FEDERAL COURT OF AUSTRALIA King v GIO Australia Holdings Ltd [2000] FCA 1543 SHANE ROBERT KING v GIO AUSTRALIA HOLDINGS LIMITED, GRANT SAMUEL & ASSOCIATES PTY LIMITED, DAVID MORTIMER, BRUCE HOGAN, STEWART STEFFEY, RONALD ASHTON, MARINA DARLING, ANDREW KALDOR, LLOYD LANGE, DAVID O'HALLORAN and IAN POLLARD N955 of 1999 WILCOX, LEHANE and MERKEL JJ SYDNEY 1 NOVEMBER 2000 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N955 of 1999 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: SHANE ROBERT KING Applicant AND: GIO AUSTRALIA HOLDINGS LIMITED First Respondent GRANT SAMUEL & ASSOCIATES PTY LIMITED Second Respondent DAVID MORTIMER Third Respondent BRUCE HOGAN Fourth Respondent STEWART STEFFEY Fifth Respondent RONALD ASHTON Sixth Respondent MARINA DARLING Seventh Respondent ANDREW KALDOR EIGHTH RESPONDENT LLOYD LANGE Ninth Respondent DAVID O'HALLORAN Tenth Respondent IAN POLLARD Eleventh Respondent JUDGES: WILCOX, LEHANE and MERKEL JJ DATE OF ORDER: 1 NOVEMBER 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant in the principal proceeding, Shane Robert King, have leave to file and serve on each of the respondents within seven days a Fourth Further Amended Application and a Third Further Amended Statement of Claim in the form of the documents submitted to the Court under cover of the applicant's solicitors' letter of 1 September, 2000. 2. Paragraph 2 of the Order of Moore J made on 12 May 2000 be set aside and in lieu thereof it be ordered that the costs of all parties of the notices of motion filed on 5 April 2000 be their costs in the cause. 3. Otherwise leave to appeal against the orders made by Moore J on 12 May, 2000 be refused. 4. The costs of the applicant and of the respondents of all of the applications for leave to appeal be their costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N955 of 1999 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: SHANE ROBERT KING Applicant AND: GIO AUSTRALIA HOLDINGS LIMITED First Respondent GRANT SAMUEL & ASSOCIATES PTY LIMITED Second Respondent DAVID MORTIMER Third Respondent BRUCE HOGAN Fourth Respondent STEWART STEFFEY Fifth Respondent RONALD ASHTON Sixth Respondent MARINA DARLING Seventh Respondent ANDREW KALDOR Eighth Respondent LLOYD LANGE Ninth Respondent DAVID O'HALLORAN Tenth Respondent IAN POLLARD Eleventh Respondent JUDGES: WILCOX, LEHANE and MERKEL JJ DATE: 1 NOVEMBER 2000 PLACE: SYDNEY REASONS FOR JUDGMENT THE COURT: 1 Each of the respondents to this proceeding sought leave to appeal against orders made by Moore J on 12 May 2000. By those orders, his Honour dismissed with costs notices of motion brought by each respondent in which they sought the striking out of the Third Further Amended Application and the Second Further Amended Statement of Claim and/or the staying of the proceeding. The proceeding is a representative proceeding brought in pursuance of Part IVA of the Federal Court of Australia Act 1976 ("the Act"). 2 The application for leave to appeal came before us on 18 August, 2000. The principal contention of the applicants for leave was that the proceeding failed to comply with s33C of the Act in that it did not disclose a claim by each group member against each respondent. Counsel for the applicant in the principal proceeding disputed their opponents' contention. 3 The Second Further Amended Statement of Claim set out the claims that each of the group members were making against the respondents. In the course of the hearing, it became apparent that there was a question whether, on the proper construction of the pleading, each group member was making a claim against each respondent. The case apparently intended to be made by the applicant was that each group member was caused to decide not to accept the AMP takeover offer by a combination of positive statements by certain respondents and the silence of others, being people who had a duty, or might have been expected, to speak up if the positive statements were incorrect. If those allegations can be established, it is arguable that a right of action lies against both those who made the positive statements and those who remained silent. 4 Counsel for the applicant, after hearing the submissions of the respondents, indicated that they wished to file a further proposed Application and Statement of Claim. We decided to allow this to be done and directed that the applicant, within 14 days, forward to the Court and the solicitors for each of the respondents any proposed further amended Application and/or Statement of Claim. We further directed that, within 14 days thereafter, the respondents provide to the Court any submissions they wish to make in relation to those documents, including submissions as to the orders appropriate for us to make. We fixed times for response by the applicant and any reply. 5 The parties have acted in accordance with these directions. The applicant has proffered a proposed Fourth Further Amended Application and Third Further Amended Statement of Claim. The respondents have made comments on these documents. 6 Paragraph 2 of the proposed Fourth Further Amended Application and para 6 of the proposed Third Further Amended Statement of Claim describe the group members as GIO shareholders who did not accept the AMP takeover offers "by reason of the conduct alleged in the Third Further Amended Statement of Claim of all (or alternatively, any) of the Respondents and who suffered loss as a consequence". The alternative "any" means that a person is a group member if he or she, as a matter of fact, suffered loss as a result of the conduct of any respondent. This is necessary to cover the situation of a group member who, although claiming against all respondents, only suffered loss by reason of the conduct of one of the respondents. That person is still to be regarded as a group member and, accordingly, is bound by the result. 7 The fact that a person is ultimately adjudged to be entitled to succeed against only one respondent, does not mean the person makes a claim against only that respondent. There is a world of difference between a claim and success on the claim. In order to determine what claims are made, it is necessary to go beyond the description of group members and examine the allegations in the proposed Third Further Amended Statement of Claim itself. 8 The proposed Third Further Amended Statement of Claim sets out factual assertions in paras 1 to 25 and 42 to 45, and pleads four causes of action: false and misleading representations (paras 26 to 41), negligence (paras 45A to 57), misleading or deceptive conduct (paras 58 to 67) and breach of s995(2) of the Corporations Law (paras 68 to 73). In relation to each cause of action, it is alleged that the applicant and each group member suffered damage. In the case of each cause of action, the claim is made by the applicant and each group member against each respondent. 9 Counsel for the second respondent, Grant Samuel & Associates Pty Ltd, submit that the revised description of group members remains objectionable because it is ambiguous. However, they themselves set out their understanding of the description, as explained by senior counsel for the applicant before us on 18 August 2000, viz: "(a) each Group Member alleges that their individual loss was caused by the conduct of each of the Respondents; and (b) a Group Member, having made the above allegation against each and every Respondent, will remain a Group Member even though they may fail in their claim against one or more or all of the Respondents." This is a correct understanding of the situation. 10 The third, sixth, eighth, ninth, tenth and eleventh respondents submit that "a non-disclosure or 'silence' case will inevitably depend on the particular circumstances of each matter". This is correct. It will be necessary, before any particular group member is adjudged entitled to recover against any respondent, for the Court to evaluate the position of that group member and identify the statements and/or silences (if any) that caused the member to act in a particular way. That is not inconsistent with the applicant's allegation that each group member has a claim against each respondent; although it may mean some (or all) of those claims may fail. 11 The recent submission of the fifth respondent, Stewart Steffey, repeats the "collapsing class" argument put to us on 18 August. The submission claims it is inappropriate to define the group by reference to potential outcomes. It is incorrect to say that the group is defined by reference to potential outcomes. Rather, the group is defined by reference to matters that are capable of being ascertained objectively namely, GIO share ownership, non-acceptance of the AMP offer by reason of certain conduct and loss suffered as a consequence. If it should transpire that there was no such conduct, or that the conduct did not cause any loss, the group members' claim will fail, now and for the future. 12 In our opinion, the proposed Fourth Further Amended Application and the proposed Third Further Amended Statement of Claim now make claims by the applicant and each group member against each respondent and are documents in respect of which the leave sought ought to be granted. We propose to order that leave be granted for each document to be filed and served within seven days. 13 We do not regard the further submissions that the claims do not give rise to a substantial common issue of fact or law as having substance. Plainly, the issue of whether the acts and omissions of which the applicant and group members complain (for example, in relation to the Pt B Statement) constituted conduct that is misleading or deceptive or likely to mislead or deceive raises substantial issues of law and fact that are common to the claims against all respondents, including the accessorial respondents. Indeed, it appears that a failure to establish misleading or deceptive conduct would result in the failure of the claims of group members which are based primarily, but not solely, on misrepresentation. 14 We would add that the fact that inducement might be an element of the causes of action relied upon by the group members does not diminish the substantial nature of the common issues of fact or law that clearly exist in the present matter. That is particularly so where the representations relied upon are primarily in documents such as a Part B statement: cf Arnison v Smith (1889) 41 Ch D 348 at 368-369 per Lord Halsbury LC. 15 Many of the criticisms made by the respondents in relation to the proposed amendments relate to pleading issues. It is unusual for a Full Court to grant leave to appeal in relation to issues arising out of pleadings. We do not think this is a case where leave ought to be granted. However, the refusal of leave is to be without prejudice to any pleading issues, including requests for particulars, that might arise from the amended pleadings. We regard those matters as appropriate for the docket judge, rather than a Full Court. 16 Accordingly, save as to one issue in respect of costs, we will refuse leave to appeal. The costs issue arises out of the order for costs made by Moore J against each of the respondents. As the pleadings before his Honour have now been superseded by the amendments made with the leave of the Court in the circumstances outlined above, the respondents have effectively been deprived of the opportunity of challenging his Honour's orders. In all the circumstances a fair outcome is that the costs of the parties of the Motion before his Honour be their costs in the cause. 17 Each of the respondents submits that the applicant should be ordered to pay the costs of the application for leave to appeal. The argument is that, even if the earlier problems have now been rectified, those problems justified the making of the applications for leave to appeal. There is some force in that argument. However, it is necessary also to take into account events since 18 August. As we have said, whatever might otherwise have been the position, the proposed new documents rectified the defects complained of. It would have been reasonable for the respondents to concede that, whatever the legitimacy of their earlier concerns, there was now no longer a case for the relief they sought. But they did not choose to take that course. Having regard to all the circumstances, we think justice would be done if the costs of all parties of the application for leave to appeal were their costs in the cause. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox, Lehane and Merkel. Associate: Dated: 1 November 2000 Counsel for the Applicant: J Burnside QC and H Borenstein Solicitor for the Applicant: Maurice Blackburn Cashman Counsel for the First Respondent: T Bathurst QC and M Tyson Solicitor for the First Respondent: Ebsworth & Ebsworth Counsel for the Second Respondent: T Jucovic QC and D Hammerschlag Solicitor for the Second Respondent: Phillips Fox Counsel for the Third, Sixth, Eighth, Ninth, Tenth and Eleventh Respondents: C Gee QC and S Climpson Solicitor for the Third, Sixth, Eighth, Ninth, Tenth and Eleventh Respondents: Sparke Helmore Counsel for the Fourth and Seventh Respondents: J Sackar QC and M Sloss Solicitor for the Fourth and Seventh Respondents: Arnold Bloch Leibler Counsel for the Fifth Respondent: P Whitford Solicitor for the Fifth Respondent: Corrs Chambers Westgarth