FEDERAL COURT OF AUSTRALIA Oliver v Commonwealth Bank of Australia (No 2) [2012] FCA 755 Citation: Oliver v Commonwealth Bank of Australia (No 2) [2012] FCA 755 Parties: ANTHONY JOHN OLIVER v COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124) MARK ALLAN IRVING v COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124) File numbers: NSD 1044 of 2010 NSD 1826 of 2010 Judge: PERRAM J Date of judgment: 17 July 2012 Catchwords: PRACTICE AND PROCEDURE – Abuse of process – vexatious or oppressive proceedings – representative proceedings and proceedings brought by class members on foot simultaneously – where class members failed to opt out of representative proceedings and had not abandoned separate proceedings – whether separate proceedings should be dismissed – whether, alternatively, separate proceedings should be stayed and transferred to the docket to the judge hearing the representative proceedings – whether costs should be awarded PRACTICE AND PROCEDURE – Representative proceedings – whether s 33S of the Federal Court Act 1976 (Cth) authorises the Court to direct that proceedings already on foot be used for the determination of an issue that concerns only the claim of one particular class member – whether, alternatively, s 33ZF may be used to the same end Legislation: Federal Court Act 1976 (Cth) ss 33C, 33J, 33Q, 33R, 33S, 33ZF Acts Interpretation Act 1901 (Cth) s 13 Cases cited: Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 distinguished Bright v Femcare Ltd (2000) 175 ALR 50; [2000] FCA 742 cited Courtney v Medtel Pty Ltd (2002) 122 FCR 168 cited Henry v Henry (1996) 185 CLR 571 cited Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 56 cited King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2002] FCA 1560 cited Moore v Inglis (1976) 9 ALR 509 cited Re Peat Resources of Australia Pty Ltd; ex parte Pollock (2004) 181 FLR 454; [2004] WASCA 122 cited The Christiansborg (1885) 10 PD 141 cited Date of hearing: 29 June 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 31 Counsel for the Applicants: IE Davidson SC, SC Ipp Solicitor for the Applicants: Levitt Robinson Counsel for the Respondent: R Hollo SC, M O'Meara Solicitor for the Respondent: Clayton Utz IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 1044 of 2010 BETWEEN: ANTHONY JOHN OLIVER Applicant AND: COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124) Respondent JUDGE: PERRAM J DATE OF ORDER: 17 july 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Apart from any questions of costs, the proceedings be permanently stayed. 2. The respondent's interlocutory application be otherwise dismissed. 3. The proceedings be transferred to the docket of Reeves J and the question of the costs of these proceedings be determined by his Honour in light of the outcome of the Sherwood proceedings (NSD 811/2010). 4. The applicant's interlocutory application be otherwise dismissed. 5. There be no order as to the costs of either the respondent's or the applicant's interlocutory applications contained in the application book filed on 18 June 2012. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 1826 of 2010 BETWEEN: MARK ALLAN IRVING Applicant AND: COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124) Respondent JUDGE: PERRAM J DATE OF ORDER: 17 july 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Apart from any questions of costs, the proceedings be permanently stayed. 2. The respondent's interlocutory application be otherwise dismissed. 3. The proceedings be transferred to the docket of Reeves J and the question of the costs of these proceedings be determined by his Honour in light of the outcome of the Sherwood proceedings (NSD 811/2010). 4. The applicant's interlocutory application be otherwise dismissed. 5. There be no order as to the costs of either the respondent's or the applicant's interlocutory applications contained in the application book filed on 18 June 2012. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 1044 of 2010 BETWEEN: ANTHONY JOHN OLIVER Applicant AND: COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124) Respondent IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 1826 of 2010 BETWEEN: mark allan IRVING Applicant AND: COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124) Respondent JUDGE: PERRAM J DATE: 17 july 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 'It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue': Henry v Henry (1996) 185 CLR 571 at 591 per Dawson, Gaudron, McHugh and Gummow JJ. Consequently, it lies upon the party bringing the second action to show that is not so: Moore v Inglis (1976) 9 ALR 509 at 514 per Mason J, citing the dissenting judgment of Lord Esher MR in The Christiansborg (1885) 10 PD 141 at 148; Henry v Henry at 591 (footnote 66). 2 Representative proceedings give rise to complexities in this area because of the possibility that proceedings by the representatives, on the one hand, and separate proceedings brought by those represented, on the other, may infringe the above principle. In this Court representative proceedings operate on an 'opt-out' basis; that is, persons remain in the class of those represented unless they take the affirmative step of indicating they do not wish to be in that class: Federal Court of Australia Act 1976 (Cth), s 33J(2). Even though that is the case, however, class members are not parties to the proceeding unless they choose to be one of the nominated representative parties: s 33C(1); King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2002] FCA 1560 at [9] per Moore J; Courtney v Medtel Pty Ltd (2002) 122 FCR 168 at 179 [35]-[36] per Sackville J. 3 Consequently, the view in this Court is that the existence of proceedings by a class member (not being a representative party) at the same time as a representative proceeding in which that class member is represented is not necessarily an immediate abuse of process. In Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 56 per Merkel J, albeit in the context of competing representative proceedings, thought that at least at an early stage the Court should determine which of the proceedings should be permitted and it was not necessarily the case that the proceeding which was filed first should be the proceeding which would go forward: see [14]-[15]. On the other hand, Lehane J thought that, after a party had failed to opt out of a representative proceeding, it was likely that the Court would prevent further pursuit of presently subsisting and overlapping ordinary proceedings: Bright v Femcare Ltd (2000) 175 ALR 50 at 83 [101]; [2000] FCA 742 at [101]. Considerations of commonsense and these two decisions suggest, therefore, that it is prima facie vexatious and oppressive for a person who has not opted out of a representative proceeding (when the opt-out time has passed) to maintain ordinary proceedings against the same respondent dealing with substantially the same subject matter. I so conclude. 4 In this case representative proceedings were commenced in this Court on 1 July 2010 entitled Sherwood v Commonwealth Bank of Australia NSD 811/2010. Initially these were docketed to Emmett J. In the Sherwood proceedings it is alleged that the Commonwealth Bank ('the Bank') was involved in the failure of Storm Financial Ltd ('Storm'). Broadly it is said that there had been conducted an unregistered managed investment scheme; that the Bank had breached its contracts with its customers; and had engaged in misleading and deceptive conduct as well as unconscionable conduct. The customers of the Bank had both margin loan facilities and ordinary investment loans. The precise nature of the allegations has varied over time. 5 The solicitors acting in the representative proceedings are Messrs Levitt Robinson Solicitors. On 13 August 2010, that is five weeks after the filing of the Sherwood proceeding, those same solicitors filed another proceeding on behalf of Dr Oliver. Broadly the subject matter of the suit was the same. On 23 December 2010 they commenced further proceedings on behalf of Dr Irving. Both Dr Oliver and Dr Irving's proceedings were docketed to me. 6 The following day another representative proceeding, Richards v Macquarie Bank Limited QUD 590/2010 was commenced. It too arose out of the failure of Storm. It was docketed to Dowsett J. Subsequently, that proceeding was transferred to Reeves J. The same fate had, in the meantime, befallen the proceedings before Emmett J. Additionally, a separate proceeding was commenced by the regulator on 22 December 2010: ASIC v Storm Financial Ltd (Receivers and Managers Appointed) (In Liquidation) QUD 577/2010. These too are before Reeves J. For present purposes the only relevant overlap is between the Sherwood proceedings and those commenced by Dr Oliver and Dr Irving. 7 Reeves J ultimately extended the opt-out date in the Sherwood proceedings (for Dr Oliver and Dr Irving only) to 23 March 2012. By that date, Dr Oliver and Dr Irving had not opted out of the Sherwood proceedings. The whole of those proceedings (as well as the other Storm-related litigation) is fixed for a 3 month trial before Reeves J commencing on 10 September 2012. 8 In their current form the proceedings of Dr Oliver and Dr Irving deal with substantially the same subject matter as the Sherwood proceedings. Prima facie, therefore, since Dr Oliver and Dr Irving failed to opt out of the Sherwood proceedings, the maintenance of the proceedings in my docket is an abuse of process. 9 In substance the vexatious nature of the current situation was accepted by Dr Oliver and Dr Irving. What they submitted instead should be done was that I should stay their proceedings and transfer them to Reeves J. This course was to be seen as useful because the present proceedings might then later be used as a vehicle for resolving, after the determination of the common issues in the Sherwood proceedings, the specific matters arising in their cases. This course was to be seen as authorised by ss 33S and 33ZF. These sections provide: 33S Directions relating to commencement of further proceedings Where an issue cannot properly or conveniently be dealt with under section 33Q or 33R, the Court may: (a) if the issue concerns only the claim of a particular member—give directions relating to the commencement and conduct of a separate proceeding by that member; or (b) if the issue is common to the claims of all members of a sub-group—give directions relating to the commencement and conduct of a representative proceeding in relation to the claims of those members. … 33ZF General power of Court to make orders (1) In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding. 10 It is not suggested that the present proceedings should be consolidated with the Sherwood proceedings (nor is it necessarily obvious that this could, in any event, be done). 11 I do not think that s 33S(a) would authorise the present proceedings to be utilised in the manner suggested by Mr Davidson SC, who with Mr Ipp of counsel, appeared for Dr Oliver and Dr Irving. Mr Davidson's submission was that the expression 'directions relating to the commencement and conduct of a separate proceeding' should be read as meaning 'directions relating to the commencement of separate proceedings or the conduct of a separate proceeding'. 12 No doubt, in an appropriate case 'and' may be read as meaning 'or' depending on the context: see the useful discussion of the law of conjunctions in Re Peat Resources of Australia Pty Ltd; ex parte Pollock (2004) 181 FLR 454 at 460-467 [23]-[54]; [2004] WASCA 122 at [23]-[54] per Malcolm CJ. But the context here does not support that conclusion. It is inconsistent with the heading which, so it seems to me, I am now permitted to take into account by the recently amended s 13 of the Acts Interpretation Act 1901 (Cth). It provides: 13 Material that is part of an Act (1) All material from and including the first section of an Act to the end of: (a) if there are no Schedules to the Act—the last section of the Act; or (b) if there are one or more Schedules to the Act—the last Schedule to the Act; is part of the Act. (2) The following are also part of an Act: (a) the long title of the Act; (b) any Preamble to the Act; (c) the enacting words for the Act; (d) any heading to a Chapter, Part, Division or Subdivision appearing before the first section of the Act. Formerly it provided: 13 Headings, schedules, marginal notes, footnotes and endnotes (1) The headings of the Parts Divisions and Subdivisions into which any Act is divided shall be deemed to be part of the Act. (2) Every schedule to an Act shall be deemed to form part thereof. (3) No marginal note, footnote or endnote to an Act, and no heading to a section of an Act, shall be taken to be part of the Act. 13 In any event, the heading does not contemplate pre-existing proceedings. Nor did the Explanatory Memorandum which, of s 33S, said: 28. After determining the common issues in a representative proceeding it may not be appropriate, in some cases, to deal with remaining issues in the same proceeding. An example would be a case where, after a determination of liability is made, there are remaining issues in relation to one or more group members which are complex and diverse. In such cases it may be more efficient for separate proceedings, limited to those remaining issues, to be brought either by individual group members or as a separate representative proceeding. This section enables the Court to give directions relating to the commencement and conduct of such an individual proceeding or representative proceeding. (Emphasis added.) 14 The emphasised portion in the quotation above is inconsistent with the use of s 33S(a) in relation to proceedings which already exist. 15 In those circumstances, I do not accept that s 33S(a) may be used in the manner suggested by Dr Oliver and Dr Irving. 16 The Bank submitted that s 33ZF could not be used to outflank that limitation in s 33S(a). Here the argument was that s 33ZF was a general power which could not be used to outflank limitations or restrictions applying to some specific power: Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7 per Gavan Duffy CJ and Dixon J. The difficulty with that submission is that s 33S says nothing about proceedings which have already been commenced. It is not a power to make directions about proceedings in general subject to a restraint that it may not be used in respect of proceedings which are already on foot; rather, it simply does not speak to that issue at all. There is no room in that circumstance to hobble the operation of s 33ZF to prevent undermining a restriction which does not exist. 17 I accept, therefore, that s 33ZF could in principle be used in the manner suggested by Dr Oliver and Dr Irving. That is not sufficient for present purposes, however. The Bank also submitted there were at least two uncertainties affecting the proceedings. The first was that it was very far from clear that resort would ever be had to these proceedings. In this regard it noted that the machinery in ss 33Q and 33R seemed more than adequate to resolve any individual issues which might arise. These provided: 33Q Determination of issues where not all issues are common (1) If it appears to the Court that determination of the issue or issues common to all group members will not finally determine the claims of all group members, the Court may give directions in relation to the determination of the remaining issues. (2) In the case of issues common to the claims of some only of the group members, the directions given by the Court may include directions establishing a sub-group consisting of those group members and appointing a person to be the sub-group representative party on behalf of the sub-group members. (3) Where the Court appoints a person other than the representative party to be a sub-group representative party, that person, and not the representative party, is liable for costs associated with the determination of the issue or issues common to the sub-group members. 33R Individual issues (1) In giving directions under section 33Q, the Court may permit an individual group member to appear in the proceeding for the purpose of determining an issue that relates only to the claims of that member. (2) In such a case, the individual group member, and not the representative party, is liable for costs associated with the determination of the issue. 18 The second was that even assuming that the present proceedings might be dragooned into later action in a different theatre of operations it was very unlikely they would, at that time, bear any resemblance to their current form. Put another way, it was not just a case – to use the cryogenic metaphor which emerged during the hearing – of putting the proceedings 'on ice' for some indeterminate period but also, upon their defrosting, of conducting potentially extensive surgery on them. 19 These two matters, but particularly the second, underscored that the purpose put forward as saving the proceedings from the label vexatious was not a purpose of the proceedings as presently constituted. On this view, all Dr Oliver and Dr Irving were seeking to preserve was a husk of a case. 20 In my opinion this is correct. It is not to the point that these proceedings may one day potentially be reconstituted and given fresh life in a new form. That is not a purpose of the proceedings as presently constituted. If it is a purpose of any proceedings it is probably a purpose of the Sherwood proceedings which might, if successful, be expected to give rise to issues about individual class members after the determination of common issues. But that process can hardly be said to be an aspect of ordinary proceedings commenced in this Court such as the present ones. I conclude that keeping these cases alive perhaps one day to form part of the sequelae to the Sherwood proceedings is not a proper purpose. 21 Subject to the question of costs to which I return below it follows that there would be no utility in transferring the proceedings to Reeves J for the purpose suggested by Dr Oliver and Dr Irving. 22 Mr Hollo SC who, with Mr O'Meara of counsel, appeared for the Bank submitted that the proceedings should be dismissed and only as an alternative that they should be stayed. The better view is that the appropriate remedy is a stay. This was the course adopted by Mason J in Moore v Inglis. 23 The remaining questions are whether the stay should be permanent and what should happen with the issue of costs. 24 The proceedings were not an abuse of process until 23 March 2012 when Dr Oliver and Dr Irving failed to opt out of the Sherwood proceedings and I do not consider their position in pursuing these proceedings prior to that time was unreasonable. However, on that date they have, in effect, elected to pursue the representative proceedings and to abandon these ones. In a sense, their submission that the current actions should be preserved so that ultimately they might facilitate the ultimate resolution of the individual claims in the Sherwood proceedings showed the subordinate role now envisaged for them. 25 In those circumstances, I propose to stay the proceedings permanently. That leaves the question of costs. I do not accept that in this case it would be appropriate now to order Dr Oliver and Dr Irving to pay the Bank's costs of these proceedings. This is because until they formally failed to opt out of the representative proceedings on 23 March 2012 these proceedings were not an abuse of process. The consequence of the permanent stay I have imposed will be that there will never be any determination of the outcome of these proceedings. 26 Mr Hollo submitted that as a result of the stay the Bank had wasted money on these proceedings which it should, in principle, be entitled to recoup. It ought to be accepted that wasted expenditure should be recouped but at the moment it is not possible to guage whether, and if so how much, wastage there has been. The reasons for this lie in the fact that Dr Oliver and Dr Irving are class members in the Sherwood representative proceedings. It may be that the work expended in these proceedings may ultimately lead to savings in the Sherwood proceedings. On the other hand there can be no certainty about that and the opposite may transpire to be the case. 27 That uncertainty requires the conclusion that the issue of costs not be determined until Dr Irving and Dr Oliver's fates as members of the class in the Sherwood representative proceedings is known. Now, then, is not the time for this issue to be resolved. 28 Who should answer the question of costs when the moment of its ripeness finally arrives? The question of assessing the extent to which the work done in these proceedings has resulted in savings in the Sherwood proceedings will require a detailed knowledge of the procedural history of both. Given the modest activity which has occurred in Dr Oliver and Dr Irving's cases the acquisition of that procedural knowledge will be relatively straightforward. On the other hand, the acquisition by me of an understanding of the entire procedural history of the Sherwood proceedings will be a much larger undertaking and one for which one would have thought the docket judge conducting those proceedings was uniquely, if unfortunately, positioned. 29 In those circumstances I propose to leave the question of what should happen with the costs of these proceedings to Reeves J to be dealt with in light of the outcome of the proceedings to be tried by him starting on 10 September 2012. 30 This will require a transfer from my docket to his Honour's docket. The Bank argued that no reason was shown for this to occur. I reject that submission. These are proceedings arising from the collapse of Storm. All of the Storm cases, apart from the present two, are before Reeves J including the Sherwood proceedings in which Dr Irving and Dr Oliver are class members. To allow these cases to remain South of the Tweed would not only be provincial but irrational. 31 In both proceedings, I will order that: 1. Apart from any questions of costs, the proceedings be permanently stayed. 2. The respondent's interlocutory application be otherwise dismissed. 3. The proceedings be transferred to the docket of Reeves J and the question of the costs of these proceedings be determined by his Honour in light of the outcome of the Sherwood proceedings. 4. The applicant's interlocutory application be otherwise dismissed. 5. There be no order as to the costs of either the respondent's or the applicant's interlocutory applications contained in the application book filed on 18 June 2012. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 17 July 2012