Uren v RMBL Investments Ltd

MURPHY J: 1 This proceeding is a class action brought by the applicant, Mr Noel Uren, on his own behalf and on behalf of an open class of persons who entered into loan agreements with the respondent, RMBL Investments Ltd (RMBL), which loan agreements contain or contained a clause in the same or substantially the same terms as the Collection Charge Clause (as defined). The case centres on the allegation that on its true construction the Collection Charge Clause only entitled RMBL to charge borrowers (including the applicant) the amount of costs, charges and expenses actually incurred by RMBL in connection with the collection of interest payable under the loan agreements, and not the charges RMBL demanded. 2 The present application concerns telephone communications by RMBL with class members, in relation to their right to opt out of the class action. The applicant sought orders for a corrective notice to be sent to class members. In the course of the hearing I indicated that I was inclined to make an order for a corrective notice and, after the matter was stood down to enable senior counsel for RMBL to obtain instructions, RMBL consented to the orders the applicant proposed.

The facts and procedural history 3 On 26 April 2019 I heard an application under ss 33J, 33X and 33Y of the Federal Court of Australia Act 1976 (Cth) (the Act) regarding, amongst other things, the form of the opt out notice and the process by which the notice would be provided to class members. 4 On 2 May 2019 I made orders regarding the form of the opt out notice and ordered that the notice be sent by 4.00 pm on 24 May 2019 to Operative Class Members through an external mail house, and to Inoperative Class Members (being corporate class members under external administration or deregistered) by the solicitors for the applicant. The orders prescribe the form of the notice and the process of notice, and they do not provide for any other communication with class members in relation to opt out. 5 On 10 May 2019 Maurice Blackburn, the solicitors for the applicant, received an email from the daughter of a class member, which included the following passage: I am writing on behalf of my mother [name redacted] who received a call from someone acting on behalf of RMBL yesterday, asking if she wanted to opt out of the class action. She was unaware of this and had finance with RMBL back in 2006/2007. She did not commit to anything over the phone and asked for anything in writing. I was wondering if we could get some information about this class action. 6 Maurice Blackburn sought further information from the class member and on 13 May 2019 the class member, through her daughter, sent a further email, in which she set out the asserted telephone conversation in the following terms: My mother and father put the phone on speaker so they both could hear what was being said as it was a shock to get call [sic] and they thought it was scam. They did not feel that it was just a call to confirm contact details as they did not even confirm their postal address during the conversation. Mum took notes while they were on the phone Approx 2pm on 09/5/19 they received a call from [phone number redacted] he asked for [the class member] and advised he was representing RMBL Investments. Did not give his name. He then confirmed that she had a loan with RMBL that was finalised with RMBL in 2009 and reassured that there was no outstanding monies owing and that it had been discharged. He proceed to explained that 2 brothers had a falling out were suing RMBL for interest rate and improper notification [sic]. He did not say much more than that. He then advised this has resulted in a class action and in 2 weeks she would receive notification from MB were she would be able to opt out, if she did return it then she would opt out and he hoped that she would opt out. Mum was very hesitant to commit anything as concern with if call recorded or scam, as they knew nothing about this. Happy to provide you with [the class member's] details for contact if you need any further details. 7 On 14 May 2019 Mr Steven Foale of Maurice Blackburn wrote to Mr David Hope of Hope & Co, the solicitor for RMBL. He raised concerns regarding the asserted telephone conversation, referred to the restriction on communication by a respondent with class members set out in the Class Actions Practice Note (GPN-CA) (the Practice Note) , and demanded that RMBL: (a) immediately cease communicating with class members in relation to the class action; and (b) advise by the following day, the number of class members RMBL had communicated with in relation to the class action, the purpose of those communications and the precise nature of the communications. 8 Mr Hope replied by letter to Maurice Blackburn dated 16 May 2019. He said that "RMBL is not aware of this particular telephone conversation and has no records of any such call being made". He also said that the demand that RMBL cease communicating with class members in relation to the class action was impractical when RMBL must remain in communication with its borrowers in the ordinary course of business, and "simply unworkable" because publicity generated by Maurice Blackburn about the class action was causing concern for borrowers who had in turn made contact with RMBL. He said that RMBL would comply with the Practice Note and would not initiate discussions with borrowers regarding the class action and the opt out process but that it "does not control what might be raised by the borrowers (past and present) with RMBL in respect of the current proceedings". 9 The applicant then brought the application herein, relying on an affidavit of Mr Foale made 17 May 2019 annexing the relevant correspondence. The applicant sought orders to vacate the deadline for the opt out notice pending RMBL's provision of an affidavit setting out: (a) the number and identity of class members with whom RMBL had initiated communications about the class action; and (b) the form of the communications with those class members (whether written or oral), the purpose of those communications, and the precise nature of the communications (including the form of words). 10 In response to the application RMBL relied on an affidavit of Mr Surinder Gurdial, a director and the Chief Financial Officer of RMBL, made 21 May 2019, in which he: (a) said RMBL had believed that the Court orders required RMBL to provide various contact details of its past and current borrowers to a mailing house for the purpose of sending those borrowers an opt out notice but had formed the view that the contact details of past borrowers may have been out of date; (b) stated that in an effort to ensure the accuracy of the contact details Mr Gurdial and several of his staff members had made telephone calls to former borrowers and had made, between them, approximately 38 telephone calls. He said that 30 of the telephone calls, including the call which prompted the email to Maurice Blackburn described above, had been made by Mr Gurdial himself, and that they included advice that the borrowers would soon receive opt out notices but did not go as far as to encourage opt out; and (c) disputed some aspects of the asserted telephone call. 11 Neither Mr Foale nor Mr Gurdial were cross examined. In response to a question from the Court senior counsel for RMBL said that it had many interactions with borrowers as part of its usual business, including because of borrowers' fears about RMBL's solvency which had been aroused by the class action, and that there might have been similar telephone conversations further to the 38 telephone calls to which Mr Gurdial referred.

The IMPORTANCE OF opt out 12 Part IVA allows a person to commence a class action on behalf of others without obtaining their consent, without listing or identifying them by name, and without a requirement to obtain leave of the Court before doing so. The right of class members to opt out of a class action is therefore fundamental to the just operation of the regime. 13 The principal purpose of an opt out notice given under ss 33X(1)(a) and 33Y(2) of Part IVA is to ensure that group members can make an informed decision concerning their rights: Law Reform Commission, Grouped Proceedings in the Federal Court (Report No 46, 1988), pars 188, 190; Femcare Ltd v Bright [2000] FCA 512; (2000) 100 FCR 331, at 336-337, 349; Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98; (2017) 252 FCR 1 at [88]. 14 An informed decision regarding opt out can only be made if class members are provided with accurate and non-misleading information and are not subjected to unfair pressure regarding their rights and obligations in regard to opt out. It is for this reason that ss 33X(1)(a) and 33Y(2) requires Court approval of the opt out process and the form of the opt out notice. It is imperative that any communication made to class members in relation to the right to opt out be accurate: Williams v FAI Home Security Pty Ltd (No 3) [2000] FCA 1438 at [24]. 15 Statements made or information provided to class members which is capable of misinforming or misleading them in relation to their right to opt out can undermine the integrity of a Part IVA proceeding by inducing a misunderstanding on their part. The same can be said of communications aimed at pressuring class members to opt out. The Court has an important role in managing a representative proceeding in the public interest to rectify any potentially misleading communications to class members in order to ensure that class members do not suffer any misunderstanding as to their rights and obligations and are not subjected to pressure in that regard: Johnstone v HIH Limited [2004] FCA 190 (Johnstone) at [102]-[105]; Davaria Pty Limited v 7-Eleven Stores Pty Ltd [2018] FCA 984, [26]-[29]. 16 That is not to say that a respondent is precluded from communication with class members in the ordinary course of business. It would not be appropriate, for example, for the Court to seek to interfere with communications which occur for a legitimate purpose in the course of an ongoing business relationship between a respondent and class members. But as has been recognised in the USA, the existence of ongoing business relationships between class members and a respondent should not be used as a channel for improper communications: Conte, A., & Newberg, H. B., Newberg on Class Actions (Thomson/West, 4th ed, 2002) vol 3, 290. 17 When the Court is considering the effect, or possible effect, of a communication between a party and class members it exercises a protective role in relation to class member's interests. If such a communication may mislead or confuse class members it may be appropriate to require that a corrective notice be sent to class members: Johnstone at [105]; Jarra Creek Central Packing Shed Pty Ltd v Amcor Limited [2008] FCA 575 at [18]-[19]. 18 The requirements of the Practice Note are important. It relevantly provides: 10. Communications with Class Members 10.1 Unless leave is granted by the Court, if a class member is a client of the applicant's lawyers then any communication with the class member by the respondent or the respondent's lawyers or agents in relation to the proceeding shall only be through the applicant's lawyers. However, there is no intention to limit the respondent's communication with class members in the ordinary course of business. Where the respondent's lawyers are uncertain as to whether the class member is a client of the applicant they should liaise with the applicant's lawyers to clarify the status of the class member, before any communication takes place. In an appropriate case, the Court may make an order that the applicant's lawyers inform the other parties whether class members are clients of those lawyers. 10.2 The Court may make orders concerning communications with class members who are not clients of the applicant's lawyers, including establishing a protocol for such communications. Where class members are not clients of the applicant's lawyers then the respondent and its lawyers or agents should use reasonable endeavours to ensure that any communications with class members in relation to the proceeding are in writing. 10.3 Where a respondent and/or its lawyers or agents communicate with a non-client class member suggesting that the class member do or not do something, the communication should, in plain language, explain the consequences of following the suggestion and encourage the non-client class member to obtain legal advice. 19 There may be stronger reasons for the Court to intervene where a respondent's communications about opt out with class members are by telephone rather than in writing, and there is a dispute on the evidence as to the content of those communications. The potential for class members to be misinformed, misled or pressured about their rights is precisely why the form of an opt out notice is approved by the Court, and why the Practice Note requires a respondent's communications with class members to be in writing. The Court having supervised and approved the form of the opt out notice and the process by which class members are to be informed in relation to opt out, the Court should be careful to ensure that the integrity of the approved notice and process is not encroached upon by unsupervised communications by a party whose interests are adverse to the interests of class members. Telephone communications between a respondent and class members are ripe for misunderstanding.

Consideration 20 Senior counsel for RMBL submitted, amongst other things, that: (a) it is wrong for the applicant to characterise Mr Hope's 16 May letter as misleading because there was not enough information about the asserted telephone call in Maurice Blackburn's letter of 14 May to ascertain that it was in fact referring to a telephone call that RMBL had made; and (b) the phrase in the letter stating that RMBL "will not initiate any discussions with borrowers (past and present) as to the current proceedings and the opt out notice process" was proposed as an undertaking directed towards RMBL's future conduct, rather than in relation to telephone calls that it had already made. Senior counsel also noted that Mr Gurdial denied urging class members to opt out of the proceeding. 21 Because RMBL consented to a corrective notice being sent to class members, it is neither necessary nor appropriate for me to decide whether Mr Gurdial and other RMBL employees encouraged class members to opt out in the admitted telephone calls. It is enough that class members may have been misled or may have unfairly been urged or encouraged to opt out: Courtney v Medtel Pty Limited [2002] FCA 957; (2002) 122 FCR 168 at [66]. 22 Nor is it necessary to decide whether Mr Hope's letter to Maurice Blackburn is misleading. It suffices to note that Mr Gurdial's affidavit represents a conspicuous departure from the position taken in that letter. Mr Gurdial described the 38 telephone conversations as intended to ascertain updated contact information, that is essentially secretarial in nature, but as RMBL's Chief Financial Officer he made 30 of the calls. It is unnecessary to decide but one might doubt that calls made by such a senior company officer were secretarial in nature. Mr Hope's letter said that "RMBL is not aware of this particular phone conversation and has no records of any such call being made". The thrust of the letter was to deny that the asserted telephone conversation had occurred and Mr Gurdial then conceded that he had made that and many other calls. 23 It is appropriate to order, as RMBL ultimately accepted, that class members be sent a corrective letter on RMBL letterhead and signed by its Chairman, attached to each opt out notice. The corrective letter will state as follows: Dear Sir/Madam The Federal Court of Australia has ordered RMBL to provide this letter to you in conjunction with the attached opt out notice. As you may be aware, there is currently pending, in the Federal Court of Australia, a class action against RMBL relating to the imposition of 'collection charges' on borrowers. The class actions has been brought on behalf of all persons who are borrowed money from, and have paid 'collection charges' to RMBL. Since the commencement of the class action, RMBL has had communications with some of the class members in the class action. To the extent that those communications may have been taken as encouraging class members to, or as suggesting that class members should, opt out of (i.e. take no further part in) the class action, RMBL unreservedly withdraws any such encouragement or suggestion. Attached to this letter is an opt out notice in a form which has been approved by the Court. The notice provides detailed information about the class action, and gives all class members the option to either: • opt out of (i.e. take no further part in) the class action; or • continue to participate in the class action. All class members should read the notice carefully, and should make their own decision as to the course which they wish to take. If, after having read the notice, you have any question or queries, you should contact the solicitors for the applicant in the class action (whose contact details are set out in the notice), or otherwise seek your own independent legal advice. Yours Faithfully [signature] Colin Madden (Chairman) 24 I have made orders accordingly. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy.