The statement that the Federal Court ordered Maurice Blackburn to replead the class action as it was too vague replaced the statement that the Federal Court struck out the first statement of claim.
12 I do not know how many persons were sent a letter in a similar form or who were sent or given a copy of the summary.
13 The concern of the applicants and their solicitors is that there are incorrect statements in these two documents which may persuade or influence group members to opt out of the proceeding on an erroneous basis. The incorrect statements are found in the box numbered "7" in each document. The Federal Court did not strike out the first statement of claim in this proceeding in November 1999 or at any other time nor was FAI Home Security awarded costs against Maurice Blackburn solicitors: see the order made on 14 December 1999 in par 3 above. This is not disputed by the respondents. It is also not disputed that it was incorrect to say that Maurice Blackburn utilises the American system of engaging clients on a contingency fee basis, that is that they share a percentage of any judgment. The group members who have signed fee and retainer agreements with the applicants' solicitors have done so on what is expressed to be a "no‑win no‑charge" basis. These group members will not be charged professional costs unless there is a successful outcome for them in the proceeding. In those circumstances the fee and retainer agreements make provision for the calculation of the fees to be paid to the applicants' solicitors on an hourly scale with an increase of the hourly rates of up to 25% for conducting the case on a no‑win no‑charge basis. Such a fee basis is allowed pursuant to the provisions of the Legal Practice Act 1996 (Vic).
14 The applicants submitted that the erroneous statements in the "A FAIR GO" documents might have a tendency to induce in the mind of a recipient a belief that as the first statement of claim was struck out and costs were awarded against the solicitors either there is no substance in the proceeding or the solicitors are not conducting the case properly. The applicants submitted that a statement that costs had been awarded against the solicitors could suggest that the solicitors had incurred the opprobrium of the Court either by reason of incompetence or misconduct.
15 They also submitted that the incorrect statement as to the solicitors using the American contingency fee basis is calculated to evoke the repugnancy to American contingency fee litigation which is widespread in Australia and was an assertion of an unlawful champertous agreement.
16 The applicants submitted that it was reasonable to conclude that a significant number of the potential group members could conclude the proceeding either has or is about to conclude or is without substance and that it would it be wise to opt out in order to avoid any possible liability as to costs and that the solicitors were incompetent or misconducted themselves or had very high fees. In short it was said that there was a real risk that the persons who received the documents might not approach the decision whether to opt out of the proceeding with a clear mind.
17 The respondents submitted that the sending of a correction notice was unnecessary. FAI Home Security is prepared to undertake to the Court not to distribute further the documents complained of or otherwise provide them to any person (other than to their legal advisers or as may otherwise be required). The respondents contended that because an opt out notice will shortly be published in daily newspapers and thereby brought to the attention of group members, it would be quite apparent to group members that the proceeding was going ahead and any inference or impression created by the incorrect statements in the two documents would be thereby dispelled. The respondents acknowledged and accepted that the statements complained of were incorrect but submitted that the lapse of time between the making of the statements and the publication of the opt out notice was such that the opt out notice made it unnecessary for any correction notice to be sent.
18 The respondents rejected the applicants' contention that the documents tended to persuade recipients to exercise their right to opt out of the proceeding. The respondents said that it was a disingenuous contention because of the lapse of almost five months between the time the applicants' solicitors became aware of the documents and the time the notice of motion seeking an order for the sending of the correction notice was filed and because of the fact that the time for the opt out procedure had not yet arrived.
19 The submissions of the respondents would have some force if the recipients of the two documents, and the group members to whom the opt out notice will be addressed, were either members of the legal profession or otherwise have immediate and easy access to legal advice. To such persons the opt out notice would make the position clear. However, I do not consider that the same situation obtains in relation to persons without legal training or legal experience or immediate and easy access to legal advice. Much language used by the legal profession and in legal and court documents is not easily understood by non‑lawyers. It would be apparent to a lawyer that if a first statement of claim was struck out, in all probability leave would have been given to file a further statement of claim. Such an understanding would not necessarily be held by a non‑lawyer. A lawyer would understand, in the context of an order striking out a statement of claim, that an order for costs would not necessarily carry with it any suggestion of improper conduct although the statement that costs are awarded against solicitors, rather than a party, in the context of a strike out application does carry with it an inference of incompetent conduct.
20 I consider a statement that a statement of claim has been struck out, without explanation, carries a negative message to a non‑lawyer and one which is calculated to induce a negative or pessimistic view of the proceeding. When it is coupled with a statement that costs have been awarded against solicitors it carries the further message either that the proceeding is at an end or that there is no substance in it and that the solicitors have in some way been neglectful or have not conducted the case properly. The negative nature of the message is exacerbated by reference to the solicitors being engaged on a contingency fee basis. There may be differing views as to the value or justification of such a basis for charging fees, on which matter I express no view. The fact is that such a fee basis is illegal: see, for example, s 99 of the Legal Practice Act 1996 (Vic). That incorrect statement, in context, is calculated to engender antipathy towards the proceeding, certainly in the minds of non‑lawyers.
21 The context in which the statements made in the "A FAIR GO" documents appear lead me to the conclusion that they were calculated and intended to be persuasive and to carry significance for the recipients of them. The incorrect statements placed opposite the words:
"The program referred to a class action suit by Maurice Blackburn solicitors"
carry a clear message which is calculated to influence the recipient either not to participate in the class action or to shy away from it. I do not consider that the lapse of time since the dissemination of those documents will necessarily have dissipated that message. Although the opt out notice makes it clear that the proceeding is continuing, recipients of the "A FAIR GO" documents will still be left with the negative incorrect statements and message uncorrected. There will therefore be the potential for confusion as to the basis on which the proceeding is continuing. The second document refers to a repleading of the statement of claim rather than it being struck out, but it contains the same references as the first document in relation to the order for costs and the charging of a contingency fee. There will also be left, uncorrected, the negative impression created by the incorrect statements as to the order for costs and the charging of a contingency fee.
22 The respondents submitted that it was apparent from the segments on "A Current Affair" and the documents that the respective interests of the group members and the respondents are the subject of vigorous presentation in the marketplace and that both sets of interests are complaining of incorrect statements. That may be an overstatement of the activities of the applicants and the group members but, in my view, it is not a relevant consideration to take into account when complaint is made of incorrect statements. Parties are entitled, at their peril, to engage in public or extra‑curial dialogue about pending legal proceedings. However, once incorrect statements are made particularly in relation to representative proceedings the Court must be astute to ensure that parties to proceedings and persons who might be affected by the outcome of the proceedings are not misled by those statements as to the nature of those proceedings.
23 I do not regard the lapse of time which occurred before the motion was filed or the nature of such dialogue as has occurred extra‑curially as being relevant to the protection of the interests of those group members who will be the beneficiaries of the rights created by the publication of the opt out notice. Those group members have not caused the delay nor have they been involved in such dialogue as has occurred extra‑curially.
24 The nature of class actions brought pursuant to provisions of Pt IVA of the Act are such that it is imperative that any communications made to group members, in whatever form, be accurate especially in relation to the rights which they have in relation to class actions of which they are a group member and the rights which they have to opt out of such proceedings.
25 I am satisfied that the incorrect statements in the two documents are such that they may influence the group members in reaching a decision whether to opt out of the proceeding once the opt out notice is published and comes to their attention. Notwithstanding the lapse of time since the dissemination of the two documents I am satisfied that the incorrect statements are such as to be present in the minds of the persons who received them at the time they come to read the opt out notice, consider their options and decide which way to act. Unless the statements are corrected I consider that a recipient of one of the two documents might think that something has happened to raise doubts about the integrity of the proceeding or the value of being bound by the proceeding because of the Court order striking out the first statement of claim, the order for costs against the solicitors personally and the fact that the solicitors will receive their costs by way of a percentage share of any judgment. Such incorrect thoughts would provide a false basis for a group member to make a decision whether to opt out of the proceeding. The incorrect statements should be corrected before group members are called upon to decide whether to opt out of the proceeding.
26 It was not contended that the Court does not have jurisdiction to order the respondents to send a correction notice; rather it was contended that the circumstances of this case did not warrant such an order. There is a specific statutory jurisdiction to order such a correction notice in s 33X of the Act which provides for the sending of notices to group members in relation to a representative proceeding. Section 33X(5) provides:
"The Court may, at any stage, order that notice of any matter be given to a group member or group members".
I consider that the jurisdiction to order the sending of a correction notice is also encompassed by the more general provision in s 33ZF(1) which provides:
"In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on 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."
27 The respondents did not deny the existence of this jurisdiction, submitting that the Court always had jurisdiction to protect the integrity of the administration of justice in any proceeding before it. The respondents submitted that in the circumstances of this case there was no necessity to protect the integrity of the administration of justice. The respondents referred to a number of authorities in support of this proposition and submitted that the jurisdiction was to be exercised with great circumspection where there was a real need to prevent real prejudice to the administration of justice. The respondents drew an analogy with the principles relevant to the jurisdiction exercised where there was a contempt of court. Reference was made to the State of Victoria v The Australian Building Construction Employees' and Builders Labourers' Federation (1982) 152 CLR 25 where at 56 Gibbs CJ said:
"There is a contempt of court of the kind relevant to the present case only when there is an actual interference with the administration of justice, or 'a real risk, as opposed to a remote possibility' that justice will be interfered with: cf. Attorney‑General v. Times Newspapers Ltd. [[1974] AC at 299]. The essence of this kind of contempt is a 'real and definite tendency to prejudice or embarrass pending proceedings': John Fairfax & Sons Pty. Ltd. v. McRae [(1955) 93 CLR 351]. The law as to contempts of court of the kind now under consideration reflects two conflicting principles of public policy: on the one hand, the need to safeguard the proper administration of justice and on the other the protection of freedom of speech (and this principle must extend to freedom of inquiry). This question has recently been discussed in Attorney‑General v. Times Newspapers Ltd., although similar views had earlier been expressed in New South Wales: Ex parte Bread Manufacturers Ltd.; Re Truth and Sportsman Ltd [(1937) 37 SR (NSW) 242]; Ex parte Dawson; Re Consolidated Press [[1961] SR (NSW) 573]. The law strikes a balance; in the interest of the due administration of justice it will curb freedom of speech, but only to the extent that is necessary to prevent a real prejudice to the administration of justice."
Although I am not faced with an issue giving rise to a contempt of court, I am faced with an issue relating to the integrity of a representative proceeding brought under Pt IVA of the Act. I consider the integrity of the proceeding may be undermined if a correction notice is not sent to the recipients of the two documents who may be induced or influenced to make a decision whether or not to opt out of the proceeding by their recollection of the incorrect statements and the message they convey.
28 The respondents submitted that as a matter of discretion I should not order the sending of a correction notice because the applicants had other remedies available to them in respect of the incorrect statements. That may be so, but the purpose of sending out the correction notice in the circumstances of this case is not so much to give the present applicants a remedy for the infringement of their rights in respect of a wrong done to them, but rather to protect the integrity of the opt out process for group members provided by Pt IVA of the Act. It is to ensure that persons, presently not identified, will be able to exercise rights given to them by Pt IVA of the Act in a fully informed manner without any concern that they may be acting on an erroneous or mistaken basis induced by the incorrect statements in the two documents.
29 I am therefore satisfied that the circumstances warrant an order that FAI Home Security send a correction notice to those persons who were the recipients of the two documents. I was not informed by the respondents as to the identity of the recipients of the two documents or as to the manner in which they were distributed. I infer from the contents of the two documents that they were sent to persons who had purchased alarm systems from FAI Home Security and who may also have financed those purchases with FAI Finance. I also infer from the document on the back of the Dawn Fraser letter that it was made available by FAI Home Security to its authorised distributors who in turn distributed it to purchasers of the alarm systems. In such circumstances I consider that it is appropriate to order that the correction notice be sent by FAI Home Security to each person who was sent either of the two documents and to each person to whom any of its authorised distributors sent either of the two documents. It is a matter for FAI Home Security to satisfy itself by information supplied to it by its authorised distributors that it is able to identify such persons. The correction notices must go out in the form of a notice printed on the same letterhead as the letter addressed to Mr Bannerman dated 29 February 2000 which is exhibit VW6 to the affidavit of Vivian Waller sworn 26 July 2000.
30 Having regard to the undertaking offered by FAI Home Security I am not disposed to grant an injunction restraining the further dissemination of the two documents.
31 The form of the correction notice propounded by the applicants contained a number of provisions which required amendment. Subject to any submissions the parties may wish to make the correction notice should be in the following terms:
"FAI Home Security Pty Ltd previously provided to you a document headed "A Fair Go". Part of that document contained statements about the class action commenced against FAI Home Security and FAI Finance Pty Ltd in relation to FAI Home Security Alarms. Those statements were incorrect. To correct those statements, we inform you of the following matters:
1. A class action against FAI Home Security and FAI Finance is currently in progress and the statement of claim has not, at any time, been struck out by the Court nor has FAI Home Security been awarded costs against Maurice Blackburn Cashman solicitors.
2. Maurice Blackburn Cashman are the solicitors for the class. The statement "Maurice Blackburn Cashman solicitors utilise the American system of engaging clients on a contingency fee basis; that is, they share a % of any judgment" is incorrect.
3. Maurice Blackburn Cashman offer a No‑Win, No‑Charge fee arrangement. Under this arrangement, clients will not be charged professional costs unless there is a successful outcome. If there is a successful outcome, the Fee and Retainer Agreement signed by persons who retain Maurice Blackburn Cashman makes provision for the calculation of the fees on an hourly scale with a 25% increase in the hourly rates for conducting the case on a No‑Win, No‑Charge basis. This is allowed pursuant to the Legal Practice Act 1996 (Vic). A copy of the fee and retainer agreement is available from Maurice Blackburn Cashman.
If you have any questions about this arrangement you should contact Maurice Blackburn Cashman on (03) 9345 2802."
32 Having regard to the fact that the opt out notice will be published for the first time on 14 November 2000 it is desirable that the correction notice be sent and received by those persons who were the recipients of the two documents no later than 13 November 2000. Because I was not informed as to the number of persons to whom the two documents were sent I do not know how long it will take FAI Home Security to ensure that the correction notice is received by the relevant persons. I will hear the parties as to the date by which the correction notices are to be sent.
33 I also consider that a mechanism should be in place so that the Court may be satisfied that the recipients of the two documents have been sent the correction notice. I therefore consider it necessary that FAI Home Security provide the Court with information as to who were the persons who were the recipients of either of the two documents and the manner in which, and the dates upon which, the correction notice was sent to those persons. I have the power under s 33Y(3)(c) of the Act to make such an order. Section 33Y(1) provides that s 33Y is concerned with "notices under section 33X". Such notices include not only an opt out notice as such: s 33X(1)(a), but also notices of any matter to be given to a group member or group members: s 33X(5). It will therefore be part of the order, in accordance with s 33Y(3), that FAI Home Security is to send the correction notices and I will hear the parties as to the manner in which the notices are to be given for the purposes of complying with s 33Y(3)(b) of the Act. It will also be part of the order that FAI Home Security, by its proper officer, make, file and serve an affidavit verifying the identity of the persons who were sent or given either of the two documents and verifying the manner in which the correction notice was given to them. Subject to hearing from the parties I would propose that such affidavit be filed and served by 14 November 2000.