FEDERAL COURT OF AUSTRALIA

Murphy v Overton Investments Pty Ltd [1999] FCA 1123

PRACTICE & PROCEDURE – representative proceedings under Pt IVA Federal Court of Australia Act 1976 – whether proceeding properly commenced as representative proceeding – whether “substantial common issue of fact or law” – whether applicant may rely on matters raised in defence as being substantial common issues – whether proceedings, even if properly commenced, should no longer continue as representative proceedings – whether statement of claim should be struck out as inadequately particularised - whether commencement of proceedings in Federal Court an abuse of process

WORDS & PHRASES – “substantial common issue”

Federal Court of Australia Act 1976 (Cth), s33C(1)(c), s33H, s33N

Connell v Nevada Financial Group Pty Ltd (1996) 139 ALR 723, cited

Silkfield Pty Ltd v Wong (1998) 159 ALR 329, cited

Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 636, cited

JOHN JAMES MURPHY v OVERTON INVESTMENTS PTY LTD

N159 OF 1999

17 AUGUST 1999

EMMETT J

SYDNEY

THE COURT ORDERS THAT:

1.         The proceeding no longer continue under Part IVA of the Federal Court of Australia Act 1976.

2.         The Further Amended Statement of Claim be struck out.

3.         The Second, Third and Fourth Applicants be removed as parties.

4.         Leave be granted to the First Applicant to file a Second Further Amended Application and Second Further Amended Statement of Claim.

5.         Any such Second Further Amended Application and Statement of Claim must be filed and served no later than 31 August 1999.

6.         Leave be granted to each of the persons referred to in Schedule A of the Further Amended Application to file an application claiming relief of the nature referred to in the Further Amended Application.

7.         Any such application may be made returnable before Emmett J.

8.         The Further Amended Notice of Motion filed on 25 June 1999 be otherwise dismissed.

9.         Costs of the notice of motion be reserved pending further argument on the question of costs.

10.       The proceedings be fixed for further argument on the question of costs and for directions generally on Monday 13 September 1999 at 9.00am.

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

REASONS FOR JUDGMENT

1                     The first respondent, Overton Investments Pty Limited (“Overton”), owns and operates the Heritage Retirement Village located at 33 Bernard Road, Padstow Heights (“the Retirement Village”).  The applicants have brought proceedings against Overton under Part IVA of the Federal Court of Australia Act 1976.  They claim to represent in excess of 100 persons (“the Lessees”) who are presently the lessees of units in the Retirement Village under leases granted by Overton.

2                     The current form of the application makes claims for:

·                    damages under section 82 of the Trade Practices Act 1974 for alleged contravention of section 52 of that Act,

·                    damages under the general law for negligent advice and fraudulent misrepresentation,

·                    a declaration that Overton is estopped from recovering certain outgoings payable under the leases,

·                    orders under section 87 of the Trade Practices Act, and

·                    orders under section 7 of the Contracts Review Act 1980 (NSW). 

The claims arise out of alleged conduct on the part of Overton in connection with the grant to the Lessees of the leases of units in the Retirement Village. 

3                     Overton has applied by notice of motion, originally filed on 8 April 1999 and subsequently amended, for the following orders:

“1.       An order that pursuant to Order 20 Rule 2(1)(b) or alternatively Order 20 Rule 2(1)(c) of the Federal Court Rules the proceedings be dismissed.

2.         An order that pursuant to Order 20 Rule 2(1)(b) or alternatively Order 20 Rule 2(1)(c) of the Federal Court Rules the proceedings be permanently stayed.

3.         An order that pursuant to Order 11 Rule 16 of the Federal Court Rules the amended Application and Amended Statement of Claim be struck out as embarrassing.

4.         An order that pursuant to Order 20 Rule 2 of the Federal Court Rules the proceedings be dismissed or permanently stayed by reason of the principles of res judicata, cause of action estoppel, issue estoppel, the principle in Port Melbourne Authority v Anshun Pty Ltd, the principle (including waiver) in Commonwealth v Verwayen, and the principle of merger in judgment by reason of the claims made and determined in Equity Division proceedings No. 1181 of 1997 in the Supreme Court of New South Wales.

5.         In the alternative, an order that pursuant to section 33N(1) of the Federal Court of Australia Act the proceedings no longer continue under Part IVA of the Federal Court of Australia Act.

6.         In the alternative, a declaration that the proceedings cannot be commenced as a representative action under Part IVA of the Federal Court of Australia Act pursuant to section 33C of the Federal Court of Australia Act.

7.         In the alternative, an order that these proceedings be transferred to the Supreme Court of New South Wales pursuant to section 5(4) Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth).

8.         In the alternative, an order that each several proceedings constituted within these proceedings be transferred to the Supreme Court of New South Wales pursuant to section 5(4) Jurisdiction of courts (Cross-vesting) Act 1987 (Cth).”

CIRCUMSTANCES SURROUNDING GRANTING OF LEASES

4                     The Retirement Village comprises 124 residential dwelling units consisting of 46 apartment type units and 78 self care type units.  Leases are granted for a term of 99 years.  The relationship between Overton and each individual Lessee is governed by the lease granted by Overton to that Lessee and a trust deed between Overton and Perpetual Trustee Company Ltd (“Perpetual”). 

5                     A sum of money was paid by each of the Lessees upon grant of a lease to such Lessee.  One quarter of the amount paid by a Lessee on grant of a lease was for the rent for the term of the lease. The rent was paid to Overton. The balance, being three-quarters of the amount paid on the grant of the lease, constituted a “lease deposit”.  The lease deposit was paid to Perpetual.  Under the terms of the trust deed, Perpetual lends 97.5 per cent of all lease deposits to Overton free of interest.

6                     A Lessee who surrenders a lease within the first 6 months receives a refund of nine-tenths of the total rent.  A Lessee who surrenders a lease within 12 months receives a refund of 80 per cent of the total rent.  A Lessee who surrenders a lease within the first 4½ years receives a refund of 10 per cent of the total rent.

7                     The letting procedure for the Retirement Village has been that Overton originally leases each unit to an incoming Lessee.  Where a Lessee desires to leave the Retirement Village, that Lessee finds a replacement Lessee.  Overton does not assist or become involved in the marketing or the promotion of a unit that is being relet by an outgoing Lessee.  If the outgoing Lessee retains an agent for that purpose, the agent is retained directly by the outgoing Lessee.

8                     When a Lessee finds a replacement Lessee, there is a simultaneous surrender of the outgoing Lessee’s lease and the grant of a new lease from Overton to the incoming Lessee. Overton asserts that at least 68 of the current Lessees have obtained their leases following such a surrender and new grant.

9                     Upon surrender of a lease, a refund of the lease deposit was to be payable.  The amount of refund, if any, of the lease deposit available to a Lessee who surrenders a lease depends upon the price paid by the incoming Lessee.  An outgoing Lessee shares in the appreciation in value with Overton on a 50/50 basis.  However, an outgoing Lessee bears the total of any depreciation in value.

10                  Prior to the grant of each lease, Overton provided to the prospective Lessee a copy of the proposed lease together with a copy of an information booklet.  The details of the information booklets varied from time to time.  The information booklets were styled:

·        Heritage Retirement Village – General Information; or

·        Local Floor Plan Booklet.

Over the period from 1986 to 1995, several versions of the relevant information booklet were utilised by Overton.  It is accepted, by the joinder of four applicants, that there are at least four classes involved in the proceedings.  The members of each class were given different forms of the information booklet.

11                  Overton asserts that, since 1986, it has always been its practice to require prospective Lessees to be represented by a solicitor when entering into a lease.  It asserts that it has been its practice not to enter into a lease in respect of a unit unless both Overton and the prospective Lessee were each represented by solicitors.  Since 1992, Overton has required all incoming Lessees to provide, prior to execution of the lease by the Lessee, a solicitor’s certificate concerning that incoming Lessee’s understanding of and agreement to the terms of the trust deed and lease.  Overton asserts that at least 72 of the current Lessees would have been required to obtain a solicitor’s certificate.

THE EARLIER PROCEEDINGS

12                  Prior to the commencement of this proceeding, there has been a history of litigation between Lessees and Overton in other courts concerning the liability of the Lessees to contribute to outgoings in respect of the Retirement Village.  In order to determine certain of the questions presently raised, it is necessary to have regard to the history of the dispute between the Lessees and Overton.

13                  In August 1996, the Lessees failed to agree to draft budgets proposed by Overton for the financial years ended 30 June 1994, 1995, 1996 and 1997.  Overton then made an application to the Residential Tenancies Tribunal of New South Wales (“the Tribunal”) against six of the Lessees.  By that application, Overton sought orders that the Lessees pay the shortfall in the operating expenses for the Retirement Village for the 1994, 1995 and 1996 financial years and pay Overton’s estimate of the level of contributions to outgoings and expenses for the Retirement Village for the 1997 financial year.  In December 1996, the Tribunal ruled that it did not have power to make the orders sought.  By way of appeal from that ruling, Overton then commenced proceedings 1407 of 1997 in the Equity Division of the Supreme Court of New South Wales.

14                  In January 1997, Overton also commenced proceedings in the Local Court of New South Wales against approximately 84 of the Lessees to recover shortfalls in contributions.  On 28 January 1997, 112 of the Lessees commenced proceedings 1181 of 1997 in the Equity Division of the Supreme Court seeking, inter alia, orders restraining Overton from prosecuting the proceedings in the Local Court.  Proceedings 1407 of 1997 were subsequently consolidated with proceedings 1181 of 1997.

15                  On 27 February 1997, Simos J made an order in proceeding 1181 of 1997 restraining Overton from prosecuting the Local Court proceedings.  As a term of that order, the plaintiff Lessees undertook to consent to judgment being entered against them in the Local Court proceedings for such amounts, if any, as the Supreme Court determines should be paid by them to Overton.  They also undertook to increase their contributions to outgoings by 10 per cent from 1 March 1997 until determination of those proceedings in the Equity Division.  In addition, Simos J directed the Lessees to take all steps to constitute a representative party to act on behalf of all of them as soon as practicable, but in any event, not later than 7 March 1997.

16                  On 14 March 1997, McLelland CJ in Eq directed that proceedings 1181 of 1997 proceed by way of pleadings and on 9 May 1997, his Honour ordered that those proceedings be expedited.  On 23 December 1997, Windeyer J determined preliminary questions formulated in those proceedings to determine the interaction between the 1989 and 1995 Retirement Village Industry Codes of Conduct and the leases granted to the Lessees.  His Honour determined those questions favourably to Overton.  An appeal from that determination to the Court of Appeal was dismissed on 3 September 1998.

17                  Overton filed a cross claim in proceedings 1181 of 1997.  The cross defendants were 112 Lessees, who were the plaintiffs.  The substance of the allegations made in the cross claim was as follows:

·                    The cross defendants are lessees under leases granted by Overton;

·                    Pursuant to clause 5 of the leases, any contributions in respect of outgoings notified by Overton to the cross defendants are due and payable within 7 days of receipt of the notice of the amount payable;

·                    Pursuant to clause 5 of the leases, Overton has claimed reimbursement, by way of contribution to outgoings, from the cross defendants;

·                    The contributions to outgoings have been calculated by Overton pursuant to clause 5 of the leases;

·                    Overton has notified the cross defendants in writing of the amount payable;

·                    The cross defendants have failed to pay the amounts notified by Overton.

In the cross claim, Overton sought an order that the cross defendants pay to Overton the amounts that continue to be outstanding under the leases as at the date of any judgment.

18                  A defence to the cross claim was filed on behalf of the cross defendants.  In the defence, the cross defendants made allegations similar to some of the allegations made in the present proceedings in the Federal Court.  In particular, the cross defendants alleged that:

·                    Overton represented to the cross defendants that the contributions for the Retirement Village would never exceed an amount which could comfortably be paid by a resident on a full pension without recourse to other income and that the contributions required to be paid would never exceed CPI increases.

·                    As a result of that representation, the cross defendants assumed that the contributions required to be paid would not exceed the lesser of CPI increases and that sum which a resident on a full pension would be able to afford to pay without recourse to other income.

·                    Overton intended that the cross defendants make that assumption.

·                    On the basis of that assumption, the cross defendants entered into their leases with Overton.

·                    The cross defendants have acted to their detriment in so far as Overton is entitled to recover from the cross defendants a contribution that is in excess of that payable in accordance with the assumption.

·                    In the circumstances, it would be unconscionable for Overton to recover any sum greater than that which would be payable in accordance with the assumption.

19                  In addition, the defences alleged that the leases were unjust within the meaning of section 7 of the Contracts Review Act in circumstances where Overton was aware that the cross defendants’ income was fixed and would not be able to finance contributions that increased over and above the lesser of CPI increases and the sum which a cross defendant on a full pension would be able to afford to pay without recourse to other income.

20                  On 26 March 1998 and 3 April 1998, Windeyer J made orders under Part 72 of the Supreme Court Rules referring to Mr Peter Taylor SC for enquiry into and report on all of the issues arising on the cross claim as to the amounts due to Overton by the 112 cross defendants.

21                  All parties agreed that it was practicable to separate the “common” grounds of defence to the cross claim from the other grounds, relying upon misrepresentations and the Contracts Review Act.  Accordingly, Mr Taylor SC made orders that, in effect, divided the reference into two parts.  The first concerned the “common” defences based upon, inter alia, the construction of the leases.  The second part concerned the specific defences of the nature that I have just outlined.  Mr Taylor SC conducted the first part of the reference during August and October 1998 and completed his report in November 1998. 

22                  The matter came before Windeyer J on 17 December 1998 for the purposes of considering the report of Mr Taylor SC.  At that time, there was discussion as to the further conduct of the action and how that ought to be handled in the light of an application by Overton for entry of judgment on the cross claim.  By that time, Windeyer J had concluded that the particular defences to the cross claim could not be allowed to proceed as then constituted.  Windeyer J observed that it had been envisaged by Simos J that a person would be appointed to represent the Lessees on the claim originally made before Simos J and that, once that claim, as to the rights of Overton to charge outgoings to the group members, was determined, judgment would be entered by consent on the actions brought by Overton in the Local Court.

23                  In the light of the matters raised by the cross defendants in their defence to cross claims, Windeyer J considered that it was necessary for the Court to take some control.  Accordingly, his Honour indicated that the proceedings on the existing cross claim must be brought to an end and that individual claims made in the defences must be raised by separate actions.  His Honour said, therefore, that any matters raised as individual defences to the cross claim would have to be pursued by separate action.  His Honour directed the solicitor for the cross defendants to be in a position to inform the Court on 4 February 1999 which cross defendants intended to pursue such separate claims.

24                  On 4 February 1999, Windeyer J ordered that the cross defendants file and serve on Overton on or before 13 February 1999 a document setting out, inter alia, the cross defendant’s contentions as to the amount for which judgment should be entered against each of them in accordance with the report of the referee.  His Honour also directed that each of the cross defendants who wished to bring claims against Overton file and serve by 13 February 1999 a verified statement of claim and a notice of motion seeking further directions returnable before Windeyer J on 24 February 1999.  The proceedings were listed for further argument on 24 February 1999 on the question of:

·                    the amount of the judgment to be entered against each of the cross defendants pursuant to the referee’s report;

·                    whether the injunction restraining Overton from proceeding in the Local Court be dissolved;

·                    whether, and if so on what terms, there should be a stay of any judgment in the proceedings against the cross defendants pending determination of their claims against Overton.

25                  None of the cross defendants filed or served a verified statement of claim as contemplated by his Honour.  However, the solicitors for the cross defendants prepared statements of claim on behalf of some of the cross defendants.  While those statements of claim were not formally filed and served on Overton, they were verified and Overton has been provided with copies of them.  The wording of the statements of claim is substantially different from that of the further amended statement of claim now before me.  However, the substance of the claims made is much the same as those made in the pleading presently before me. 

26                  On 24 February 1999, senior counsel then appearing for Overton before Windeyer J, after referring to the statements of claim, invited counsel for the cross defendants to file them in the Equity Division.  That invitation was apparently repeated on 16 March 1999 in open court.  The invitation was not taken up.

27                  On 24 February 1999, Windeyer J made orders as follows:

·                    That each of the cross defendants named in a schedule make an interim payment to Overton of the amount shown in that schedule;

·                    That upon Overton undertaking to the Court to take no further steps in the proceedings in the Local Court, the injunction granted by Simos J on 27 February 1997 be dissolved;

·                    That the proceedings be listed for further argument on 16 March 1999 on the question of the amount of the judgment to be entered against each of the cross defendants pursuant to the referee’s report.

28                  Seventeen of the cross defendants failed to comply with the order made by Windeyer J for an interim payment.  Overton subsequently commenced proceedings against those cross defendants for contempt of Court.  I do not have before me any evidence as to the result of those proceedings.

29                  On 30 March 1999, after recounting much of the background outlined above, Windeyer J observed that it had been accepted or ordered that, in one form or another, separate actions needed to be brought by the cross defendants for the claims set forth in their defence to the cross claim.  His Honour also observed, however, that those claims would require substantive orders if they are to be of any avail.

30                  In the meantime, this proceeding had been commenced in the Federal Court on 23 February 1999.  Windeyer J said on 30 March 1999 that, had the cross defendants’ claims based on misrepresentation and the Contracts Review Act proceeded as he had envisaged by separate action in the Supreme Court, it would have been appropriate to defer making any order for costs on the cross claim until those matters were determined.  However, his Honour did not consider that the same position arose after this proceeding had been commenced in the Federal Court.

31                  By notice of motion filed on 23 March 1999, most of the cross defendants sought a stay of any judgment entered against them on the cross claim in proceedings 1181 of 1997.  The basis for that stay was that this proceeding had been commenced in the Federal Court.  It was apparently thought that, if the action in this Court succeeded in full, it was likely that the damages awarded to the cross defendants would exceed the amount of the judgments then being entered against them individually.

32                  Windeyer J concluded that the cross defendants’ claims must be brought by separate action and that, accordingly, judgments could not be entered.  Had the Local Court claims continued, it was likely that, if the defences to the cross claim were raised in the Local Court proceedings, they would either have been heard in the Local Court to conclusion, or the Local Court proceedings would have been stayed to allow the defences to be raised in a court having appropriate jurisdiction.  His Honour considered that at least two of the pendant claims raised in this proceeding in the Federal Court were always recognised, albeit perhaps incorrectly, as being part of the matters for determination in the Equity Division.  His Honour considered that that provided justification for a stay.  However, his Honour considered that it would be unfair to Overton not to require a substantial payment towards outgoings for which the cross defendants were liable.

33                  His Honour then ordered that:

·                    The report of Mr Taylor SC be adopted;

·                    All matters not yet finally determined by Mr Taylor SC be determined by the Court;

·                    All matters arising under the individual defences raised by the cross defendants, being estoppel and Contracts Review Act defences, be brought to trial by separate action by the cross defendants raising such matters but that judgments be entered on Overton’s cross claim without regard to such defences, subject to any application for a stay;

·                    Judgment be entered for Overton on the cross claim against individual cross defendants for the amounts set forth in a schedule;

·                    Proceedings for enforcement of those judgments against the cross defendants (subject to some exceptions) be stayed upon condition that the cross defendants obtaining the benefit of such stay pay to Overton 50 per cent of the amount shown against the name of that cross defendant in the schedule within 21 days, such stay to continue until the conclusion of the Federal Court proceeding or earlier order of the Supreme Court.

THIS PROCEEDING

34                  The proceeding in this Court was commenced on 23 February 1999 by the filing of an application and statement of claim.  On 18 May 1999, after hearing argument on Overton’s notice of motion, I ordered that the statement of claim filed on 23 February 1999 be struck out but that leave be given to the-then applicant to file an amended statement of claim and an amended application.  Overton’s notice of motion was adjourned for further hearing on 30 June 1999.  An amended statement of claim was filed on 8 June 1999.

35                  On 30 June 1999, after further hearing of Overton’s notice of motion, I ordered that certain paragraphs of the amended statement of claim be struck out.  I also gave leave for the joinder as applicants of other representative parties.  The applicants were also given leave to file, no later than 12 July 1999, a further amended application and a further amended statement of claim containing amended provisions to take the place of those paragraphs which I then ordered to be struck out.  A further amended statement of claim was filed on 12 July 1999.

36                  I stood Overton’s motion over for further hearing on 22 July 1999.  On that day, for reasons that are not presently relevant, the hearing of the motion was further adjourned to 5 August 1999 and on that day the hearing of Overton’s motion was completed.

37                  The further amended statement of claim alleges six different causes of action as follows:

·                    misleading or deceptive conduct in contravention of section 52 of the Trade Practices Act;

·                    estoppel by representation;

·                    negligent advice;

·                    fraudulent misrepresentation;

·                    unconscionability under the general law and under section 51AA of the Trade Practices Act;

·                    relief under section 7 of the Contracts Review Act.

38                  In addition, the further amended statement of claim also makes a claim for damages against Mr John Edward James who, since October 1992, has been the managing director of Overton.  The applicants claim that Mr James was involved in certain of the contraventions of section 52 of the Trade Practices Act alleged against Overton. 

39                  I shall deal separately with each cause of action.  The references are to paragraphs of the further amended statement of claim.

Misleading or Deceptive Conduct

40                  The allegations under this head may be summarised as follows.

1.1       (Para. 39)  Prior to each group member entering into a lease from Overton, Overton represented to such group member:

(a)        That certain figures contained in documents furnished by Overton to such group member constituted an accurate estimate by Overton, at the time, of the total outgoings for which the group member would be liable under the proposed lease.

(b)        That all outgoings incurred by Overton in the operation of the Retirement Village at the time of the estimate had been incorporated into the figures contained in the relevant documents.

(c)        That the quantum of future total outgoings would be limited to the figures shown in the relevant documents plus such increases in costs which were fairly and/or reasonably based on the outgoings comprised in the figures contained in the relevant documents.

(d)        That any increases in outgoings would be limited to ensure that residents on a full pension could afford to pay all outgoings for which they were liable without recourse to depleting their assets.

1.2       (Para. 40)  Overton also represented to certain of the group members that:

(e)        Any increases in outgoings would be limited to ensure that residents on a full pension could afford to pay all outgoings for which they were liable without recourse to depleting their assets and any increases in outgoings would be limited to increases in CPI.

1.3       (Para. 41)  The representations referred to above were false.

1.4       (Para. 42)  Prior to any group member entering into a lease, Overton failed to inform that group member that:

·                    Overton had excluded from its calculations of the figures in the relevant documents certain of the outgoings which would, in fact, be recoverable under the lease to that group member;

·                    that the figures included in the documents were not an accurate estimate by Overton, at the time, of the total outgoings for which the group members will be liable under their leases;

·                    that it was open to Overton to increase substantially the level of outgoings under the leases without regard to the basis upon which the figures included in the relevant documents had been calculated;

·                    that it was open to Overton so to increase future outgoings recoverable under the leases that residents on a full pension would not be able to afford to pay all outgoings for which they were liable without recourse to depleting their assets;

·                    that it was open to Overton under each lease to recover all outgoings incurred for such levels of expenditure as Overton in its sole discretion saw fit to incur, even though that involved significant increases in staffing levels, catering expenses and expenses relating to residents’ functions and entertainment.

1.5       (Para. 43)  By reason of those matters, Overton engaged in conduct in trade or commerce that was misleading or deceptive or was likely to be misleading or deceptive.

41                  The claims by various group members are based on several different documents.  Each group member was furnished with a proposed form of lease that stated the initial contribution that the Lessee would be called upon to pay.  In addition, Overton furnished group members with information booklets that set out an estimate of the level of costs payable by Lessees for various units.  The form of the documents changed from time to time.  In fact, four different forms of booklet and lease were utilised by Overton during the period in question.  Representations (a) to (d) referred to in paragraph 1.1 above are said to be implied from the terms of those documents.  Representation (e) referred to in paragraph 1.2 above is said to have been made orally to certain of the Lessees.

Negligent Advice

42                  The claims of the applicants under this head may be summarised as follows:

2.1       (Para. 57)  Overton as manager of the Retirement Village undertook to give advice to prospective Lessees and held itself out as being competent to give advice as to the level of outgoings payable by Lessees.

2.2       (Para. 58)  It was reasonable for group members to rely on such advice.

2.3       (Para. 58A)  In making representations referred to in paragraphs 1.1 and 1.2, Overton gave advice to group members.

2.4       (Para. 59)  In giving such advice, Overton knew or ought to have known that it would be relied on by the group members when entering into leases.

2.5       (Para. 60)  Each group member relied on the advice when entering into a relevant lease.

2.6       (Para. 61 and 62)  In all the circumstances, Overton owed a duty to each group member to exercise due care, skill and diligence when giving the advice.

2.7       (Para. 63)  Overton breached its duty of care when giving the said advice and when failing to inform each group member of the matters referred to in paragraph 1.4.

Fraudulent Misrepresentations

43                  The allegations under this head are as follows:

3.1       (Para. 65)  The representations referred to in paragraph 1.1 and 1.2 above, in so far as they were made after 10 March 1994, were false at the time they were made.

3.2       (Para. 66)  Overton knew the representations, in so far as they were made after 10 March 1994, were false at the time they were made or alternatively did not care whether the representations were true or false.

3.3       (Para. 67)  Overton intended that each of the representations, in so far as they were made after 10 March 1994, would be relied upon by each group member when entering into a lease.

3.4       (Para. 68)  Each group member who entered into a lease after 10 March 1994 relied upon the representations.

44                  The significance of 10 March 1994 is that that is the date of a letter from Messrs Pannel Kerr Forster, chartered accountants of Overton, to Mr James in which Overton was advised that the proper level of expenditure for the 1992-93 year was substantially in excess of the amounts shown in the relevant documents.

Estoppel by Representation

45                  The claims under this head may be summarised as follows:

4.1       (Para. 44)  Each group member assumed the representations referred to in paragraph 1.1 and 1.2 above were true and correct.

4.2       (Para. 45)  The representations and the conduct referred to in paragraph 1.1, 1.2 and 1.4 were relied on by each group member when entering into a lease.

4.3       (Para. 46)  At the time that each group member entered into a lease, Overton was aware of the assumption made by each group member and was aware that the assumptions were relied on by the group members when entering into a lease.

4.4       (Para. 47)  Each group member acted to his or her detriment in entering into a lease in so far as Overton departed from the assumptions.

4.5       (Para. 48)  In all of the circumstances, it would be unconscionable for Overton to recover outgoings in so far as they exceed the assumptions made by each group member as to the amount of the outgoings.

4.6       (Para. 49)  In the circumstances, Overton is estopped from recovering outgoings in so far as they exceed the assumptions made by each group member as to the amount of outgoings either for the duration of the lease or alternatively until reasonable notice is given by Overton of any substantial change in the level of outgoings.

Contracts Review Act

46                  The claims under the Contracts Review Act may be summarised as follows:

5.1       (Para. 73)  There was a material inequality in the bargaining power between each group member and Overton.

5.2       (Para. 74 and 75)  There was no negotiation of the terms of clause 5 of the leases and it was not reasonably practicable for each group member to negotiate for the alteration of or to reject any of the provisions of clause 5 of the lease.

5.3       (Para. 76)  At the time that each group member entered into a lease, that group member was not able to protect his or her interests in so far as Overton was able to recover by way of outgoings under clause 5 amounts in excess of those reasonably and fairly based on the figures contained in the relevant documents.

5.4       (Para. 77)  Overton did not accurately explain to each group member the effect of clause 5 of the lease.

5.5       (Para. 78)  The provisions of clause 5 of each lease whereby a group member is obliged to pay;

·                    legal and accounting costs incurred by Overton in litigation with the residents and/or the Director-General of the Department of Fair Trading or any other office or department of the New South Wales executive; and

·                    interests on monies borrowed or raised impose conditions on the individual Lessees;

are not reasonably necessary for the protection of the legitimate interests of Overton.

5.6       (Para. 80)  By reason of those matters, each of the leases was unjust, harsh or oppressive within the meaning of section 7 of the Contracts Review Act.

Unconscionability

47                  The applicants do not assert that any of the issues raised under this heading are substantial common issues.

PARTICULARS

48                  Paragraph 39 of the further amended statement of claim asserts that “when, prior to each group member entering into their individual lease, each group member was handed the lease they were to execute and their information booklet, by the servants or agents of Overton”, Overton made representations (a) to (d) to each of the Lessees.  The allegation is that the representations are to be implied.  It is not entirely clear whether the implication is said to arise from the mere handing to a prospective Lessee by a servant or agent of Overton of the form of lease and one of the information booklets. 

49                  However, whether the mere handing of the documents gave rise to the representations alleged will depend upon such things as:

·                    the precise circumstances in which the booklet was handed to the group member,

·                    any conversation that took place at that time between Overton’s agent or servant on the one hand and the Lessee on the other hand, and

·                    who on behalf of the Lessee received the booklet.  For example, Overton asserts that many of the Lessees were represented by solicitors in connection with the grant of their leases. 

50                  When giving leave for the further amended statement of claim to be filed, I directed that the applicants should particularise the claims of all of the Lessees in the manner specified in Connell v Nevada Financial Group Pty Ltd (1996) 139 ALR 723 where Drummond J said (at 728):

“It would generally be necessary for the applicants facing such a challenge to put in evidence setting out as precisely as possible the statements made that are said to contain each oral (or written) representation, if the pleading does not particularise the precise words said to contain the representation to each group member.”

51                  At present, the further amended statement of claim does not particularise in any manner the circumstances in which any lease and information booklet were handed to any particular Lessee.  To that extent, I consider that the further amended statement of claim is deficient. Thus, it is clear that proper particulars will be required of the circumstances in which each of the Lessees is alleged to have been furnished with a copy of the relevant documents. 

52                  The further amended statement of claim alleges the same representations were made to each of the Lessees. Significantly, the absence of particulars may tend to obscure the question of whether or not there is in truth a substantial common issue raised by the allegations made in paragraph 39.  That is to say, it is by no means clear that, as a matter of fact, the same issue concerning representations will arise in relation to the claim of each group member. When those particulars have been furnished, it could well be that any apparent identity in the circumstances of making the alleged representations will evaporate. 

53                  While further particulars must be furnished, the deficiency in particulars does not justify summary dismissal of the proceeding. 

ABUSE OF PROCESS

54                  The thrust of Overton’s contention is that, in the light of the current state of the proceedings in the Equity Division of the Supreme Court, it was an abuse of process or vexatious for the applicants to purport to commence proceedings under Part IVA in the Federal Court.  The assertion is that Windeyer J at the end of 1998 and early 1999 evinced a willingness to authorise a process that would have enabled individual claims by the Lessees to be determined in the Supreme Court.

55                  However, it is by no means clear that Windeyer J addressed in any detail the precise procedure that might be adopted.  The Supreme Court of New South Wales does not have available to it a procedure equivalent to Part IVA of the Federal Court Act.  Simos J clearly had in mind a process that involved a representative proceeding.  Windeyer J referred to that observation by Simos J.  Further, it is clear that, if a representative process is available in this Court that would not have been available in the Supreme Court, it would be sensible and appropriate for the procedure in this Court to be adopted on behalf of the Lessees. 

56                  The proceedings in the Supreme Court had been taken as far as they could in resolving the issues raised between the parties as to the true liability of the Lessees under their leases.  Further, Overton has not indicated how the procedures of the Supreme Court can be adapted to deal with the many claims formulated on behalf of Lessees.  Even in the absence of availability of Part IVA in this Court, the Supreme Court does not have any particular advantage over this Court, other than having resolved the questions of construction that arose under the leases. 

57                  I do not consider that the commencement of these proceedings, with a view to taking advantage of the procedure under Part IVA, constituted an abuse of the process of this Court.  Nor, in the circumstances, was it vexatious.  I have reached that conclusion irrespective of whether or not I conclude that the proceedings fall within section 33C(1).  Apart from the obfuscation created by the successive forms of statement of claim filed on behalf of the applicants, the question of whether section 33C(1)(c) is satisfied is not without difficulty.  I would not, irrespective of the outcome of that question, dismiss the proceeding as an abuse of process.

RES JUDICATA

58                  Overton contends that the effect of the proceedings before Windeyer J is that it is no longer open to any of the Lessees who were cross defendants in those proceedings to pursue the claims now made in the further amended statement of claim.  The defence filed by Overton relies on res judicata, issue estoppel and related defences.  I do not consider that it is appropriate to decide those defences on a summary basis, although it may be possible to decide those questions separately under Order 29 at a later stage in the proceedings.

59                  Furthermore, I do not consider that it would be more convenient for any such question to be determined in the Supreme Court by Windeyer J.  Windeyer J decided the questions that are said to give rise to the res judicata and related defences.  However, his Honour is not in any better position than any other judge to determine whether that decision constitutes a bar to the claims now being made.

THE SCHEME OF PART IVA

60                  The principal issue that arose on the hearing of Overton’s motion concerned the application of Part IVA of the Federal Court Act.  It is desirable, therefore, to say something about the scheme of Part IVA.

61                  Under section 33C(1), where:

“(a)     7 or more persons have claims against the same person; and

(b)     the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and

(c)      the claims of all of those persons give rise to a substantial common issue of law or fact;

a proceeding may be commenced by one or more of those persons as representing some or all of them.”

However, under section 33B, a proceeding may only be brought under Part IVA in respect of a cause of action that arose after 5 March 1992, being the date of commencement of the Federal Court of Australia Amendment Act 1991.

62                  A representative proceeding may be commenced under Part IVA, notwithstanding that it includes claims for damages that would require individual assessment and whether or not it is concerned with separate contracts or transactions between the respondent in the proceeding and individual group members and whether or not the proceeding involves separate acts or omissions of the respondent done or omitted to be done in relation to individual group members.  That is the effect of section 33C(2).  That is consistent with the prerequisite of section 33C(1)(b) that the claims of all claimants must be in respect of or arise out of similar or related circumstances.  Nevertheless, there must also be found a substantial common issue either of law or of fact.

63                  Section 33H(1) provides that an application commencing a representative proceeding must:

“(a)     describe or otherwise identify the group members to whom the proceeding relates; and

(b)       specify the nature of the claims made on behalf of the group members and the relief claimed; and

(c)        specify the questions of law or fact common to the claims of the group members.”

It is not necessary to name or specify the number of the group members.  However, the further amended application filed in the proceeding identifies in excess of 100 individuals as being members of the group.  Each member of the group is a Lessee of a unit in the Retirement Village under a lease granted by Overton.  There are presently four applicants.  That reflects the circumstance that, on one view, there are four different representative actions comprised in the proceeding.  I shall elaborate on that point later.

64                  Section 33N(1) of the Federal Court Act provides as follows:

“The Court may, on application by a respondent, order that a proceeding no longer continue under Part IVA where it is satisfied that it is in the interests of justice to do so because:

“(a)     the costs that would be incurred if the proceeding were to continue as a representative proceeding are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding; or

(b)     all the relief sought can be obtained by means of a proceeding other than a representative proceeding under [Part IVA]; or

(c)      the representative proceeding will not provide an efficient and effective means of dealing with the claims of group members; or

(d)     it is otherwise inappropriate that the claims be pursued by means of a representative proceeding.”

Overton claims that, even if the requirements of section 33C(1)(c) have been satisfied, nevertheless an order should be made under section 33N.

65                  Whether the applicants are permitted by section 33C(1) to commence the action as a representative proceeding must be tested by reference to those questions or issues common to the claims of all group members, as that class is defined in the application – Silkfield Pty Limited v Wong (1998) 159 ALR 329 at 340.  Section 33H requires the applicants to demonstrate, in the originating application, that grounds then exist which show that the action is properly commenced as a representative proceeding.  In order that a matter may properly proceed under Part IVA, it is necessary that the pleadings filed on behalf of the applicants adequately indicate the basis upon which it is claimed that the procedures mentioned in Part IVA are said to be available.  If a representative applicant has complied with those obligations, it should be possible for the Court to determine, by reference to the application and supporting statement of claim, whether an action brought under Part IVA meets the requirements of section 33C(1)(c) – Silkfield (at page 342).

66                  Thus, it is not sufficient that a substantial common issue of fact or law be raised by a defence.  That is of some significance in the present case.  The requirement of section 33H that the initiating process specify the questions of law or fact common to the claims of the group members indicates that the common issues must arise on the statement of claim and not by reason of some defence, such as a defence in the nature of confession and avoidance, which might be pleaded by a respondent.  A respondent could, for whatever reason, choose not to rely on a limitation defence or a res judicata defence that might be available.  Such an issue would only be raised by reason of the defence filed on behalf of a respondent.  It would be curious for section 33H to require an applicant to specify common issues that might be raised by a defence. 

67                  Overton has foreshadowed that it intends to rely on limitation defences and res judicata or issue estoppel defences.  In the course of the hearing of Overton’s motion, I required Overton to file an indicative defence in an endeavour to determine the nature of the issues that were likely to be raised in the proceeding.  While that might not be of particular relevance in relation to the question raised by section 33C(1), it appears to me to be directly material to the exercise of any discretion conferred by section 33N.  That is to say, even though the claims as pleaded in a statement of claim may give rise, on the pleading, to substantial common issues of law or fact, a defence may indicate that there is, in fact, no substantial common issue to be determined by reason of admissions made on the pleadings. 

68                  Accordingly, consideration of the questions raised in relation to section 33C(1) must proceed without reference to the issues that might be raised by Overton’s defence.  On the other hand, consideration of the issues raised by section 33N may well take account of admissions, made by Overton in any defence, that could have the effect of eliminating issues that would otherwise arise on the further amended statement of claim.

69                  The question that arises under section 33C(1)(c) concerns the effect of the word “substantial”.  That word is imprecise and its application involves an element of evaluation – Silkfield (at 342).  Some guidance is given as to the range of considerations that are relevant in making such an evaluation by the Minister’s speech on the second reading of the Bill for the enactment that inserted Part IVA.  The objectives of the new procedure proposed by the Bill were to:

“enhance access to justice, reduce the costs of proceedings and promote efficiency in the use of court resources.”

The inherently imprecise word “substantial” should be given a meaning, in the context of section 33C(1)(c), that furthers those objectives – Silkfield (at 343).

70                  A common issue justifies the use of the Part IVA procedure only where it is an issue with some special significance for the resolution of the claims of all the group members.  The objectives of the procedure cannot be achieved unless determination of the issue or issues common to the claims of all group members is likely to have a major impact on the conduct and outcome of the litigation – Silkfield (at 344). 

71                  Determination of the issue may not necessarily result in resolution of the whole of the group members’ claims or even of an element of those claims, such as the liability of the respondent to all.  But where such an issue can be seen, in the circumstances of the particular case, to be a matter the resolution of which will have a major impact on the litigation, because it is an issue at the core of the dispute between the respondent and each group member, then it can properly be described as being a “substantial” common issue – Silkfield (at 345).

72                  Thus, a common issue may only be one of a number of issues that has to be determined to resolve each group member’s claims and that is of no more importance, practically or legally, to the outcome of all of the members claims than any of the non common issues in each claim.  In such a case, determination of the common issue in representative proceedings will be highly unlikely to achieve the purposes of the legislation, namely, the economic disposition of any individual group member’s claim or the cost-effective use of legal resources, including Court resources, in disposing of a large number of claims.  Accordingly, it would not be capable of being a “substantial” common issue – Silkfield (at 345).

73                  In one case, a critical issue may be whether an act or omission of the respondent caused or contributed to a fire and explosion which caused damage to all of the group members – Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 636 paragraphs 11-13.  In another case, the critical question may be whether a particular representation is misleading – Silkfield (at 345).  In the latter case, however, it would be necessary to show that the same representation was, in fact, made to all group members in virtually identical circumstances.

74                  If a common issue will be “substantial” in any single action involving each of the group members, it will not cease to be “substantial” simply because of the joinder of all of the claims in a representative proceeding.  Otherwise, the benefits to be derived from Part IVA, namely the saving of Court time, the saving of parties’ costs, the efficient administration of justice and so on, would be available to a small group but would be lost if the group were very large.  Such an approach could not have been intended – Johnson Tiles Pty Ltd (at paragraph 16). 

75                  Having regard to the nature of the allegations made by the applicants in these proceedings on behalf of the Lessees, it is very likely that Overton will call as witnesses solicitors who were engaged by outgoing and current Lessees and who provided advice to them in connection with the grant of leases.  It is also possible that former lessees and real estate agents engaged by them would also be called as witnesses.  Such evidence will relate to the nature of information furnished and statements made to any Lessees.

76                  The circumstances outlined above indicate that, even if there are common issues raised in the various claims made on behalf of each Lessee, there will be considerable evidence unique to each of the Lessees.  That may have a bearing, first, on whether it can be said that there are “substantial common issues” raised by the various individual claims and, secondly, on whether it is appropriate for the proceedings to continue under Part IVA even if there are substantial common issues.

77                  The Full Court’s decision in Silkfield is the subject of an appeal to the High Court.  The appeal has been argued but no decision has yet been given.  The outcome of that appeal could have an effect on this proceeding if the High Court were to cast doubt on the correctness of the reasoning of the Full Court. However, I must approach the task before me in deciding the matters raised by Overton’s motion on the basis that the Full Court’s reasoning is correct. 

COMMON ISSUES

78                  In order to comply with section 33H, the applicants assert, in the further amended application, that the questions of law or fact common to the claims of the group members are as set out in Schedule B to that application.  A copy of Schedule B is attached as Appendix 1 to these reasons.  In the course of argument, counsel for the applicants conceded that issues 18 to 23 inclusive were not common issues.  Senior counsel for Overton accepted that issues 7 to 16 inclusive were common issues to which the applicants claims give rise but disputed that the other issues were common.

79                  On the other hand, Overton contended that there are many more issues to which the applicants’ claims give rise that are not common.  A schedule of some 69 issues was prepared on behalf of Overton to demonstrate the extent of issues that would arise that would not be common.  While counsel for the applicants contended that some of those issues were in fact common issues, he accepted that a large number of those issues would not be common. 

80                  The first three issues in Schedule B raise the question of the construction of the leases and the information booklets.  These issues are whether the words of the relevant documents give rise to the representations (a) to (d) referred to in paragraph 1.2 above.  It is not entirely clear whether the assertion is that merely by handing over the relevant documents, Overton made the alleged representations.  As I have indicated above, the representations are said to be implied. Thus, representations (a) to (c) are said to arise from the fact that “an estimate unless otherwise expressly stated, is accurate and is based on all outgoings as defined in the lease.”  Nevertheless, as I have indicated above, the circumstances in which the documents were handed to a Lessee would have a bearing on whether any representation was made.

81                  It could be that there are issues common to the claims by all of the group members as to the meaning of particular words contained in the documents in question.  In other words, there could be a question as to whether the documents are capable of giving rise to representations (a) to (d).  That, however, is not alleged in terms.  In any event, such questions would not take very long to resolve. Further, their resolution would not have a significant bearing on the total cost of litigation necessary to determine the claims of all group members. Even if it were resolved, it would not be decisive because it would still be necessary to consider the circumstances in which the relevant documents were furnished to each of the Lessees. 

82                  In addition, whether the furnishing of the documents constitutes an actionable representation would depend upon how they were understood by any particular group member. The understanding of a particular Lessee would be relevant to the question of the causal connection between the alleged conduct on the part of Overton and the damage alleged.  That is to say, the understanding of individual group members bears on the question of reliance. Further, in particular circumstances, it may not have been misleading or deceptive for the documents to be furnished to a Lessee where, for example, they were handed to the Lessee’s solicitor. 

83                  Even if the Court were to determine that the mere handing over of the relevant documents was not capable of giving rise to the representations alleged, that would not be decisive of many of the claims.  There are also in the order of 80 claims that are based on alleged oral representations unique to individual Lessees as referred to in paragraph 1.2 above.  Such allegations could not give rise to a common issue since it is not asserted that the oral representations were in identical terms or were made at the same time.  Nor is any implication said to arise from any particular words used.  The only issue in relation to the claims of each of those Lessees is whether the words alleged were used and how they were understood and acted upon by the relevant Lessee, if at all.

84                  Issues 4 and 5 in Schedule B relate to the falsity of the alleged representations.  The essence of the first three representations is that the figures contained in the relevant documents were based on all outgoings for which Lessees could be made liable.  The complaint is that the figures fail to take into account many outgoings that, as the Supreme Court has now determined, Overton was entitled to pass on to the Lessees.  The complaint has nothing to do with the accuracy, as an estimate, of any estimate contained in the relevant documents of the limited outgoings that were in fact taken into account.

85                  Thus, as I understand the complaint, it is really a combination of the first three representations that constitutes its essence.  The essence of the complaint is that the relevant documents represented that the figures shown in them took into account all outgoings that Overton was entitled to pass on to the Lessees.  So understood, there is no real issue as to the truth or falsity of such a representation.  It is clear, from the history of the dispute between the parties to date, that the figures in the relevant documents did not take into account all outgoings that Overton is entitled, under the terms of the leases, to pass on to the Lessees.  Accordingly, while the question of falsity of representations may be common to all claims, that is not a substantial issue in the proceedings as I apprehend them.

86                  Issue 6 is concerned with the allegation that failure on the part of Overton to disclose the matters referred to in paragraph 1.4 above was conduct that was misleading or deceptive or likely to mislead or deceive.  The pleading, as it stands, does not allege that that of itself gives rise to contravention of section 52.  It is the combination of the alleged representations and the failure to disclose the matters that is said to constitute a contravention of section 52 of the Trade Practices Act 1974.

87                  In any event, whether the failure to disclose the relevant material was misleading or deceptive will depend upon the particular circumstances of the relationship between Overton and each individual group member.  Whether it was misleading or deceptive not to make the disclosure, in circumstances where a group member was represented by an independent solicitor, will depend entirely on the circumstances of each case. While those considerations may not necessarily be relevant to the application of section 33C(1)(c), I consider that they are very material to the questions arising under section 33N.

88                  Issues 7 to 16 are conceded by Overton to be common issues.  However, they are essentially matters of accounting analysis and detail that are not really in issue, on a proper analysis of the Lessees’ complaints.  I do not consider that these issues are substantial in the sense that they are likely to have a major impact on the conduct and outcome of the litigation.  They are not issues that are at the core of the dispute.

89                  Issue 17 concerns the allegation relevant to the negligent advice count that Overton, as manager of the Retirement Village, undertook to give advice as to the level of outgoings payable by Lessees.  Whether the conduct of Overton amounted to an undertaking to give advice must depend upon an analysis of the circumstances relating to each individual group member.  I do not consider that this issue is a common issue.

90                  Issues 24 and 25 relate to the allegation made in the further amended statement of claim that the representations alleged were made fraudulently, in so far as they were made after 10 March 1994.  The first allegation is that Overton intended that each of the representations would be relied on by group members when entering into leases and knew that each representation was false.

91                  On proper analysis, the representation made to each separate group member, if made, was a separate act on the part of Overton.  Nevertheless, there may well be a common element in the factual enquiry that would be undertaken in order to determine whether the allegation is made out.  As a pragmatic fact, if the applicants establish that Overton made the representations, it may not be difficult for an inference to be drawn that Overton intended the representations to be relied on.  If it is established, in relation to any one of the group members, that Overton knew that the representation was false or did not care whether it was true or false and intended that the representation be relied on, an inference could well be available that the same circumstances applied in relation to each other group member.

92                  On the other hand, while in a pragmatic sense the same question arises in relation to each group member, the question is not strictly common.  That is to say, similar facts must be established in relation to each group member.  In that regard, it is necessary to have regard to the distinction drawn between section 33C(1)(b) and section 33C(1)(c).  Under paragraph (b), the claims may arise out of similar or related circumstances.  However, the claims must give rise to a common issue.  The only common issue that arises in relation to the fraud allegation is whether or not Overton received the letter of 10 March 1994 and understood its contents.  That is unlikely to be in dispute.  Accordingly, I do not consider that the outcome of that issue is likely to have a major impact on the conduct and outcome of the litigation.  It is not an issue at the core of the dispute.  Accordingly, I do not consider that it is substantial within section 33C(1)(c).

93                  Issue 26 raises the involvement of Mr James, the second respondent, in the context of the allegation that Mr James was involved in any contravention by Overton of the Trade Practices Act.  The allegation against Mr James is also based on knowledge of the contents of the letter of 10 March 1994.  For the reasons that I have just indicated concerning the allegation of fraudulent misrepresentation, I do not consider that the question of whether Mr James knew of the contents of the letter of 10 March 1994 is a substantial issue.  It is unlikely to be a disputed fact.

94                  Issue 27 arises out of the claim based on the Contracts Review Act.  Clause 5 of the leases obliges each Lessee to pay:

·                    legal and accounting costs incurred by Overton in litigation with residents or the Director General of the Department of Fair Trading; and

·                    interest on monies borrowed or raised;

One of the allegations is that that provision imposes conditions on Lessees that were not reasonably necessary for the protection of the legitimate interests of Overton.  That allegation is made on behalf of each group member.  To that extent, it is a common issue raised by their claims.  The further amended statement of claim, as it presently stands, alleges that, by reason of each of various matters, including the allegation to which I have just referred, the leases entered into by Lessees were unjust, harsh or oppressive.

95                  However, the pivotal provision of the Contracts Review Act is section 7 which requires the Court to be satisfied that a contract was unjust in the circumstances relating to the contract at the time it was made.  That question must entail a consideration of the individual circumstances of each group member to determine whether or not relief is available under the Contracts Review Act.

96                  While the question of whether a provision such as that to which I have just referred was reasonably necessary for the protection of the legitimate interests of Overton may well arise in relation to each claim, I do not consider that that question would have a major impact on the conduct and outcome of the litigation, even in so far as it is limited to the claim for relief of the Contracts Review Act.  It is not an issue at the core of the dispute.  Accordingly, I do not consider that it is substantial within the meaning of section 33C(1)(c).

97                  Issue 28 concerns a matter raised by the defence filed on behalf of Overton.  The defence asserts that the claims made on behalf of group members:

·                    constitute an abuse of process of the Federal Court; and

·                    are estopped from being raised in these proceedings;

by reasons of the principles of:

(a)        res judicata,

(b)        cause of action estoppel,

(c)        issue estoppel,

(d)        the principle in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589,

(e)        the principle of waiver and estoppel in Commonwealth v Verwayen  (1990) 170 CLR 394,

(f)         the principle of merger in judgment;

by reasons of the claims made and determined in the Supreme Court proceedings between the parties.

98                  For the reasons I have indicated, I do not consider that a question raised by a defence filed on behalf of a respondent in a proceeding commenced under Part IVA is capable of being a common issue to which claims made in the proceedings give rise.  As I have indicated, the requirements of section 33H indicate that the issue must be thrown up by the allegations in the statement of claim, not by a defence which may or may not be raised by a respondent.

99                  Issue 29 concerns the time at which loss or damage on the part of group members first accrued within the meaning of section 82(2) of the Trade Practices Act.  Under that provision, a claim under section 82 for recovery of loss or damage suffered by conduct in contravention of the Act must be commenced within 3 years of the cause of action first accruing.  The trade practices count in the further amended statement of claim alleges representations made between 1986 and October 1996.  The leases, said to have been entered into in reliance upon the misleading or deceptive conduct, were entered into between January 1987 and 17 October 1996, being the last.  These proceedings, however, were not commenced until 23 February 1999.  No more than 6 of the Lessees entered into leases within three years prior to that date.

100               On one view, all but those six claims are outside the limitation imposed by section 82(2).  If questions of limitation under section 82 are matters to be raised by way of defence, any issue which might arise in relation to the other group members would not be a common issue raised by the claims within the meaning of section 33C(1)(c), for the reasons I have just indicated.  However, on a different view of the operation of section 82, the limitation is a question of jurisdiction.  On that view, the issue is one raised by the claim itself.  That is to say, the applicants would have to establish the Court’s jurisdiction as an element in succeeding on the claim. 

101               The applicants contend that the causes of action arising under the Trade Practices Act accrued when damage or loss was first suffered.  Loss or damage is an essential element in the cause of action.  However, the question is when loss or damage was first suffered.  Overton contends that, if any loss or damage was suffered, it was incurred when, in reliance upon the alleged misleading or deceptive conduct, the Lessees entered into their leases.  It was that act which rendered them liable to pay the contributions.

102               The further amended statement of claim particularises the damage said to arise from the contravention of section 52 in the following fashion (para. 69):

·                    The level of outgoings claimed by Overton has caused the market for leasehold interests in the Retirement Village to collapse and the Lessees have lost the value of their leasehold interests.

·                    Because individual Lessees do not have the financial resources to acquire alternative accommodation, until an alternative Lessee can be found who will pay a sufficient sum of money to purchase a leasehold interest from Overton, the Lessees have been totally “locked in”.

·                    The Lessees have been required to pay levels of outgoings greatly in excess of the alternative accommodation available to them at the time they entered into their leases.

103               Thus the allegation appears to be that the loss was first suffered when Overton established an entitlement to recover outgoings greater than would have been payable had the representations alleged being true.  That loss is said to have occurred at the time when the Supreme Court determined the entitlement of Overton under the leases to recover the full amount of the outgoings claimed by Overton.  That determination occurred within 3 years prior to the commencement of these proceedings.  If, therefore, that is the time when loss was suffered, section 82(2) would create no impediment to the claims.

104               The point at which substantial loss or damage was suffered raises a question of law that would be common to all group members whose leases were entered into more than 3 years before the commencement of the proceedings in this Court.  The outcome of that question could have an impact on the conduct and outcome of the litigation because it could put an end to the claims under the Trade Practices Act by most of the Lessees.

105               However, even if the question which might arise under section 82(2) of the Trade Practices Act is a common issue to which the claims of all of the Lessees give rise, or at least most of the Lessees give rise, it is difficult to characterise it as “substantial” so long as the claims under the general law are maintained.  Precisely the same factual enquiry must be undertaken in relation to the negligent advice and fraudulent misrepresentation claims.  Accordingly, even if a decision were given that the trade practices claims were brought out of time, that would have little impact on the conduct and outcome of the litigation because of the remaining claims, based on the alleged representations.

106               Similar questions arise in relation to the claims under the general law and under the Contracts Review Act.  The fraudulent misrepresentation claims would have been barred under the Limitation Act 1969 (NSW) if not commenced within 6 years after the cause of action first arose.  However, whether the Limitation Act is pleaded is a matter for the respondent.  The limitation point, therefore, is not a common issue under section 33C(1)(c).

107               Further, under the Contracts Review Act, any claim for relief must be made within 2 years.  In so far as the claim is based on the leases being unjust at the time they were entered into, it appears that the claims of all group members under the Contracts Review Act are barred.  Again, however, in relation to such claims, a question may arise as to whether the limitation goes to the Court’s jurisdiction rather than a matter of defence to be raised by a respondent.  In any event, so long as there are other claims, this issue would not result in any significant reduction in the scope of the proceeding.

SECTION 33C(1)

108               The requirements of section 33C(1)(a) are clearly satisfied in the present case.  In my view, the requirements of section 33C(1)(b) are also satisfied.  Each group member is alleged to have entered into a relevant lease in reliance on misleading or deceptive conduct on the part of Overton.  There is sufficient connection between the circumstances alleged to warrant their being characterised at least as “related circumstances” within section 33C(1)(b) – see Silkfield (at 341). 

109               However, in the light of the above analysis there is a significant question as to whether the claims by the Lessees give rise to a substantial common issue of law or fact within the meaning of section 33C(1)(c).  Clearly there will be issues that are common to the claims of most if not all of the Lessees.  However, I consider that much of the differences in the issues that will arise tend to be obscured by the pleading of all of the claims in the fashion of the current statement of claim.  I am not satisfied, on the material that I have, that the common issues that will arise can properly be characterised as substantial within the meaning of section 33C(1)(c). 

SECTION 33N

110               There are four separate and independent grounds upon which the Court may order that a proceeding properly brought under Part IVA should no longer continue under that Part.  I have set them out above and it is convenient to deal with each separately.

Costs

111               There is no reason to conclude that the costs that would be incurred if the proceedings were to continue as a representative proceeding are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding.  It is essentially a matter of speculation at the present time as to which course, if any, would result in any cost saving.  Having regard to the individual evidence that would have to be called in relation to the claim of each of the Lessees, I am not presently satisfied that there would be a substantial saving in cost by reason of the proceeding being treated as a representative proceeding under Part IVA.  As I have indicated, there are some common issues both on strict analysis and, from a pragmatic point of view.  However, it will be necessary to examine the circumstances of each individual Lessee in order to determine whether any particular claim will succeed.

Relief available in another proceeding

112               It is clear that each group member could obtain relief in his or her own separate proceedings.  However, there is no other single proceeding under which all of the relief sought could be obtained.  As indicated above, such a procedure is not available in the Supreme Court.

Efficient and effective means of dealing with the claims

113               For the reasons I have indicated above, I am not satisfied that the conduct of the proceedings under Part IVA would result in a significant, if any, saving or cost.  Because of the need to examine the circumstances of each individual Lessee in detail, I am not satisfied that representative proceedings would necessarily provide a more efficient or more effective means of dealing with the claims. 

114               Clearly, it would be desirable for one judicial officer to retain control of the management of all of the claims, whether they are brought individually or whether they are brought in a representative action.  However, in so far as there are common issues, the time needed to resolve those issues is likely to be insignificant, when compared with the time necessary to investigate and examine the circumstances of each individual Lessee.

Inappropriateness

115               The legislature has not given much assistance as to the criteria for determining the appropriateness or inappropriateness of pursuing claims by means of a representative proceeding.  It would be inappropriate for me to endeavour to set out in any exhaustive manner what might make pursuit of the claims in a representative proceeding inappropriate. 

116               Of course, under section 33C(2) it is permissible for Part IVA to be utilised, notwithstanding that the proceeding includes claims that would require individual assessment.  Nevertheless, under section 33N, even if there is a substantial common issue, the Court may order that the proceeding no longer continue under Part IVA.

117               Inappropriateness must be determined by reference to the objects of Part IVA.  Unless the adoption of the procedure will enhance access to justice, reduce the costs of proceedings and promote efficiency in the use of court resources, the inconvenience of hearing a multiplicity of claims together will render the proceeding inappropriate. 

118               One possible basis upon which it would be inappropriate for the proceeding to continue is that the Supreme Court had offered a process whereby individual claims could be determined.  Notwithstanding that the Court is not satisfied that all the relief sought could be obtained by means of a proceeding other than a representative proceeding, the availability of a process in the Equity Division of the Supreme Court might render it inappropriate that the claims be pursued under Part IVA.  However, for the reasons I have articulated above in relation to the alleged abuse of process, I do not consider that the availability of any proceeding in the Supreme Court makes it inappropriate for this proceeding to continue under Part IVA. 

119               Two factors were raised by the applicants that may go to the appropriateness or inappropriateness of the claims being pursued under Part IVA.  The first is the multiplicity of filing fees that would be involved if each of the Lessees was required to bring his or her own claim.  If a proceeding is otherwise within section 33C(1), the saving in multiple filing fees could only be of very marginal significance, if any, in determining the appropriateness of the pursuit of the claims by means of a representative proceeding.  While Part IVA was intended to enhance access to justice, it was not designed as a means of avoiding filing fees.  In any event, where hardship is involved, Lessees may be entitled to waiver of filing fees. 

120               The other factor raised by the applicants concerns the capacity of some of the Lessees.  In the nature of things, many of the Lessees are elderly, since they have decided to take accommodation in a retirement village.  There is some evidence before me that some of the Lessees may not have the capacity to give instructions to commence proceedings on their behalf.  Again, if section 33C is otherwise satisfied, that is not a weighty consideration to be taken into account in determining the inappropriateness or otherwise of the claims being pursued by means of representative proceedings.  Procedures are available, for example, whereby guardians ad litem can be appointed for incapacitated or disabled parties. 

121               In the course of analysing the issues that are common to all claims, I have indicated my concern that those issues are not of great significance in the overall resolution of the claims of all of the Lessees. I consider that each claim should be separately articulated, without reference to the other claims.  I am satisfied that, having regard to the relative insignificance of the common issues in the context of the necessity to examine the individual circumstances of each of the Lessees, it is not appropriate that all of the claims be disposed of in a single proceeding.

CONCLUSION

122               It follows from the conclusions that I have expressed above that I am not persuaded that the claims made in the further amended statement of claim give rise to substantial common issues within section 33C(1)(c).  I do not consider that there is any single issue or group of issues that is, or are, likely to have a major impact on the conduct and outcome of the litigation.  Putting it in the other way expressed by the majority in Silkfield, I do not consider that there is any issue or group of issues that will have a major impact upon the litigation because it or they can be said to be at the core of the dispute.  Accordingly, section 33C(1) did not authorise the commencement of the proceedings by the applicants as representing all of the Lessees.

123               Further, even if the proceeding falls within section 33C(1), I am satisfied that it is in the interests of justice that the proceeding no longer continue under Part IVA.  It will be necessary to investigate and examine the individual states of mind of each of the group members in relation to their decisions to enter into leases.  Further, there will be difficulties in connection with more than 100 claimants being involved in a single proceeding.  Those considerations outweigh any saving in costs or resources that might result from a determination of those relatively minor common issues to which the claims of all the Lessees give rise.

124               On the other hand, I do not consider that the commencement and prosecution of the proceedings constitutes an abuse of the process of this Court.  Nor do I consider that the prosecution of the proceedings is vexatious.  I do not consider that it is appropriate to dismiss the proceedings. 

125               Whatever procedure is adopted, it is essential that each individual claim be properly asserted and particularised.  For example, a difficulty with the verified statements of claim produced following the direction by Windeyer J is that each is in identical terms, save only for changes of name, dates and particulars of lease.  Each makes precisely the same allegation as to the representations without giving any adequate particulars of the representations.

126               In the light of my conclusion concerning Part IVA, the further amended statement of claim should be struck out and the three additional applicants who were joined after commencement of proceedings should be removed as parties. They may wish to commence their own proceedings. The first applicant should have leave to file, within 28 days, a second further amended application and statement of claim asserting his own individual claim.  I will, of course, retain management of that claim.

127               I propose to stand the proceeding over for further directions on a date convenient to the parties.  Each of the Lessees described in the further amended statement of claim who wishes to file an application may have such application made returnable before me on that day so that I can manage those claims in addition to the present claim.  There will be no need, at this stage, for any affidavit or statement of claim to be filed in support of any such application. 

128               It may be that the defences raised by Overton will succeed.  That should only be determined after a final hearing as to those defences. If common defences are raised, in a multiplicity of proceedings, it may be convenient for some of those defences to be decided before other questions that will arise in the proceedings. In that regard, it may be desirable, for example, to treat some evidence in a particular proceeding as evidence in all of the proceedings in which such defences are raised. 

129               Both parties have had a measure of success thus far.  In due course, I shall hear the parties on the question of costs of Overton’s motion after they have had an opportunity to consider my reasons.

130               The proceedings appear to me to be clearly appropriate for mediation.  I would like to hear the parties at the next directions hearing on the question of whether I should make orders for all of the claims to be referred to mediation, either within the Court or outside the Court.  I am mindful of the logistical difficulties that may arise in connection with such a mediation.  However, those difficulties are very much less than the difficulties that will be thrown up by a proceeding or proceedings involving in excess of 100 separate claims.

Associate:

Dated:              17 August 1999

APPENDIX 1

Schedule B to the Further Amended Application ‑ Common Questions of Law or Fact

1.       Whether the Estimated Initial Outgoings in Item 6 of the Individual Leases in Schedule A gave rise to each of the implied representations pleaded in paragraph 39 of the Further Amended Statement of Claim?

2.       Whether the "present budget figures would indicate the following level of cost payable monthly" as was asserted by Overton in certain information booklets known as the Heritage Retirement Village ‑ General Information gave rise to each of the implied representations pleaded in paragraph 39 of the Further Amended Statement of Claim?

3.       Whether the statement "List of all periodical charges or fees payable by Residents" stated in information booklets known as "Location Floor Plan Booklet” gave rise to each of the implied representations pleaded in paragraph 39 of the Further Amended Statement of Claim?

4.       Whether each of the implied representations pleaded in paragraph 39 of Further Amended Statement of Claim were false?

5.       Whether each of the representations pleaded in paragraph 40 of Further Amended Statement of Claim were false?

6.       Whether the failure by Overton to advise group members of each of the matters pleaded in paragraph 42 of the Further Amended Statement of Claim amounted to misleading and/or deceptive conduct and/or conduct which was likely to mislead and/or deceive?

7.       Whether in relation to all group members, Overton excluded from its calculations of the Estimated Initial Outgoings and of “the level of cost payable” by Individual Lessees and of the "List of all periodical charges or fees payable by residents" the items of expenditure  set out in paragraphs 31, 32 and 33 of the Further Amended Statement of Claim?

8.       Whether in relation to all members of the group who entered into Leases after 1 July 1992, from 1 July 1992 to 30 June 1993 the level of outgoings recoverable from the Lessees under Clause 5 of their Individual Leases was $1,018,548 (i.e. an average of $169 per Lessee per week when divided among 116 units.)?

9.       Whether in relation to all members of the group who entered into Leases after 1 July 1993, from 1 July 1993 to 30 June 1994, the level of outgoings recoverable from the Lessees under Clause 5 of their Individual Leases was an amount of not less than $1,018,548 (i.e. an average of $158 per Lessee per week when divided among 124 units.) having regard to the facts that 124 units compared with a maximum of 116 units were available in 1993‑4 as compared with 1992‑3?

10.     Whether in relation to all members of the group who entered into Leases after 1 July 1994, from 1 July 1994 to 30 June 1995 the level of outgoings recoverable from the Lessees under Clause 5 of their Individual Leases was $958,110. (i.e. an average of $149 per Lessee per week)?

11.     Whether in relation to all members of the group who entered into Leases after 1 July 1995, from 1 July 1995 to 30 June 1996 the level of outgoings recoverable from the Lessees under Clause 5 of their Individual Leases was $937,324. (i.e. an average of $145 per Lessee per week)?

12.     Whether throughout the period from late 1986 to 27 November 1996, the Estimated Initial Outgoings in Item 6 of each Individual Lease and also Overton's estimate set out in the booklets known as the Heritage Retirement Village ‑ General Information. And the Location Floor Plan Booklet was not an accurate estimate by Overton, at the time, of the total outgoings for which the Individual Lessees would be liable under the said Individual Leases?

13.     Whether throughout the period from late 1986 to 27 November 1996, the Estimated Initial Outgoings in Item 6 of each Individual Lease and also Overton's estimate set out in the booklets known as the Heritage Retirement Village ‑ General Information and the Location Floor Plan Booklet from time to time was no greater than half the total outgoings for which Individual Lessees were liable under Clause 5 of their Individual Leases at the time they entered into their Individual Leases?

14.     Whether throughout the period from late 1986 to 27 November 1996it was open to Overton to substantially increase the level of outgoings under the Individual Leases without regard to the basis upon which the said Estimated Initial Outgoings in Item 6 of each Individual Lease and also Overton's estimate set out in the booklets known as the Heritage Retirement Village ‑ General Information and the Location Floor Plan Booklet had been calculated?

15.     Whether throughout the period from late 1986 to 27 November 1996 it was open to Overton to so increase future outgoings recoverable under the said Individual Leases that residents on a full pension would not be able to afford to pay all outgoings for which they were liable without recourse to depleting their assets?

16.     Whether throughout the period from late 1986 to 27 November 1996it was open to Overton under the said Individual Leases to recover all outgoings incurred for such levels of expenditure as Overton in its sole discretion saw fit to incur even though this involved significant increases in staffing levels, catering expenses and expenses relating to residents' functions and entertainment?

17.     Whether Overton undertook to give advice to prospective Lessees throughout the period late 19 86 to 27 November 1996 when making certain estimates: ‑

•        as to the Estimated Initial Contribution in each Lease;

•        as to the level of cost payable by a Lessee as set out in the booklet known as the Heritage Retirement Village ‑ General Information; and

•        the "List of all periodical charges or fees payable by residents” as set out in the booklet known as the Location Floor Plan.

18.     Whether Overton gave advice to prospective Lessees throughout the period late 1986 to 27 November 1996 when making the representations pleaded in paragraphs 39 and 40 of the Further Amended Statement of Claim?

19      Whether it was reasonable for group members to rely on this advice?

20.     Whether in giving the advice referred to in the previous paragraph, Overton knew or ought to have known that it would be relied upon by the Lessees when entering into their Individual Leases?

21.     Whether Overton and the Lessees were in a proximate relationship to each other when entering into the Individual Leases?

22.     Whether Overton owed a duty to the Lessees to exercise due care, skill and diligence when giving the said advice?

23.     Whether Overton breached its duty of care when giving the said advice and when failing to advise the said Lessees of each of the matters in paragraph 42 above?

24.     Whether Overton knew the representations in the paragraphs 39 and 40 of the Further Amended Statement of Claim insofar as they were made after 10 March 1994 were false at the time they were made or alternatively did not care whether the said representations were true or false?

25.     Whether Overton intended that each of the representations in paragraphs 39 and 40 insofar as they were made after 10 March 1994, would be relied upon by the Individual Lessees when entering into their Individual Leases after 10 March 1994?

26.     Whether the Second Respondent is a person involved in the s.52 contravention by Overton insofar as group members who entered into Leases after 10 March 1994 are concerned?

27.     Whether the provisions of Clause 5 of the said Lease whereby the Individual Lessees are obliged to pay:‑

•        legal and accounting costs incurred by Overton in litigation with the residents (or any of them) and /or the Director‑General of the Department of Fair Trading or any other officer or department of the New South Wales Executive; and/ or

•        interest on moneys borrowed or raised

          impose conditions on the Individual Lessees which were and are not reasonably necessary for the protection of the legitimate interests of Overton?

28.     Whether Overton is entitled to defend these proceedings on the basis of an estoppel arisinR out of Proceedings No. 1181 of 1997 in the Supreme Court of New South Wales Equity Division?

29.     When did the loss or damage available to individual group members first accrue within the meaning of s.82 (2) of the Trade Practices Act, 1974, (Comm.)?