FEDERAL COURT OF AUSTRALIA

Dillon v RBS Group (Australia) Pty Limited [2017] FCA 896

ORDERS

THE COURT ORDERS THAT:

1.    The applicants’ interlocutory application dated 17 July 2017 (and filed on 18 July 2017) be dismissed.

2.    There be no order as to the costs of the interlocutory application.

3.    The time for the Sample Group Member to file and serve points of claim which, to the extent possible, is to incorporate by reference, allegations made in the second amended statement of claim but supplement those allegations with the individual factual and legal contentions made by the Sample Group Member, be extended to 11 August 2017.

4.    The time for the respondents to file and serve points of defence in relation to the points of claim filed by the Sample Group Member, be extended to 25 August 2017.

5.    The time for the Sample Group Member to file and serve any reply to the points of defence, be extended to 1 September 2017.

6.    The time for the Sample Group Member to give standard discovery as required by order 19 made on 15 June 2017, and to provide electronic copies of the documents discovered in Part 1 of the list of documents, be extended to 11 August 2017.

7.    The time for the applicants and Sample Group Member to serve lay affidavit evidence upon which they intend to rely at the initial trial be extended to 11 August 2017.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

LEE J:

A    Introduction AND RELEVANT ISSUES

1    Part IVA of the Federal Court of Australia Act 1976 (Cth) (FCAA) has reached its silver anniversary. Born in controversy, in its turbulent infancy procedural disputation was its almost constant companion. As it matured, and the more the adjectival law and the lore of Part IVA developed, the disputation lessened. Despite this, procedural arguments still recur; indeed, they are often the same arguments in different guises. Although the precise relief sought in the present interlocutory application is uncontested, as I will explain, it springs from, and is connected to, a series of contested issues.

2    As these reasons explain, the making of the orders of 15 June 2017 (Initial Trial Orders) required consideration to be given, among other things, to the identification of group members’ claims and the scope of the issues that can and should be determined at an initial trial (often labelled, somewhat misleadingly, an ‘initial trial of common issues’).

3    In order to understand how these issues arose, it is necessary to recount a short prologue.

4    It was as long ago as October 2014 that the applicants commenced this proceeding seeking relief for themselves and on behalf of parties who, during a three year period, acquired an interest in one or more Unlisted Rolling Instalment Warrants or Managed Fund Instalment Warrants (Claim Warrants) from the first respondent. For the purposes of these reasons, it is unnecessary to distinguish between the three respondents and I will refer to them, collectively, as “RBS”.

5    It was asserted by the applicants that their claims, and those of the described group members, arose in similar or related circumstances in that they were all clients of Navra Financial Services Pty Limited (Navra) and all invested (in a specified time period) in warrants created or issued by RBS, where the underlying reference assets were comprised directly or indirectly of shares or units in one of a number of ‘Navra Managed Funds’. It was further contended that a common thread was that the relevant Claim Warrants were acquired on the advice of Navra.

6    So far, so good. This is a far from uncommon factual scenario which gives rise to series of ‘claims’ by persons, being claims which existed anterior to and separately from the existence of the proceeding, and which, in accordance with one of the ‘gateway provisions’ (s 33C of the FCAA), allows a representative proceeding to be commenced where: (a) seven 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.

7    Despite this, a dispute arose on the pleadings as to whether:

(a)    the applicants “have validly commenced proceedings as representative parties to the extent that these proceedings relate to the acquisition of “NRFUZA” Claim Warrants”: see Further Amended Defence (FAD) [1(a)]);

(b)    persons who “acquired “NRFUZA” Claims Warrants are group members in respect of “NRFUZA Warrants”: FAD [2(b)].

8    RBS did nothing of an interlocutory nature to seek a remedial response to these alleged deficiencies in the composition of the proceeding, but in making orders facilitating opt out and determining what is to be resolved at an initial trial, it is necessary that there is precision as to the composition of the group and the scope of the justiciable controversy. If challenges are made to the constitution or regularity of a representative proceeding, or to class composition, such contentions should be identified, pressed and resolved with promptitude.

9    In any event, after commencement, it is fair to say that the proceeding has not moved along with the speed of summer lightening. The pleadings did not finalise for well over two years (28 November 2016). In December 2016, the parties were directed to confer as to “the formulation of the common questions set out in the Further Amended Statement of Claim” and “appropriate staging of evidence and discovery”.

10    Bringing this stasis to an end, the matter was listed on 27 April 2017 for a case management hearing to deal with the timetabling of all outstanding interlocutory matters, in order to ready the matter for an initial trial at the earliest available opportunity. Following lengthy case management hearings on 27 April 2017, 15 May 2017 and 15 June 2017, orders were made to:

(a)    settle the form and content of an opt out notice and facilitate opt out by 25 August 2017;

(b)    provide for the service of evidence (both lay and expert), expert conclaves, discovery and to facilitate a Court ordered mediation;

(c)    require preparation of documents by the parties to assist in narrowing issues in dispute, for a submissions template and to fix the matter for the hearing of an initial trial in March 2018.

11    As noted above, as part of this process, it was necessary to make the Initial Trial Orders which identified, with precision, the matters to be determined at the initial trial. In the lingua franca of Part IVA practitioners, these are commonly called ‘Merck Orders’, taking this appellation from Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2009] FCAFC 26, where the Full Court explained, at [8], that if issues are framed as questions, “orders can be made answering them” which then allows a party disaffected by the determination to challenge those answers by way of appeal, as contemplated by s 33ZC(1) of the FCAA. I will return to some further aspects of Merck below.

12    In any event, the formulation of questions required the making of the Initial Trial Orders and order 12, made on 15 June 2017, was in the following terms:

12.    Subject to further order, the matters to be determined at the initial trial are:

(a)    the whole of the claim of the applicants;

(b)    the whole of the claim of a sample class member (Sample Group Member) who acquired from the respondents an interest in Unlisted Rolling Instalment Warrants with warrant code “NRFUZA”;

(c)    the questions of fact or law common to the claims of the applicants and the group members set out in Schedule 2 to these orders;

(d)    any other questions of substantial commonality identified in Schedule 2 to these orders.

13    The interlocutory regime put in place by the Initial Trial Orders also provided for service of points of claim and points of defence in relation to the claims of the Sample Group Member. The points of claim involved the incorporation, by reference, of the pleading of material facts common to the claims of the applicants and the Sample Group Member, coupled with the specification, by pleading, of any bespoke features of the Sample Group Member’s claim. In this way, procedural fairness was to be afforded to RBS as to all features of the additional claim to be determined (see Banque Commerciale SA En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 290 per Brennan J). The regime also allowed, by providing for points of defence, for a joinder of issue on the additional claim.

14    The Initial Trial Orders set out no less than 105 questions, which, after hearing extensive argument, I was prepared to identify as appropriate. Commendably, there was a high degree of cooperation between the parties in identifying the questions and then revising and recasting the questions after initial rulings had been made. Given the number of questions, it will be no surprise that the questions descend to a level of fine granularity in specifying the facts and issues to be determined.

15    In order to facilitate opt out and resolve what claims could and should be the subject of the initial trial, consideration was required of three issues which arose from the contentions contained in the pleading (see [7] above), being:

(a)    whether the applicants (who had not acquired one of the Claim Warrants being the ‘NRFUZA’ Claim Warrants (NRFUZA Warrants)) could validly represent persons who acquired NRFUZA Warrants (Representation Issue);

(b)    whether the persons who only acquired NRFUZA Warrants were group members (Group Member Identification Issue); and

(c)    whether group members whose claim against RBS included a claim with regard to an NRFUZA Warrant, was a group member in respect of that claim (Bifurcation of Claim Issue).

16    I will deal with the three issues I have identified below, however, returning to the background to the current application, after the Initial Trial Orders had been made, my Associate received a communication from the solicitors for the applicants on 4 July 2017, which relevantly stated:

The orders do not appear on their face to have been made pursuant to section 33Q or section 33R of the [FCAA]. Further, the Sample Group Member will not be taking part in the proceeding for the purpose of determining a question that relates only to the claim of that member.

Moreover, it does not appear that the parties and the Court intended for the Sample Group Member to have any liability for adverse costs following similar authorities which are apposite….Prior to serving the points of claim and affidavit evidence of the Sample Group Member, we are instructed and we submit that it is in the interests of justice that the position with respect to the cost liability of the Sample Group Member be clarified…. In the circumstances, we are instructed and respectfully seek that the Court make the following declaration in the proceedings:

“Pursuant to section 33ZF of the [FCAA], the Sample Group Member referred to in the orders of the Court made on 15 June 2017, has no liability to pay the Respondents’ costs of the trial pursuant to section 33R or section 33Q of the Act or otherwise”.

17    In response, I requested my Associate to indicate that if any party (or a proposed Sample Group Member) wished to make any application, then the appropriate course was for such an application to be dealt with in open Court. It is against this background that, on 18 July 2017, an interlocutory application was filed which sought what was described as an “interlocutory declaration” in the form that had been previously notified.

18    The declaration was not opposed by RBS and the only evidence in support of the application was an affidavit sworn by the applicants’ solicitor, Ms Vicky Antzoulatos, on 17 July 2017. The affidavit explains the rationale in seeking the declaration. Put simply, despite there being no issue between the parties as to costs, no group member will be prepared to be a Sample Group Member “without comfort that he or she would not be liable for adverse costs in the event the claim was unsuccessful”. It is for this reason that the applicants contend that it is in the interests of justice and the efficient conduct of the proceeding that the position with regard to the costs liability of the Sample Group Member be clarified now by a declaration of right.

19    I indicated to the parties on 18 July 2017 that I was not prepared to make the declaration sought but, to provide clarity, at the time of making orders, I indicated that I would deliver detailed reasons as to:

(a)    why I was not prepared to make the declaration; and

(b)    the making of the Initial Trial Orders.

20    The balance of these reasons will be structured as follows:

    Part B: Why the Declaration Should not be Made;

    Part C: The Three Relevant Contested Issues;

    Part D: The Initial Trial Orders;

    Part E: Conclusion and Orders.

B    WHY THE Declaration sHOULD NOT BE MADE

21    In support of the proposed order sought, junior Counsel for the applicants, Mr Rares, helpfully referred me to Matthews v SPI Electricity Pty Ltd (Ruling 5) [2012] VSC 66; (2012) 35 VR 615, where J Forrest J, at 625 [43], made a declaration as to the potential costs liability of a Sample Group Member, describing the making of an order which provided finality as “a practical and sensible suggestion designed to facilitate a decision by the Sample Group Members as to whether to participate in the trial”: at 623 [34].

22    In summary, his Honour held that:

(a)    those group members contemplating engaging in the process should not be left in the dark and should know whether, like the applicant, if their claim failed, they would be at risk of the application that costs follow the event;

(b)    in Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3) [2001] VSC 372, Gillard J ruled against a contention that a Sample Group Member ought to be exposed to an order for costs in the event that the group member’s claim failed. In doing so, his Honour determined that the relevant legislative provisions prevented a sample group member being liable for adverse costs; and

(c)    it was neither inappropriate nor beyond the power of the Court to make an interlocutory declaration as sought because: (i) of the breadth of the power contained in s 33ZF; and (ii) it was in the interests of justice to ensure that sample group members are aware of the costs consequences of their participation.

23    For my part, despite the broad nature of the power contained in s 33ZF, I am not prepared to grant the relief in this case because the order sought is a form of relief which is not directed to the final determination of a real legal controversy. This statement requires some elaboration.

24    The first issue to be considered is what was described by the applicants as the ‘interlocutory’ nature of the declaration (although, for reasons I will explain, I think this description, in the present case, is a misnomer).

25    In Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540, a final judgment at an initial trial was entered in relation to the individual claim of the representative applicant but the primary judge went on to make a declaration in connexion with claims of group members. Put another way, the Court purported to make an interlocutory order in the form of a declaration affecting the rights of the respondent and group members. In noting that the making of such a declaration was “wrong”, Gummow and Hayne JJ said (at 590 [128]) that an: “(i)nterlocutory declaration” is a form of order not known to the law ...” The same point was made in another representative proceeding by Hayne and Callinan JJ in Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317 at 363 [143].

26    Away from the context of representative proceedings, the notion that a Court should not make an interim or interlocutory declaration has long been regarded as being fundamental; this is because an interim declaration is inimical to the very nature of declaratory relief, which is to determine, on a final basis, the whole or part of the justiciable controversy between the actors to a dispute: see, for example, International General Electric Co of New York v Customs and Excise Commissioners [1962] Ch 784 (Upjohn LJ and also Diplock LJ) and the cases collected in Heydon JD, Leeming M and Turner PA, Meagher, Gummow & Lehane’s Equity, Doctrines & Remedies (5th ed, Butterworths, 2014) at [19-140].

27    This is not to say, however, that declarations cannot be made at anything other than a final hearing (although these circumstances will be rare or, at least, special). To explain why, it is important to understand what is meant by the word ‘interlocutory’ in this context.

28    In Kinsella v Gold Coast Council [2014] QSC 65; [2015] 1 Qd R 274 at 288-293 [61]-[78], Philip McMurdo J reviewed, in some detail, the two judgments of the High Court of Australia which had contained admonitions as to the heterodox nature of ‘interlocutory’ declarations. After examining the authorities cited in support for this proposition, his Honour explained that in context, the term ‘interlocutory’ was synonymous with the term ‘interim’.

29    When one has regard to cases such as AED Oil Ltd v Puffin FPSO Ltd [2010] VSCA 37; (2010) 27 VR 22 (Victorian Court of Appeal); Re Estate of R D Firns [2001] NSWSC 184 (Young J); Sutherland v Take Seven Group Pty Ltd [1998] NSWSC 538; (1998) 29 ACSR 201 (Young J); Clarke v Chadburn [1985] 1 WLR 78 at 81 (Sir Robert Megarry VC); International General Electric Co of New York, and the consideration as to whether declarations are to be treated as interlocutory or final when made at an early stage of ‘split’ trial by Finkelstein J in Warramunda Village Inc v Pryde [2002] FCA 250; (2002) 116 FCR 58 at 75-81 [64]-[81], it seems the settled position is that although an interlocutory or interim declaration is unavailable in Australia, this does not operate as an insuperable barrier against making a declaration other than at a final hearing in the special case where the declaration determines on a final basis an aspect of the matter in dispute (and hence can properly be seen as the final determination of the whole or part of a legal controversy).

30    The problem in Graham Barclay Oysters and Dovuro was that the declarations made by the primary judge operated as a form of provisional statement of entitlements of the represented persons, by declaring that each was entitled to succeed in negligence if the group member could prove that they had suffered damage. It followed that this did not amount to a final determination of rights or quelling of this aspect of the justiciable controversy between the group members and the respondent.

31    I pause here to note that is why Merck Orders work; they quell aspects of the overall justiciable controversy by reason of the keystone provision of Part IVA, s 33ZB, which provides that the orders made at the conclusion of an initial trial will bind all group members (other than any person who has opted out) by what the High Court described as a “kind of statutory estoppel”: see Timbercorp Finance Pty Ltd (in liquidation) v Collins; Timbercorp Finance Pty Ltd (in liquidation) v Tomes [2016] HCA 44; (2016) 91 ALJR 37 at 47 [52]. Of course, the orders finally bind the applicant and respondent as parties in accordance with usual principles of res judicata subject only, of course, to a right of appeal.

32    Returning to the declaration presently sought, in the particular circumstances of this case, it does purport to state the rights as between RBS and the Sample Group Member as to the costs consequences of the determination of the whole of the Sample Group Member’s claim against RBS, on a final basis, at the initial trial (which is the form of procedure contemplated by the Initial Trial Orders).

33    Accordingly, if the stage at which this declaration was sought was the only problem, the better view is that this potential barrier to relief could be put to one side. The vice here, however, is more fundamental: there is simply no controversy to resolve. This is for two reasons.

34    First, the position under s 43(1A) of the FCCA is clear. It relevantly provides:

(1A)     In a representative proceeding commenced under Part IVA… the Court or Judge may not award costs against a person on whose behalf the proceeding has been commenced (other than a party to the proceeding who is representing such a person) except as authorised by… section 33Q or 33R...

    (emphasis added)

35    It is plain as a pikestaff that unless directions are made under s 33Q (or s 33R), including directions for establishing a sub-group consisting of group members and appointing a person to be the sub-group representative party on behalf of sub-group members or, for some reason, another type of direction is made using these statutory powers permitting an individual group member to appear in the proceeding for the purpose of determining an individual claim, that the necessary precondition to awarding costs against a group member under s 43(1A) is not enlivened and therefore the Sample Group Member has no potential liability for adverse costs. As I will explain, there have been many similar case management orders made in other cases. They are no longer novel and no party here suggested or suggests that I was making an order under s 33Q (or s 33R). Indeed, the whole point of orders facilitating a Sample Group Member was to resolve issues which transcended the individual claim of the Sample Group Member but were considered utile to resolve at the initial trial.

36    Secondly, RBS has indicated that it will not seek any costs against the Sample Group Member and, moreover, does not suggest that the circumstances referred to in s 43(1A) are present such as to “authorise” an award of costs against the Sample Group Member. Not even a cigarette paper lies between the parties on this issue. This, of course, is a different situation from the one considered by the Full Court in Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56; (2012) 201 FCR 378 at 387 [30]-[33] were it was held that a Court has power to make a declaration when there was a dispute but a party who has an interest to oppose the declaratory relief sought nonetheless decides not to oppose it.

37    Here it is common ground that the making of an order determining a Sample Group Member claim on a final basis was made under s 33ZF and s 37P, permitting an individual group member to appear for purposes which transcended the purpose of determining an individual claim. As noted above, it was to provide a potentially useful (but strictly speaking, unnecessary) vehicle to determine issues common to such of the group members who had purchased NRFUZA Warrants. That course, sensibly, was eventually adopted by consent and there are no opposing interests in relation to the costs consequences of this agreed course.

38    In light of these two matters, the evident purpose of this declaration is to provide what amounts to no more than an advisory opinion to one or other group members in considering whether they should become the Sample Group Member. The broad discretionary power to grant declaratory relief is “confined by the considerations which mark out the boundaries of judicial power” so that “declaratory relief must be directed to the determination of legal controversies” and not to answering abstract questions: Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 582 [38] per Mason CJ, Dawson, Toohey, Gaudron JJ. Declarations of right are made by the principled exercise of judicial power, not because it might be convenient for a third party, or a person advising a third party, or to somehow make assurance doubly sure.

39    Even if I was wrong, and making a declaration in these circumstances could be a licit exercise of judicial power, I would not make it in the exercise of my discretion. As with all discretionary remedies, a ground for refusing declaratory relief is that no good purpose will be served by granting it or that it lacked utility: see Meagher, Gummow and Lehane’s Equity, Doctrines & Remedies at [19-300]. For reasons I have explained, the proposed declaration has no utility in the circumstances of this case.

40    Having dealt with the interlocutory application, I now turn to the resolution of the three issues which informed the making to the Initial Trial Orders.

C    The THREE Contested Issues

I    Representation Issue

41    The notion that the applicants who had not acquired one of the NRFUZA Warrants, by reason of that fact, have some infirmity preventing them from validly representing persons who acquired NRFUZA Warrants, is misconceived.

42    The starting (and end) point is s 33C(1) of the FCAA, which provides as follows:

Subject to this Part, where:

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

(b) the claims of all of 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.”

(emphasis added)

43    The provision directs attention to the notion of a ‘claim’ – a fundamental concept in Part IVA proceedings. It is critical to understand that a ‘claim’ is not the cause of action pleaded: King v GIO Australia Holdings Limited [2000] FCA 617; (2000) 100 FCR 209 at 219 [23]-[24] and at 222-223 [34]-[35] per Moore J. It is a term to be given a wide meaning (Allphones Retail Ltd v Weimann [2009] FCAFC 135 at [80] per Tracey and McKerracher JJ) and need not be based on the same conduct and may arise out of quite disparate transactions. The breadth of the concept was explained by Lindgren J in Australian Competition and Consumer Commission v Giraffe World Australia Pty Limited [1998] FCA 819; (1998) 84 FCR 512 at 523:

As to the meaning of “claims” in s 33C(1)(a), certain matters are tolerably clear.

First, the claims must be claims recognised by the law.

Second, s 33C(2)(a)(i) shows… that the “claims” to which s 33C(1)(a) refers are not confined to claims to relief as of right.

Third, whatever the word “claims” in the provision denotes, they have an existence independent of, and antecedent to, the commencement of the proceeding, since it is only if seven or more persons have claims against the same person that a proceeding under Part IVA may be commenced by one or more of them. Perhaps this signifies that it is not a sufficient condition of the existence of a claim that a claim has been “made”, “asserted” or “threatened”.

Fourth, for obvious reasons, s 33C(1)(a) does not speak of a “right” or “entitlement” to relief — a matter which cannot be known until a final hearing.

Fifth, it is not required that the persons who have the claims be aware that they have them, let alone that they have asserted them.

(original emphasis)

44    The ‘claims’ of all persons referred to in this ‘gateway’ provision are only required to be in respect of, or arise out of, similar or related circumstances and give rise to one substantial common issue of law or fact. It necessarily follows that the claims of the applicants (who represent the group) and group members (represented persons) can be quite different. As Gordon J explained in Timbercorp at [104], the legislative scheme:

…expressly contemplates and provides for the individuality of claims within a group proceeding. For example, a group proceeding may be commenced “whether or not the relief sought ... is the same for each person represented” and whether or not the proceeding “is concerned with separate contracts or transactions between the [respondent] and individual group members”, or “involves separate acts or omissions of the [respondent] done or omitted to be done in relation to individual group members”.

(citations omitted)

45    As noted in [5] above, the relevant claims arose in similar or related circumstances in that all those with claims were clients of Navra, all invested (it is asserted on Navra’s advice), in a specified time period, in warrants created or issued by RBS, where the underlying reference assets were comprised directly or indirectly of shares or units in one of a number of ‘Navra Managed Funds’. As s 33C(1)(c) makes plain, one or more of the persons with such a claim was entitled to commence a proceeding as representing some or all of the others.

II    Group Member Identification Issue

46    The notion that persons who only acquired NRFUZA Warrants were somehow not group members is misconceived for a similar reason. They are group members if they are persons whose claims meet the description in s 33C and they are identified as such in accordance with the other important ‘gateway’ provision, s 33H. This provision requires that an application commencing a representative proceeding, or a document filed in support, must relevantly:

(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 also provides that in describing, or otherwise identifying group members, it is unnecessary to name, or specify the number of, the group members.

47    The description, complying with the statutory requirement, was provided in paragraph 2 of the statement of claim.

48    I pause to note, incidentally, that there was no necessity for the group member description to be pleaded (as it was here). It is often said that a role of a statement of claim in a Part IVA proceeding is to demonstrate that the s 33C ‘gateway’ has been passed through by specifying the matters required by s 33H, and that this necessitates ‘pleading’ group members’ claims at a level of generality sufficient to show compliance: see Philip Morris (Australia) Ltd v Nixon [2000] FCA 229; (2000) 170 ALR 487 at 514-515 [128] per Sackville J. As a matter of practice, this is generally the case, but it is worth noting there is nothing in the FCAA or the Federal Court Rules 2011 (Cth) (FCR) that requires, in cases where damages are not sought, a Part IVA proceeding to be commenced by statement of claim or for it to proceed by way of pleadings (see FCR 8.01, 8.05(b), Commercial and Corporations Practice Note (C&C-1) [5]; but also see Class Actions Practice Note (GPN-CA) [3.1]). It is necessary but sufficient that the “application”, or a “or a document filed in support of such an application” demonstrates compliance with s 33C by describing and specifying those matters mandated by s 33H. Of course, a Form 19 originating application, required to commence a representative proceeding (FCR 9.32), is not a pleading: see FCR, Schedule 1, definitions.

III    Bifurcation of Claim Issue

49    The last contention is a little more complicated and, in the past, has been apt to cause some confusion.

50    It is important to bear in mind another fundamental concept which, although simple, is sometimes obscured: a group comprises persons and not the claims of persons. The best way of avoiding confusion is by imagining that a list of group members is always a list of names but, when actual names are not used, the “list” of persons is defined by a criterion (or more usually criteria) specified at the time the group is described. The identity of all persons is ascertainable and the characteristics describing membership, subject to leave under s 33K, will necessarily all be in existence immediately prior to the commencement of the proceeding on their behalf. The claims which are the subject of the proceeding are the entirety of the claim of each of those persons, which each existed separately from the proceeding.

51    The suggestion that group members whose claim against RBS included a claim with regard to an NRFUZA Warrant could not be a group member in respect of that claim but could be a group member in respect of other claims, is necessarily attended by the notion that a ‘claim’ that meets the description of s 33C of a particular group member can either be multifarious or can somehow be bifurcated (in the sense that one claim (or part of a singular claim) is within the representative proceeding and another claim (or the balance of a singular claim) is outside the representative proceeding). This notion is irreconcilable with the text and context of Part IVA.

52    I have already explained at [43]-[44] above, the central importance and characteristics of what is meant by a ‘claim’, as that expression is used in Part IVA. Apart from its use in s 33C and s 33H, the notion of a claim is found, relevantly, in a variety of other sections within Part IVA, in particular:

(a)    Section 33D, which provides that a representative applicant retains sufficient interest to continue as a representative “even though the person ceases to have a claim against the respondent”;

(b)    Section 33N, which provides that a proceeding may be ‘declassed’ when it is in the interests of justice to do so because, inter alia, the proceeding “will not provide an efficient and effective means of dealing with the claims of group members” or “it is otherwise inappropriate that the claims be pursued by means of a representative proceeding”;

(c)    Section 33Q, which provides that if the determination of the common issues “will not finally determine the claims of all group members”, the Court may give directions (including establishing sub-groups) in relation to the determination of “the remaining issues”;

(d)    Section 33S, which provides where “an issue cannot properly or conveniently be dealt with” under sections (ss 33Q or 33R, which deal with directions as to individual issues), the Court may: (i) if the issue concerns only “the claim of a particular member”, give directions about a separate proceeding; or (ii) if the issue is common to “the claims of all members of a sub-group”, give directions relating to the commencement of another representative proceeding “in relation to the claims of those members”;

(e)    Section 33W, which allows representative party to settle “his or her individual claim” and thereafter withdraw as representative party;

(f)    Section 33X, which requires notice to be given of, inter alia, of bringing into Court of money “in answer to a cause of action on which a claim in the representative proceeding” is founded;

(g)    Section 33ZA, which provides that if there is a fund for distribution to group members, the Court may provide for the payment by the respondent into the fund of instalments “to meet the claims of group members”;

(h)    Section 33ZC, which provides: (i) that appeals can be brought by an applicant as a representative proceeding against a judgment “to the extent that it relates to issues common to the claims of group members” and the same in respect of sub-groups; and (ii), like with s 33H, on an appeal, the notice of appeal “in relation to issues that are common to the claims of group members” must describe or otherwise identify the group members but need not specify the names or number of those members; and

(i)    Section 33ZE, which provides that: (i) “the running of any limitation period that applies to the claim of a group member to which the proceeding relates is suspended”; and (ii) the limitation period does not begin to run again unless either the member opts out or the proceeding and any appeals “are determined without finally disposing of the group member’s claim”.

53    As can be seen by the way in which the notion of a claim is always employed in Part IVA, the key is to identify whether or not the relevant claim of a person has the characteristics identified in 33C, that is, that it has sufficient commonality in the sense that it is one of seven or more claims of persons which are in respect of, or arise out of, the same, similar or related circumstances and give rise to at least one substantial common legal or factual question. That claim is then the subject of the Part IVA regime until either opt out, settlement approved by the Court, judicial determination at an initial or later ‘group’ hearing (if the orders made at that stage, which are binding on the group member under s 33ZB, are determinative), or by judicial determination at an individual trial after a ‘declassing’.

54    Of course, at the one time, one person may have a number of claims against another person but if there is a claim for the purposes of s 33C (and which allows a Part IVA proceeding to be brought), the relevant claim is singular. The point can be usefully illustrated by an example. Assume that there are two infrastructure projects conducted by the same state government. One (Project A) is approved but is in its infancy and a person wishes to challenge some aspect of the administrative decision making by which a decision was made to allow the project to go ahead. This claim might be advanced by the person affected by orthodox inter partes litigation, but if there were enough persons affected they may be entitled to do so by invoking the Part IVA procedure.

55    Further imagine that the same person affected by Project A also had a claim in respect of another project, being a project which had already advanced (Project B). The claim in respect of Project B arose because there was some industrial accident which allegedly caused a wide range of differing types of economic and non-economic loss.

56    On a straightforward application of s 33C, it can be seen that the claim in relation to Project A is separate and distinct from the claim the subject of Project B; that is, the claims are in not in respect of, or arise out of, the same, similar or related circumstances, nor do they give rise to a substantial common issue of law or fact. Although both claims are against the same respondent, they arise out of an entirely different substratum of facts and could not give rise to the same class action. This is a clear example of two claims being in existence, one of which is within and one of which is without, the Project B class action.

57    In respect of the Project B class action, however, there may be very disparate claims of different group members that are the subject of the representative proceeding. The representative applicant may have only suffered loss to real property, for which he or she is claiming damages in tort. The group member with whom we are concerned may also have suffered damage to real property. However, he or she may also have suffered damage of a quite different nature, for example psychological injury, or there may be a related statutory compensation claim of some type. Aspects of the person’s claim for damages or statutory compensation may be quite different but that does not mean he or she has more than one claim – rather, there is one claim with different heads of damage or perhaps different causes of action which arise out of the same substratum of facts. The analogy to the constitutional concept of a “matter” is obvious (although for reasons unnecessary to expand upon here, is not perfect).

58    It would, of course, be possible for a representative applicant to commence a proceeding defining the Project B class action by reference to a criterion which restricted the class only to persons who have suffered, say, damage to real property. This does not mean, however, that a representative applicant can unilaterally restrict the nature or ambit of the individual claims of those persons (whose individual claims are the subject to the class action). Again, as I noted in [50], the group members are a group of persons (not groups of claims of persons) and although an applicant may only wish to pursue common issues and the applicant’s claim (which may only include one type of loss), this does not mean that when it comes to the determination of individual issues, the whole of the claim of the group member (with different types of loss or possibly additional causes of action) is somehow unable to be advanced by that group member.

59    Of course, if such a class action, restricted by the type of loss criterion I have identified, caused real inefficiencies, it may be susceptible to an application under s 33N. If it caused a problem for an individual group member or a subset of group members, in that an aspect of loss was not being addressed, several remedial responses might be available depending upon the circumstances: it may be appropriate for the group member to make an application for a sub-group (ss 33Q and 33R) or seek acceleration of the determination of other issues (ss 33ZF and 37P), seek replacement of the applicant, if representation was, for some reason, inadequate (s 33T), or opt out (s 33J, together with directions under s 33S if thought appropriate).

60    Given that an applicant may know nothing about the precise details of individual claims of group members (other than they meet the description in s 33C), s 33H does not require that group members’ individual claims be pleaded in any particular way, only that specification is required of “the nature of the claims made on behalf of the group members and the relief claimed”. There may be cases where the demands of procedural fairness require descent from a relatively high level of generality, but this will depend on the particular circumstances of the case and, more importantly, the stage it has reached.

61    Returning to the present circumstances, when the concept of a claim is properly understood the suggestion that group members whose claim against RBS included a claim with regard to an NRFUZA Warrant could not be a group member in respect of that claim but could be a group member in respect of other claims, must be rejected. Likewise, a contention, not ultimately pressed, that issues as to the NRFUZA Warrants could not be determined because they were not pleaded in the applicants’ claim, misapprehends the role and nature of pleadings in representative proceedings and has no merit.

D    THE INITIAL TRIAL ORDER

62    When one understands the variety between individual claims that can be determined in a class action, it is not surprising that the grouping and acceleration of types of group members’ claims is far from unprecedented. For example, in large scale negligence actions (such as the Project B class action example given above) there are likely to be a number of complexities involving not only the questions of the existence of duty, but also breach and causation.

63    It was the recognition of this reality that brought into focus the use of case management techniques to identify questions that went beyond strictly common questions (as that concept is used in s 33C and 33H). As Gillard J explained in Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27; (2003) Aust Torts Reports 81-692, at [42]:

In my opinion, it is important that the Court conducts group proceeding litigation in a practical manner and ensures that as many questions of law and fact having a degree of commonality are decided. Once the group proceeding is completed and if an individual claim is to proceed, the individual litigant has the benefit of findings of law or fact to assist him in obtaining relief. It follows that a group proceeding is not concerned with the complete cause of action of a claimant, in the sense that all elements of the cause of action and issues raised are determined in the proceeding. The Court considers and determines the common questions of law and fact.

(emphasis added)

64    Similarly, J Forrest J in Matthews v SPI Electricity Pty Ltd noted at [4]:

In practice, notwithstanding that there may be a commonality in the alleged cause of the harm occasioned to the group members, a trial focusing solely on the representative plaintiff’s claim may not cover the claims of all group members. To address this problem, a practice has developed to permit other group members to give evidence at trial as to relevant facts concerning his or her claim. This evidence then enables the court to make findings and give judgment in relation to those other claims, which enables binding determinations to be made in respect of most, if not all, group members.

65    In Earglow Pty Limited v Newcrest Mining Limited [2015] FCA 328; (2015) 230 FCR 469 at 483-485 [55]-[66], Beach J noted the practice of the Court adopting this expedient where there may be significant differences in the liability cases of individual claimants apart from just causation and damages issues.

66    What this approach demonstrates is the flexibility which the extensive case management powers in s 33ZF and s 37P provide for the efficient management of class actions. I said at the outset of these reasons that the expression an “initial trial of common issues” is a misnomer. This is because experience demonstrates that in many cases of quite different types of class actions, the Court has found it expedient to not only deal with the claim of the representative applicant at the initial trial but also with common questions (properly so called) and also questions which have utility in resolving aspects of the claims of a subset of the group members, which, to adapt Gillard J’s phrase, may be called issues of commonality.

67    An individual claim of one or other group member may provide an efficient way of dealing with these issues of commonality. The acceleration of the claim of a group member might not be necessary, depending upon the circumstances. To use an example, in securities class actions, the Court is often asked to make factual determinations which do not squarely arise on the claim of the individual applicant but are plainly issues of commonality. One common context is where contravening conduct is alleged against a company during an extended period and yet the claim of the representative applicant may arise from a purchase of shares during the very early part of the relevant period. Findings as to contravening conduct at later periods (which may be irrelevant to the applicant’s liability or damages claim) are not abstract or hypothetical (and hence constitute an improper exercise of Chapter III judicial power) provided the Court is satisfied that the relevant determination of an issue or finding of fact is material to a determination of claims of at least some identifiable group members. Accordingly, assuming the proviso exists, it is a question of utility, discretion and case management considerations (and not a question of power) as to whether the Court determines a particular issue or makes a relevant finding of fact at the initial trial.

68    Informed by the requirement that the Merck orders made for the initial trial in this proceeding were, under s 37M(3), required to be made in a way which best promotes the overarching purpose being the “just resolution of disputes” (including the disputes represented by group member claims), according to law and as quickly, inexpensively and efficiently as possible, Schedule 2 of the Initial Trial Orders made on 15 June 2017 identified for determination not only the individual claims of the applicants and the Sample Group Member but also the common issues that arose on those claims and, additionally, issues of commonality which have been specified and which have utility.

69    Two further matters merit mentioning.

70    First, I noted I would come back to Merck orders. In Grave D, Adams K and Betts J, Class Actions in Australia (2nd ed, Thomson Reuters, 2012) at [12.215], the authors note:

There appear to be three primary [sic] approaches to identifying the matters to be determined at the initial trial, namely:

•    a list of questions or issues could be settled upon identifying the specific questions to be determined at the initial trial (for example, Peterson v Merck Sharpe & Dohme (Australia) Pty Ltd (No 5) (2010) 87 IPR 234, …);

•    orders could be made which define, by certain exclusions, the scope of the initial trial (for example, Dorojay Pty Ltd v Aristocrat Leisure Limited (Federal Court of Australia, Proceedings No NSD 362 of 2004), …; or

•    some hybrid of the above approaches could be adopted (for example, Kirby v Centro Properties Ltd (Federal Court of Australia, Proceedings No. VID 326 of 2008), …

71    In effect, each of these approaches is similar but each identifies the issues or questions to be determined at the initial trial at different levels of generality. Needless to say, the question as to the appropriate level of detail or granularity is informed by the particular characteristics of the case. The critical matter is that there be no misapprehension whatsoever as to what is to be determined and what is not to be determined at the initial trial. One of the benefits of Merck orders is to avoid the problem that can be experienced (and was experienced in the early days of Part IVA) when, after the delivery of a judgment, the parties had to parse it and then engage in debate as to what common issues had been determined and what were the appropriate orders to be made pursuant to s 33ZB. Given that a judgment given in a representative proceeding will invariably bind the group members who have not opted out, the greater the specificity, the easier it will be to identify, with precision, the extent of the “statutory estoppel”.

72    Secondly, by way of completeness, I should mention the recent decision of McDonald J in Kamasaee v Commonwealth of Australia (No 10) [2017] VSC 272 in which his Honour dealt with an argument that the decision of Gillard J in Johnson Tiles (see [63] above) was clearly wrong and that the same approach now taken in numerous cases, very often by consent, was somehow inconsistent with the decision of the High Court in Timbercorp. In short, it was contended that absent the appointment of a sub-group representative under s 33Q, the Court has no power to hear evidence or make findings other than in respect of the representative applicant’s claim for damages: see Kamasaee at [34].

73    After viewing the relevant authorities and extracting to remarks of Gillard J, his Honour relevantly said, at [74]-[78], that:

75.    This passage [in Johnson Tiles] was cited with approval by Beech-Jones J in Rodriguez [& Sons Pty Ltd v Queensland Bulk Water Supply Authority [No 5] [2015] NSWSC 1771]. His Honour stated, in respect of the reasoning of Gillard J in Johnson Tiles:

This approach is apposite to the circumstances of this case. To the court’s observation the resources that will be devoted to the resolution of these proceedings are likely to be prodigious. The reassembly of the respective armadas for subsequent hearings will no doubt present logistical difficulties especially if the relevant expert witnesses must return. An approach that involves the determination of as many questions that are of utility to the resolution of the group members’ claims is to be preferred. Such an approach is more likely to facilitate an early resolution either by settlement or otherwise. None of the parties suggested to the contrary.

76.    The observations of Beech-Jones J apply with equal if not greater force in the current proceedings. The parties have devoted enormous resources to preparing for the trial based upon the issues defined by the pleadings. At no point has there been any complaint of substance from any of the defendants that they are not aware of the claims they are to meet. The issues as defined by the pleadings extend beyond the plaintiff’s personal claim for damages. Further, the practical difficulties besetting individual group members’ participation in the proceedings weigh heavily in favour of the Court endeavouring to determine as many issues of fact and law as possible which have a degree of commonality….

77.    The matters set out above bring ss 7 to 9 of the Civil Procedure Act 2010 sharply into focus. The overarching purpose of the Civil Procedure Act is to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute. In approaching the task of making an order prescribing the issues to be determined at trial, the Court is required to have regard to the objects in ss 9(1)(c) and (d), namely, the efficient conduct of the business of the court and the efficient use of judicial and administrative resources. These objects will be advanced by the Court endeavouring to decide as many questions as possible with a degree of commonality.

78.    I do not accept the defendants’ contention that, absent evidence of the injuries sustained by group members other than the plaintiff, any consideration of their claims would be ‘in the abstract’ and involve ‘hypothetical determinations’. Findings which the Court makes in relation to the plaintiff’s systemic allegations will not be hypothetical. They will be relevant to the determination of claims of individual group members….

74    With respect, the approach taken by his Honour is clearly correct.

75    The boundaries of what can be determined at the initial trial are the boundaries of the principled exercise of judicial power, being questions or facts in issue which are neither abstract nor hypothetical. Case management imperatives, procedural fairness and the mandate of the overarching purpose inform what should be determined. This approach informed the issues selected to be determined in this case, as reflected in Schedule 2 to the Initial Trial Orders.

E    Conclusion and Orders

76    An order should be made dismissing the interlocutory application seeking declaratory relief. There should be no order as to costs. The parties have agreed on further orders as to the determination of any Sample Group Member’s claim, which I will also make.

77    As I indicated at [13] above, these orders provide for service of points of claim and points of defence allowing for a joinder of issue on the additional claim. They also provide for standard discovery to be made by the Sample Group Member.

Associate:

Dated:    8 August 2017