McMullin, Brian and Anor v ICI Australia Operations Pty Ltd & Ors [1996] FCA 991

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CatchwordsPRACTICE AND PROCEDURE - Applications for summary dismissal - Agreement between applicants and other respondents alleged to contravene the law concerning maintenance of actions - Whether the other respondents had a pecuniary interest in the proceeding between the applicants and the respondents - Whether summary dismissal is an appropriate remedy where unlawful maintenance is established.

REPRESENTATIVE PROCEDURES - Principal proceeding is a representative action on behalf of some hundreds of group members - Numerous cross-claims - Cross-claims concerned only the claims of individual group members - Whether hearing of cross-claims should be separate from hearing of principal proceeding - If so, whether the cross respondents should be bound by findings made at that hearing - Whether all issues of liability (including issues of reliance, causation etc) should be dealt with at the initial hearing.

Federal Court of Australia Act 1976, Part IVA

BRIAN McMULLIN and LEONE MARGARET McMULLIN

v ICI AUSTRALIA OPERATIONS PTY LTD, ICI AUSTRALIA LTD, CROP CARE AUSTRALASIA PTY LTD, THE STATE OF NEW SOUTH WALES, THE STATE OF QUEENSLAND

NO. NG305 of 1995

CORAM: WILCOX J

PLACE: SYDNEY

DATE: 18 NOVEMBER 1996

Orders

IN THE FEDERAL COURT OF AUSTRALIA )

) No. NG305 of 1995

NEW SOUTH WALES DISTRICT REGISTRY )

)

GENERAL DIVISION )

BETWEEN: BRIAN McMULLIN and LEONE MARGARET McMULLIN

Applicants

AND: ICI AUSTRALIA OPERATIONS PTY LTD

First Respondent

ICI AUSTRALIA LTD

Second Respondent

CROP CARE AUSTRALASIA PTY LTD

Third Respondent

THE STATE OF NEW SOUTH WALES

Sixth Respondent

THE STATE OF QUEENSLAND

Seventh Respondent

AUSCOTT LIMITED

First Cross Respondent

GURLEY STATION PTY LIMITED

Second Cross Respondent

LEYDE PTY LIMITED

Third Cross Respondent

NEIL STEWART SOWERBY

Fourth Cross Respondent

DUNAVANT GINNING PTY LIMITED

Fifth Cross Respondent

QUEENSLAND COTTON CORPORATION LIMITED

Sixth Cross Respondent

COLLY FARMS PTY LIMITED

Seventh Cross-Respondent

DARLING RIVER COTTON PTY LIMITED

Eighth Cross Respondent

NORTH-WEST GINNING PTY LIMITED

Ninth Cross Respondent

NAMOI COTTON CO-OPERATIVE LIMITED

Tenth Cross Respondent

DEAN PHILLIPS, INC

Eleventh Cross Respondent

TWYNAM COTTON PTY LIMITED

Twelfth Cross Respondent

LIMETOWN PTY LIMITED

Thirteenth Cross Respondent

and

TARIGI PTY LIMITED

Fourteenth Cross Respondent

CORAM: WILCOX J

PLACE: SYDNEY

DATE: 18 NOVEMBER 1996

MINUTES OF ORDER

THE COURT ORDERS THAT:

The hearing fixed for March/April 1997 be a hearing to determine, separately and in advance of the determination of all other issues, the following issues:

The case against ICI

(i) The status of ICI, the manufacture, distribution and marketing of Helix, its nature, content, purpose and use (more specifically, the matters referred to in paras 1 to 8 of the Second Further Amended Statement of Claim);

(ii) The contamination of cattle by feeding them cotton trash (paras 9 to 11, 13 to 16 and 22);

(iii) The contamination of cattle through ingestion of contaminated stubble, grass and water (paras 11 to 16) but excluding any detail of the effect on the operations of group members as stated in para 12;

(iv) The knowledge of ICI (paras 17 to 20) and the advice given by them (para 21);

(v) Whether ICI engaged in conduct contravening s 52 of the Trade Practices Act 1974 (para 23), leaving aside issues of reliance on such conduct and consequential damage;

(vi) Whether ICI owed a duty of care to persons in the position of the applicants and group members (para 25), leaving aside any fact relevant to that issue that is peculiar to the applicants or a particular group member;

(vii) Assuming a duty of care, whether ICI acted negligently in relation to persons in the position of the applicants and group members (paras 26 and 27), leaving aside all issues of damage.

The case against New South Wales

(viii) The constitution, functions and actions of TCAC and PACC (paras 28-29, 32-33);

(ix) The vicarious liability of New South Wales for the conduct of its TCAC representative (para 30);

(x) The knowledge of TCAC members (para 31);

(xi) The nature of chlorfluazuron (paras 35 and 50);

(xii) Whether New South Wales carried on a business within the meaning of s 3 of the Fair Trading Act 1987 (NSW) (paras 36, 51, 67 and 79);

(xiii) Whether New South Wales engaged in conduct contravening s 42 of the Fair Trading Act, if it applied, in relation to acts and omissions affecting ICI (paras 37 and 52), leaving aside issues of reliance upon such conduct and consequential damage;

(xiv) Whether TCAC and AAVCC, and their members, owed duties of care to persons in the position of the applicants and group members (paras 39 and 54), leaving aside any fact peculiar to the applicants or a particular group member;

(xv) Assuming a duty of care, whether TCAC and AAVCC and its members acted negligently in relation to persons in the position of the applicants and group members (paras 40 to 41 and 55 to 56);

(xvi) The sale and use of Helix and contamination by chlorfluazuron (paras 42 and 57), leaving aside all issues of damage;

(xvii) The constitution, functions, duties and actions of AAVCC (paras 43-44, 47-48);

(xviii) The vicarious liability of New South Wales for the conduct of its AAVCC representative (para 45);

(xix) The knowledge of AAVCC members (para 46);

(xx) The existence, functions and status of the Registrar of Chemicals, including the vicarious liability of New South Wales (paras 58-59);

(xxi) The existence and functions of the Department of Agriculture (paras 60-61 and 74) and the status of its employees, including the vicarious liability of New South Wales (para 75);

(xxii) The knowledge of the Registrar of Chemicals and Department of Agriculture (paras 62 and 76);

(xxiii) The acts and omissions of the Registrar of Chemicals in connection with the registration of Helix (paras 63-64);

(xxiv) Whether the Registrar of Chemicals engaged in conduct contravening s 42 of the Fair Trading Act (para 68), if it applied, leaving aside issues of reliance upon such conduct and consequential damage;

(xxv) Whether the Registrar of Chemicals owed a duty of care to persons in the position of the applicants and group members (para 70), leaving aside any peculiar fact;

(xxvi) Assuming a duty of care, whether the Registrar of Chemicals acted negligently in relation to persons in the position of the applicants and group members (paras 71 to 72);

(xxvii) The registration, sale and use of Helix in New South Wales (para 73), leaving aside all issues of damage.

(xxviii) Whether New South Wales engaged in conduct contravening s 42 of the Fair Trading Act (para 80), leaving aside issues of reliance upon such conduct and consequential damage;

(xxix) Whether the Department of Agriculture and New South Wales owed a duty of care to persons in the position of the applicants and group members (para 82), leaving aside any peculiar fact;

(xxx) Assuming a duty of care, whether New South Wales acted negligently in relation to persons in the position of the applicants and group members (paras 83-84);

The case against Queensland

(xxxi) The existence, functions and status of the Standards Officer, including the vicarious liability of Queensland (paras 86 to 87);

(xxxii) The existence and functions of the Department of Primary Industries (paras 88 to 89);

(xxxiii) The knowledge of the Standards Officer and Department of Primary Industries (para 90);

(xxxiv) The acts and omissions of the Standards Officer in connection with the registration of Helix (paras 91 to 92);

(xxxv) Whether the Standards Officer owed a duty of care to persons in the position of the applicants and group members (para 95), leaving aside any peculiar fact;

(xxxvi) Assuming a duty of care, whether the Standard Officer acted negligently in relation to persons in the position of the applicants and group members (paras 96 to 97); and

(xxxvii) The registration, sale and use of Helix in Queensland (para 98), leaving aside all issues of damage.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court of Australia Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

) No. NG305 of 1995

NEW SOUTH WALES DISTRICT REGISTRY )

)

GENERAL DIVISION )

BETWEEN: BRIAN McMULLIN and LEONE MARGARET McMULLIN

Applicants

AND: ICI AUSTRALIA OPERATIONS PTY LTD

First Respondent

ICI AUSTRALIA LTD

Second Respondent

CROP CARE AUSTRALASIA PTY LTD

Third Respondent

THE STATE OF NEW SOUTH WALES

Sixth Respondent

THE STATE OF QUEENSLAND

Seventh Respondent

AUSCOTT LIMITED

First Cross Respondent

GURLEY STATION PTY LIMITED

Second Cross Respondent

LEYDE PTY LIMITED

Third Cross Respondent

NEIL STEWART SOWERBY

Fourth Cross Respondent

DUNAVANT GINNING PTY LIMITED

Fifth Cross Respondent

QUEENSLAND COTTON CORPORATION LIMITED

Sixth Cross Respondent

COLLY FARMS PTY LIMITED

Seventh Cross-Respondent

DARLING RIVER COTTON PTY LIMITED

Eighth Cross Respondent

NORTH-WEST GINNING PTY LIMITED

Ninth Cross Respondent

NAMOI COTTON CO-OPERATIVE LIMITED

Tenth Cross Respondent

DEAN PHILLIPS, INC

Eleventh Cross Respondent

TWYNAM COTTON PTY LIMITED

Twelfth Cross Respondent

LIMETOWN PTY LIMITED

Thirteenth Cross Respondent

and

TARIGI PTY LIMITED

Fourteenth Cross Respondent

CORAM: WILCOX J

PLACE: SYDNEY

DATE: 18 NOVEMBER 1996

REASONS FOR JUDGMENT (No. 3)

WILCOX J: I have previously dealt with summary dismissal applications in relation to this proceeding. The first series of applications resulted in the dismissal of the proceeding as
against the fourth and fifth respondents, the Commonwealth of Australia and National Registration Authority ("NRA"). Similar applications by the sixth and seventh respondents, the States of New South Wales and Queensland, were refused. Orders in respect of those applications were made on 29 May 1996. Subsequently, New South Wales brought a further application, this time in reliance on a New South Wales statutory provision which, it claimed, barred the action as against it. On 25 September I refused that application. My decision is now subject to appeal.

On Friday, 8 November, I heard argument on a number of motions by respondents and cross-respondents. Most of the issues were disposed of during the hearing. They included further applications by New South Wales and Queensland for summary dismissal on the ground that the proceeding, as against those respondents, was instituted and continued pursuant to an agreement between the applicants and one or more of the first three respondents (collectively and severally "ICI") that constituted unlawful maintenance or champerty. At the conclusion of the argument, I refused the dismissal application and said I would give written reasons later.

The other outstanding matter is the appropriate directions for trial of the proceeding, including the difficult question as to how much of the whole proceeding should be the subject of the projected hearing in March/April 1997. I decided to take time to consider the submissions made about that question. The question is discussed below and I will today make the directions I think most appropriate.

Maintenance and champerty

Counsel for Queensland read an affidavit of a solicitor, Lucinda Susan Kasmer, annexing correspondence. The correspondence referred to an agreement between the applicants and ICI under which ICI would indemnify the applicants against costs incurred by them in respect of their claims against the two States. It seems that ICI's solicitors suggested that the applicants join the Commonwealth, NRA and the two States and provided information to assist preparation of the claim against them. The applicants' solicitors acknowledge in one letter that they might not otherwise have joined these respondents and, in another, that senior counsel would be briefed, in relation to any strike out motion, from a pool nominated by ICI's solicitors. This did not, in fact, occur in relation to the application made to me; the applicants were represented only by the junior counsel, Mr Rowe, who has been in the case from its commencement. However, I understand senior counsel has been briefed in the pending appeal. The correspondence also suggests that ICI's solicitors have actively assisted the applicants' solicitors in their conduct of the litigation against the two States.

Upon the basis of that evidence, counsel for Queensland and counsel for New South Wales argue that the applicants and ICI have entered into an agreement infringing the rules about maintenance and champerty. In a written submission, counsel for Queensland quote Lord Atkinson's description of "the essence of the action of maintenance" in Neville v London Express Newspaper Limited [1919] AC 368 at 395:

"the officious intermeddling in and supporting litigation in which the maintainer has no legitimate interest."

This description is consistent with that applied in a later case, Martell v Consett Iron Company Limited [1955] 1 Ch 363. Its accuracy is not disputed before me. See also The Laws of Australia, Vol 33, Part 33.8 at paras 130 and 131 where maintenance and champerty are defined. Champerty is an aggravated form of maintenance whereby the maintainer enters the agreement upon condition to have part of the proceeds of the action.

Counsel for Queensland pose the question whether ICI has a legitimate interest "in stirring up the applicants' claim" against their client. They say that assistance might be justified if the applicants were impoverished and they acknowledge that, in recent years, the courts have adopted a more liberal attitude towards the supporting of litigation
than in earlier times. But they argue that ICI has no legitimate interest in the applicants making a claim against their client. They concede that ICI might have an interest in making a cross-claim against Queensland, as it has now done, but they say it has no interest in the applicants suing Queensland direct. In any event, they contend, the relevant interest must lie outside the litigation itself. They quote something said by Drummond J in Re Movitor Pty Ltd; ex parte Sims (1996) 136 ALR 643 at 650:

"It is also essential, if an interest in litigation is to be sufficient to justify its maintenance by an outsider, including its maintenance in circumstances that involve champerty, that it be an interest in the litigation separate from the benefit the outsider seeks to derive from his support for the litigation. If the agreement to assist another's litigation could itself provide an interest by the outsider in the litigation sufficient to take the agreement out of the area of maintenance and champerty, the rule against maintenance and champerty could always be easily circumvented."

Counsel for ICI responded to the argument advanced by Queensland concerning this issue. They referred to a later decision of Drummond J, Magic Menu Systems Pty Ltd v AFA Facilitation Pty Limited (1996) 137 ALR 260. In that decision his Honour (at 269) expanded on the question of what constitutes a sufficient interest. He adopted a test stated by Danckwerts J, at first instance in Martell, viz "a bona fida community of pecuniary interest or religion or principles or problems" shared by the litigant and the assisting outsider. Drummond J explained:

"The outsider can have an interest in the litigation of another, brought to advance the latter's personal pecuniary interests, which will be sufficient to make his maintenance of that other's litigation lawful. But there must be a link between that other's litigation and a commercial, financial, religious or other interest that both the outsider and the litigant share."

Counsel for ICI argued that their clients had a pecuniary interest in the litigation; if the liability to pay damages is spread amongst a number of respondents, ICI's commercial and pecuniary interests are affected beneficially. Consequently, ICI had an interest entitling them to support the applicants.

I think there is substance in this response but I do not find it necessary to reach a final conclusion about it. It seems to be clear, as ICI's counsel also submitted, that a stay of proceedings is an inappropriate remedy where maintenance is established. Jenkins LJ dealt with this point in Martell at 421-422:

"It is well settled that the illegal maintenance of the plaintiff in an action is no defence to the action: see Skelton v. Baxter [1916] 1 K.B. 321 at 326. I find difficulty in reconciling this with the theory that it affords proper ground for a stay of proceedings. It is not, to my mind, a satisfactory answer to this difficulty to say that the stay would be of a temporary character only, operating until such time as the proceedings are purged of the taint of illegality. Once there has been illegal maintenance, the crime by which the proceedings are said to be tainted has been irretrievably committed, and I do not see how the taint could be purged otherwise than by discontinuing these proceedings and starting a fresh action. That would, in effect, make maintenance a defence to the action, which it clearly is not. If the court should not allow a plaintiff to proceed with the prosecution of his action while he is being illegally maintained, it would seem that, by parity of reasoning, the court should not allow a defendant to proceed with his defence while he is being illegally maintained. In the latter case, a stay of proceedings would obviously be inappropriate, and indeed would benefit the party alleged to be abusing the process of the court; and to strike out the defence would be as much as to make the illegal maintenance of the defendant a ground for holding the plaintiff entitled to judgment. Moreover, it seems to me undesirable that the question whether an action is being illegally maintained should be adjudicated upon on an application to stay proceedings in that action, for this procedure involves, in effect, a trial of the question whether the alleged maintainer is guilty of what is still, theoretically at all events, a crime, in the absence of the person accused."

This reasoning is compelling. It applies with even greater force to an order for summary dismissal. It was for that reason that I refused the strike out applications.

Directions for the March/April hearing

The major issue between counsel in relation to the forthcoming hearing was its scope. Some months ago, before joinder of the cross respondents, I directed that trial of the issue of damages be deferred until after determination of liability. That left open the position concerning trial of any cross-claims. After cross claims were filed, several cross respondents filed motions seeking deferral of the hearing of the cross-claims until a later stage.

When these motions were argued on 8 November, the position taken by parties varied considerably. Some parties argued that the whole case should be dealt with at one hearing, including the quantum of damages payable to each group member if the case against one or more of the respondents succeeded and all claims for indemnity and apportionment. The parties who put that submission accepted that, if the matter were heard in that way, it would occupy the Court for many months. They said it ought to be possible to program the hearing in such a way that not every party needed to be present throughout; nonetheless, they agreed, the hearing would be burdensome and extremely costly. Their argument was that any other course would be unsatisfactory.

I do not think this is an appropriate way of handling the case. It would require counsel for the applicants to call evidence from each of the hundreds of group members, descending into considerable detail as to their losses. Preparation for that evidence would be an extremely time-consuming task and the cost enormous. If the Court subsequently held that none of the respondents were liable to the applicants, or any group member, this effort and cost would be wasted; as would all the evidence designed to support the numerous cross-claims. With 16 active parties involved, at this stage, the cost of the trial would run into many millions of dollars.

One other suggestion was that the March/April trial be confined to the issues between the applicant and the respondents and the cross-respondents not be bound by the Court's findings on those issues. The argument was that this would relieve the cross respondents from the burden of attending that hearing; if the applicants' claim failed, they might never have to attend a hearing. The problem, of course, is that, if the applicants' claim succeeded and the respondents decided to pursue their cross claims, and there is no reason to doubt they would, the evidence pertaining to liability would have to be led again; unless all cross respondents agreed otherwise, and there is no reason to believe they would. Unless cross respondents are bound by findings in a principal proceeding, there is no point in having a cross-claim procedure; the Court might as well leave respondents to institute separate actions for contribution or indemnity after determination of the principal proceeding. This suggestion is plainly unacceptable.

A number of intermediate positions were put. One suggestion, like that just mentioned, was that the March/April hearing be confined to issues of liability, as between the applicants and the respondents, but with the difference that the cross respondents be bound by the Court's findings on those issues. It was argued that, if the Court was not concerned at that stage with issues of contribution, indemnity or damages, the hearing would be comparatively short and more manageable. As there would be no evidence concerning the detail of the transactions and events with which they were involved, it might not be necessary for all cross respondents to be represented (or, at least, separately represented) throughout.

Counsel for ICI objected to this proposal. They said their clients' defence would include the claim that the cause of the contamination of the cattle was the mismanagement of Helix by the cross respondents; much of the evidence that would be required to support the cross-claims would, in any event, be required for their clients' defence.

This consideration points to the desirability of the cross-claims being tried at the same time as the principal action. But there are problems about that course. The main problem arises from the fact that this is a representative proceeding involving hundreds of group members. The view taken by counsel for the applicants is that it is unnecessary for him to call evidence from each of the group members in order to obtain findings against the respondents. He concedes that some of the group members must be called, if only because some of the causes of action include as an ingredient a personal element such as reliance, causation or damage. But his argument is, and apparently will be at the trial, that if these ingredients are established in connection with some group members, and the factors of general application are also proved, the applicants will be entitled to findings in their favour on liability and it will then be appropriate to move to the next stage of the trial: a one by one examination of the circumstances of each group member, this member being called to prove reliance or causation, as the case may be, and the precise extent of his or her damage.

I think counsel for the applicants is entitled to conduct his case in the way he suggests. He ought not be forced into a situation where he has to call every group member in order to obtain favourable findings on liability. To require him to take that course would be to defeat the purpose of the representative procedure. But the consequence is that there will not be evidence, at this first stage, concerning the experience of all the group members in relation to matters germane to the cross-claims. According to counsel for the applicants, the stories of only about 15 to 18 group members will be investigated at the trial. Which cross respondents are affected by those particular stories will be entirely a matter of accident. Some cross respondents may be affected by one or more stories, some not at all.

The fundamental problem, as was pointed out by one counsel, is that this case is a representative action as regards the principal proceeding but not in relation to the cross-claims. Nor are the cross-claims capable of being made, or - so far as I can tell - treated as, representative proceedings; they appear not to involve any substantial common issue of law or fact.

I have come to the conclusion that, in the situation confronting the Court, wisdom lies in proceeding one step at a time. I think it is preferable to defer consideration of the cross-claims until after determination of most, if not all, issues concerning the liability of the respondents in the principal proceeding. This will allow concentration on those issues without the distraction of pieces of evidence that are relevant only to a particular cross-claim, or to damages, with a consequential saving in hearing time and costs. Moreover, this course probably would allow the cross respondents to consolidate their representation at the first hearing, if they wish. It seems unlikely that there would be any conflict of interest between cross respondents at this stage. Of course, consistently with the views expressed above, I intend that the cross-respondents would be bound by the findings made in respect of the evidence led at this first hearing. And the evidence itself would be evidence in the cross-claims, if they proceed.

The next question is whether any limitation ought to be imposed on the liability issues to be explored at the forthcoming hearing. I have found this a difficult question - there are strong arguments for and against imposing a limitation. As I have indicated, the assumption, hitherto, has been that the applicants will call evidence on all elements of their causes of action, including personal elements: causation, reliance and the fact of sustaining some (unquantified) damage. However, one party submitted it would be preferable to confine the first hearing to the issues that justified the bringing of this proceeding as a representative action: the common issues of law and fact. Upon reflection, I agree. That course has the advantage of tending to limit duplication of evidence. On this approach, the applicants would be concerned, at this stage, only to prove those elements of their case that concern the conduct of the respondents. Although it would be necessary for the applicants' counsel to present some evidence from his clients, and the group members, for the purpose of providing background information, the evidence would focus on the question whether any of the respondents acted in breach of a statute, or its duty. All the material on these questions would be of general interest; although material concerning New South Wales events might not affect Queensland, or group members and cross respondents concerned only with events in Queensland, and vice versa. To the extent that the case failed against a particular respondent, or failed in relation to a particular cause of action, it would never be necessary for the Court to receive evidence concerning the personal elements in that claim or cause of action.

Approaching the problem in this way, it is possible to define the issues to be investigated at the forthcoming hearing either by inclusion or exclusion. I think the safer course, in order to avoid any misunderstanding, is to define by inclusion. Counsel for ICI and counsel for New South Wales kindly prepared lists of what they suggest to be common issues. Each list was compiled by reference to the Second Further Amended Statement of Claim but counsel for ICI referred only to the applicants' summary of common issues at para 102 of that pleading. Counsel for New South Wales referred to the allegations themselves, but only insofar as they relate to the case against New South Wales. Reference to the allegations is the safer way, in case there are omissions in the summary.

With these matters in mind, I have myself analysed the Second Further Amended Statement of Claim. The direction that follows is intended to reflect the approach just described. If any party feels it does not, or that it is ambiguous, I invite that party to draw the matter to my attention, through my Associate. I will examine the situation and clarify the direction, if necessary. I do not wish anybody to be under a misapprehension as to the issues under investigation in the forthcoming hearing.

I propose to direct that the hearing fixed for March/April 1997 be a hearing to determine, separately and in advance of the determination of all other issues, the following issues:

The case against ICI

(ii) The contamination of cattle by feeding them cotton trash (paras 9 to 11, 13 to 16 and 22);

[In relation to contamination, I accept that the nature of the problem may vary as between group members. Nonetheless, there seems to be sufficient alleged commonality to make it worthwhile investigating these issues as they bear generally upon ICI's conduct and liability. Although it will be necessary for the applicants to prove these allegations in relation to the applicants and some group members, it will not be necessary or appropriate to do so in relation to them all.]

(iv) The knowledge of ICI (paras 17 to 20) and the advice given by them (para 21);

(v) Whether ICI engaged in conduct contravening s 52 of the Trade Practices Act 1974 (para 23), leaving aside issues of reliance on such conduct and consequential damage;

(vii) Assuming a duty of care, whether ICI acted negligently in relation to persons in the position of the applicants and group members (paras 26 and 27), leaving aside all issues of damage. If it is correct, as ICI's counsel say, that the question of adequacy of testing varies for each method of contamination alleged, the evidence should address adequacy in relation to each method.