the court by s 33ZF of the Act which permits the court to:

of its own motion or an application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

In Multiplex (No 2), Finkelstein J was of the view that this provision enabled him to make an order for discovery from a group member. I respectfully adopt his Honour's opinion. Moreover, s 48(1) of the CPA will, from January 2011, enable a court to make:

any order or give any direction it considers appropriate to further the overarching purpose in relation to pre-trial procedures.

...

[54] Secondly, it was submitted that because the focus of a Pt 4A proceeding is on the representative plaintiff's claim, then this in some way militates against the court facilitating ADR processes of the claim by the group. I reject this proposition outright. My own experience in Pt IVA cases has been that early discussion concerning the size and quantum of the group claim has facilitated resolution and a fast track settlement process; in doing so it has obviated the necessity for a lengthy trial, a judgment and then complicated arguments concerning causation and damages in relation to the claims of the group members. This approach is, of course, all the more relevant given the impending introduction of the CPA To focus in the pre-trial ADR process solely on the representative plaintiff's claim is both blinkered and contrary to the interests of justice.

[55] Thirdly, counsel for Mr Thomas is correct in saying that there is no material before the court to substantiate the proposition that Powercor needs this information to enable it to prepare for the mediation. Counsel pointed particularly to the fact that despite opportunities to do so, Mr Shute, the solicitor for Powercor, had not said a word about its desire to obtain such information for the purpose of a mediation or its bona fides in relation to settlement discussion. There was some force in this submission, however, I think it flies in the face of Powercor's statutory obligations and experience. Powercor will be obliged by s 22 of the CPA to 'use reasonable endeavours to resolve a dispute by agreement'. This is also consistent with my own experience with group proceedings - the likelihood of resolution is inevitably enhanced by a defendant having, in a general sense, an idea of the quantum of the claim in the event that liability is established against it.

[56] I am satisfied that prior to any ADR Powercor should be provided with information that will assist it in determining the likely quantum of the claim it is to meet. Indeed, I would have reached this conclusion absent the introduction of the CPA Its imminent proclamation has merely fortified my view that Powercor should be provided with sufficient information, relevant to the group members, to enable it to have some idea as to the size of the claim it has to meet in the event it is found liable to the group.

[57] As I have said, the provision of discovery by all group members is out of the question; however there should be a process by which Powercor can obtain such information in the form of particulars of loss and with accompanying substantiating documentation from, if possible, a representative sample of members.

25 Counsel for the applicant argued that the judge erred in failing to distinguish this case from Thomas v Powercor Australia Limited (Ruling No 1)[16] and thus by concluding that it was appropriate to make the kind of orders in this case which were made in Thomas. In counsel's submission, this case is different in six important respects. First, counsel said, in this case the State is not seeking to obtain an idea of quantum in a general sense, as it was in Thomas, but rather particulars and documents which are likely to be 'reliable'. Secondly, unlike the position in Thomas, the State here is seeking further to assess the reliability of materials already provided or otherwise available to the State. In counsel's submission, there is no support in authority or principle for group members being ordered to give discovery as to quantum in order to enable a defendant to 'double check' on the reliability of information already provided or otherwise available. Thirdly, counsel said, whereas in Thomas the solicitors for group members had already undertaken a lot of the work needed to comply with the orders, here all of the work would have to be started, as it were, from scratch. Fourthly, the number of group members the subject of the impugned orders is greater than the number of group members the subject of the orders in Thomas. Fifthly, the size and scale of the discovery which has been ordered in this case is unprecedented in circumstances where, counsel said, the State already has at its disposal the means of estimating the claimants' loss in a general sense. Sixthly, it is by no means certain that the discovery which has been ordered would provide a reliable indicator of claimants' losses.

26 In the course of oral submissions this morning, counsel for the applicant added for the first time three further bases on which he said Thomas v Powercor was to be distinguished. First, he submitted that there was nothing to show that the material which was sought was necessary to enable the State accurately to assess the quantum of represented parties' claims. Secondly, he said that there is nothing to show that it would provide a useful sample and thus a meaningful outcome in the assessment of the quantum of the represented parties' claims. Thirdly, he argued that it was impermissible or improper for the judge to order the representative party to make discovery of documents in its possession or power as it were on behalf of the represented parties.

27 Putting aside for the moment questions of the costs and burden of complying with the orders, we are not persuaded by those arguments. As we have said, in this case the representative party and the Group members are in effect in it together, funded by a common litigation funder, and represented by one firm of solicitors. Consequently, if the proceeding is going to settle, it is more likely to do so on a class-wide basis; and the applicant's solicitors have stated that it is unlikely to settle on a class-wide basis for less than $100 million. In the scheme of things - quite apart from any insurance arrangements which may stand behind the respondents - it is improbable that a settlement of that nature and magnitude could be arrived at without the respondents first being provided with information which will enable the true value of the Group's claims to be assessed with some precision. The judge was entitled to conclude that the information already provided will not enable the respondents to make such an assessment with sufficient exactitude. It follows in our view that, whatever may or may not have been said about the subject in other cases, in this case it was open to the judge to regard a 'double check' as warranted.

28 In particular, it appears to us on the basis of Mr Suddick's uncontested affidavit that it was well open to the judge to conclude that it was necessary to make the impugned orders. It was not suggested below, and there is nothing before us now (other than assertion) which suggests that the sample selected would not provide a useful insight into the quantum of the represented parties' claims. To the contrary, the selection process through which the judge went with counsel in making the selection prima facie implies that it will provide the sort of assistance which the judge envisaged. There is no reason in principle or authority why, in a case like this, it should be thought improper or inappropriate to require a representative party to discover documents in its possession or power relating to the quantum of represented parties claim. And we note that the judge went to considerable lengths in the course of discussion with senior counsel for the applicant to establish that it was appropriate and something which could be achieved within a relatively short period of time.

29 Finally, on this aspect of the matter, if contrary to expectations voiced in the course of argument below, it proves impossible to comply or comply in some respects with the impugned orders, that difficulty can be met by the applicant deposing to the steps undertaken in its attempt to comply with the impugned orders and why those steps failed to achieve the outcome required.

30 It remains to consider the burden and costs of compliance with the impugned orders. Counsel for the applicant submitted that they would be so great as to render the task intolerable.

31 We are not persuaded by that either. According to the applicant's solicitors' estimate, compliance with the orders would take one solicitor a period of three months and would entail costs in the order of 'several hundred thousand dollars'. As the respondents point out, however, that estimate was based on supposition that the orders which the judge might make would be considerably broader than the impugned orders. It is also not without significance that, despite the opportunity which the applicant's have had to provide a more precise estimate since the impugned orders were made, they have chosen not to do so. As the evidence stands, therefore, the most one can say is that the task of complying with the impugned orders would likely take one solicitor substantially less than three months - and, therefore, a number of solicitors a good deal less than a month - and that the costs likely to be incurred would be significantly less than 'several hundred thousand dollars'. In view of the nature and complexity of this litigation, we are not persuaded that the judge was in error to regard that as acceptable.

32 In the result, we do not accept that the impugned orders are attended by sufficient doubt to warrant the grant of leave to appeal, or indeed that they are likely to be productive of any injustice. We refuse the application for leave to appeal for those reasons.

34 The orders of the Court are that the application for leave to appeal is dismissed and that the applicant shall pay each respondent's costs of the application.

[2] Unreported, SCVAD 23 August 1994; BC 9406091.

[3] Niemann v Electronic Industries Ltd [1978] VicRp 44; [1978] VR 431, 442; BHP Petroleum Pty Ltd v Oil Basins [1985] VicRp 72; [1985] VR 756, 758; Australian Dairy Corporation v Murray Goulburn Cooperative Co Ltd [1990] VicRp 33; [1990] VR 355, 364-365 and 380.

[5] (1946) 46 SR (NSW) 318, 323.

[6] Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177.

[7] Banque Keyser Ullmann v Skandia Insurance Co [1991] 2 AC 249, 280-281 and Ashmore v Corporation of Lloyds [1992] 1 WLR 446, 448 and 453-454 (HL); cf Bank of New Zealand v Spedley Securities Ltd [1992] 27 NSWLR 91, 95 (Kirby P).

[8] [2010] VSC 489 (J Forrest J).

[9] [2002] HCA 27; (2002) 211 CLR 1, 31-2 [38]-[41] (citations omitted).

[10] [2012] VSCA 168 (Bell AJA, Bongiorno and Harper JJA in agreement).

[11] Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55.

[12] (1959) 103 CLR 347.

[13] Interest reipublicae ut sit finis litium.

[14] [2010] FCA 176.

[15] [2010] VSC 489 (citations omitted).