Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd

• Jurisdiction: Australia Federal only
• Judge: Gleeson CJ,Gummow,Hayne,Crennan JJ,Kirby J,Callinan,Heydon JJ
• Judgment Date: 30 August 2006
• Neutral Citation: [2006] HCA 41,2006-0830 HCA A
• Court: High Court
• Docket Number: S514/2005 to S520/2005 Matter No S515/2005 Matter No S516/2005 Matter No S517/2005 Matter No S518/2005 Matter No S519/2005 Matter No S520/2005
• Date: 30 August 2006

Campbells Cash and Carry Pty Limited

Appellant

and

Fostif Pty Limited

Respondent

Australian Liquor Marketers Pty Limited

Appellant

and

Dale Leslie Berney

Respondent

Iga Distribution (Vic) Pty Limited

Appellant

and

Whelan & Hawking Pty Limited

Respondent

Queensland Independent Wholesalers Pty Ltd

Appellant

and

Sydney Richard Veitch Murray & Anor

Respondents

IGA Distribution (Sa) Pty Limited

Appellant

and

Paul Ashley Neindorf & Anor

Respondents

Composite Buyers Pty Limited

Appellant

and

Barry George Williamson & Anor

Respondents

IGA Distribution Pty Limited

Appellant

and

Joanne Margaret GOW & ORS

Respondents

[2006] HCA 41

Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ

S514/2005 to S520/2005

Matter No S514/2005

Matter No S515/2005

Matter No S516/2005

Matter No S517/2005

Matter No S518/2005

Matter No S519/2005

Matter No S520/2005

HIGH COURT OF AUSTRALIA

Campbells Cash and Carry Pty Limited v Fostif Pty Limited

Practice — Representative proceedings — Supreme Court Rules 1970 (NSW), Pt 8 r 13 — Representative proceedings brought in each case by a licensed tobacco retailer to recover from its wholesaler licence fees paid from the beginning of the financial year commencing 1 July 1997 until the decision in Ha v State of New South Wales which declared the licensing scheme invalid and which licence fees were not paid to the taxing authorities — Proceedings financed by litigation funder — Proceedings intended to be conducted by litigation funder on behalf of those retailers who ‘opted-in’.

Practice — Representative proceedings — Supreme Court Rules 1970 (NSW), Pt 8 r 13 — Whether provisions for representative proceedings in the Supreme Court Rules were validly engaged — ‘Same interest’ — Common interest of fact or law — Whether there were, at the time the proceedings were commenced, numerous persons who had the same interest in the proceedings — Proceedings intended to be conducted on behalf of those retailers who subsequently ‘opted-in’ — None had ‘opted-in’ when proceedings commenced — Relationship between ‘same interest’ and relief sought.

Practice — Representative proceedings — Stay of proceedings — Abuse of process — Public policy — Proceedings financed by litigation funder — Litigation funder sought out possible claimants — Retailer gave up to funder one-third of its claim — Whether the representative proceedings should be stayed as contrary to public policy or an abuse of process — Maintenance, Champerty and Barratry Abolition Act 1993 (NSW).

Practice — Discovery — Right to administer interrogatories in representative proceedings to identify others with the ‘same interest’ in the proceedings.

Constitutional law (Cth) — Judicial power of Commonwealth — Abuse of process — Consistency of common law doctrine of abuse of process with judicial process.

Words and phrases — ‘abuse of process’, ‘maintenance and champerty’, ‘public policy’, ‘representative proceedings’, ‘same interest’, ‘trafficking in litigation’, ‘overriding purpose rule’.

Maintenance, Champerty and Barratry Abolition Act 1993 (NSW). Supreme Court Rules 1970 (NSW), Pt 1, r 3; Pt 8, r 13.

Representation

A J Myers QC with H K Insall SC and A E Ryan for the appellants (instructed by Freehills)

S J Gageler SC with M J Leeming for the respondents (instructed by Robert Richards & Associates)

Interveners

H C Burmester QC with R A Pepper for the Attorney-General of the Commonwealth intervening in all matters (instructed by Australian Government Solicitor)

B W Walker SC with M C Walker seeking leave to intervene on behalf of IMF (Australia) Limited (instructed by McMahons National Lawyers)

K P Hanscombe SC with L W L Armstrong and K W Dawson seeking leave to be heard as amicus curiae for the Australian Consumers Association (instructed by Public Interest Advocacy Centre)

ORDER

In each matter: 1. Appeal allowed with costs.

2. Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 31 March 2005 and in their place order that the appeal to that Court be dismissed with costs.

1 Gleeson CJ. The issues in these appeals, and the relevant facts, are set out in the reasons of Gummow, Hayne and Crennan JJ. I agree with what is said in those reasons concerning the issues of public policy and abuse of process. The Court of Appeal's decision, favourable to the respondents, on those issues has not been shown to be in error. The proceedings do not constitute an abuse of process, and there was no reason in public policy why they should have been stayed.

2 On the issue whether the provisions of the Supreme Court Rules 1970 (NSW), Pt 8 r 13(1), were validly engaged I would uphold the decision of the Court of Appeal. The decision of this Court in Carnie v Esanda Finance Corporation Ltd1 appears to me to require that conclusion.

3 In order to explain why that is so, it is necessary to refer to some details of the litigation in Carnie, which, in certain respects, was a more difficult case for the plaintiffs than the present. The main problem is that the rule of court in question in Carnie, and in the present case, was based on a model taken from the nineteenth century, and was ill-adapted to the exigencies of modern commercial litigation funding. The rule is required to bear a weight for which it was not designed.

4 In Carnie, the persons on whose behalf the plaintiffs brought their representative action all had separate contracts with Esanda. There was, however, more to the problem than that. The contracts in question were variations of contracts of loan between Esanda, a finance company, and borrowers who were unable to comply with their original obligations, and required some relief. By the variation agreements, they were given an extended time to pay their debts. The plaintiffs originally sought a declaration that their variation agreement, and the variation agreements of other borrowers with whom Esanda had dealt in the same manner, were ‘null and void and of no effect’ 2. The reason for this was a failure to comply with certain provisions of the Credit Act 1984 (NSW) (‘the Credit Act‘). The plaintiffs brought the proceedings on behalf of themselves and all other persons who entered into variation agreements which did not comply with the relevant provisions of the Credit Act. The variation agreements, however, to the extent to which they relieved their original position, were beneficial to the borrowers 3. There was a real doubt whether it was in the interests of the people the plaintiffs were claiming to represent to have their variation agreements declared null and void. The plaintiffs sought to

overcome this problem by modifying their claim to relief, but, as will appear, they were unable to make the problem disappear. It resulted from the nature of the contracts of variation. The three reports of the case, when it was before the Court of Appeal, then this Court, then Young J 4, all reveal the difficulty the plaintiffs had in formulating a claim for relief that did not have the capacity to disadvantage at least some of the people said to be represented.

5 This Court held that the provisions of Pt 8 r 13 were engaged. It also held, however, that there was a serious question whether the proceedings ought to continue as representative proceedings (a question of discretion as distinct from jurisdiction), and the matter was remitted to the Supreme Court of New South Wales. As Brennan J said 5, the application of the provisions of the Credit Act relied on ‘could prove to be a pyrrhic victory for a debtor’.

6 When the matter went back to the Supreme Court of New South Wales, Young J recorded that a ‘very worrying aspect of [the] case [was] the possibility that [some borrowers] may, as a result of the plaintiffs' activity, which appears to have been taken without any reference to them, be left with a liability to Esanda’ 6. Young J imposed requirements as to explanatory circulars to be sent out in connection with an opt-in procedure that was devised in the absence of any provision in the rule to cover the situation. Subsequently, the plaintiffs announced that they were unwilling to incur the expense involved in meeting those requirements, and Young J, by consent, ordered that the action should not go ahead as a representative action.

7 A concern existed, and was recognized at all stages in Carnie, as to whether the proceedings were in the interests of all the other borrowers whom the plaintiffs claimed to represent. Yet this Court held that the rule was engaged and, in particular, that ‘the represented debtors’ and the plaintiffs had the ‘same interest’ in the action 7. What was described by Mason CJ, Deane and Dawson JJ as ‘the requisite commonality of interest’ 8 was held to follow from the common question of law (whether the variation agreements complied with the requirements of the Credit Act) that affected the rights and obligations that existed between Esanda and each individual borrower. This conclusion was

reached knowing that it was possible that some of the people whom the plaintiffs claimed to represent might be worse off if the action succeeded, and might not wish to be represented in the action. Hence the reservation of the discretionary issue, which turned out to be decisive. Yet, in Carnie, there was no other discretionary problem except such as arose from the potentially differing interests of some of ‘the represented debtors’. If they all had the same interest in the broadest sense of that term, it is hard to see why there was any problem about allowing the proceedings to continue on a representative basis.

8 The inadequacy of the rule in making no prescription as to whether or not consent was required from borrowers who were represented, or as to procedures for opting in or opting out of the action, or as to notice to represented persons, or as to settlement or...