Lessons from Ireland’s sex abuse coverups

High court divided on freedom of speech

Two recent decisions in the High Court have left open the question of how far our law will go to protect Australia’s equivalent of free speech.

In one case, street preachers in Adelaide’s Rundle Mall lost their fight to espouse Christian fundamentalism in a public setting.

In another case, the court was split on whether a man who allegedly sent offensive letters to the families of soldiers killed in Afghanistan should have his right to do so recognised by the High Court.

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In recent months our papers have carried stories of the employee of Leighton Holdings who is said to have systemically taken some $20million from his employer over several years, and of Supreme Court proceedings in which the Public Trustee of Qld sought to recover some $3million taken from a mentally impaired man and then siphoned overseas.

Further south, there continues to be a steady stream of reported and unreported decisions of the Supreme Court of New South Wales, adjudicating attempts by banks and employers to recover funds taken by identity and cheque fraud.2

The increasing use of EFT and on-line banking, coupled with an aging population, means that cases of this kind are likely to continue to present themselves in coming years.

Whilst many of these cases end up as criminal prosecutions, in some the victim will wish to bring civil claims to recover what has been lost. However, fraud is not part of the bread and butter of civil practice, and few of us have first-hand familiarity with the law of fraud as it applies in a civil context.

This paper seeks to identify some of the key legal principles and practical issues that may arise if you are instructed by a client who wishes to trace and recover the proceeds of fraud in the civil courts. The paper is based around my own learning experience when presented with just such a client.

The starting point: Black v Freedman

The starting point remains the High Court’s decision in Black v S Freedman & Co (1910) 12 CLR 105.3

John Black was employed by S Freedman & Company. From 1907 he began stealing money from his employer, and took considerable sums over the next three years. Black later absconded, but was captured and arrested. Black’s wage was only £4 per week, but the evidence showed that he had paid several hundred pounds to wife, Isabella Black. Questions arose as to the employer’s right to claim any money from Isabella Black, who was not herself involved in the theft. Griffith CJ, Barton J and O’Connor J held that it could be inferred that the money that Isabella Black had received from her husband had been stolen by him, and that S Freedman & Company could recover the money from her. The critical passage in the judgment is that of O’Connor J, who said as follows (at p 110):

Where money has been stolen, it is trust money in the hands of the thief, and he cannot divest it of that character. If he pays it over to another person, then it may be followed into that other person’s hands. If, of course, that other person shows that it has come to him bona fide for valuable consideration, and without notice, it then may lose its character as trust money and cannot be recovered. But if it is handed over merely as a gift, it does not matter whether there is notice or not.

Importantly, the High Court did not suggest that John Black’s fiduciary relationship with S Freedman & Company was a necessary element to the tracing claim. The basis for the conclusion that the money was held on trust by John Black and could be traced into the hands of Isabella Black, was that it had been acquired by fraud, and not that it had been taken in breach of fiduciary duty.

This is how the case has been subsequently interpreted. Australian law has, in this respect, not been complicated by the debates that have dogged English law in recent years, as to whether fraud unaccompanied by a breach of fiduciary duty is sufficient to permit a tracing claim, and as to whether generalized pronouncements of the kind made by O’Connor J in Black v Freedman, are in fact too widely expressed.4

What counts as “fraud”?

Whilst O’Connor J spoke in terms of money that had been “stolen”, the authorities since that time appear to indicate that any dishonest taking or receiving of money will trigger a constructive trust: see eg. Bank of America v Arnell [1999] Lloyds Rep Bank 399 (recipient of money aware payer’s mistake due to fraud of another); Robb Evans v European Bank Ltd (2004) 61 NSWLR 75, [111], [113] (CA) (proceeds of credit card fraud); Westpac Banking Corporation v Ollis [2007] NSWSC 956, [18], [29]-[32] (exploiting bank error by writing ‘an avalanche’ of cheques); Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429, [40] (Sup Ct NSW) (paying away money knowing it was received by mistake); Heperu Pty Ltd v Belle (2009) 76 NSWLR 230, [92]-[93] (CA) (proceeds of misappropriated cheques).

It seems that in determining what constitutes “dishonesty” for the purposes of the principle, the body of case law establishing what counts as “dishonesty” in the crime of fraud may be applied by analogy.5

This rather generalized right to bring an equitable tracing claim founded upon the dishonest taking of money, or (if legal title passes) property, [6] stands in sharp contrast to other much more closely proscribed causes of action that are founded upon dishonesty. The three familiar instances are as follows:

(a) damages for the tort of deceit: this requires proof that the plaintiff suffered loss by reason of a fraudulent representation made by the defendant, that the defendant intended the plaintiff to rely upon.7 In contrast, a representation and reliance does not need to be established for a tracing claim founded upon fraud;

(b) fraudulent misrepresentation permitting the rescission of a contract: here again, the orthodox view is that a representation must be proved;8

(c) dishonest assistance in a breach of trust: this requires proof of a pre-existing trust of the relevant assets, or perhaps a pre-existing fiduciary relationship.9 Neither a prior trust, or fiduciary relationship, needs to be proved for a tracing claim founded upon the fraudulent taking of money or property.

Tracing the proceeds of fraud

Tracing “Tracing” has been said to be neither a claim nor a remedy, and is rather the process by which a claimant demonstrates what has happened to its property, identifies its proceeds and the persons who have handled or received them. The successful completion of a “tracing exercise” may be a preliminary to the making of a personal or proprietary claim, to the extent either is available: Foskett v McKeown [2001] 1 AC 102 at 128 per Lord Millett, approved and applied in Robb Evans of Robb Evans and Associates v European Bank Limited [2004] NSWCA 82 at 103 [133] (Spigelman CJ, with whom Handley JA and Santow JA agreed), and Heperu Pty Ltd v Belle (2009) 76 NSWLR 230 at [89] (CA) (Allsop P, with whom Handley and Campell JAA agreed).10

The leading text on the law of tracing is still probably Lionel Smith’s seminal work, The Law of Tracing (OUP, 1997).11

Tracing in cases of fraud The approach adopted where the proceeds of fraud are traced were recently summarized by Allsop ACJ in Toksoz v Westpac Banking Corporation (2012) 289 ALR 557, 579-80 (NSWCA) (in the context of a bank’s claim against the wife of a thief who had stolen some $1million by identity fraud):

[8] Money can be traced notwithstanding an inability of the follower to connect each link in the chain of accounts. Commonsense and reasonable inference play their part, especially if there is fraud involved and if there is a lack of explanation, when the circumstances cry out for honesty to be explained, if it can be.

[9] A number of cases reveal a sensible robust approach to the tracing of moneys from theft: R v Powell (1837) 7 Car & P 640 ; 173 ER 280; Harford v Lloyd (1855) 20 Beav 310 ; 52 ER 622; Black; Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 ; [1992] 4 All ER 512; El Ajou v Dollar Land Holdings Plc [1993] 3 All ER 717 ; and see the discussion in L D Smith, The Law of Tracing, Clarendon Press, Oxford, 1997, p 263 and the other cases there cited. The expression “tracing by exhaustion” is sometimes used. Where the facts as proved are sufficient to permit the inference that moneys have been received or property bought without there being an honest source available to explain the wealth and the sums or value can be seen as referable to the following party’s property wrongfully obtained, such that the inference is open that the wrongfully obtained funds were the source of the wealth, the funds can be so treated. One does not need to be able to show every link in the chain of accounts from and through which the money passed. Inferences will be more easily drawn, as here, in circumstances where the funds were stolen, the person who is said to have provided the funds was one of the thieves who stole money from the follower, when the recipient has an apparent close relationship with the thief, which recipient gave no value for it, has no personal source of income and gives no explanation as to the source or circumstances of the receipt of the money or any honest source of it.

[10] None of this is the expression of a principle of law. It is the expression of the available approach to fact finding in the presence of fraud and lack of explanation when plainly called for.

Constructive trust The claim asserted will usually be for the declaration of a constructive trust over identified assets in the hands of the defendant(s), or perhaps assets to be identified, together with ancillary orders to give effect to the trust. The ancillary orders will include orders adapted to the delivery over of possession and legal title to the relevant assets, to the plaintiff as beneficial owner.

Charge Where the target asset has been acquired in part using misappropriated funds and partly with other monies, the plaintiff is entitled to claim either a proportionate beneficial interest in the asset, or a charge to the extent of his money that has been applied to acquire the asset: Allianz Australia Insurance Limited v Rose Marie Lo-Guidice [2012] NSWSC 145 at [32], [33] (cheque fraud).

In practice, a charge will be claimed if the asset has decreased in value since the date of acquisition, and proportionate beneficial ownership will be asserted where it has increased in value.

Overseas assets A proprietary interest can be asserted even over assets located overseas, as long as the owner or custodian of the assets is subject to the jurisdiction of the Queensland court: Ewing v Orr Ewing (1883) 9 App Cas 34, 40; also, Macmillan Inc v Bishopgate Investments Trust plc [1996] 1 WLR 387, 398F-G, 408 (CA). Nor is it necessary for the law of the place where the assets are located to recognize equitable rights or the concept of a trust, before an equitable interest may be asserted: El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, 736-7 (Ch D) per Millett J (rev on other grounds); L Smith, The Law of Tracing (OUP, 1997) p 277; also, Virtel Limited v Zabusky [2006] 2 QdR 81, [62]-[63] per de Jersey CJ.

Personal claim An important claim in this context, is the constructive trustee’s personal obligation to account for the value of the property received.12 So, if the fraudster (or, perhaps, a third party recipient compelled to hold as trustee) pays away the money obtained, so that there remain no traceable proceeds over which a trust can be asserted,13 he or she will be subject to a personal obligation to account for the value of that property: Lurgi (Australia ) Pty Ltd v Gratz [2000] VSC 278, [79], [80], [85]; Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429, [64] (Sup Ct NSW). Indeed, causing the money to be paid away is likely to be a breach of the constructive trustee’s obligation to get in the trust estate, and to return it to the beneficial owner: Lurgi (Australia ) Pty Ltd v Gratz [2000] VSC 278, [79]; Robb Evans v European Bank Ltd (2004) 61 NSWLR 75 at [116], [162] (CA); Heperu Pty Ltd v Belle (2009) 76 NSWLR 230 at [114] (CA).

Where it is money that has been taken, a claim for money had and received will also lie against the recipients of the misapplied fund (save for a bona fide purchaser for value).14

Advantages of a tracing claim

The main advantages of a tracing claim in the context of fraud are as follows.

First, where proceeds can be traced and identified and a proprietary interest asserted over them, the claimant will rank ahead of all unsecured creditors in respect of those assets. Where the defendant is insolvent (as will often be the case in fraud cases), a proprietary claim will usually be the only claim of value.

Second, a wider range of remedial orders can be sought, in order to vindicate the proprietary interest. Orders for delivering possession and title to identified assets will be made, and an injunction may be ordered or even a receiver appointed, either at an interlocutory stage or in aid of execution, where appropriate.15

Third, a tracing claim has the advantage that it will often permit a claim to be brought against third parties. As O’Connor J explained in Black v Freedman, the money or property taken can be traced into the hands of all third party recipients, save those who can establish that they are bona fide purchasers for value. This effectively increases the size of the asset pool against which recovery can be sought.

Key practical issues

First issue: protecting assets and obtaining information

In cases of fraud, urgent steps will usually need to be taken to gain information as to where the relevant assets are, and to preserve them if possible. The English courts developed several types of interim order directed to that end, and they are now well established in Queensland.

Freezing order The order most commonly sought to protect assets is a freezing order. A freezing order is not an injunction, and is not an order made in respect of any particular property; it simply binds the respondent personally, ordering him or her to not deal with their property otherwise than according to the terms of the order.16

In Queensland, the procedure and the usual form of the order are set out in a comprehensive practice direction, which is modeled on the English practice (number 1 of 2007, which should be read with rule 260A of the Uniform Civil Procedure Rules 1999).

To obtain a freezing order, an a pplicant must show a good arguable case on an accrued or prospective cause of action, and prove that there is a danger that a judgment or prospective judgment will be wholly or partially unsatisfied because the judgment debtor might abscond or their assets might be removed from Australia or disposed of, dealt with or diminished in value: see UCPR r 260A(1).

The second requirement, of risk of dissipation, tends to be easier to prove if there is evidence of fraud, and there is some authority that if dishonesty can be shown, this alone is sufficient to give rise to an inference that assets may be dissipated or disposed of.17

Asset disclosure order An ancillary order requiring a respondent to disclose the value and location of their assets is regularly made,18 particularly where a prima facie case of fraud is shown. Rule 260B(2)(a) of the UCPR makes provision for this type of order, and it is reflected in the terms of the pro-forma order in the practice direction (para 8 and 9).

An order of this kind is of particular importance where the defrauded party wishes to undertake a tracing exercise. It may be the best, or indeed the only, practical means of locating the proceeds of the money or property taken.

Search order Whilst the Anton Pillar or search order is often associated with copyright cases, it is also now established that in appropriate circumstances, orders of this kind may be granted in fraud cases.

The purpose of the order is to preserve or secure evidence which is or may be relevant to an issue in proceedings or anticipated proceedings: rule 261A of the UCPR. There are three requirements for the order to be made, which are set out in rule 261B.19

Reference should also be made to rules 261 to 261F of the UCPR, and Practice Direction 2 of 2007, which provides a very detailed pro-forma form of order.

Again, evidence of fraud will tend to assist in satisfying the conditions for the making of a search order. One such condition is that “there is a real possibility that the respondent might destroy the material or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding before the court” (rule 261B(c)(ii)), and it has been said that:20

It has certainly become customary to infer the probability of disappearance or destruction of evidence where it is clearly established on the evidence before the court that the defendant is engaged in a nefarious activity which renders it likely that that he is an untrustworthy person. It is seldom that one can get cogent or actual evidence of a threat to destroy materials or documents. So it is necessary for it to be inferred from the material which is before the Court.

Restricting travel The UCPR gives the Supreme Court power to make an ancillary order restraining a defendant from leaving the jurisdiction and requiring the delivery up of any passports: see the last line of r 259(2)(c), and r 260B of the UCPR. [21] There is probably also an inherent power in the court to make the order.22

An order prohibiting a defendant from leaving the jurisdiction may be coupled with a further order that the defendant deliver up his or her passports to the person who serves the interim order on the defendant: Bayer AG v Winter [1986] 1 All ER 733.

References A useful reference is Biscoe, Freezing and Search Orders (Butterworths, 2008).

Second issue: concurrent criminal liability

The conduct that triggers the right to trace the proceeds of fraud in equity, will usually also involve the commission of a criminal offence; in particular, the crime of fraud,23 or the offence of stealing.24

This overlap with the criminal law raises two issues of practical importance.

First, the High Court’s decision in Reid v Howard (1995) 184 CLR 1 establishes that an ancillary order that the respondent swear an affidavit as to the whereabouts and value of his or her assets (discussed above), will not be made in terms that undermine the respondent’s right to claim privilege against self-incrimination. This restriction is, however, accounted for in the pro-forma order that forms part of our practice direction. It makes the obligation to swear an affidavit as to assets, subject to the entitlement to object to doing so on the ground that providing the information will tend to incriminate the respondent.

In Reid v Howard, the High Court left open the possibility that an asset disclosure order might still be made in the face of the assertion of the privilege against self-incrimination, if the police had given an undertaking not to use any disclosed information in criminal proceedings or investigations.25 Whilst there is English authority that this is possible,26 the point remains open in Australia, as also is the question of whether the QPS could properly give such an undertaking.

Second, if complaint is made to the police and a police investigation is commenced, or criminal proceedings are instituted, this will have implications for civil proceedings that may be commenced.

The reason is that in such a case, there is some prospect that the alleged fraudster will be able to successfully apply to stay the civil claim, until completion of the criminal proceedings, on the basis that this is necessary to preserve his privilege against self-incrimination, or otherwise to ensure that he or she receives a fair trial.27

The relevant principles were explained by Wootten J in McMahon v Gould (1982) 7 ACLR 202:

(a) Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court (Rochfort v John Fairfax & Son Ltd at 19);

(b) It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds (ibid);

(c) The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with (Jefferson v Bhetcha at 905);

(d) Neither an accused (ibid) nor the Crown (Rochfort v John Fairfax & Sons Ltd at 21) are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;

(e) The court’s task is one of “the balancing of justice between the parties” (Jefferson Ltd v Bhetcha at 904), taking account of all relevant factors (ibid at 905);

(f) Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors (ibid at 905);

(g) One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused’s “right of silence”, and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding (ibid at 904). I return to this subject below;

(h) However, the so-called “right of silence” does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action is not debarred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceedings (ibid at 904-5);

(i) The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings (ibid at 905);

(j) In this regard factors which may be relevant include:

(i) the possibility of publicity that might reach and influence jurors in the civil [sic] [28] proceedings (ibid at 905);

(ii) the proximity of the criminal hearing (ibid at 905);

(iii) the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses (ibid at 905);

(iv) the burden on the defendant of preparing for both sets of proceedings concurrently (Beecee Group v Barton);

(v) whether the defendant has already disclosed his defence to the allegations (Caesar v Somner at 932; Re Saltergate Insurance Co Ltd at 736);

(vi) the conduct of the defendant, including his own prior invocation of civil process when it suited him (cf Re Saltergate Insurance Co Ltd at 735—6);

(k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant’s obligation to the plaintiff;

(l) In an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed. (Beecee Group v Barton).

In Queensland, McMahon’s case has been applied by McMeekin J in Hamilton Island Enterprises Ltd v Johnstone [2010] QSC 38, Daubney J in Osric Investments v Probs [2007] QSC 293, and in the Federal Court by Logan J in Wide Bay Conservation Council Inc v Burnett Water Pty Ltd [2008] FCA 1900.

Doubts have been raised as to whether these guidelines place too little weight on the privilege against self-incrimination, in light of the High Court’s decision in Reid v Howard (1995) 184 CLR 1 (see, for example, Osric Investments v Probs [2007] QSC 293 at [12]), but it is submitted that the principles do continue to apply, unless modified by the High Court.29

Given that police will generally not act until complaint is made, in each case consideration has to be given to whether a complaint should be made. This ultimately must be a decision of the client, but it may be a matter where the client requests advice about whether to do so. A criminal complaint must not be made to further a civil proceedings. However, where a criminal act is believed to have been committed there is a public interest in this being brought to the attention of the police. Under the Police Powers and Responsibilities Act 2000 (Qld), police officers are given the responsibility of determining in a given case if it is appropriate to lay criminal charges.

It is important to recognize that the police are only permitted to commence proceedings against a person for a criminal offence where the officer “reasonably suspects” such an offence has been committed.30 It would be necessary for sufficient evidence to justify that reasonable suspicion be provided to police or be capable of being lawfully obtained by police before a charge was preferred. If a person is charged, then the police have a significant range of powers which are available to restrict the defendant’s capacity to further dissipate or hide assets obtained by fraud. These powers potentially complement steps taken by the victim of the fraud through the civil processes discussed in this paper.

It will also be necessary for the client to consider the potential for a criminal complaint to lead to the alleged fraudster being able to successfully apply to stay any civil recovery proceedings, relying upon the principles explained above.

When considering the involvement of the police, the potential operation of the Criminal Proceeds Confiscation Act 2002 (Qld) should also be considered. This statutory regime operates independently from the general law principles considered in this paper. The legislation is not adapted to restoring the proceeds of crime to the victim, but to the stripping away of the proceeds of crime for the benefit of the State.31

Third issue: need to rescind?

There is a distinction between cases where money or property is transferred away under a contract that has been induced by fraud, and where the fraudulent taking or receiving happens outside the context of any contract.

Usually, fraud on the part of one contracting party will not prevent a contract from arising.32 It will, instead, render the contract voidable at the instance of the innocent party, conferring a right in that party to elect to set the contract aside ab initio.33

Legal and beneficial title passes in money and property transferred under a voidable contract, and that title cannot be got back until the contract is rescinded or an election to do so is made. Until such time as there is an election to disaffirm the contract, all that the innocent party holds is the “mere equity” of his right to set aside the contract. After the contract is set aside, the rescinding party can assert a beneficial interest in the property or money transferred, or in their traceable substitutes, as against both the transferee, and third party recipients: see Alati v Kruger (1955) 94 CLR 216, 224; Fysh v Page (1956) 96 CLR 233; Daly v Sydney Stock Exchange (1985) 160 CLR 371, 387-9; further, The Law of Rescission (OUP, 2008), Ch 16.

The practical point is that it is in each case necessary to consider whether the defrauded party has parted with money or property under a contract or purported contract, or not. If no contract has been entered, there is no difficulty. If, on the other hand, a contract has been concluded, in order to effectively bring a claim for restitution of what has been given, the injured party must elect to avoid the transaction. This will in turn require attention to other issues that inevitably arise in this fact pattern: what is the risk that any such election will turn out to be wrongful, and expose the client to a claim for damages for breach of contract; what is the prospect that the client has so conducted himself that the right to rescind has in fact been lost; and has the client obtained benefits under the impugned contract that will have to be returned upon rescission?

Fourth issue: ethical and evidential considerations

The fourth practical matter that will arise where a claimant wishes to trace the proceeds of fraud, are the ethical and evidential issues that attend claims of this kind.

Restrictions on alleging fraud Barristers’ rules of conduct have long provided that an allegation of fraud should not be pleaded unless there is a sufficient basis for it. The principle is now expressed in rules 64 and 65 of the Barrister’s Conduct Rules, 23 December 2011.34 Failure to comply with the rule carries potential exposure to a wasted costs order against counsel.35

When made, allegations of fraud must be pleaded with particularity (UCPR, rule 150(1)(f)).

Standard of proof An allegation of fraud should be supported by cogent evidence. The court will require the allegation to be clearly proved, and by reference to a standard of proof commensurate with the seriousness of the allegation: Briginshaw v Briginshaw (1938) 60 CLR 336, 362-3 (per Dixon J).

Full disclosure for ex parte hearing At the interlocutory stage, it is common for both a freezing order and a search order to be sought without notice. The order will typically expire at the return date for the application, when the matter will come back before the court on notice.

Where the application is made ex parte it is vital to ensure that there is placed before the court, all facts that are material to the exercise of the court’s discretion, including matters that weigh against the granting of the relief, or that would adversely limit its scope. The client will otherwise be at risk of having the order discharged at the return date for failure to having made proper disclosure, and possibly having the undertaking as to damages called upon.

It will often be the case that any circumstances that weigh against the making of the order sought, or that would limit its terms adversely, is protected by legal professional privilege. Under the Barrister’s Conduct Rules 2011, counsel must seek instructions from the client to waive privilege in respect of that matter, and if those instructions are not given, the barrister must not appear on the application (rule 30).

Conclusion

I hope that this brief survey has provided at least one perspective on the legal and practical points that arise if you receive instructions to act for a client who appears to have parted with assets in circumstances of fraud, and who may therefore have rights to recover them back, if they can be traced and found.

A key point that I want to leave you with is that when we look into this corner of the law, we find that the civil courts possess an exceptional armory to deal with cases of fraud, and for that reason it is always worth carefully reviewing the options at your client’s disposal, before fixing upon the course of action that you will recommend.

Dominic O’Sullivan

Footnotes

1. Queensland Bar Association Annual Conference, Sheraton Mirage, Gold Coast. Thanks are due to Stewart Webster, Benedict Power, Andrew Hoare, Jennifer Waldon and John McKenna SC, for their valuable assistance in connection with this paper.

2. Eg, Allianz Australia Insurance Limited v Rose Marie Lo-Guidice [2012] NSWSC 145; Toksoz v Westpac Banking Corporation (2012) 289 ALR 557 (CA); para 10 below.

3. See also, Creak v James Moore and Sons Pty Ltd (1912) 15 CLR 426, 432 (stolen goods); J Tarrant, “Theft Principle in Private Law” (2006) 80 ALJ 531.

4. See, for example, Shalson v Russo [2005] 1 Ch 281, [109] — [117] per Rimer J.

5. Lawrie v Hwang [2012] QSC 422 at [76], [134], [147] (criminal law as to fraudulent taking from a person of impaired intellect applied to a tracing claim).

6. In the case of property as opposed to money, a constructive trust only arises if legal title to the property passes to the fraudster. If it does not, a trust cannot arise because the victim has never ceased to be the owner of the property. In that case, the claimant’s rights are instead found in the common law actions for wrongful interference with possession (conversion, trespass etc.), and in the case of goods, also the self-help remedy of reception. These rights can be enforced against the fraudster, or whoever else may come to possess the property thereafter (nemo dat quod non habet). Money is different, because the recipient will usually obtain legal title. As to the transfer of title to money, Sinclair v Brougham [1924] AC 398, 418; Porter v Latec Finance (Qld) Pty Ltd (1964) 111 CLR 177; Ilich v R (1987) 162 CLR 110; Fox, [1996] RLR 60, 69-70; and in the case of transfers of money between bank accounts, R v Preddy [1996] AC 815, 834; Foskett v McKeown [2001] 1 AC 102, 128.

7. For discussion, P McGrath, Commercial Fraud in Civil Practice (OUP, 2008) 11-29; RP Balkin and JLR Davis, The Law of Torts 4th edn (Lexis Nexis, 2009) [23.12]-[23.40].

8. The Law of Rescission (OUP, 2008) at [4.02], [4.05].

9. Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.

10. As was helpfully observed by John Greenwood QC in the discussion following delivery of the paper, and referring to Re Diplock [1948] Ch 465 (CA), the key feature of the tracing exercise is that the Plaintiff may trace his proprietary interest in the money or property taken, into exchange substitutes for it; for example, property bought with the money taken, or money received from the realization of property taken.

11. See also, D Fox, Property Rights in Money (OUP, 2008) Ch 5, 6, 7.

12. The same obligation is owed by the knowing recipient of trust property: Lewin on Trusts 18th edn (Sweet & Maxwell, 2008) at [42-23]; C Harpum “The Stranger as Constructive Trustee” (1986) 102 LQR 114 and 267, at p 269.

13. That is, assuming that there exists no asset into which the money can be traced; cf. note 10 above.

14. Colonial Bank v Exchange Bank of Yarmouth, Nova Scotia (1885) 11 App Cas 84 (payment to wrong bank); Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (dishonest taking of client money by solicitor); Break Fast Investments Pty Ltd v Giannopoulos [2011] NSWSC 1508, [33]; also, Restitution Law in Australia 2nd edn (Lexis Nexis, 2008) at [308]. See also, Heperu Pty Ltd v Belle (2009) 76 NSWLR 230, [143]- [145], [153] (CA), applied Break Fast Investments Pty Ltd v Giannopoulos [2011] NSWSC 1508, [33]-[34], [80] (suggesting that the claim is limited to value surviving where the recipient is innocent).

15. Masri v Consolidated Contractors International Co SAL [2009] QB 450 (CA); Hall v Foster [2012] NSWSC 97; also, Young, Croft and Smith, On Equity 2009, at 1144-6.

16. Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 at 558.

17. See Lock International plc v Beswick [1989] 1 WLR 1268 at 1280; Yousif v Salama [1980] 1 WLR 1540. But see: Thorne Investments Ltd v Tomlinson [2003] EWCA Civ 1272 at [28] (Gibson LJ).

18. See, e.g. Ballabil Holdings Pty Ltd v Hospital Products Pty Ltd (1985) 1 NSWLR 155; Sup Ct of Qld PD 1 of 2007, para 8.

19. 261B Requirements for grant of search order

The court may make a search order if the court is satisfied that—

(a) the applicant has a strong prima facie case on an accrued cause of action; and

(b) the potential or actual loss or damage to the applicant will be serious if the search order is not made; and

(c) there is sufficient evidence in relation to a respondent that—

(i) the respondent possesses important evidentiary material; and

(ii) there is a real possibility that the respondent might destroy the material or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding before the court.

20. Dunlop Holdings Ltd v Staravia Ltd [1982] Com LR 3 at 3, approved in Lock International plc v Beswick [1989] 1 WLR 1268 at 1280 and IndiciiSalus Ltd v Chandrasekaran [2007] EWHC 406 at [15] by Warren J; also, P Biscoe, Freezing and Search Orders (Butterworths, 2008) at [7.32].

21. See Talacko v Talacko (2009) 25 VR 613; [2009] VSC 444.

22. See Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 617 and 623; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [26]. Formerly, b efore judgment in cases of an equitable debt or demand, an order could be made in the nature of a writ of ne exeat colonia, preventing a defendant quitting the jurisdiction without giving adequate bail or security, if a real ground appeared for believing that the defendant was seeking to avoid the jurisdiction or that if the defendant was allowed to depart the plaintiff will lose his debt or be prejudiced in his remedy: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [39] (for discussion, Talacko v Talacko (2009) 25 VR 613) . Where the demand was one at common law, t he writ of capias ad respondendum was available on similar grounds. However, these writs were abolished in Queensland by s 129(1) of the Supreme Court of Queensland Act 1991 (Qld), introduced by the Civil Justice Reform Act 1998 (Qld). Although s 207 of the Civil Procedure Act 2011 (Qld) provides that s 129 is henceforth omitted from the Supreme Court Act 1991 (Qld), it is submitted that the effect is not to revive either of these old writs. Rule 935 and 942 of the Uniform Civil Procedure Rules 1999 (Qld) and s 100 of the Civil Procedure Act 2011 (Qld) provide for the issue by the Supreme Court of Queensland of a warrant for the arrest of a person on grounds similar to those that would formerly have permitted the issue of a writ of ne exeat colonia and capias ad respondendum, and on terms providing that the defendant not be arrested, or be released, if security identified in the warrant is provided.

23. Section 408C(1). By section 408(2), if the property or the yield to the offender from the dishonesty or the detriment caused exceeds $30,000, the offender is liable to imprisonment for up to 12 years.

24. Sections 390, 391,398; Ilich v R (1987) 162 CLR 110.

25. (1995) 184 CLR 1 at 15 — 16.

26. Istel Ltd v Tully [1993] AC 45.

27. Criminal proceedings will not, however, provide a ground for staying civil confiscation proceedings commenced under the Criminal Proceeds Confiscation Act 2002 (Qld) — s93.

28. The reference should be to criminal proceedings.

29. De Simone v Bevnol Constructions And Developments Pty Ltd [2010] VSCA 23 at [8]-[9]; also, Re APCH (No 2) [ 2012] VSC 576 at [19] – [24].

30. S365 and 382 of the Police Powers and Responsibilities Act 2000

31. This occurs by the means of forfeiture orders, which vest the relevant property in the State (ss 56, 59, 153, 164, 202, 214) and proceeds assessment orders, which require payments of money to the State secured by a charge (s77, 79, 86, 88, 184, 196), pursuant to schemes administered by the DPP and the CMC respectively. Cf. section 210 (permitting certain amounts to be paid to the victims of crime).

32. Shogun Finance v Hudson [2004] 1 AC 919, [6]-[8] (fraud does not itself negative contractual intention).

33. Alati v Kruger (1955) 94 CLR 216; also, The Law of Rescission (OUP, 2008) [10.23], [10.25].

34. Compare the more restrictive rule in the Code of Conduct of the Bar of England and Wales, 8th edition:

704. A barrister must not devise facts which will assist in advancing the lay client’s case and must not draft any statement of case, witness statement, affidavit, notice of appeal or other document containing:

… (c) any allegation of fraud unless he has clear instructions to make such allegation and has before him reasonably credible material which as it stands establishes a prima facie case of fraud…

35. Compare Medcalf v Mardell [2003] 1 AC 120.

What is the brand of barristers in Queensland today? Do people know what to expect of a barrister and why a barrister may be important to them? Do they know the tradition of barristers and what makes them different from solicitors? Do they trust barristers and value their knowledge and skills?

As an increasing number of solicitors undertake work traditionally performed by barristers and the public is encouraged to think of the ‘no win, no fee’ model of justice, the profession is under increasing pressure. And, unlike solicitors, barristers can’t advertise and build their presence in the marketplace.

The answer, or one of the pivotal answers, is to consider the profession’s branding.

When people think of branding, they typically think of consumer goods like Coca Cola, Nike, Apple and Holden. They might think of the individual brands of companies like solicitors. But it may not be immediately obvious how branding can apply to a profession.

There are precedents to show how the same principles that are applied to developing any consumer brand can be applied to help increase the standing — and understanding — of a profession.

One obvious recent example in Australia is the work the Institute of Chartered Accountants has done to build its brand and change perceptions of its members’ role. No longer are Chartered Accountants the faceless, boring, backroom number-crunchers. They are now analytical thinkers who have a critical role in helping successful companies succeed. We are less likely to think of them as men in grey suits adding up columns of figures and more likely to think of them as energetic, creative men and women, participating in vibrant meetings and helping chart innovative ways forward.

Understanding brand

Before we can discuss the potential for branding the Bar, we must clear up a few misunderstandings about what branding is. ‘Brand’ has become a popular term but few organisations understand what branding really is and the tangible value it delivers.

To many, branding means the consistent application of the logo and positioning statement. However, this is not branding. A truly effective brand is the cornerstone of an organisation and is closely intertwined with its vision and strategy:

• What does it believe in? • How should it look, sound and behave? • How well does it connect with its stakeholders? • Is it relevant and meaningful?

Branding represents the essence of the organisation or product. It provides an emotional connection with its target audiences. It encapsulates what we can expect when we interact with the product, service — or profession.

Importantly, it must reflect the truth or people will quickly see through it and the brand will be damaged. That truth can be a new aspirational step in the organisation’s evolution but must be reflected in the way the employees or members conduct themselves.

An integrated brand is visible in everything from the organisation’s website, to the language it uses, to the values of its representatives. It is the sum of both the tangible and intangible elements within an organisation. It is the physical, such as communication collateral, and cultural i.e. behaviour.

How is a brand developed?

Normally organisations that want to develop, enhance, realign or consolidate their brand call on the services of branding consultants who help them to get a better understanding of their strengths, values, motivations and unique potential to connect with their stakeholders. The process is an in-depth exploration of current and desired perceptions, and of revealing the genuine qualities already hidden or latent within the organisation.

Once this foundation work has identified the way forward, the insights can then be used to redesign how the organisation connects with its market. This includes reviewing the brandmark, key messages, photographic styling and design. Together, this has the potential to create a powerful and compelling proposition for the target markets.

From this point of transformed understanding, a brand continues to develop through every public interaction, both formal and informal. The manifestation of consistent brand qualities must be nurtured and the brand promise must be fulfilled with the same commitment one would give a legal agreement. It is the organisation’s contract with the public.

It goes without saying that major transgressions of a brand’s promise are very damaging and dilute the invaluable trust that clients or other stakeholders invest in the brand.

The benefits of a strong brand

The value of a strong, trusted brand is not to be underestimated. Many branding-conscious companies put multi-million dollar values on that unique combination of factors that constitutes their brand.

Some of the benefits of a strong brand for a profession include:

• Respect for their work and greater demand for their skills • Ability to justify the costs associated with their services • Pride in the profession and greater work satisfaction • Recruitment of quality candidates for the next generation of professionals • Resilience in a competitive or demanding environment.

An opportunity to brand the Bar?

All the signs point to the fact that barristers are in need of better branding for their profession.

The public generally has less understanding of a barrister’s role than barristers might like to believe. The average person lumps solicitors and barristers together as ‘lawyers’ and probably perceives them with an ambivalent mixture of respect and distrust. The glamourous face of smart lawyers in courtroom combat on TV dramas contrasts with the perception that lawyers are expensive, self-serving and the only ones who really win in any complex case.

A 2012 Roy Morgan survey of professions found only 30% of Australians think that lawyers’ honesty and ethical standards are high or very high. This was down 8% on the previous year and puts lawyers only marginally above financial planners and talk-back radio hosts.

Similarly a Readers’ Digest 2012 poll of Australia’s most trusted professions ranks lawyers and bankers in joint 29th place, marginally above journalists, sex workers and insurance salespeople.

While solicitors understand the barrister’s role (and hopefully have a higher regard for their trust and ethics), financial pressures and personal ambition may mean they underestimate the value a barrister can add and choose to argue more cases themselves. If the client doesn’t appreciate the barrister’s knowledge and role, they are unlikely to request one if a solicitor offers to do the job more cheaply for them.

This devaluing of the Bar is potentially disastrous for a highly-educated profession that attracts some of our best minds — and people who usually also have a strong passion for justice, fair-play and integrity.

If barristers can build and promote their profession’s brand, they have the opportunity to remain relevant and reclaim trust — both essential if they are to be profitably employed in a changing future.

Who is doing it well?

We already mentioned the Institute of Chartered Accountants that has found a way into our minds (and perhaps even a little into our hearts) over the past few years. In addition to advertising and promotional material that creates a new value and perspective of the profession for clients, the new brand also enhances recruitment of trainees and gives an umbrella positioning under which larger accountancy firms like Deloittes and PWC can align themselves. Accountants are collectively acknowledging the change in their market and have moved to shift perception of themselves from numbers people to design thinkers.

In the USA, the teaching profession has been rebranded — moving away from the tired images of apples and text books to teachers presented as educators of the future who ‘change the world’. http://www.good.is/posts/a-design-team-rebrands-the-teaching-profession/  

Of even greater relevance, the UK Bar Council has taken steps to position itself with a clearer brand. It presents a human and contemporary face for barristers yet still incorporates the sense of tradition and the knowledge that sets the profession apart. A tour of its website gives an immediate impression of smart people, of legal leaders with elite skills who are very much grounded in today’s world. http://www.barcouncil.org.uk/ 

Defining a 21st century Australian barrister

How do barristers want to be seen in Australia in the next decade and beyond? How will they hold their ground in a changing legal environment? How do they connect with a public that is usually one step removed through the solicitors and not accessible through individual practitioner’s advertising? How do they rebuild low levels of public trust, when trust should be one of the pillars of their relationship with clients?

These are challenges that need careful consideration. Branding can offer some of the solutions if barristers are willing to collectively brand their profession and invest in developing perceptions that reflect their capabilities as knowledgeable specialists and skilled campaigners in the arena of justice.

Any investment in a branding journey should be repaid many times over in a stronger and more highly-regarded profession that connects with clients, engenders their trust and supports their best interests at times when they face the daunting complexity of the law.

Nicola Lloyd

 Nicola Lloyd is a leader in brand creation, positioning and design-led thinking. Director and brand strategist at Lloyd Grey Design, Nicola (Nicki) is passionate about the positive effects a design thinking approach can have on Australian business, NFP and the regulatory landscape. She consults and mentors Australian CEO’s and leadership teams from a variety of industries, helping them to discover how they can use branding more effectively and how they can achieve brand differentiation in a crowded competitive market.

Nicki has earned a plethora of accolades for her contribution to the Australian design landscape including a raft of design awards, including receiving the Queensland Premier’s Smart State Design Fellowship in 2011. She is a Fellow of the Design Institute of Australia (Queensland Chapter), holds Certified Practising Marketer qualifications from the Australian Marketing Institute and is a longstanding member of the Australian Institute of Management.

For more information, contact Nicki Lloyd on 0412 415 514 or visit Lloyd Grey Design’s website: www.lgd.com.au

 

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Queensland law and practice has failed to keep up with national and international developments. Procedural reform should be introduced to facilitate class actions in Queensland courts, on behalf of Queensland persons and conducted by Queensland practitioners. This is long overdue. Queensland needs to adapt to the new landscape. This may be on the horizon. It is my understanding that the Queensland Attorney General and Minister for Justice has indicated that he is seeking the support of his colleagues for the preparation of the necessary legislative amendments.

This paper examines a number of developments in other Australian jurisdictions where statutory class action regimes have been introduced. The focus is on pleading and procedural problems and pitfalls for new players. Such issues may be of interest to both those involved in the design of a class action regime for Queensland and to practitioners who may become involved in this ‘changing face of practice’.

1. The limited utility of the Queensland representative action rule

The Queensland representative action rule would appear to be of limited utility in many instances, particularly where the claims for relief include damages3. Rule 75 Uniform Civil Procedure Rules 1999 (Qld) provides that:

A proceeding may be started and continued by or against 1 or more persons who have the same interest in the subject matter of the proceeding as representing all of the persons who have the same interest and could have been parties in the proceeding (emphasis added).

Courts which have similar representative action rules have frequently adopted a narrow construction of the ‘same interest’ requirement and often concluded that this precludes bringing representative claims for damages. Moreover, other representative action rules often provide that the proceeding may be brought on behalf of ‘some or all’ of those with the ‘same interest’4 whereas the Queensland rule does not expressly provide for a limited number of class members.

Whilst various courts have adopted differing views over the years as to the ambit of the traditional representative rule, the high water mark of restrictive interpretations would appear to be the decision of the Chancellor and subsequent endorsement by the English Court of Appeal in Emerald Supplies Ltd v British Airways plc [2010] EWCA Civ 1284.

In that case an attempt to use the English representative action rule to bring claims on behalf of persons who allegedly suffered loss as a result of price fixing by an air cargo cartel was thwarted on the basis that such persons did not have the requisite ‘same interest’. It was suggested, inter alia, that the English ‘group action’ procedure was the more appropriate procedural option, even though that would have required the filing of individual claims by all those seeking damages.

Perhaps not surprisingly the decision has attracted some criticism, not least of all by a former Queensland lawyer who is an internationally recognized academic class action expert5, together with proposals by judges for reform6.

Legislative proposals for reform have been introduced in the United Kingdom, at least for the purpose of facilitating class actions in the area of competition law. The UK Government recently published a report indicating that it will send proposals to Parliament for the adoption of an opt‐out class actions regime by which consumers can pursue claims for anti‐competitive conduct. The proposals envisage that the UK Competition Appeals Tribunal (CAT), which currently hears appeals from decisions of the OFT, Competition Commission and sectoral regulators, will be the primary venue for the new class actions. More detailed information is contained in the press release of the Department of Business Innovation and Skills (BIS)7 and in the full report8.

2. Are you able to proceed by way of a class action and if so where?

At present, one obvious difficulty facing Queensland claimants with causes of action arising under the common law, or based on State statutory provisions, is that class actions in the Federal Court require there to be (at least one) ‘federal’ cause of action. Attempts to join common law claims with a (barely) arguable federal cause of action may be a recipe for disaster for both litigants and lawyers. For example, in Cook v Pasminco9 proceedings were brought as a class action in the Federal Court against the owners of smelters in NSW and South Australia claiming damages for injury to health allegedly caused by noxious emissions together with claims for the loss in value of real estate. In addition to the common law causes of action (not otherwise able to be pursued by way of a class action in the Federal Court) it was pleaded that for the purposes of Part VA of the Trade Practices Act 1974 (Cth) the noxious emissions were ‘goods’ manufactured by the respondent and supplied in trade or commerce in circumstances where the ‘defect’ in such goods had caused the injuries in question. Not surprisingly Lindgren J dismissed the proceedings as incompetent and made an order for costs on an indemnity basis against the applicant’s solicitors (but not the counsel on whose advice they had relied!).  

Similarly, difficulties in establishing a basis for federal jurisdiction arose in Johnson Tiles v Esso Australia litigation which arose out of the explosion at the Longford gas plant in Victoria and encompassed claims for misleading and deceptive conduct in contravention of the Trade Practices Act 1974 (Cth). After 3 years of disputation in the Federal Court in Victoria the proceeding was transferred to the Supreme Court of Victoria and a fresh proceeding was commenced.

However, where there is a bona fide and arguable claim that there is federal jurisdiction the Federal Court may have jurisdiction over the (remaining) claims even if the invocation of a federal right is unsuccessful.10

Depending on the facts it may of course be possible to bring a class action on behalf of Queensland group members in other Australian jurisdictions with class action regimes (e.g. Victoria and NSW) if the other state court has jurisdiction.

In the present Hopkins class action proceedings in the NSW Registry of the Federal Court the group members claiming damages include Queensland investors who acquired an interest in stapled units in the RiverCity Motorways Investment Trust and the RiverCity Motorway Holding Trust, both of which were involved in financing the design and construction of the North‐South Bypass Tunnel in Brisbane.

There has also been press and media coverage of a long foreshadowed class action against the State of Queensland itself claiming damages for victims of the 2011 floods. Query whether a NSW resident who has suffered property loss in Queensland could lead a class action in the NSW Supreme Court under Part 10 of the Civil Procedure Act 2005 (NSW). This might be considered as there is no federal cause of action available and no applicable class action procedure in Queensland.

It is my understanding that there have been recent proposals for reform of the representative action rule in Queensland by law firms, the Law Society and the Bar Association. Thus, as noted in the introduction to this paper, it may be that Queensland will introduce a state class action regime modeled on the Federal, NSW and Victorian provisions.

Accordingly, it may be instructive to have regard to some recent and current procedural problems that have arisen in class action proceedings in the Federal Court and the Supreme Courts of NSW and Victoria. The following topics are not intended to be exhaustive. Moreover, only selected cases are referred to.

3. Do you really want to bring a class action?

Class actions clearly facilitate access to justice and enable proceedings to be commenced on behalf of large numbers of persons at relatively little cost per person. Neither the consent nor the knowledge of such persons is required. Moreover, the commencement of the action stops the limitation clock running in respect of those causes of action pleaded in respect of the defined class.

However, in many class actions to date there has been considerable interlocutory warfare. Many cases have been protracted and extremely expensive to conduct.

In some instances considerations of cost and delay may favor the use of one or more ‘test cases’ , with ‘protective’ proceedings issued to protect the interests of some or all class members where such persons have become clients and have authorised the commencement of individual proceedings on their behalf.

In a number of cases in NSW ‘protective’ proceedings have been commenced on behalf of large numbers of persons by the filing of one or more summonses or statements of claim with the names of all of the plaintiffs included in a schedule attached to the initiating process. Whilst this may involve a degree of procedural ‘criminality’ such irregularity is unlikely to result in the proceeding being a nullity. This procedural methodology was used in the Dalkon Shield litigation for thousands of claimants (pending the outcome of proceedings in the United States); in the silicone gel breast implant litigation (also pending the outcome of United States litigation) and in the more recent tobacco license fee recovery litigation. In the Tracknet class action in the Federal Court11 each of the members of the class was identified in a schedule to the initiating process but, other than the applicant, were not parties, per se.

In some cases it may be possible to delay service of any ‘protective’ proceeding pending the commencement and conduct of suitable ‘test cases’. However, procedural rules in relation to time for service have become increasingly attenuated in recent years and these have to be carefully considered. Moreover, it may be advisable to seek orders from the court expressly authorizing a stay of the ‘group cases’ together with directions for the conduct of the ‘test cases’. The defendants will no doubt seek to be heard and cannot be expected to consent to the procedural course proposed. One or more contested interlocutory hearings may be necessary in order to determine how the litigation is to be managed by the court and the parties.

For example, in the Cu7 IUD litigation in the NSW Supreme Court of NSW Smart J devised an elaborate procedure for the selection of 10 test case plaintiffs from amongst the 300 women with pending personal injury claims with a view to ensuring that they were representative of the types of injuries, covered the periods during which different warnings were in place and encompassed the two different size devices used and the claims of women who had, and women who had not, had children before use of the IUD device. Nine lead plaintiffs cases proceeded to trial jointly. Whilst the proceedings in the Cu7 litigation were unduly protracted, were very costly and had an unfortunate outcome12, in many cases the trial of one or more test cases may be a more expeditious and economical procedural path than pursuit of a class action. However, it may be that the (relatively) recent introduction of case management conferences in class actions in the Federal Court may facilitate the more expeditious and economical resolution of the issues in dispute.

The abovementioned and other alternatives to a class action are only appropriate where the ‘class’ is limited to persons who have become clients and have authorized the commencement of proceedings on their behalf. However, many current class actions comprise only identifiable group members who have provided individual instructions (and have agreed to litigation funding arrangements).

One obvious legal limitation of alternatives to a class action is that any judicial resolution of ‘common’ questions in the ‘test cases’ is not binding in the other cases. However, in practical terms this is unlikely to be of much consequence. Success or failure in the ‘test cases’ will usually bring about a resolution of the other proceedings.

Assuming that it has been decided to pursue a class action a number of practical and procedural problems may arise.

4. Threshold considerations in commencing a class action

4.1 Pre action obligations

Depending on the jurisdiction and the applicable substantive law and procedural rules it may be advisable, or in some instances legally necessary, to comply with certain pre‐action requirements.

4.2 The individual claim of the representative plaintiff(s)

One of the key objectives of a class action is to facilitate judicial determination of the ‘common’ legal and/or factual questions that arise in respect of the claims of all of the class members.

This is done through the trial and determination of the claims of the representative plaintiff. This may give rise to some difficult procedural, legal and ‘tactical’ problems. Some of these may be illustrated by reference to relatively recent product liability class actions.

4.2.1  Should you plead and pursue ALL causes of action that are available?

In Courtney v Medtel a class action was brought on behalf of all persons who had suffered injury as a result of having been implanted with a particular defective pacemaker. The pacemakers were alleged to be defective because the batteries were found to have a propensity to stop without prior warning short of the expected life of the batteries. In persons who were totally dependent on the pacemaker this could result in death.

The causes of action available to the lead applicant and the class members encompassed (a) negligence; (b) misleading and deceptive conduct; (c) contravention of implied warranties in respect of the merchantability and fitness for purpose of the pacemakers; and (d) ‘strict’ liability for defective goods under the provisions of the Trade Practices Act 1974 (Cth).

A tactical decision was made to limit the trial to the ‘easiest’ causes for action for which liability was strict (ss 74B and D of the Trade Practices Act 1974). This was procedurally achieved by having these causes of action determined first as separate issues. Notwithstanding the reluctance of the trial judge to agree to this course, given the well known principles against the ‘splitting’ of causes of action, the Respondents agreed and the trial proceeded on this basis.

This not only expedited the trial but considerably curtailed the ambit of discovery and the factual and expert evidence at trial thus substantially reducing the costs. The Applicant succeed at trial on the two ‘strict liability’ causes of action (Courtney v Medtel Pty Ltd [2003] FCA 36) and the judgment was upheld on appeal (Medtel Pty Limited v Courtney [2003] FCAFC 151 (7 July 2003). The application for special leave to the High court was refused. The proceedings were resolved in a relatively short period of time with relatively modest legal costs.

An alternative approach was adopted in the Vioxx product liability class action. All available causes of action were pleaded and were sought to be relied upon at trial. This had the effect of considerably widening the ambit of discovery and the factual and expert evidence at what became a lengthy trial. On one estimate the total costs of the parties exceeded $20 million.

The representative Applicant, Mr Peterson, succeeded at trial and obtained an award of damages in the sum of $330,465.

However, he only succeeded on the two ‘strict liability’ causes of action under the Trade Practices Act 1974 (ss 74B & D). Moreover, those causes of action had only been pleaded against one of the two respondents.

Jessup J held that, because Vioxx involved about a doubling of the risk of heart attack, it was not reasonably fit for the purpose of being used for the relief of arthritic pain, which was the purpose implicitly made known by the applicant as required by s 74B and which was the purpose for which goods of the relevant kind were commonly bought as required by s 74D.

The trial judge held that the first respondent, under its common law duty of care, ought to have warned the Applicant’s doctor of the cardiovascular risk and ought not to have emphasised the safety of Vioxx. However, he was not satisfied that, had a sufficient warning been given, or had the safety of Vioxx not been emphasised, the applicant would not have taken Vioxx exactly as he did. Thus it was held that the first respondent’s failure to discharge its duty of care did not contribute to the applicant’s heart attack. Thus he rejected this aspect of the applicant’s negligence case as against the first respondent. The applicant claim in negligence against the second respondent was also dismissed.

In respect of the applicant’s other cause of action under the Trade Practices Act: Jessup J held that the first respondent’s failure to warn, and its emphasis on safety, amounted to misleading conduct in trade or commerce in contravention of section 52. However, he was not satisfied that the applicant’s heart attack occurred by reason of this misleading conduct.

The applicant alleged also that Vioxx had a defect within the meaning of s 75AD of the Trade Practices Act. Jessup J held that Vioxx did have such a defect, in the sense that the safety of Vioxx was not such as persons generally were entitled to expect. However, he upheld the first respondent’s defence under s 75AK(c) of that Act, namely, its claim that the state of scientific or technical knowledge at the time when Vioxx was supplied to the applicant was not such as would enable the defect to be discovered. Thus he rejected the applicant’s claim under s 75AD of the Trade Practices Act. (Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd [2010] FCA 180)

Thus, although successful at trial the applicant succeeded only on two of the causes of action and only against one of the two respondents.

Moreover, at the trial it was sought to be proved that Vioxx caused a number of physical injuries, including heart attacks and strokes. Mr Peterson succeed in respect of his own claim, arising out of his heart attack, but the trial judge not accept that Vioxx caused strokes.

Thus, although successful in respect of his claim for damages he obtained an order for only some of the costs incurred in connection with the proof of his individual claim; was ordered to pay the costs of the successful respondent; and was ordered to pay some of the costs incurred by the unsuccessful respondent. (Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (No 5) [2010] FCA 605).

However, things got worse for Mr Peterson. The decision of the trial judge was overturned on appeal by the Full Federal Court on the basis that the court was not satisfied that it had been proved at trial that Vioxx caused Mr Peterson’s individual heart attack. (Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2011] FCAFC 128).

Needless to say, this had even more adverse cost consequences for Mr Peterson (Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (No 2) [2011] FCAFC 146) notwithstanding the fact that the ‘generic’ finding that Vioxx causes heart attacks was not overturned on appeal.

A comparison of the above two cases will I hope illustrate the pitfalls of proceeding to trial on all available causes of action and the advantages of seeking a preliminary determination of what, from the plaintiffs perspective, are the ‘easiest’ causes of action to succeed and which may be resolved more economically and expeditiously. Moreover, it is of little comfort to defendants to succeed on some but not all of the causes of action, particularly if a costs order in their favor is not able to be enforced against an impecunious lead plaintiff and where, at least in the federal, Victorian and NSW class action regimes, cost orders cannot be made against class members.13 Furthermore, it is clearly in the interests of the administration of justice if cases can be resolved more quickly and expeditiously and with fewer judicial resources.

In Federal Court class action proceedings the applicable Practice Note14 now provides that to narrow the scope of the dispute, at the earliest practicable date the Court may consider the utility of either (a) determining any common question in the proceeding as a preliminary question15 or (b) give summary judgment16 on any common question in the proceeding.

In the current bank fees litigation in the Federal Court in Victoria the court ordered the determination of separate questions.17 The subsequent interlocutory determination of several of the critical issues concerning the recoverability of certain fees and charges facilitated an expeditious appeal which was determined by the High Court in less than six months from the interlocutory judgment.18  

> Continued Part B

Footnotes

1. I am grateful to Ben Slade of Maurice Blackburn for helpful comments and suggestions following a review of an earlier draft of this paper. I am reluctantly required to accept personal responsibility for any errors.
2. See generally, Grave D, Adams K and Betts J, Class Actions in Australia, second edition, Law Book Company, 2012; Cashman P, Class Action Law and Practice, Federation Press 2007.
3. A quick search on Austlii, using the search term ‘representative action’, of cases decided by the Queensland Supreme Court elicited 6 cases: Virgtel Limited & Anor v. Zabusky & Ors [2006] QSC 66 (6 April 2006) a case involving a derivative action; Martin & Anor v Qld Electricity Transmission Corporation [2003] QSC 309 (8 August 2003) a discrimination case brought by way of representative complaint; Jones v State of Queensland & Anor [1997] QSC 209 (31 October 1997) a native title case brought by way of representative action; I S Schache and K Schache as t’ees for the Schache Superannuation Fund and as representative for investors in the Arafura Pearl Project for the financial year 2005/2006 & Ors v GP No 1 Pty Ltd & Ors [2011] QSC 413 (23 December 2011) a claim by investors brought in a representative capacity seeking equitable relief; Borg & Ors v Northern Rivers Finance Pty Ltd & Ors [2003] QSC 112 (9 May 2003) proceedings arising out of tax minimization schemes; IVI Pty Ltd v. Baycrown Pty Ltd [2005] QSC 330 (9 November 2005) a case concerning, inter alia, whether representative capacity is required to be stated in proceedings brought by an agent on a contract.
4. See e.g. r 21.09.1 High Court Rules 2004 (Cth); r 18.02 Supreme Court Rules (NT), r 18.02 Supreme Court (General Civil Procedure) Rules 2005 (Vic); O 18 r 12(1) Rules of the Supreme Court 1971 (WA)
5. Mulheron R, ‘A Missed Gem of an Opportunity for the Representative Rule’ [2012] Euro Business L Rev 49‐60; ‘Emerald Supplies Ltd v British Airways plc; A Century Later, the Ghost of Markt Lives On’ (2009) 8 Competition LJ 159‐179. See also, Mulheron R, ‘The Case For an Opt out Class Action Regime for European Member States: A Legal and Empirical Analysis’ 15 The Columbia Journal of European Law 3, Summer 2009, 409; ‘Recent Milestones in Class Actions Reform in England: A Critique and a Proposal’ (2011) 127 Law Quarterly Review 288‐315; ‘The Impetus for Class Actions Reform in England Arising from the Competition Law Sector’ in Wrbka S et al (eds) Collective Actions: Enhancing Access to Justice and Reconciling Multilayer Interests?, Cambridge University Press 2012, chapter 15, 385‐412.
6. Sir Gerald Barling, ‘Collective Redress for Breach of Competition Law‐A Case for Reform?’ [2011] Competition LJ 5. See also the decision of Jacobs LJ in Enron Coal Services Ltd (in liq) v English Welsh & Scottish Railway Ltd [2011] EWCA Civ 2, [142]. Previously there had been a number of proposals for in introduction of an ‘opt out’ class action regime in the United Kingdom, including for competition law cases. See e.g. Office of Fair Trading, Private Actions in Competition Law: Effective Redress for Consumers and Business, OFT 916, November 2007; Civil Justice Council, Improving Access to Justice Through Collective Actions: Developing a more Efficient and Effective Procedure for Collective Actions, Final Report to the Lord Chancellor, November 2008.
7. https://www.gov.uk/government/news/new‐help‐for‐consumers‐and‐businesses‐to‐take‐action‐against­price‐fixing.
8. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/69123/13‐501‐private­actions‐in‐competition‐law‐a‐consultation‐on‐options‐for‐reform‐government‐response.pdf.
9. Cook v Pasminco (2000) 99 FCR 548; Cook v Pasminco (No 2) (2000) 107 FCR 44
10. See generally, Allsop J, ‘Federal Jurisdiction and the Federal Court of Australia’ in 2002’ (2002) 23 Australian Bar Review 29
11. See e.g. Lukey v Corporate Investment Australia Funds Management Ltd [2005] FCA 1074 (27 July 2005)
12. The trial judge inappropriately found in favour of the defendants on the issue of general causation and did not proceed to consider the individual cases of the nine plaintiffs: Denzin v Nutrasweet Co [1999] NSWSC 106. The judgment was overturned on appeal and a new trial ordered: Moylan v Nutrasweet Co [2000] NSWCA337.
13. Except in limited circumstances not relevant for present purposes.
14. Practice Note CM 17, Representative Proceedings Commenced under part IVA of the Federal Court of Australia Act 1976 (Cth), 8. See also 9 Trial of common questions.
15. See Rule 30.01 Federal Court Rules 2011
16. See s 31A Federal Court of Australia Act 1976 (Cth)
17. Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 388
18. Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30

Introduction

It is unsurprising that, in a conference dedicated to a review of the changing face of legal practice, some attention is paid to developments in the Australian law relating to class actions.

Of course, representative procedures themselves are not new, having been available under English law for a long time. For example, Order 16 rule 9 of the Rules of the Supreme Court of England 1883  provided that “… where there are numerous persons having the same interest in one cause or matter, one or more of such persons may sue or be sued … on behalf of or for the benefit of all persons so interested”. These rules were replicated in Australia.1 However, interpretation of these provisions by the Courts led to procedural difficulties,2 and the representative procedures fell into disuse.

The modern class action procedure was introduced in response to the deficiencies of the former representative scheme and that is what we are here to talk about today. This modern procedure is an attempt to deal with the problems of mass claims arising from the very large civil wrongs that sometimes occur in modern economies – that is, a mass solution for mass wrongs.

The report of the Australian Law Reform Commission into Grouped Proceedings

The Australian class action journey started in 1977 when the Federal Attorney General requested advice from the Australian Law Reform Commission (“ALRC”) as to whether class actions ought to be introduced into Australia. Following a review by a group, including Justice Wilcox of the Federal Court and Dr Peter Cashman, the ALRC issued a report in 1988 which recommended that a class actions procedure should be introduced in the Federal Court.

It did so for the expressly stated aim of enhancing access to justice by reducing the cost of court proceedings to the individual and improving access to legal remedies by the individual. It also aimed to promoted efficiency in the use of court resources, increase consistency in the determination of common issues, and make the substantive law more enforceable and effective.3

The class action regime in the Federal Court

Part IVA of the Federal Court of Australia Act 1976 (Cth) which contains the class action provisions, came into effect on 5 March 1992. It set out a prescriptive regime containing detailed provisions for the commencement and conduct of class actions.

Section 33C sets out the threshold requirements for the commencement of a class action under the regime:

(a) There must be claims by seven or more persons against the same person.

(b) The claims must arise out of the same, similar or related circumstances.

(c) There must be substantial common issues of law or fact.

Other important provisions include the following:

• Standing  (s 33D);

• No consent required to be a class member (s 33E);
• Right to opt out (s 33J);
• Ability to “de-class” proceedings (ss 33L, 33M, and 33N) when;

– there are less than 7 class members;

– the cost of distribution of damages is excessive having regard to the total of the amounts;

– it is in the interests of justice to do so.

• Determination of individual issues (s 33R);
• Settlement and discontinuance (including requirement for court approval) (s 33V);
• Settlement of the representative’s claim (s 33W);
• Suspension of limitation periods while class members’ claims are on foot (s 33ZE);
• Power of the Court to make such orders as it deems necessary in the interests of justice (s 33ZF);
• Prohibition on ordering costs against class members (s 43(1A) (except in relation to specific individual or sub group issues).

The climate in which the regime was introduced

The new class action regime only passed Federal Parliament following vigorous debate. The regime was introduced in a climate of concern that class actions would usher in;

• legal entrepreneurialism;
• US style litigation; and
• misuse of the media in a litigation context;

thereby causing serious impediments to business. In particular, there was a concern that;  

• the floodgates of litigation would open; and
• financial and reputational pressure from class actions would induce substantial out of court settlements regardless of the merits of a case.4

The operation of the regime in practice

Fortunately, the operation of the regime in Australia has been such that these early fears have gone unrealised in practice. Some important differences are apparent in the ways that class actions operate in the US and in Australia and these differences have assisted our system to remain balanced. It is now broadly accepted that the Australian class action regime is working well, which conclusion is supported by both the empirical and evidence available.

Empirical Research

Since 2009 we have had the benefit of detailed empirical research performed by Professor Vincent Morabito.5 Professor Morabito’s research shows that many of the myths about class actions are without foundation. Amongst other things, his research shows that:

• The number of class actions that have commenced has been modest. The studies show that, in the Federal Court and the Supreme Court of Victoria, a total of about 281 class actions commenced in the 17 year period between March 1992 and 31 December 2009. This is an average of only about 15 per year in the Federal Court and about 3 per year in the Supreme Court. With respect to other jurisdictions, the number of commenced class actions is unlikely to be significant because they either did not have a class action regime for the relevant period or it was only recently introduced.
• Despite early concerns of an avalanche of such litigation, shareholder class actions still represent only 25 per cent of all class actions in the past five years.
• Close to 70 per cent of all class actions concluded within two years and, at the time of publication of Professor Morabito’s research, the average duration was declining.
• Class actions are not always successful and in fact 51 per cent of the time class actions either do not continue or do not continue in that form. This result undermines the basis to concerns that defendants would be placed in such a disadvantageous position that claims would succeed despite a lack of merit.
• The “typical” class representative was a married, middle aged, professional male residing in New South Wales. Professor Morabito’s research indicates that, in Australia, there is no culture of organising class actions such that the obligation to pay costs would be avoided in the event the litigation was unsuccessful. 
• “Closed” or opt in classes has not led to any significant increase in competing class actions.
• During the 17 year period from 1992 to 2009, every class action under the federal system that was supported by a litigation funder resolved in favour of the class.

The view of the ALRC

In January 2000, the Australian Law Reform Commission finished a lengthy and detailed review of the federal civil justice system. This review specifically included a consideration of the class action regime, concluding that:

Procedures for representative proceedings generally appeared to be working well and in accordance with legislative intention.  The Federal Court does not view such cases as more problematic than other complex cases.6

The view of state legislatures

Following introduction of the federal regime the various state parliaments in Australia have had ample opportunity to see how the regime operates in practice. It is said that imitation is the most sincere form of flattery, and a good indication that the federal regime is operating well is the fact that several state governments have adopted the same procedures. Class action regimes substantially the same as the federal regime were introduced in Victoria and New South Wales in the years 2000 and 2010 respectively. More recently the same regime has been recommended in Western Australia and there is support for the introduction of a similar regime in Queensland.

The view of lawyers acting for defendants in class actions

Of course these views vary, but the view of defence lawyers appears to be that the Australian class action regime is working reasonably well. This sentiment has been confirmed to me at numerous class actions seminars, conferences and symposiums that I have attended or spoken at in the last 15 years. These forums have been attended by partners from each of the major law firms acting for defendants or their insurers. In the vast majority of cases they have informed me that they consider that the Australian regime is, in general terms, working well.7

Mr Ken Adams and Mr Damian Graves, the lawyers who head Australia’s largest defence class action practice and the co-authors of a leading Australian academic text on class-action,8 wrote in a 2010 article:

There is a lot of hysteria surrounding class actions in Australia and unfortunately for all parties involved it can lead to some serious misconceptions about what’s happening in the local legal sector.

The view of Australian corporate regulators

The two main corporate regulators in Australia have expressed support for the role class actions play in assisting the regulation of corporate misconduct.

First, in December 2005 the then Deputy Chairman of the Australian Securities and Investment Commission, Mr Jeremy Cooper, stated: 

ASIC cautiously welcomes the emergence of the shareholder class action in Australia  as a “self help” mechanism whereby shareholders are able to seek damages for loss  incurred at the hands of directors and advisers who negligently or dishonestly cause loss to those shareholders…….Vigilant shareholders and a vigorous, but appropriately balanced, shareholder class action landscape, will play an important part in maintaining the integrity of the equity capital market in years to come.

Second, in July 2006 the then Chairman of the Australian Competition and Consumer Commission, Mr Graeme Samuels welcomed the settlement of the Vitamins Cartel class action and stated that the $41 million settlement was “a lesson to those that are involved in cartels”.9 He referred to a three pronged approach under which the ACCC would first seek penalties, and second seek jail terms for cartel operators. The third prong was private claims for damages by consumers and businesses.

The view from the bench

Whilst it would be wrong to suggest that there exists unanimity of views amongst judges as to the operation of the class action regime.10 I consider that it is now safe to say that the regime is viewed with much less suspicion by judges than was initially apparent. This appears from various decisions refusing to strike out class actions under s 33N of the Act, the apparent ability of the Federal Court and other courts to effectively case manage, hear and determine class actions and the fact that in doing so judges have not considered it necessary to point to any unfairness or injustice to either plaintiff or defendant in the regime.

In my view the successes of the regime, particularly its apparent success in delivering a measure of justice to both claimants and defendants in mass claims, have lead to it being cautiously embraced.  For example, in 2008 Justice Finkelstein said:

While there are problems with securities class actions, it must, I think, be accepted that they serve a useful function.  It is often said that these actions promote investor confidence in the integrity of the securities market.  They enable investors to recover past losses caused by the wrongful conduct of companies and deter future securities law violations.11

The claimants

Another obvious touchstone with regard to the success of the class action regime is its application to a large number of different causes of action, and on behalf of many hundreds of thousands of claimants in diverse areas. Examples include the following:

• Personal injury through food, water or product contamination

Such class actions include claims for injury arising from contaminated peanut butter12, water13, oysters14, pizza15, pork rolls16, Christmas dinner17, Spanish Mackerel18, food provided on a holiday cruise19, and illnesses caused by excessive iodine in soy milk20. 

• Personal injury through defective products

Class actions of this type include claims arising from defective breast implants21, tobacco22, defective pacemaker batteries23, sterilisation clips24, artificial knees25, adverse reactions to a travel sickness pill26 ,and arthritis medication27. 

• Actions under the Migration Act

Approximately 21 Class Actions relating to the operation of the Migration Act 1958 (Cth) and, in particular, in relation to refugee status,28 illegal detention, refusal of visas,29 and the like were commenced in the period 1992 to 2002.  However, in October 2001 an amendment to the Migration Act put an end to such class actions by providing that class actions are not permitted in any proceeding relating to visas, deportations or removal of non-citizens30.

• Shareholder class actions

Approximately 25 class actions have been commenced on behalf of shareholders for misleading and deceptive conduct and/or breaches of the continuous disclosure regime on the share market by various companies. The largest of these cases include the GIO Class Action31 which settled for $112 million in 2003, the Aristocrat Class Action32 which settled for $145 million in 2008, the Multiplex Class Action33 which settled for $110 million in 2010, and the Centro Class Action34 and National Australia Bank Class Action35 which settled for $200 million and $115 million respectively in 2012, and a series of smaller cases.

• Investor class actions

Numerous class actions been commenced by investors complaining of conduct by the promoters of various investments including in infrastructure projects,36 a shopping centre,37 debentures and security notes,38 vehicle tracking technology,39 margin lending arrangements,40 investments in collateralised debt obligations and in apartment purchases.41

• Anti-cartel class actions

Four class actions to date have been commenced on behalf of consumers and businesses against cartelists. Three of these cases concerned international cartels, and one concerned a local cartel. Three have been resolved, namely the Vitamins Cartel Class Action42 for $41 million, the Rubber Chemicals Class Action43 for $1.5 million, and the Amcor-Visy Class Action44 for $120 million. The Air Cargo Class Action45 which relates to an international cartel to fix various surcharges for air freight is ongoing.

• Disaster class actions

Such class actions include: The Longford Gas Plant Class Action46 in 1998 on behalf of more than 1 million consumers, businesses and employees, which related to an explosion and fire at a major gas plant which caused a two week interruption to the gas supply to Australia’s second-largest city. Following judgment and lodgement of an appeal the action was settled for $32.5 million.

The Melbourne Aquarium Class Action47 in 2000 on behalf of more than 100 people who alleged that they contracted Legionnaires disease at the aquarium. The action was settled on the basis of payment in full to all class members for their personal injury and economic loss.

Five Bushfire Class Actions were commenced in 2009 on behalf of thousands of people who suffered personal injury, property damage and economic loss as a result of bushfires against power companies whose alleged negligent maintenance and operation of powerlines is said to have caused the fires. Three of these class actions have been settled in favour of the class members48 and another two are still on foot.

The Abalone Virus Class Action in 2010 by Victorian abalone fishermen against a state government department in relation to the escape of a virus from an abalone farm which then decimated the wild abalone population off the Victorian coast.49

A class action has been threatened against the Queensland government department that operates the Wivenhoe Dam in relation to major floods which caused numerous deaths and major property damage and economic loss in January 2011.

• Consumer class actions

These have included class actions by consumers induced by misrepresentations to purchase goods which were not as represented50 and the Bank Fees Class Action,51 which commenced in September 2010 against eight Australian banks for allegedly illegal fees charged including honour and dishonour fees, over limit fees, and late payment fees.

• Environmental class actions

There have been few such cases but those that have commenced include a class action in relation to injury caused by industrial pollution52 and a class action brought on behalf of landowners who suffered losses when gas from a nearby former rubbish tip entered into their houses. This last case was settled for $23.5 million.53

• Human rights class actions

Similarly, there have been few such actions but some examples include a class action commenced in 2011 on behalf of children and young adults who had been wrongly arrested and jailed because of out of date or incorrect bail information in the New South Wales police computer system54, and a class action on behalf of former students at the Fairbridge Farm School between 1938 and 1974 against the Fairbridge Foundation and the Commonwealth Government alleging physical and sexual abuse.

• Trade union class actions

Trade unions commenced 45 class actions in Australia in the period between 1992 and 2011 (although 19 of these cases were brought with respect to the same industrial dispute.) The workplace issues have included matters such as underpayment claims55, disputes about employer conduct in obtaining workplace agreements56, and orders against imminent termination of employment57.

• Miscellaneous

Numerous other class actions have been commenced for causes of action which fall outside the broad categories I have set out above. These include diverse causes of action such as a class action by women who were infected with Hepatitis C at a medical clinic58, and a class action by travel agents to recover commissions on fuel charges paid by airlines59.

The variety of these causes of action, the large numbers of claimants, and the variety of types of claimants (including “mums and dads”, private individuals, small companies, public companies and institutions) that sign fee and retainer agreements or litigation funding agreements so as to join class actions indicates acceptance of the regime by the community.

In my view they do so because they expect some justice through the regime. Whilst there is no empirical research as to the total damages paid to date, my rough estimate is that the total is well over $1 billion60.

Laws which purport to provide protections to citizens but which are not capable of being used by them are no more than an illusion. In improving access to the protection of substantive laws an effective class actions procedure is plainly important. As observed by the Age editorial that begins this paper, in Australia we have so far seen hundreds of thousands of people – who would have been unable to pursue their losses in individual court proceedings – successfully obtain a measure of damages by use of a procedure that also provides protections to defendants.

While the regime is working well, of course there remain numerous issues in the operation of class action law in Australia. Professor Cashman and I will now deal with some of these issues, although it is of course impossible to do so in detail in a presentation of this length. I will deal with the first such issue, which is discovery and interrogation of class members, and Professor Cashman will deal with the remaining issues.

 Continued in Part B

* Justice of the Federal Court of Australia.

Footnotes

1. For example, Victorian Supreme Court Rules 1957 O16 r9; Federal Court Rules 1979 O6 r13.
2. See Temperton v. Russell [1893] 1 QB 435 ; Markt Co Ltd v. Knight Steamship Co Ltd [1910] 2 KB 1021; John v Rees [1970] Ch 345; Prudential Assurance Co Ltd v Newman Industries Ltd [1981] Ch 229; RJ Flowers Ltd v Burns [1987] 1 NZLR 260; and Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398
3. Australian Law Reform Commission, Grouped Proceedings in the Federal Court, Report No. 46 (1998) (“ALRC Report”), p 8. At page 9 the report proposes that such a procedure could “…enhance access to remedies where many people have suffered loss or injury as a result of the same wrongful act or similar wrongful acts of another. The ability to act together as a group in making a claim for relief could enable the cost to the individual to be reduced and ensure an effective determination of common issues; one person being able to act on behalf of the group might assist those people to know about and to pursue their rights. The result could be to enhance access to legal remedies, ensure the efficient use of resources and avoid multiplicity of proceedings.”
4. For example, Commonwealth, Parliamentary Debates, House of Representatives, 26 November 1991, 3284 (Peter Costello)
5. Vincent Morabito, An Empirical Study of Australia’s Class Action Regimes -First Report: Class Action Facts and Figures (Department of Business Law and Taxation, Monash University, December 2009) (“the First Report”); Vincent Morabito, An Empirical Study of Australia’s Class Action Regimes-Second Report: Litigation Funders, Competing Class Actions, Opt Out Rates, Victorian Class Actions and Class Representatives (Department of Business Law and Taxation, Monash University, September 2010), (“the Second Report”); Vincent Morabito, ‘Clashing Classes Down Under- Evaluating Australia’s Competing Class Actions Through Empirical and Comparative Perspectives’ (2012) 27 Conn. J. Int’l L. 245 (“the Third Report”); with Vincent Morabito and Vicki Waye, Reining in Litigation Entrepreneurs: A New Zealand Proposal (2011) New Zealand Law Review 323, 346 (“the Fourth Report”).
6. Australian Law Reform Commission, Managing Justice: A Review of the Federal Civil Justice System, Report No 89 (2000) 530
7. L eaving aside the separate question as to the level of regulation of litigation funding which is appropriate, about which representatives of defence law firms have often expressed concerns.
8. Damian Graves, Ken Adams and Jason Betts, Class Actions in Australia (Lawbook Co, 2nd ed, 2012).
9. Interview with Graeme Samuel (ABC Radio National PM Program 17 July 2006).
10. See Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 73, where Callinan J said: The question here is not whether, by their nature, group or class proceedings are oppressive to defendants, give rise to entrepreneurial litigation, in fact proliferate and prolong court proceedings, undesirably substitute private for public law enforcement or contrary to the public interest, with disadvantages outweighing a public interest in enabling persons who have been damnified but who would not, or could not bring the proceedings themselves, to be compensated for their losses. The question simply is whether the Victorian Act is valid.’
11. Cf Fostif v Campbells Cash and Carry [2005] NSWCA 83 at [101] where Mason P said: “In the report, Access to Justice, Lord Woolf wrote (Ch 17 §2):
12. It is now generally recognised, by judges, practitioners and consumer representatives, that there is a need for a new approach both in relation to court procedures and legal aid. The new procedures should achieve the following objectives: (a) provide access to justice where large numbers of people have been affected by another’s conduct, but individual loss is so small that it makes an individual action economically unviable;(b) provide expeditious, effective and proportionate methods of resolving cases, where individual damages are large enough to justify individual action but where the number of claimants and the nature of the issues involved mean that the cases cannot be managed satisfactorily in accordance with normal procedure; (c) achieve a balance between the normal rights of claimants and defendants, to pursue and defend cases individually, and the interests of a group of parties to litigate the action as a whole in an effective manner.
13. Kirby v Centro Properties Ltd (2008) 253 ALR 65, 67.
14. Butler v Kraft Foods & Anor (settled)
15. Schokman v Sydney Water Corporation Limited , Federal Court of Australia, Proceeding No NG 794 of
16. 1998
17. Ryan v Great Lakes Council [1999] FCA 177
18. Sophia Pizza Class Action (settled)
19. Lopez v. Star World [1999] FCA 104 (settlement approved).
20. Georgiou v Old England Hotel [2006] FCA 705 (settlement approved)
21. For background see McLean v Nicholson [2002] VSC 446
22. Neil v. P&O Cruises Ltd [2002] FCA 1325 (settlement approved)
23. Downie v Spiral Foods Pty Ltd (on foot in the Supreme Court of Victoria)
24. Bates v Dow Corning (Aust) Pty Ltd [2005] FCA 927 (discontinued)
25. For background see Nixon v Phillip Morris (1999) 165 ALR 515
26. Courtney v. Medtel Pty Ltd (No 5) [2004] FCA 1406 (settlement approved)
27. For back ground see Bright v. Femcare (2002) 195 ALR 574, 590.
28. Casey v DePuy International Limited (No 2) [2012] FCA 1370 (settlement approved)
29. Reynolds v. Key Pharmaceuticals Pty Ltd (unreported, VSC, No N5621 of 3002)
30. See Peterson v Merck Sharp and Dohme (Australia) Pty Ltd (2010) 266 ALR 1
31. Wu v. Minister of Immigration
32. Lek v. Minister for Immigration (1993) 117 ALR 455.
33. Migration Act 1958 (Cth) s486B(4)
34. King v. AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2003] FCA 980
35. Dorajay Pty Ltd v Aristocrat Leisure Ltd [2009] FCA 19
36. P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029
37. Kirby v Centro Properties Ltd (No 6) [2012] FCA 650
38. Pathway Investments v National Australia Bank (No 3) [2012] VSC 625
39. For background see AECOM Australia Pty Ltd (formerly known as Maunsell Australia Pty Ltd v RiverCity Motorway Management Ltd [2012] FCA 1304
40. For background see Barbara O’Sullivan v Challenger Managed Investments Limited [2008] NSWSC 602
41. For background see Harrison v Sandhurst Trustees Ltd [2011] FCA 541
42. See Lukey v Corporate Investment Australia Funds Management Ltd [2005] FCA 1074
43. For background see Imobilari v Opes Prime Stockbroking Ltd [2008] FCA 1920
44. Wong v Silkfield Pty Ltd [1999] HCA 48 ; see also Reiffel v. can 075 839 226 Ltd [2001] FCA 509
45. Darwalla Milling & Ors v. F Hoffman La Roche & Ors (No 2) [2006] FCA 1388 (settlement approved)
46. Wright Rubber Products Pty Ltd v Bayer AG (No 3) [2011] FCA 1172
47. Jarra Creek Packing Shed Pty Ltd v Amcor Ltd [2011] FCA 671
48. For background see De Brett Seafoods Pty Ltd v Qantas Ltd (No 3) [2011] FCA 1059
49. Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 4) [2004] VSC 266
50. Hilton v. Melbourne Underwater World Pty Ltd [2004] VSC 357
51. Thomas v Powercor Australia Ltd [2011] VSC 614; Mercieca v SPI Electricity Pty Ltd [2012] VSC 204.
52. For background see Regent Holdings Pty Ltd v State of Victoria [2012] VSCA 221
53. Williams v. FAI Home Insurance Pty Ltd (No 5) [2001] FCA 399 ; For background see Tropical Shine v. Lake Gesture (1993) 118 ALR 510
54. Andrews v Australia and New Zeal and Banking Group Ltd [2012] HCA 30
55. For background see Cook & Ors v. Pasminco Ltd & Ors [2000] VSC 534
56. Wheelahan & Anor v City of Casey & Ors 2011] VSC 215
57. For background see Konneh v State of New South Wales[2011] NSWSC 1170
58. Constuction, Forestry, Mining and Energy Union v Contract Blinds Pty Ltd [2009] FCA 572 (settlement approved)
59. For background see Smith v University of Ballarat [2006] FCA 138
60. Patrick Stevedores No 2 Pty Ltd v Maritime Union of Australia (1998) 153 ALR 643

Stuart Bywater Design is widely recognised throughout Queensland and Australia as one of the leading furniture designers and makers in the country.

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I will commence this review by saying that over the past 40 plus years of practice, I have been involved in a great number of jury trials, both in the criminal and civil jurisdictions, albeit not in Queensland. When I saw this book advertised, my interest was immediately sparked and you will see why, as this review proceeds.

The 12 good people and true are a time honoured method of determining guilt or otherwise in criminal trials and, in the many in which I have been involved, only twice did I think they got it wrong. In one of those cases, I later changed my mind when my client committed another crime using the identical procedure. In the other, to this day, I continue to think their decision was wrong.

Thus, I remain an advocate of jury trial. But my mind could not help but think about whether our approach to these trials was keeping abreast with the times and with the increased use of computer animation, power point presentations and the like. We remain very conservative in our approach to how we present our evidence to a jury. In contrast, we would not think of giving a lecture to the public without modern aids.

This excellent book is written by Dr. Horan, an academic Victorian barrister who has taken my thoughts to a much more refined level, resulting in a text from which anyone who engages in jury trials, or intends to do so, can gain a great deal.

The book considers juries from the beginning, that is, jury selection, right through to the presentation of evidence to them. Juries in the 21st Century considers the results of jury polling in a number of States as well as the results of some mock jury trials. The book, generally, tries to use this feedback to guide the legal profession in attaining a better understanding of how jurors are selected and what makes a jury tick.

Perhaps to me, the most informative chapter of this book is that which considers scientific evidence. I include in that subject, statistical evidence. Very few of us would ever forget the Lindy Chamberlain cases and how forensic evidence seemed so important to that jury’s decision. Since then, we have had a proliferation of cases apparently decided almost solely on DNA evidence. But as Dr. Horan points out, the legal profession accepts, without reservation and perhaps too readily, statistical evidence which is probably not within the expertise of the witness and which, in any event, may be suspect. She considers, albeit briefly, mock jury research with 571 Australian high school students in which they were willing to convict even when presented with evidence having low statistical significance. The mock jurors recorded the same conviction rate for random match probabilities of 4000 and 400,000 and were more likely to convict when the figure went up to 4 million.

I have sometimes seen what Dr. Horan and others have called the “CSI effect” where juries are so attuned to crimes being solved within an hour, purely by scientific evidence, that they expect the prosecution to present them with the case, all gift wrapped, in the same way. We know that, in real life, this rarely happens. I refuse to watch such television shows, I hasten to add, because it is so easy to pick holes in them.

Dr. Horan also considers expert evidence in the sense of joint experts, single experts, concurrent expert evidence and, importantly, the problems that arise where the prosecution experts and defence experts give their evidence days or weeks apart, making it particularly difficult for the jury to compare them.

Finally, I commend to you the discussion of what evidence should be made available to the jury when it considers its verdict and in what form. We all know how juries are directed that they must not make their own inquiries but must base their decision on the evidence heard in the Court. In a matter I was involved in some years ago, notwithstanding this direction, the foreman went out at lunch time and obtained documents from a local council which he then shared with the other jurors. That jury was discharged and a retrial ordered. Dr. Horan discusses detective juries in some thought provoking depth.

Let me leave you with the suggestion that every page of this book contains thoughtful material of how we can better present our evidence to a jury. I did not agree with everything that was said. But every comment that I read was thought provoking and challenged my own personal views. Surely, that is the hallmark of a first rate textbook.

This newly published book is highly recommended.

Brian Morgan

Chambers

27 February 2013

Footnotes

61. Mobil Oil Australia Pty Ltd v State of Victoria (2002) 211 CLR 1, [50] per Gaudron, Gummow and Hayne JJ “The position of the plaintiffs in the proceeding may be contrasted with those whom they represent – the group members. Subject to some exceptions that do not matter for present purposes, the consent of a person to be a group member is not required. Group members may neither know of the commencement of the proceeding nor wish that it be brought or prosecuted, although Pt 4A does provide for notice to be given to group members of (among other things) the commencement of the proceeding.”

62. see for example ss 33L and 33N

63. P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176, [16]

64. Thomas v Powercor Australia Ltd (Ruling No 1) [2010 VSC 489, [39].

65. [2002] FCA 1560

66. see for example [2011] VSC 401

67. Ibid [32] to [33]

68. Vincent Morabito, the Second Report, above n 5, 35; Paul Miller, ‘Shareholder class actions: Are they good for shareholders?’ (2012) 86 ALJ 633.

69. Nicholas Pace, Class Actions In The United States Of America (Globalisation of Class Actions Conference, Oxford University, 2007); Marc Galanter, ‘The Vanishing Trial: An Examination Of Trials And Related Matters In Federal And State Courts’ (2004) 1 J. Empirical Legal Stud., 459.

70. Ken Adams, Issues And Challenges In Resolving Class Actions (Commercial Law Conference, Supreme Court of Victoria, 2012).

71. Ibid [16] to [17].

72. [2010] VSC 489, [39]

73. Ibid [49]

74. [2012] VSCA 168

75. [2012] VSCA 221

76. Ibid [15].

77. [2013] FCA 115

78. There is though a question as to the basis of the respondent’s concerns that they may become unable to claim contribution from the class members’ financial advisors by effluxion of the limitation period (as accepted by Nicholas J). For example, s 24(4)(a)(i) of the Wrongs Act 1958 (Vic) allows a contribution claim to be made at any time within which the action might have been commenced against the party seeking contribution. The relevant limitation period is six years for the causes of action under the Corporations Act. However the time limit is suspended for all class members by operation of s 33ZE of Pt IVA which provides: (i) Upon the commencement of a representative proceeding, the running of any limitation period that applies to the claim of a group member to which the proceeding relates is suspended. (ii) The limitation period does not begin to run again unless either the member opts out of the proceeding under section 33J or the proceeding, and any appeals arising from the proceeding, are determined without finally disposing of the group member’s claim.

79. [2001] 2 S.C.R. 534; 201 DLR 385

80. David Herr, Annotated Manual for Complex Litigation (Thomson West, 4th ed 2007)[21.41]

81. Thomas v Powercor Australia Ltd (Ruling No 1) [2010 VSC 489 [56] to [57] where Forrest J said: “…Powercor should be provided with sufficient information, relevant to the group members, to enable it to have some idea as to the size of the claim it has to meet in the event it is found liable to the group. As I have said, the provision of discovery by all group members is out of the question; however there should be a process by which Powercor can obtain such information in the form of particulars of loss and with accompanying substantiating documentation from, if possible, a representative sample of members.”