FEDERAL COURT OF AUSTRALIA Pampered Paws Connection Pty Ltd (ACN 116 460 621) (on its own behalf and in a representative capacity) v Pets Paradise Franchising (QLD) Pty Ltd (ACN 054 406 272) (No 4) [2009] FCA 817 PAMPERED PAWS CONNECTION PTY LTD (ACN 116 460 621) (ON ITS OWN BEHALF AND IN A REPRESENTATIVE CAPACITY) v PETS PARADISE FRANCHISING (QLD) PTY LTD (ACN 054 406 272), PETS PARADISE FRANCHISING (SA) PTY LTD (ACN 069 620 391), PETS PARADISE FRANCHISING (NSW) PTY LTD (ACN 006 919 222), GLOBAL PET PRODUCTS PTY LTD (ACN 005 666 599), PETS PARADISE (FRANCHISING) PTY LTD (ACN 006 626 455), PETS PARADISE PTY LTD (ACN 005 558 378), PARADISE RETAIL HOLDINGS PTY LTD (ACN 105 253 441) and GARY DIAMOND SAD 142 of 2008 MANSFIELD J 4 AUGUST 2009 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 142 of 2008 BETWEEN: PAMPERED PAWS CONNECTION PTY LTD (ACN 116 460 621) (ON ITS OWN BEHALF AND IN A REPRESENTATIVE CAPACITY) Applicant AND: PETS PARADISE FRANCHISING (QLD) PTY LTD (ACN 054 406 272) First Respondent PETS PARADISE FRANCHISING (SA) PTY LTD (ACN 069 620 391) Second Respondent PETS PARADISE FRANCHISING (NSW) PTY LTD (ACN 006 919 222) Third Respondent GLOBAL PET PRODUCTS PTY LTD (ACN 005 666 599) Fourth Respondent PETS PARADISE (FRANCHISING) PTY LTD (ACN 006 626 455) Fifth Respondent PETS PARADISE PTY LTD (ACN 005 558 378) Sixth Respondent PARADISE RETAIL HOLDINGS PTY LTD (ACN 105 253 441) Seventh Respondent GARY DIAMOND Eighth Respondent JUDGE: MANSFIELD J DATE: 4 AUGUST 2009 PLACE: ADELAIDE REASONS FOR DECISION 1 On 9 July 2009 I adjourned a motion of the respondents, which had been listed for hearing on that day, for an order that the proceedings no longer continue as a representative proceeding. I also made orders on an oral application of the applicant for a further extension of time to file and serve a further amended statement of claim to 23 July 2009. I ordered that, if the further amended statement of claim was not filed within that time, the application be struck out. I ordered that the costs of that oral application be the respondents' costs in any event. The motion has been relisted for hearing on 4 August 2009. 2 These are my written reasons for making that ruling. Background 3 This is a class action under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). In earlier reasons in this matter, Pampered Paws Connection Pty Ltd v Pets Paradise Franchising (QLD) Pty Ltd (No 3) [2009] FCA 138 (the earlier judgment), I noted at [1]: This matter has progressed along a bumpy path to date. This judgment concerns another obstacle or set of obstacles on that rough path … Hopefully, the applicant will present some proposed orders which will ensure that the matter now progresses speedily and efficiently, and which also secures procedural fairness for the respondents. In those reasons, I set out the background to this matter at paragraphs [2] to [7]. I do not propose to repeat that background information, save in so far as is necessary to recite the progress made in this matter since that date. 4 In the course of those reasons, I said that the application could not be allowed to proceed with the amended statement of claim as it then stood, but indicated a tentative view that the applicant and the group members might be able to maintain a representative action. I invited the parties to confer to agree upon appropriate orders to be made in the light of my reasons, and as a result of those discussions, I made orders on 27 February 2009 striking out the amended statement of claim, and giving leave to the applicant to re-plead by filing a further amended statement of claim, to be filed and served by 7 April 2009. That further amended statement of claim was to contain, by a schedule, such particulars of the claim of the applicant as are personal to it, and a separate schedule of particulars of claims of persons nominated as group members (and to the extent possible, the applicant was to file and serve those schedules to the further amended statement of claim relating to persons nominated as group members containing particulars of their claims). 5 I also made orders on 27 February 2009 for the applicant to file and serve by 7 April 2009 an indexed book of documents that the applicant is proposing to rely upon at the hearing that are common to the group members, and an indexed book of documents personal to the applicant, and witness statements of the witnesses that the applicant proposes to rely upon. By consent, that time was extended to 7 May 2009. 6 However, the applicant did not file a further amended statement of claim, indexed book of documents or witness statements by 7 May 2009. No application was made by the applicant for an extension of time to comply with them. 7 Not surprisingly, the respondents wanted to progress the matter. On 26 May 2009, the respondents by motion sought an order pursuant to s 33N of the FCA Act that the proceedings no longer continue as a representative proceeding under Part IVA of the FCA Act. The respondents also sought an order that the applicant provide security for the payment of costs that may be awarded against it, and the costs of the motion. The motion was returnable for directions on 27 May 2009. The applicant then orally sought a further extension of time for filing the required documents. The applicant requested an eight week extension. That application for an extension of time was opposed by the respondents. I was not prepared to allow such a long extension of time, in the circumstances, and having regard to the work that should have been done to that date and the extension of time already granted. I further extended the time for filing a further amended statement of claim to 3 July 2009. I also ordered the applicant to use its best endeavours to file the indexed book of documents and witness statements by 3 July 2009. I listed the respondents' motion of 26 May 2009 for hearing on 9 July 2009 to the extent that it sought an order that the proceedings no longer continue as a representative proceeding. I gave leave to the respondents to file and serve any further affidavits in support of their motion by 10 June 2009, and leave to the applicant to file and serve any affidavits in opposition to the motion by 6 July 2009. 8 By the hearing on 9 July 2009, the further amended statement of claim had still not been filed. Nor were an indexed book of documents, or any witness statements filed. At the hearing, I pointed out to counsel for the applicant that no documents had yet been filed in compliance with earlier orders, despite further extensions of time being granted. There was technically no statement of claim, so it was difficult to address the motion in such a vacuum. Senior counsel for the respondents applied to have the proceedings dismissed, on principle, on the basis that there was not any affidavit or explanation for the delays incurred to date, and no formal application on foot for a further extension of time, although he accepted that such an outcome was unlikely, as the applicant had not clearly evidenced an intention not to proceed or simply to disregard the Court's directions. 9 Counsel for the applicant indicated that "endeavours" were being made to comply with my earlier orders, and that a further amended statement of claim was "days, if not hours" away from being filed. On that basis, she made an oral application for an extension of time for the filing of those documents. She indicated that she was instructed to ask for a further two weeks within which to file the documents. 10 In support of the oral application for an extension of time, the applicant relied upon parts of two affidavits of an instructing solicitor of 26 May 2009 (paras 20 to 33 inclusive) and of 5 July 2009 (paras 11 to 16 inclusive). That material does not explain the delay, or the applicant's progress to date in trying to comply with the earlier orders. It is ten months since the proceeding was commenced. The progress is obviously unsatisfactory. It addresses the disadvantage to the respondents if a further extension of time were granted. I shall refer to that material below. 11 I accept the submission of counsel for the applicant that work has been "continuing and ongoing" to try and comply with earlier orders, and that the voluminous and complex nature of the documents and issues has resulted in it taking a long time to complete the work, especially in an endeavour to particularise the claim. Counsel for the applicant noted that the director of the applicant had personally attended at the solicitor's office from Queensland twice to give detailed instructions. The evidence (adduced by the respondents: paras 18 and 19 of the affidavit of the applicant's instructing solicitor of 26 May 2006) shows that the applicant is in effect a two-person company, each working seven days a week for long hours. 12 As to the interests of justice, counsel for the applicant submitted that the proceedings offered the "capacity to deliver access to justice to a number of people", by offering group members a legal remedy that they might not otherwise be able to afford individually, and that although it might take slightly longer to achieve that remedy, it was in the interests of justice to permit the proceeding to continue as a representative action. 13 Senior counsel for the respondents relied on parts of four affidavits (the affidavit of Mr El-Hissi of 16 June 2009, paras 3 to 29; the first affidavit of Ms Bird of 26 May 2009, paras 9 to 18; and the second affidavit of Ms Bird of 26 May 2009, paras 5 to 40 and 42 to 50) to demonstrate prejudice to the respondents by the grant of a further indulgence to the applicant, as well as pointing out that the respondents have been attempting to progress the matter, and that the Court directions have been "consistently ignored" by the applicant, so that there is still no proper statement of claim. 14 The asserted prejudice was the inability to pursue recovery of moneys which the respondents say are due to them, and which continue to increase, because those franchisees who are still trading are not paying their franchise fees. Senior counsel for the respondents submitted that not only did his clients face the prospect of a ten month old proceeding without a statement of claim, but also a substantial time before this matter progresses to hearing, and if it is to continue, the prospect that the respondents will be unable to recover any moneys due to them. 15 As to the progress of the matter, senior counsel relied upon correspondence of 3 July 2009 from the solicitors for the applicant indicating that the further amended statement of claim, indexed book of documents and witness statements would be filed on 6 July 2009, and an email dated 6 July 2009 from the solicitors for the applicant saying the they were "taking final instructions" on the further amended statement of claim and "anticipate being in a position to deliver it tomorrow" (being 7 July 2009). That material was annexed to a further affidavit of Ms Bird sworn on 7 July 2009. Hence, it was submitted, the Court and the respondents could not reasonably expect accurate estimations of time and compliance with any timeline as ordered. 16 Counsel for the respondent also referred to unsuccessful requests for information relating to the financial position of the applicant, and the results of searches carried out by the respondents' solicitors which indicated that there are two charges securing the property of the applicant and that it does not own any real property, but that some land is held in the name of one or other of its directors or shareholders with a total government ascribed value of $426,000. 17 I took those various matters into account. Ultimately, as indicated above, I granted the applicant a limited further time to put its house in order rather than determine that the proceeding should not continue as a representative proceeding, or taking some more drastic action to dispose of the applicant's claim. 18 In my view, although the applicant has been consistently dilatory in complying with directions, that is not shown to be a consequence of any want of effort on its part or that of its legal advisers. If the further indulgence sought could, therefore, be granted without significant prejudice to the respondents or in a way which minimises any prejudice they may suffer, I consider it would be appropriate to grant that further indulgence. It would be a significant injustice to the applicant to dismiss its claim, or to bring a class action to an end when I have determined that at least at a conceptual level it may be sustainable (as explained in the earlier judgment), if a short period of time could edify the true status of the proceeding. 19 As to the prejudice to the respondents, I bore in mind that the further indulgence sought was but a short one. The costs thrown away by the adjournment of the motion were to be the respondents' costs in any event. If it is successful in the proceeding, however it progresses, the prospect of recovering its costs is not likely to be altered in any material way by a short further delay. There is evidence that suggests the applicant and at least some of the putative group members may not have the resources to meet any order for costs, but a short further adjournment of the motion will not worsen that position. Those matters will, no doubt, be significant when the application for security for costs is heard. 20 There is also evidence that there are 16 sets of proceedings in either the Magistrates Court of Victoria or the County Court of Victoria by one or other of the respondents against various of its franchisees, in which the total claims (excluding interest and costs) are said to be $1,299,440, and that additional liabilities are being incurred by all or some of those franchisees. There may be an arithmetical error overstating that amount. It is not, however, the position that the various respondents have been kept out of progressing all those claims by the applicant, or by these proceedings. Apparently, ten of those actions have resulted in judgments, or cannot proceed or have not proceeded for reasons unrelated to these proceedings. The remaining six have been stayed, by agreement between the parties or on the application of the relevant respondent (not resisted by the particular franchisee/defendant). The picture, therefore, at least as at present it appears to me, is that the respondents are not precluded from reviving their pursuance of their outstanding claims by any actions of the applicant (or of other franchisees) although sensibly the parties in some instances have agreed that it is appropriate to put some of those actions on hold. What is not clear is that a further delay of two weeks will in any material way worsen the prospects of the respondents from recovering that to which they may be entitled (depending on the outcome of these proceedings). 21 To ensure the progress of the matter, as the respondents are entitled to expect, I have granted the extension of time sought. I did so under a "sunset" provision, which counsel for the applicant acknowledged was not inappropriate. I also indicate that, assuming the applicant now complies with the orders previously made within the further time frames allowed, there should be only such further time as necessary for the respondents to prepare for trial before the matter is listed for hearing, in whatever form the action is to proceed, depending upon what is determined on the adjourned motion. That time should not be too long. 22 By those orders, I sought to minimise any prejudice to the respondents and to accommodate the request by the applicant for further time. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield. Associate: Dated: 4 August 2009 Counsel for the Applicant: M McCarthy Solicitor for the Applicant: Piper Alderman Counsel for the Respondents: P O'Sullivan QC and C Munt Solicitor for the Respondents: Donaldson Walsh Date of Hearing: 9 July 2009 Date of Judgment: 4 August 2009