FEDERAL COURT OF AUSTRALIA

TMAC Pty Ltd trading as Northstar Property Services v Thomas Ford Trading Pty Ltd trading as Fresh Telecoms [2010] FCA 445

THE COURT ORDERS THAT:

1.                  Proceedings No. 7218 of 2009 in the Local Court of New South Wales be transferred to the Federal Court of Australia pursuant to s 86A(4) of the Trade Practices Act 1974 (Cth).

2.                  Proceedings No. 7721 of 2009 in the Local Court of New South Wales be transferred to the Federal Court of Australia pursuant to s 86A(4) of the Trade Practices Act 1974 (Cth).

3.                  Proceedings No. 7078 of 2009 in the Local Court of New South Wales be transferred to the Federal Court of Australia pursuant to s 86A(4) of the Trade Practices Act 1974 (Cth).

4.                  The parties within 14 days formulate appropriate consent orders amending the pleadings to ensure the efficient and orderly progress of all proceedings to hearing. Such amendment to include the joinder of any necessary parties and enable the claims of Technology Leasing to be heard with the proceedings instituted by the Applicants in this Court conducted by way of defences and cross-claims to the claims of Technology Leasing.

5.                  The proceedings be listed for directions on 26 May 2010 at 9:30 am.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     The parties have become enmeshed in a complex web of litigation arising from the institution of proceedings in two jurisdictions. In this jurisdiction the proceedings are representative proceedings under Part IVA of the Federal Court of Australia Act 1976 (Cth) (‘the Court Act’). By its Notice of Motion filed 1 April 2010 (‘the motion’) currently before the Court, Technology Leasing Limited (‘Technology Leasing’) seeks orders which it submits will simplify the litigation. The applicants in the proceedings, who are respondents to this motion, oppose certain of the orders sought.

The Present Motion

2                     The motion seeks the following relevant orders:

1.        That pursuant to section 33N of the Federal Court of Australia Act 1976, these proceedings no longer continue as representative proceedings.

2.        That these proceedings be stayed pending determination of proceedings 7218 of 2009, 7721 of 2009 and 7078 of 2009 in the Local Court of New South Wales, Downing Centre Registry.

3.        In the alternative to 2 above, pursuant to section 86A(4) of the Trade Practices Act 1974, proceedings 7218 of 2009, 7721 of 2009 and 7078 of 2009 in the Local Court of New South Wales, Downing Centre Registry (the “Local Court Proceedings”) be transferred to the Federal Court of Australia.

4.        That in the event the Local Court Proceedings are transferred, that pursuant to Order 29 Rule 5 of the Federal Court Rules that these proceedings and the Local Court Proceedings be consolidated.

3                     The Local Court proceedings referred to are three Local Court of New South Wales (‘the Local Court’) proceedings involving claims of Technology Leasing against the applicants in these proceedings. The Court notes that Technology Leasing has also instituted approximately 42 other claims in the Local Court or the District Court of New South Wales (‘the District Court’) arising out of circumstances materially similar to the three Local Court proceedings referred to above. The approximately 42 other claims in the Local and District Courts will be referred to in these reasons as ‘the other lower court proceedings’.

Background

4                     The outline of facts which are, for the purpose of this motion, not in dispute and apply to each claim, are as follows:

(a)     At some time during the period between 27 May 2007 and 19 June 2008 the respondents to this motion had business dealings with representatives of Thomas Ford Trading Pty Ltd trading as Fresh Telecoms. Mr Thomas David Ford (‘Ford’) was the principal of that company, whose business was the provision of telecommunications services. It offered to provide communication services (‘the services’) and associated telephone and other equipment to access those services (‘the equipment’) to the respondents, who became customers of Fresh Telecoms. The services and equipment made up what has been described by the applicants as a ‘bundled package’;

(b)     The equipment to enable the use of the communications services was to be rented. Fresh Telecoms forwarded the application for the rental of the equipment to Bower Finance Pty Limited, a finance broker;

(c)     Bower Finance Pty Limited forwarded the rental applications to Technology Leasing;

(d)     If the finance application was approved, Fresh Telecoms sold the equipment to Technology Leasing who then rented it to the prospective customer;

(e)     Fresh Telecoms undertook to provide communications services to those customers;

(f)      Fresh Telecoms ceased to provide communication services in July 2008;

(g)     Technology Leasing has instituted over 40 separate claims in the Local Court and two claims in the District Court for unpaid rental payments outstanding under the leases.

5                     Each claim is said to arise out of breaches of the rental agreement by each defendant as lessee or as guarantor of such agreement.

6                     As outlined above, during 2009 Technology Leasing commenced proceedings in the Local Court against each of the applicants in these proceedings, either in their capacity as a lessee or as a guarantor. Each proceeding has been defended, and virtually identical cross-claims have been filed against Technology Leasing. Similar steps have been undertaken in the other lower court proceedings.

7                     On 23 February 2010 an application and a Statement of Claim (‘the SoC’) were filed in the Federal Court of Australia by TMAC Pty Ltd (‘TMAC’); Divvie Enterprises Pty Ltd (‘Divvie’); Valentina Rural Developments Pty Ltd (‘Valentina’) and by ktheir respective Directors. An amended Statement of Claim (‘the amended SoC’) was filed on 8 April 2010 during the hearing of this motion. Such application is brought as representative proceedings pursuant to Part IVA of the Court Act and is stated to bring claims both on the applicants’ own behalf and potentially on behalf of the plaintiffs in the other lower court proceedings.

8                     The pleadings divide the applicants into two groups. The Customer group, represented by the 1^st to 3^rd applicants, are all companies which purportedly entered into the relevant agreement with Fresh Telecoms and Technology Leasing. The Guarantor group, represented by the 4^th to 7^th applicants, is made up of individuals who acted as guarantors of the agreements made between Fresh Telecoms, Technology Leasing and the members of the Customer group.

9                     The amended SoC raises numerous allegations under the Trade Practices Act 1974 (Cth)(‘the TPA’), arising out of the conduct which is essentially the same as that referred to in the cross-claims raised by the customers against Technology Leasing in the Local Court proceedings.

Submissions of Technology Leasing

10                  In support of its motion, Technology Leasing refers to paragraph three of the SoC (filed in the Federal Court proceedings) which defines membership requirements of the Customer group. It defines a member of the Customer group as an entity who: (a) had one or more of the defined representations (‘the class representations’) made to them during the period between 27 May 2007 and 19 June 2008; (b) relied on such representations in signing documents provided to them by Fresh Telecoms to enter into an agreement with Fresh Telecoms and Technology Leasing; (c) has been sued by Technology Leasing in the Local Court or District Court of New South Wales; and (d) have suffered loss or damage as a result. Technology Leasing submits that to determine if any of the applicants or other parties are part of a class, it must first be determined if any of the class representations were made to them and further if they relied upon and were induced by such representations.

11                  Technology Leasing refers to the seven class representations contained in the amended SoC. It submits that the representations alleged to have been made to two of the Customer group, namely TMAC and Divvie, each satisfy only one of the class representations, and that the representations claimed to have been made to Valentina do not conform to any of the class representations. Technology Leasing also submits that the representations alleged to have been made to the Customer and Guarantor groups in the Local Court pleadings are different to those alleged to have been made to those parties in the Federal Court pleadings.

12                  Of the other lower court proceedings, one is a claim by Technology Leasing in the Local Court against Jaysen Whitbread (Proceedings No. 27318 of 2009). Those proceedings were heard in the Local Court on 23 and 24 February 2010. Such proceedings are now part-heard, the hearing having been stayed by order of the Local Court until 15 June 2010. Technology Leasing submits that the representations that are alleged to have been made by Fresh Telecoms to the Customer/Guarantor group in those proceedings are different to the representations alleged to have been made to TMAC, Divvie and Valentina in their cross-claims filed in the other lower court proceedings.

13                  Accordingly it is submitted by Technology Leasing that there is no common thread linking the representations made by Fresh Telecoms to each of the applicants. Technology Leasing submits that to establish that commonality each potential member of the Customer group in any representative proceedings would need to give evidence of the particular representations made to them. The question would then arise as to whether, in respect of each member, the representation was in fact made, whether those individual members were induced by such representation and if so whether it was relied upon.

14                  Technology Leasing submits that the observations of Hill J in Leung v American International Assurance Company (Australia) Limited [2004] FCA 1763 at [35]-[39] apply. At [37] his Honour said:

However, the most significant point is that the facts in each case, whether those facts relate to the case sought to be made under s 52 or the case sought to be made of unconscionable conduct, are likely to be so diverse that to deal with the case as involving a representative proceeding together with numerous individual proceedings involving which applicant will ultimately involve greater time than would be the case if each application were treated as a separate proceeding and litigated as such.

15                  Technology Leasing submits that the applicants and all of the potential class members are defendants and/or cross-claimants in either Local Court or District Court proceedings, and that the resolution of the Federal Court proceedings would not resolve the proceedings in those jurisdictions. As a further complication, Technology Leasing refers to the fact that the Local Court proceedings do not include all of the respondents which have been joined into the Federal Court proceedings.

16                  Technology Leasing submits that the principal objects of the class action procedure are to promote the efficient use of Court time and the parties’ resources by eliminating the need to separately try the same issue; to provide a remedy in favour of a person who may not have funds to bring separate actions; and to protect defendants from multiple suits and the risk of inconsistent findings. Technology Leasing submits that these objects would not be met in the present proceedings.

Considerations

17                  Section 33C of the Court Act provides:

Commencement of proceeding

(1)     Subject to this Part, 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 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.

(2)     A representative proceeding may be commenced:

         (a)     whether or not the relief sought:

                   (i)      is, or includes, equitable relief; or

                   (ii)      consists of, or includes, damages; or

                   (iii)     includes claims for damages that would require individual assessment; or

                   (iv)     is the same for each person represented; and

         (b)     whether or not the proceeding:

                   (i)      is concerned with separate contracts or transactions between the respondent in the proceeding and individual group members; or

                   (ii)      involves separate acts or omissions of the respondent done or omitted to be done in relation to individual group members.

18                  It should be observed at the outset that the section does not require that the claims of each person in the relevant group be identical, but only that the claims of such persons arise out of the same, similar or related circumstances and that those claims give rise to substantial common issues of law or fact (see s 33C(b) and (c)).

19                  Further, s 33C envisages that the proceeding may be concerned with separate contracts or transactions (see s 33C(b)(i)). Accordingly, it is implicit in such section that the evidence relating to each individual claimant need not be the same.

20                  In Australian Competition and Consumer Commission v Giraffe World Australia Pty Limited and Others (1998) 84 FCR 512, Lindgren J at 520 referred to the Second Reading Speech of the Federal Court of Australia Amendment Bill 1991 (Cth) by the Minister for Justice and Consumer Affairs, the passing of which introduced Pt IVA into the Court Act. For present purposes the relevant portions of such speech provide:

The Bill gives the Federal Court an efficient and effective procedure to deal with multiple claims. Such a procedure is needed for two purposes. The first is to provide a real remedy where, although many people are affected and the total amount at issue is significant each person's loss is small and not economically viable to recover in individual actions.

It will thus give access to the Courts to those in the community who have been effectively denied justice because of the high cost of taking action.

The second purpose is to deal efficiently with the situation where the damages sought by each claimant are large enough to justify individual actions and a large number of persons wish to sue the respondent.

The new procedure will mean that groups of persons, whether they be shareholders or investors, or people pursuing consumer claims, will be able to obtain redress and do so more cheaply and efficiently than would be the case with individual actions.

21                  In Giraffe World, Lindgren J at 539 ordered that the proceedings no longer continue as representative proceedings. However the factual issues in that case were such that it was not even apparent whether any of the ‘class’ of claimants had suffered loss or damage. In the present proceedings the loss or damage prima facie can be quantified in each case.

22                  Although in a different context, in Zhang v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384 French J (as he then was) considered whether a group who sought determination of their status as refugees and who sought to challenge a decision under the Administrative Decisions (Judicial Review) Act 1997 (Cth) had standing to initiate representative proceedings, even though the facts of each individual case would vary. His Honour at 400 referred to the manner in which representative proceedings could be initiated prior to the introduction of Pt IVA and considered further (at 403) the extent to which Part IVA had widened the scope for representative or class actions. His Honour observed at 404:

The question of whether the claims of the persons who are proposed as members of a group arise out of “the same, similar or related circumstances” as required by s 33c(1) is not to be answered by an elaboration of that verbal formula. It contemplates a relationship between the circumstances of each claimant and specifies three sufficient relationships of widening ambit. Each claim is based on a set of facts which may include acts, omissions, contracts, transactions and other events. As appears from s 33c(2), the circumstances giving rise to claims by potential group members do not fall outside the scope of the legislation simply because they involve separate contracts or transactions between individual group members and the respondent or involve separate acts or omissions of the respondent done or omitted to be done in relation to individual group members.

23                  In McBride v Monzie Pty Ltd and Others (1997) 164 FCR 559 Finkelstein J at [21] repeated the statement he made in Bright v Femcare Ltd and Another (2003] 195 ALR 574 at 606 and said:

I said in that case that if the applicants and the group members were not permitted to bring a group claim it was likely that many of them would not pursue an individual claim because the potential gain would not justify incurring the risk of costs. I said that in that sense it would be contrary to the interests of justice to make an order under s 33N. This is an even stronger case, due to the quantum of the individual damages claims, where stopping the group proceeding would work a serious injustice.

24                  In Finance Sector Union of Australia and Another v Commonwealth Bank of Australia (1999) 94 FCR 179, the Full Court considered whether a substantial common issue of law or fact had been identified. The critical issue in Finance Sector Union was confined to the interpretation of an award. Had the issue been determined adversely to the representative applicants in the proceeding, the claim would fail in respect of all claimants since the underlying basis of all claims was common. However, if relief was granted, the quantum of damage for each employee would differ. The Full Court observed at [13]:

It is a fundamental mistake to argue that the existence of some non-common issues takes a case outside s 33C(1)(c) of the Federal Court Act. Section 33C(2) provides that a representative proceeding may be commenced “whether or not the relief sought ... includes claims for damages that would require individual assessment” (para (a)) and “whether or not the proceeding ... is concerned with separate contracts or transactions ... [or] separate acts or omissions” (para (b). Plainly, Parliament envisaged cases involving non-common material; that was not to be a disqualification from using Part IVA of the Federal Court Act.

25                  In Wong and Others v Silkfield Pty Limited (1999) 199 CLR 255, the High Court of Australia sought to address the scope of the requirement under Part IVA that ‘substantial common issue of law or fact’ exist between the representative parties. At [28] the High Court observed:

Clearly, the purpose of the enactment of Pt IVA was not to narrow access to the new form of representative proceedings which applied under regimes considered in cases such as Carnie. This suggests that, when used to identify the threshold requirements of s 33C(1), “substantial” does not indicate that which is “large” or “of special significance” or would “have a major impact of the…litigation” but, rather, is directed to issues which are “real or of substance”. [Footnotes Omitted]

26                  The High Court further held at [30]:

It was not necessary to show that the litigation of this common issue would be likely to resolve wholly, or to any significant degree, the claims of all group members.

Finding

27                  The applicants allege that each applicant in these proceedings has a claim against the respondents arising out of very similar transactions. Whilst different contracts were entered into between Technology Leasing and each one of those persons, there is a clear similarity in respect of the facts giving rise to each claim. Technology Leasing’s submission regarding the dissimilarity between the circumstances of each group member does not give sufficient weight to the core facts. Each member of the group signed a lease agreement containing identical terms which allegedly had been put to each member of the group in circumstances that were not materially different. In essence, the conduct relied upon arises out of similar circumstances in each case. It is such conduct that gives rise to all claims under the TPA.

28                  Although the factual circumstances giving rise to the individual claims may vary, this fact is not sufficient to warrant the Court finding that the claims of the applicants do not arise out of the same, similar or related circumstances and give rise to a substantial common issue of law or fact within the meaning of s 33C(1) of the Court Act. These circumstances are not dissimilar to the circumstances in Pampered Paws Connection Pty Limited v Pets Paradise Franchise (Qld) Limited (No. 6) [2010] FCA 295 which also involved an application under s 33N of the Court Act. In that case, although the claims of each group member were not identical, Mansfield J at [39] found that there was ‘extensive range of common issues’. The Court adopts a similar conclusion in the proceedings now before it.

29                  The Court is satisfied that it has the requisite power to ensure that these proceedings are dealt with efficiently even though it may be necessary to hear separate evidence in relation to the individual claims concerning the circumstances in which the representations were made and the damages applicable to each individual. The Court is required to ensure that justice is administered efficiently and in the most cost effective manner. The most substantial claim by Technology Leasing in the Local Court is that against TMAC for a total sum of $61,580.15. The claim against Valentina is $15,701.89 and the claim against Divvie is $8,439.00. If this is broadly representative of the amounts claimed in the other lower court proceedings, it is clearly cost inefficient for those claims to all be heard separately if the claims have a common substratum.

30                  The Court is satisfied that the conduct of separate proceedings is not the appropriate course in the interests of all the parties and that management of the Federal Court proceedings under Part IVA is preferable to each defendant having to face separate proceedings.

31                  Accordingly the Court, in the exercise of its discretion, dismisses the claim made for an order under s 33N of the Court Act that the proceedings no longer continue as representative proceedings.

Should the proceedings be stayed?

32                  Technology Leasing refers to the following chronology relating to the dates when pleadings were filed in the Local Court proceedings instituted by Technology Leasing against TMAC, Divvie and Valentina. They are as follows:

33                  Technology Leasing submits that there has been substantial delay in the institution of the proceedings in this Court, since the SoC was not filed until 23 February 2010. It also refers to the Whitbread proceedings in the Local Court in which an Amended SoC was filed in November 2009, an amended defence was filed on 12 January 2010 and a cross-claim was filed on the same day. The defence for the cross-claim was filed on 15 February 2010.

34                  Technology Leasing points to the fact that the Whitbread proceedings are part-heard, and submits that the current proceedings constitute an abuse of process, since the party pursuing proceedings in the Local Court against the applicants in these proceedings will be required to defend proceedings relating to similar issues in this Court. It is submitted that proceedings in the Local Court should proceed to finality and that these proceedings should be stayed until that time.

Finding

35                  In Batistatos v Roads and Traffic Authority of New South Wales (No 5530/2005); Batistatos v Newcastle City Council (No 5531/2009) (2006) 227 ALR 425 the High Court of Australia identified examples of an abuse of process. The majority judgment of Gleeson CJ, Gummow, Hayne and Crennan JJ referred to circumstances which would amount to an abuse of process at [9]:

Abuse of court process

What amounts to abuse of court process is insusceptible of a formulation comprising closed categories. Development continues. One example is the line of authority dealing with the stay of proceedings instituted in a second forum where there are pending proceedings in another forum and the continuance of the second proceedings would be an abuse of the process of the first forum. [Footnotes omitted]

36                  Such a statement of general principle must be applied having regard to the particular facts of each case to determine whether the institution of the latter proceedings can truly be categorised as an abuse of process. Although the Whitbread proceedings are part-heard, this Court has been informed that on the second day of the hearing before the Local Court, Technology Leasing belatedly produced two documents of vital relevance to the proceedings. The delayed production resulted in a claim by the defendant that the proceedings should begin afresh. As it currently stands, the evidence is incomplete, no findings have been made and as referred to in [12] above the proceedings have been stayed until 15 June 2010. It appears that the Whitbread proceedings may have to be re-commenced.

37                  Technology Leasing acknowledges that the Local Court would not have jurisdiction to deal with certain issues arising under the TPA which are raised by the cross-claims in that jurisdiction. Accordingly, if the proceedings remain in the Local Court, those issues would need to be determined in this Court. Such a process would be unwieldy, costly and time consuming. Further, the parties joined as respondents in the proceedings in this Court are more extensive than those in the Local Court proceedings. For example Fresh Telecoms, Ford, Bower Finance and David Beat are not included in the Local Court proceedings as parties, yet their involvement appears to be material. Accordingly there is the real possibility that the litigation currently before the Local Court will not resolve all claims, and subsequent actions arising out of that Court’s findings might be commenced against parties not joined.

38                  Further, the Court is informed that the Local Court has no facilities for representative proceedings. As a result, the matters for determination arising from these facts are now scattered over more than forty-five proceedings and in three different jurisdictions.

39                  The Court is satisfied that it is clearly in the interests of the parties for the resolution of all of the issues to be determined in the one forum. By virtue of Part IVA of the Court Act, this Court has the facilities to deal effectively with these circumstances. The Court concludes that the interests of justice warrant that the proceedings in this Court not be stayed.

Should the proceedings in the Local Court (7218 of 2009, 7721 of 2009 and 7078 of 2009) be transferred to the Court pursuant to s 86A(4) of the TPA?

40                  The Court has jurisdiction to make an order under s 86A(4) of the TPA that proceedings be transferred to this Court where:

(a)     a proceeding is pending in a court (other than the Supreme Court) of a State or Territory; and

(b)     a matter for determination in the proceeding arose under Part IVA or Division 1, 1A or 1AA of Part V;…

41                  The respondents to this motion do not oppose the relief sought and since the claims in the Local Court cross-claims will at least involve issues arising under Div 1 of Part V of the TPA, the Court has jurisdiction to make the order: see Champion Truck Bodies Pty Limited v Capital Finance Australia Limited [2010] FCA 332; see also Trade Practices Commission v Port Adelaide Wool Company Pty Limited [1995] ATPR 41-441; Cytel Pty Limited v Mastech Asia Pacific Pty Limited [2004] FCA 1464.

42                  The Court is satisfied that in the interests of the expedition of justice and of minimising costs, such order should be made.

Should the Local Court proceedings, upon transfer, be consolidated with these proceedings?

43                  Section 33ZF(1) of the Court Act empowers the Court to make any order it ‘thinks appropriate or necessary to ensure that justice is done in the proceeding’. In Courtney v Medtel Pty Ltd and Another (2002) 122 FCR 168 at [48]-[49] Sackville J observed that s 33ZF should be given a generous interpretation because of the breadth of its provisions.

44                  Accordingly the Court will order that, upon transfer, a re-pleading be undertaken to ensure the efficient progress of this matter to hearing. The Court envisages that the most appropriate manner in which to conduct the proceedings, upon transfer, is to hear the claims of Technology Leasing as an applicant in the manner that such claims were to be made as a plaintiff in the Local Court. The claims of the Applicants in these proceedings could then be heard as defences and cross-claims. The Court will direct the parties to formulate, by consent, appropriate orders to reflect the intention of this Court.

Observation

45                  The Court has considered this motion relying upon its understanding of several facts provided orally by the legal representative of the parties. This course was necessary in view of the paucity of factual detail provided to the Court by way of affidavit. Nevertheless, there seems to be no dispute between the parties relating to the common events giving rise to the claims of Technology Leasing.

Costs

46                  Technology Leasing seeks an order that the respondents pay the costs of this motion. The Court considers that the appropriate order is that the costs of this motion be reserved.

Associate:

Dated:         12 May 2010