Consideration
24 The respondents have challenged as unsuitable for a respondent representative action all three groups as defined by Stacey Brothers. Whether this challenge succeeds depends on O 6 r 13 of the Rules.
25 Order 6 r 13(1) provides as follows:
Where numerous persons have the same interest in any proceeding the proceeding may be commenced, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them.
Therefore, before O 6 r 13(1) can be invoked, there must be "numerous persons" having "the same interest in [the] proceeding". This requirement must be satisfied at the time the proceeding is commenced. The interest in question is an interest in the proceeding, to be judged by reference to the effect of the matters at issue on the rights and obligations of the representing respondent and the represented persons. A representative proceeding will not necessarily be defeated because some members, or even the representing party, have separate interests additional to a common interest, providing there is a common interest: compare Duke of Bedford v Ellis [1901] AC 1 at 7 per Lord Macnaghten.
26 Thus, on the respondents' motion, the basic question is whether, at the time the proceeding commenced, it could be said that numerous persons had the same interest in the proceeding as between themselves and Swimart Balwyn. For the reasons stated below, I would answer this question in the negative.
27 In order to understand my reasons for ruling against Stacey Brothers, it is necessary to refer to the case law on the operation of O 6 r 13 and provisions like it.
28 The High Court considered Pt 8, r 13 of the Supreme Court Rules (NSW), which at the time was relevantly the same as O 6 r 13 of the Federal Court Rules, in Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 and Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386: contrast Wong v Silkfield Pty Ltd (1999) 199 CLR 255, an applicant representative action under Pt IVA of the Federal Court of Australia Act 1976 (Cth). As noted in Carnie, "the ancestor" to these Rules "is to be found in the English Rules of the Supreme Court", which was "in turn derived from an earlier rule which itself was derived from the practice of the Court of Chancery": see Carnie 182 CLR at 415 per Toohey and Gaudron JJ and 427-429 per McHugh J.
29 Some care needs to be taken, however, with regard to Carnie and Campbells Cash since both concerned plaintiff representative actions, not defendant representative actions. Thus, in Carnie 182 CLR at 404, Mason CJ, Deane and Dawson JJ said that the purpose of the representative procedure was "to facilitate the administration of justice by enabling parties having the same interest to secure a determination in one action rather than in separate actions". In Campbells Cash 229 CLR at 422 [55], Gummow, Hayne and Crennan JJ made much the same point, saying:
A central objective of the representative procedures for which Pt 8, r 13 provided was the avoidance of multiplicity of proceedings and the efficient determination, once and for all, of controversies in which parties have the same interest. An important indication of the nature of the interest that numerous persons must have in proceedings instituted under Pt 8, r 13 was given by Pt 8, r 13(4). A judgment entered or order made in the proceedings 'shall be binding on all the persons as representing whom the plaintiffs sue'. What the rules were intended to achieve was a single determination of common issues in a way that binds those who were interested in those issues.
30 Speaking generally, it may be accepted that an important purpose of the representative procedure in O 6 r 13 of the Federal Court's rules, whether the proceeding is an applicant representative proceeding or a respondent representative proceeding, is to avoid numerous proceedings where one proceeding could determine a common question in which numerous persons have the same interest. There are, however, differences in the purposes of applicant and respondent representative proceedings. In the present case, in contrast to an applicant representative action, the question is whether there can be a single determination of a common issue of law or fact in a way that binds those interested to justify some relief the applicant seeks against them. This must be determined by reference to the issues that the proceeding raises and the relief that is sought.
31 As Carnie and Campbells Cash show, though simply expressed, the requirement of "same interest" has presented difficulties. In Carnie the High Court held that persons having separate causes of action in contract and tort might have the same interest in a proceeding for the purposes of the representative proceeding rules as they then stood in the NSW Supreme Court. The fact that the represented persons' claims arose under separate contracts was held insufficient to defeat the requirement that there be numerous persons having the same interest. In Carnie 182 CLR at 405, Mason CJ, Deane and Dawson JJ held that, in the circumstances of that case, numerous persons had "the requisite commonality of interest" to satisfy the jurisdictional requirement of the rule. Toohey and Gaudron JJ reached a similar conclusion, holding that the onus was on the named plaintiffs "to identify the class with sufficient particularity", without necessarily identifying every member, and that they had done so, noting that "[t]he class is not open-ended; it is limited to those persons who have credit sale or loan contracts with the respondent which have been varied in circumstances where the variation has been executed in such a way as to be inconsistent with the [Credit] Act": see Carnie 182 CLR at 422.
32 In discussing Carnie in Trustees of the Roman Catholic Church for the Archdiocese of Sydney v Ellis (2007) 70 NSWLR 565 at 582 [74], Mason P, with whom Ipp JA and McColl JA agreed, usefully summarised the various approaches in Carnie thus:
McHugh J suggested (at 427) that a plaintiff and the represented persons would have 'the same interest' in legal proceedings when they have a community of interest in the determination of any substantial question of law or fact that arises in the proceedings. Brennan J (at 408) agreed with this test. Toohey and Gaudron JJ said (at 421) that persons would have the same interest in proceedings if there was a significant question common to all members of the class and they stood to be equally affected by the (declaratory) relief sought by the appellants in the instant proceedings. Mason CJ, Deane and Dawson JJ thought (at 404) that the 'same interest' requirement 'may … [extend] to a significant common interest in the resolution of any question of law or fact arising in the proceedings'.
33 In Campbells Cash, a proceeding was instituted in the name of one plaintiff and a group of represented retailers who chose, by opting-in, to be bound: see Campbells Cash at 421 [52]. Gummow, Hayne and Crennan JJ accepted, at 421 [54], that "the rule did not require the separate identification of, and consent from, those who were said to constitute the 'numerous persons'". In Campbells Cash, their Honours held, however, that, at the commencement of the proceeding, there was no person, other than the named plaintiff, who had an interest in the proceeding, because no order or judgment given in the proceeding would have bound any other person: see Campbells Cash at 422 [57]-[58]; and see also 472-473 [222]-[226] per Callinan and Heydon JJ. Accordingly, the jurisdictional requirement was not met.
34 As foreshadowed, I accept that there are significant differences between plaintiff (or applicant) representative actions and defendant (or respondent) representative actions: see also BT (Australasia) Pty Ltd v New South Wales [1997] FCA 1553 per Sackville J. As Sackville J noted, members of a represented group may have much to gain when represented by a plaintiff and everything to lose when represented by a defendant.
35 The development of the law relating to defendant representative proceedings reflects the fact that they have typically been used in the past against members of unions and unincorporated associations: see, e.g., Taff Vale Railway Co v Amalgamated Society of Railway Servants [1901] AC 426 at 438-439 per Lord Macnaghten, 443 per Lord Lindley; London Association for Protection of Trade v Greenlands Ltd [1916] 2 AC 15 at 30 per Lord Atkinson, 39 per Lord Parker; and John v Rees [1970] 1 Ch 345 at 371 per Megarry J.
36 Amos Removals & Storage Pty Ltd v Small [1981] 2 NSWLR 525 is illustrative of this history. The plaintiffs, who were members of the New South Wales Road Transport Association, sued 19 members of the Committee of Management of the Shipping Section of the Federated Clerks Union of Australia (NSW Branch) as representing the Section, or at least those members of the Section that attended a meeting at which certain resolutions were passed. The plaintiffs relied on the representative procedure of the NSW Supreme Court, which, as we have seen, was then equivalent to O 6 r 13. In giving reasons for judgment in the case, Hunt J identified three requirements for a defendant representative procedure: first, that the persons to be represented formed an identifiable group or class; secondly, that the person selected as a representative must be in management of the group or class and have control of its funds; and thirdly, that those selected to be represented must have a common interest or a community of interest with all other members: see Amos Removals [1981] 2 NSWLR 525 at 529-530. Hunt J held that this last element was satisfied in Amos Removals because "the liability as alleged against the members ... was … enlarged to become one of conspiracy, based upon what is said to be the history of concerted action by those members and the resolution" at the meeting: Amos Removals [1981] 2 NSWLR 535 at 520.
37 The respondents in this case made much of the "management" issue. Subsequent cases indicate, however, that "management" is neither a sufficient nor a necessary requirement, although there must be something that binds the group together so as to give rise to a commonality of interest and render a representative proceeding appropriate. In truth, in Amos Removals, Hunt J's first two "requirements" are to be understood as factors that were strongly indicative of a commonality of interest. In other circumstances, respondent representative orders have been made where there has been no management and control, although there has been some other factor linking the group. For example, a respondent representative order was made in an action involving breach of trademark to support an ex parte interlocutory injunction against the members of the represented group where the evidence indicated that there was in fact a group of persons acting in a co-ordinated way: see Tony Blain Pty Ltd trading as Acme Merchandising v Jamison (1993) 41 FCR 414. See also EMI Records Ltd v Kudhail [1985] FSR 36. In these cases, there were factors other than mere management and control that supported the representative order, such as knowledge within the group of the group's members, co-ordinated action, and common purpose.
38 Even against unincorporated associations and unions, a representative proceeding is not properly brought where the essential inquiries concern the individual circumstances of the members. For example, in Geelong Wool Combing Ltd v Textile, Clothing and Footwear Union of Australia (2003) 130 FCR 447 at 452 [12], Finkelstein J held that the representative procedure of this Court was unavailable and that the union could not represent its members participating in a picket. First, the evidence did not establish that the members of the group were acting with a common purpose and, secondly, the proceeding was one to recover penalties. As his Honour said, the applicant had to establish that each respondent had contravened the legislation, which involved an inquiry into each respondent's conduct and purpose and, if the contravention were established, separate consideration of the amount of the penalty. There was, therefore, "no community of interest" amongst the members of the group.
39 In the context of a defendant (or respondent) representative proceeding, the nature of defences may be especially significant. The authorities support the proposition that a proceeding will generally not disclose persons in the same interest where defendants are entitled to raise different defences, although this is not an absolute rule. I agree with Mason P who said, in Trustees of the Roman Catholic Church v Ellis 70 NSWLR at 582 [74], that "[t]he requirement that each member of the class have identical defences may not be an absolute proposition". Whether the fact that different defences may be taken will defeat a finding of commonality of interest depends on the nature of the case, the centrality of any common questions of law and fact, and, having regard to the proceeding as a whole, the reality, importance and likely scope of the different defences.
40 For example, the general rule (that separate defences defeat the same interest criterion) did not prevent insurers being sued via representative orders in Irish Shipping Ltd v Commercial Union Assurance Co Plc [1991] 2 QB 206, where a shipowners' contractual claim, which all insurers had an interest in resisting, disclosed a community of interest amongst the insurers, even though there was a possibility that some foreign insurers might have a defence not available to all insurers: see [1991] 2 QB at 227 per Staughton LJ, 231-232 per Sir John Megaw, and 240 per Purchas LJ. An argument that the representative order might work injustice because a represented insurer might wish to contend lack of authority, fraud or misrepresentation was put aside on the basis that there was "no suggestion" that any such contention would be made, and appropriate steps could be taken if there were: see [1991] 2 QB at 232.
41 In other circumstances, however, the availability of different defences has precluded a finding of community of interest. Thus, in Mercantile Marine Service Association v Toms [1916] 2 KB 243, the members of an unincorporated association were to be represented on the defendant's side in a libel action against them. Swinfen Eady LJ noted, at 246, that the various members of the association might be "in a wholly different position", saying:
If the members of the management committee were sued, and if in fact they had authorized the publication of the libel they could raise such defences as might be open to them. It might be that their defence would be that the words complained of were not capable of the meaning alleged or of any defamatory meaning, or that the words did not refer to the plaintiffs. The other members of the association, if sued, might say that, however defamatory the words complained of might be, they did not authorize their publication; that they were on the high seas and knew nothing about the matter.
42 Similarly, in Roche v Sherrington [1982] 2 All ER 426, a proceeding to set aside gifts on the grounds of undue influence against defendants representing the present members of Opus Dei, an organisation within the Roman Catholic Church, failed for lack of common interest amongst the represented defendants. Slade J held that the representative proceeding rule was not available against the defendants because members of the group were likely to have separate defences. His Honour said that "where separate defences may be opened to some members of the class in question, there can be no common interest within the rule": see [1982] 2 All ER at 434.
43 Further, if membership of a defendant group is liable to fluctuate, then this may indicate a want of sufficient particularity and a lack of commonality: see Hardie & Lane Ltd v Chiltern [1928] 1 KB 663 and Minister for Industrial Development of Queensland v Taubenfeld [2003] 2 Qd R 655. In Taubenfeld at 659, Mackenzie J pointed to "the difficulty in establishing the necessary identity of interest of all persons against whom the [representative] order was sought and of eliminating the possibility of different defences" on account of the fluctuating nature of membership of the group.
44 Having discussed some of the authorities, I turn to this proceeding. The jurisdictional question presented by O 6 r 13(1) requires me to decide whether there was a commonality of interest amongst Swimart Balwyn and the members of the putative group at the time the proceeding commenced. That is, O 6 r 13(1) requires the Court to be satisfied that numerous persons had the same interest in the proceeding at the time it was commenced. If this requirement is not satisfied, then the proceeding was not properly begun and there is no representative proceeding to continue. Having regard to the original statement of claim, the jurisdictional question thus becomes whether there was a commonality of interest amongst Swimart Balwyn and the Swimart franchisees displaying the Poster or Display System, or installing a pool filtration system in accordance with the Poster or Display System.
45 It is plain enough that Stacey Brothers has had difficulty in defining the group to be represented. This problem is not merely the result of the fact that it knows insufficient about Waterco's business and the Swimart franchise, although lack of knowledge is a contributing factor. The problem is also attributable to Stacey Brothers' attempt to capture too much in the representative net, with the result that there is a lack of commonality of interest amongst members of the group and between the group and Swimart Balwyn.
46 In my view, bearing in mind all relevant matters, including the following, there was no such commonality of interest within the putative group and with Swimart Balwyn to permit Stacey Brothers to rely on O 6 r 13(1).
1. The group would include persons whose allegedly infringing conduct differed in significant respects. Some but not all members of the group would be franchisees who displayed the Poster. Some members of the group would be franchisees who installed a pool filtration system allegedly in accordance with the Poster, even though not displaying the Poster. Further, Swimart Balwyn's conduct was unique in the sense that it made the Display System. It follows that, although some members might have an interest in resisting the allegation that, in displaying the Poster, they infringed Stacey Brothers' patent rights, there are likely to be other members of the group with no such interest. Indeed, there might be no community of interest amongst installers of pool filtration systems, if some urge that their installation differs relevantly from other installations and the installation depicted in the Poster. Furthermore, Swimart Balwyn's interest in resisting the infringement allegation is likely to become an interest in showing that the whole of its conduct, as defined by reference to the Poster and the Display System, did not amount to an infringement.
2. In these circumstances, having regard to the nature of Stacey Brothers' claims, it would be open to Swimart Balwyn and the group members to rely on various defences of significantly different kinds. The respondents touched on some of these defences in their submissions. The availability of different cross-claims would in such a case as this also be pertinent. In this case, the possibility of separate defences and cross-claims does not merely signify that injustice might be done if the Court does not manage the proceeding so as to allow these defences and cross-claims to be run. Rather, it signifies that there is in truth no commonality of interest between the members of the group and with Swimart Balwyn.
3. Accordingly, this is not a case in which it can be said that, at the time the proceeding began, Swimart Balwyn and the represented persons had the same interest in the determination of some substantial question of law or fact. Nor can it be said that there was a significant question common to all members of the group. When the proceeding commenced, there was no common question concerning the display of the Poster in which all members of the group had an same interest, notwithstanding that this is the question that Stacey Brothers would now seek to put forward as common to all.
4. The relief, including the declaratory relief, sought by Stacey Brothers also emphasises that there is in truth no commonality of interest in the group.
5. Further considerations militating against a finding of same interest include that Swimart Balwyn has no relevant relationship with the members of the group. Swimart Balwyn is not in control in any sense. Nor does it know of, or co-operate or have a common purpose with, members of the group.
6. The group is open-ended. Persons may enter the group in the course of the litigation, as, for example, where, during this time, they install a pool filtration system in accordance with the Poster. It would, therefore, be difficult to identify the separate defences that might be open to all members of the group. The fact that Stacey Brothers might close the group in the course of the litigation would not cure the jurisdictional difficulty that existed when the proceeding commenced.
7. The provisions of O 6 r 13 that operate to protect a represented person in a properly constituted respondent representative proceeding cannot make up for a failure to meet the jurisdictional requirement in O 6 r 13(1). Whilst it may in many cases be appropriate to defer ruling on the appropriateness of a representative proceeding, when it is clear that there is no commonality of interest as required by O 6 r 13(1), the proceeding simply cannot be a representative one.
47 Bearing in mind the above considerations, I conclude that, at the time the proceeding commenced, there was no commonality of interest among the group that Swimart Balwyn was to represent and with Swimart Balwyn. Accordingly, the representative proceeding - as it was framed - was not properly commenced and cannot be continued.
48 If Stacey Brothers had (contrary to the above conclusion) made out the "same interest" requirement, there would be a further question whether the same interest was shared by numerous persons. The respondents pressed this issue in this case. They referred to Mr Sloan's statement in his affidavit of 11 February 2009 that some Swimart franchisees claimed not to have displayed the Poster at all.
49 Whether there are sufficient persons to constitute "numerous" persons has been said to depend on whether "the parties were so numerous that you could never 'come at justice' … if everybody interested was made a party": see Duke of Bedford v Ellis [1901] AC at 8 per Lord Macnaghten. Today, the question may be put a little differently - whether the representative proceeding can be regarded as an efficient and just way to proceed, having regard to the likely costs, the issues involved and the capacity of the Court to manage the proceeding suitably. In view of my conclusion as to lack of commonality of interest, it is unnecessary to explore this question further. It is also unnecessary to consider the effect on this issue of Mr Sloan's third affidavit, as to which see below.
50 Carnie also showed that, even if the jurisdictional requirements of O 6 r 13(1) are satisfied, the Court may nonetheless consider, as a matter of discretion, that the proceeding ought not continue as a representative proceeding. Various factors might be relevant to this determination, including whether alterations to the group description can be allowed, notice requirements for group members, and the practicalities of settlement or discontinuance of the proceeding. As Mason CJ, Deane and Dawson JJ said in Carnie at 405, determining the importance of such matters in the context of the particular case is not necessarily straightforward, especially in the context of a defendant representative proceeding. Again, having regard to the conclusion I have reached on the lack of commonality of interest, it is strictly unnecessary to explore these discretionary considerations further.
51 Since, however, Stacey Brothers specifically sought to amend the definition of the group, in order, so it said, better to "capture" the group, I discuss briefly whether the amendment might be made.
52 If granted, the amendment that Stacey Brothers seeks by its motion would expand the group of represented persons in the sense that the group would henceforth include persons who were not Waterco franchisees. In SZ v Minister for Immigration and Multicultural Affairs (2000) 172 ALR 172, at 179, Lehane J held that O 6 r 13 did not allow an amendment that would expand the group of person on whose behalf an applicant had commenced a proceeding. The case might be distinguished on the basis that it concerned an applicant representative proceeding, as opposed to a respondent representative proceeding. I do not, however, consider that this approach would withstand scrutiny, because his Honour's reasoning is applicable in both kinds of representative proceedings. Further, there is no reason to doubt his Honour's reasoning.
53 In this proceeding, if there were to be an amendment to expand the persons sought to be bound, the amendment would need to take place under O 6 r 2, governing the joinder of parties. This is not an amendment of a kind that might be made under O 13 r 2. Having regard to the terms of O 6 r 2, Stacey Brothers would be obliged to seek leave to amend pursuant to O 6 r 2(b). There is power under O 6 r 2(b) to join additional parties after the commencement of the proceeding. It is, however, a discretionary power. Stacey Brothers did not apply for leave under O 6 r 2 in respect of any particular respondent. Nor did it advance submissions in support of any discretionary exercise of the power in its favour in respect of any respondent. It is therefore inappropriate to say anything more about the possible application of O 6 r 2. It should be borne in mind that any amendment under O 6 r 2 would require amendment of the terms in which the substantive relief claimed in the proceeding is framed. This and other matters would fall for consideration in an application under O 6 r 2(b) to join additional parties.
54 Stacey Brothers relied on passages in Bright v Femcare Ltd (2002) 195 ALR 574 at 580 [18] and 589 [79] per Lindgren J, in support of its argument that the respondents' challenge to the representative character of the proceeding was premature. I observe that this was a case under Pt IVA of the Federal Court of Australia Act, and that his Honours' comments were clearly directed to this legislation. Different considerations apply in a case such as this, where it is apparent even at this early stage that the putative group is not held together by the same interest, so as to satisfy O 6 r 13(1) of the Rules.
disposition
55 For the reasons stated, I would dismiss Stacey Brothers' motion, with costs. I would order that the application and the statement of claim be struck out in so far as each refers to "the Represented persons", and in particular the following paragraphs be struck out:
(a) in the application - paragraph 9 (in its entirety) and paragraphs 1 to 5 and 7 (in so far as these paragraphs refer to "the Represented persons"); and
(b) in the statement of claim - paragraphs 4, 5, 30 and Schedule 1 (in their entirety) and paragraphs 10, 12, 13, 14, 16, 17, 18, 19, 20, 21, 23, 24, 27, 28 and 29 (in so far as these paragraphs refer to "the Represented persons").
Stacey Brothers will have seven days to file and serve an amended statement of claim in conformity with this order. Since the respondents have succeeded on their motion, they should also have their costs.
matters arising after the hearing of the motions
56 At the commencement of these reasons, I noted that, after the hearing, the respondents sought leave to file a third affidavit by Mr Sloan. This affidavit concerned various matters, chiefly the printing and distribution of the Posters, and the information obtained as a result of inquiries made of Swimart franchisees. In a letter dated 13 March 2009, the respondents' solicitor wrote:
The Respondents' position is that the content of the affidavit does not … impact on the majority of the arguments raised by the Respondents and, subject to the stance taken by the Applicant, the Respondents propose that the Court decide on the Notices of Motion and arguments already advanced. If the Applicant wishes to be heard on matters arising from the affidavit then we propose that they be given the opportunity to file supplementary written submissions limited to those issues.
57 Stacey Brothers' response was to seek the issue of a subpoena directed to Waterco, c/- its solicitor in this proceeding, seeking a range of documents, some of which might attract legal professional privilege claims.
58 For the reasons earlier stated, it has proved unnecessary to refer to Mr Sloan's third affidavit in determining the outcome of the present motions. I have not formally granted leave to file this affidavit, although I have had regard to the exchanges at the hearing of the motions and would hear the parties briefly on the question if they so wished. If leave were pressed, this might be the occasion for Stacey Brothers to renew its application for leave to issue the subpoena directed to Waterco. Whether or not Stacey Brothers wishes to do so may depend on the status of Mr Sloan's third affidavit and the manner in which Stacey Brothers proposes to pursue the present proceeding.
I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.