Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2005] HCATrans 777 (30 September 2005)

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Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2005] HCATrans 777 (30 September 2005)

Last Updated: 6 October 2005

[2005] HCATrans 777

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S178 of 2005

B e t w e e n -

CAMPBELLS CASH AND CARRY PTY LIMITED

Applicant

and

FOSTIF PTY LIMITED

Respondent

Office of the Registry
Sydney No S179 of 2005

B e t w e e n -

AUSTRALIAN LIQUOR MARKETERS PTY LIMITED

Applicant

and

DALE LESLIE BERNEY

Respondent

Office of the Registry
Sydney No S180 of 2005

B e t w e e n -

IGA DISTRIBUTION (VIC) PTY LIMITED

Applicant

and

WHELAN & HAWKING PTY LIMITED

Respondent

Office of the Registry
Sydney No S181 of 2005

B e t w e e n -

QUEENSLAND INDEPENDENT WHOLESALERS PTY LTD

Applicant

and

SYDNEY RICHARD VEITCH MURRAY

First Respondent

LINDA MURRAY

Second Respondent

Office of the Registry
Sydney No S182 of 2005

B e t w e e n -

IGA DISTRIBUTION (SA) PTY LIMITED

Applicant

and

PAUL ASHLEY NEINDORF

First Respondent

JO-ANNE GAIL NEINDORF

Second Respondent

Office of the Registry
Sydney No S183 of 2005

B e t w e e n -

COMPOSITE BUYERS PTY LIMITED

Applicant

and

BARRY GEORGE WILLIAMSON

First Respondent

LYN MARGARET WILLIAMSON

Second Respondent

Office of the Registry
Sydney No S184 of 2005

B e t w e e n -

IGA DISTRIBUTION PTY LIMITED

Applicant

and

JOANNE MARGARET GOW

First Respondent

IAN RODGER GOW

Second Respondent

PHILLIPA COMINO

Third Respondent

LYNNETTE MAREE GREEN

Fourth Respondent

PETER LAURENCE GREEN

Fifth Respondent

Office of the Registry
Sydney No S380 of 2005

B e t w e e n -

MOBIL OIL AUSTRALIA PTY LIMITED

Applicant

and

TRENDLEN PTY LIMITED

Respondent

Applications for special leave to appeal

GLEESON CJ
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 30 SEPTEMBER 2005, AT 9.30 AM

Copyright in the High Court of Australia

MR A.C. ARCHIBALD, QC: May it please the Court, in those matters I appear with my learned friend, MR H.K. INSALL, SC, for the respective applicants. (instructed by Freehills)

MR S.J. GAGELER, SC: If the Court pleases, in each matter I appear with MR M.J. LEEMING for the respondent or respondents. (instructed by Robert Richards & Associates)

GLEESON CJ: I am just checking. I must have been under a misapprehension. I thought that the matter of Mobil Oil v Trendlen was following this matter.

MR J.K. KIRK: Your Honour, I appear in that matter led by MR N.C. HUTLEY, SC and of course it has been listed not before 11.00. We did check with the Registry and we were informed that that was indeed what the Court desired. Mr Hutley is in chambers. I can very quickly go and grab him. (instructed by Blake Dawson Waldron)

GLEESON CJ: Yes, I would be obliged if you would. I am afraid I was under a misapprehension. I thought that the matters of Campbells Cash and Carry, et cetera, and the matters of Mobil, et cetera, would be dealt with at the same time. Who is your opponent?

MR KIRK: Mr Gageler and Mr Leeming.

GLEESON CJ: All right. Are you content with that Mr Gageler?

MR GAGELER: Yes, your Honour.

GLEESON CJ: Well, what about giving Mr Hutley a surprise and we will hear argument in this matter and argument in the Mobil matter before we give a decision in either matter. Yes, go ahead, Mr Archibald.

MR ARCHIBALD: If the Court please. In our contention the Court of Appeal wrongly regarded the 1993 Act as abolishing more than the consequences in criminal law and in tort of champertous conduct. It treated the Act as effectively abolishing the public policy itself and therefore abolishing champerty. The role that the court saw after the passage of the legislation for the notions of public policy which previously obtained seems to have been confined, in the court’s view, to the private relationship between the contracting parties and the invalidating effect of champerty upon the contract, but no more.

Such a stance, in our contention, is at odds certainly with what the Full Court of the Federal Court observed in Magic Menu and is contrary to the Australian and the English authorities to which the Full Court made reference in its reasons in that case at page 268, in particular in the House of Lords, Giles v Thompson and the somewhat earlier decision in Trendtex. So that there is that central issue arising. A corollary of that view of the court appears to be the notion that a defendant vexed with a champertous proceeding no longer has standing to complain of that circumstance.

At paragraph 119 of the reasons at page 272 to 273 of the application book the learned President said “it is simply no business of a defendant to be taking up the cudgels” on the footing that no legitimate interest resides or continues to reside in a defendant in those circumstances. That serves to further and exemplify, in our contention, the erroneous view taken by the court as to the continuing role of public policy. That all leads to what is essentially a proposition that champerty no longer exists in the modern law. One sees that perhaps most clearly at paragraph 122 at page 276 of the application book where at line 26 in the President’s reasons it was observed that lack of independent interest in the proceedings and the presence of profit motive “do not establish champerty in the modern law”. That, in our contention, is fundamentally at odds with the - - -

McHUGH J: But, Mr Archibald, this is all about public policy. The judges made this particular aspect of public policy and the judges are entitled to change it. The reason for the change is that the courts have been influenced by concerns about access to justice and a heightened awareness of the cost of litigation. In those circumstances the view is taken by the Court of Appeal that what they referred to as the modern law in respect of champerty does not make this either champerty or an abuse of process.

MR ARCHIBALD: That is certainly the question raised. It is at odds, as we contend, with other decisions of intermediate courts of appeal in this nation, including the Federal Court in Magic Menu, including the Full Court in Western Australia, and it produces the perverse result observed in our learned friend’s contentions that there are different public policies in difference States and Territories according to whether there has or has not been legislation enacted, that the public policy - - -

McHUGH J: Well, that is so, but there is one common law of Australia; there is not six sets of common law for Australia.

MR ARCHIBALD: Yes, but this approach to public policy treats the change or the alteration in public policy as being referrable not to some development of the common law but to the effect of the legislation, the passage of the legislation, the passage of the legislation itself producing by legislative edict some disappearance of the common law policy.

McHUGH J: Well, Lord Diplock thought that was a proper approach in Warnink v Townend, that passing off case that this Court in Public Service Board v Osmond thought was not the proper approach. Maybe that raises an important question in itself. But the point is, I suppose you say, is that whether this decision is right or wrong it does raise some fairly fundamental questions of principle which deserve the attention of this Court.

MR ARCHIBALD: In our contention, yes, these matters are of current concern. They are being actively considered in numbers of cases around the nation. I think there have been seven or eight decisions since the decision of the Court of Appeal in this matter.

GLEESON CJ: Which is the passage in Magic Menu that you say is most clearly at odds with the decision of the Court of Appeal in this case?

MR ARCHIBALD: At page 268D. One perhaps gleans a little more from it from the case references that are cited by the Court, Trendtex Trading at page 653 where Lord Denning spoke of the parallel English legislation which was a template for all of the Australian legislation. The Criminal Law Act 1967 did away, his Lordship said, with the tort, did away with the crime:

But it did not strike down our modern cases in so far as they carry out the public policy –

and at 654 spoke of the reasons why the common law condemns champerty and at C said:

This reason is still valid after the Act of 1967.

That is fundamentally at odds with the view of the Court of Appeal that after 1993 Act here, identical in all material forms, there is a disappearance of the previous public policy.

GLEESON CJ: The next sentence in Magic Menu says:

The Giving of financial assistance to a litigant by a non-party will not however conclude the question - - -

MR ARCHIBALD: Yes, of course, and we - - -

GLEESON CJ: So that if a newspaper, for example, funds litigation in the pursuit of a good story, that is not necessarily champertous.

MR ARCHIBALD: Well, one needs to be careful to keep separate the question of whether conduct is champertous and whether there is an abuse. It has never been contended by the applicants in this case that the mere fact of champerty itself is conclusive as to whether there is or is not abuse. But the circumstance that conduct is champerty will be a central element in a consideration as to whether there is an abuse because the very ground of public policy is that champertous conduct has the tendency to generate abuses and that is why it is stigmatised.

GLEESON CJ: But is your argument here that the conduct is champertous or that it is an abuse of process?

MR ARCHIBALD: It is an abuse of process for a number of reasons, but central to the consideration is the circumstance that it is champertous.

GLEESON CJ: What is it exactly that makes it champertous?

MR ARCHIBALD: The champerty here derives – and it is classic champerty – in the support of litigation by a party without an antecedent legitimate or genuine interest and a sharing of the spoils of that litigation. The sharing of the spoils is what distinguishes champerty from maintenance. Maintenance exists where a party without some antecedent legitimate interest in the litigation supports that litigation. The addition of the ingredient of sharing the spoils, as the cases have it, constitutes the aggravated form labelled champerty.

GLEESON CJ: How do you relate the concept of sharing the spoils by a non-party with a solicitor’s uplift?

MR ARCHIBALD: A solicitor’s uplift is statutorily provided for. The need for the statute to protect the solicitor’s uplift demonstrates the concern of Parliament that absent such statutory arrangements there would - - -

McHUGH J: But nearly 50 years ago in Clyne v The Bar Association this Court accepted that it was proper for a barrister or any professional person to run litigation on what was basically a speculative basis.

MR ARCHIBALD: Yes, and those circumstances reflect the proper role of lawyers in the system of the administration of justice and the way in which the profession aids and conduces to the achievement of justice rather than the outsider trafficking in litigation for speculative profits.

McHUGH J: But the other side of the coin in cases like this is that justice is given to people who otherwise would be denied justice. The only thing that you have going for you is you say a third party funder will gain from that. Now, why should that prevent persons who are being represented here in this case from getting justice?

MR ARCHIBALD: Well, it will plainly not be the case that every funded piece of litigation will constitute an abuse, but central to the considerations is whether the funding party and the circumstances of the funder reflect those elements which have for centuries been the proper and legitimate concern of public policy because of the tendencies which those arrangements have.

McHUGH J: Well, you have probably studied it. It is some years since I have looked at the history of this part of the law, but at the back of it was there not the notion of oppression? Was that not at the back of it, that powerful interests could oppress other interests by funding litigation?

MR ARCHIBALD: That was one concern. This subject matter of public policy has changed and adapted over the centuries. Those medieval concerns have rather been left behind. The modern considerations and concerns are the stirring up of litigation by a party who seeks to achieve profit and speculative advantage from litigation which likely would not otherwise be agitated.

GLEESON CJ: Bottom feeders.

MR ARCHIBALD: Yes, and one knows from the circumstances obtaining in this nation that we now have a company listed on the Australian Stock Exchange whose business is litigation funding. One of the points sought to be raised by our friends is that these activities are in their infancy, one should wait until everything is out of Pandora’s box, all of the ills have been suffered and then this Court might look at it. But the activities are mature activities, a flourishing industry in which numerous pieces of litigation around the country, particularly in representative proceedings, are the subject of funding of this kind.

McHUGH J: But is it any different in principle from insurance companies not only paying for verdicts, but often in their interest are urging or creating – taking over litigation, running cross-actions?

MR ARCHIBALD: Yes, radically different and recognised by all the authorities. The insurer, by reason of the existence of policies and the like, have what is now regarded and accepted by the authorities as an appropriate antecedent interest. In the United Kingdom special legislation has been introduced to cover after-the-event insurance so as to allow insurers to enter the field without falling foul of champertous principles and provide insurance protection where it did not exist before the insured event occurred. Again, the need for that legislation demonstrates, in our contention, the continued existence of the public policy which would otherwise intrude upon these activities absent special legislation.

GLEESON CJ: Whom does this public policy aim to protect?

MR ARCHIBALD: It aims to protect particularly the party vexed with the litigation, but it also is directed to the interests of the funded party whose circumstances may be influenced and disadvantaged by these funding arrangements. That is where one looks at the elements of control. But centrally it is the defendant. That is why the defendant formerly before the legislation had the entitlement to sue for the tort, because the defendant suffered the vexation of litigation with which that party should not otherwise have been vexed.

McHUGH J: I appreciate that. Forgive my pejorative expression, but it really protects big shot defendants, does it not, defendants such as the appellants in this case who have many dealings with many people all of whom have small claims? If your argument is successful, it means these people with just small claims cannot bring their actions and you profit from it.

MR ARCHIBALD: Certainly not, in our contention, particularly in this case. The evidence showed no inclination, desire or incentive for the retailer plaintiffs or the represented class to institute their own proceeding, no suggested they wanted to but were impeded by the economics of the position. The litigation in this case really raises the question, which of two groups of commercial parties should have a windfall advantage flowing from the unconstitutionality exposed in Ha’s Case? Neither party has suffered loss. The question is, because the burden was passed on to the consumer, which of two parties here should retain the funds in question? So there is no question of small anxious litigants here being held out from pursuing a claim which they seek to advance in order redress loss that they have suffered. It is not this case.

McHUGH J: Mr Archibald, it is only New South Wales, Victoria and South Australia, is it, that have passed legislation equivalent to the Maintenance, Champerty and Barratry Abolition Act 1993 (NSW)?

MR ARCHIBALD: The Australian Capital Territory has such a provision in the Civil Law (Wrongs) Act, but Queensland, Western Australia, Tasmania and the Northern Territory have not passed legislation.

GLEESON CJ: Was the purpose of that legislation to permit the solicitor’s uplift?

MR ARCHIBALD: No, the purpose of the legislation is to abolish the crime and the tort but in other respects, in our contention, to preserve the public policy with whatever consequences that has.

GLEESON CJ: Yes, but was that the particular issue that motivated the passing of the legislation?

MR ARCHIBALD: On some occasions there has been parallel legislation dealing with the position within the legal profession. On other occasions there has not been the companion legislation. They have had a general review of offences and torts and a desire to eliminate the crime and the tort without having parallel and contemporaneous provisions about solicitor’s fee entitlement.

GLEESON CJ: There used to be a point of view that as a matter of professional conduct there was a radical difference between doing a case on a speculative basis and doing a case on a basis of sharing in the proceeds. Sometimes the line between those two might have been a little blurred, but is that still, in terms of professional regulation, the view that prevails, subject to the uplift?

MR ARCHIBALD: There are particular statutory provisions generally in most of the States, I think, which deal in differing ways with those issues.

GLEESON CJ: Because the very fact that the uplift itself is regulated suggests that the general position is still the same, does it not?

MR ARCHIBALD: Yes, and Lord Justice Morritt observed in Stocznia in the United Kingdom that there was an unregulated and unlicensed market in litigation. That is the problem which is raised by this case. This case has nothing to do with the position of the solicitors in relation to fees. If the Court pleases.

GLEESON CJ: Thank you, Mr Archibald. Mr Hutley, I am sorry if we have disconcerted you, but it just seemed to us convenient to deal with Mobil and, as I say, I was under an impression that that was how it was going to be done.

MR HUTLEY: We anticipated the same, your Honour, and then I was told yesterday afternoon we had been moved which gave me some relaxation, but then again these things happen.

McHUGH J: I thought it must have been for your convenience. I thought you might still be cross-examining somebody.

MR HUTLEY: We do not work on Fridays down here.

GLEESON CJ: Well, is it convenient for you to let us have your argument in Mobil?

MR HUTLEY: Yes, essentially on the - - -

GLEESON CJ: Needless to say, what we are particularly interested in is any difference between Mobil and - - -

MR HUTLEY: Of course.

McHUGH J: You have the constitutional point, have you?

MR HUTLEY: Yes, that is there, but we also have what I might call the letter point which is the question which was dealt with by Justice McDougall in paragraph 82 of his Honour’s reasons at page 89 of the application book. The letter in question was tendered in evidence on a voir dire. Your Honours will find that at application book 101, if I could take your Honours to it shortly.

This was an offer of settlement made by the Firmstones on behalf of Trendlen on 9 March 2005 to, in effect, bring the proceedings to an end on circumstances that the named clients, that is those clients of Firmstones who had, as it were, signed up, to use the vernacular or the cant which was adopted in the case, to the terms of the offer would get 85 per cent of their entitlement; whereas the unknown and unnamed participants in the class who could not be known or named, as your Honours would appreciate, until the court’s process had been invoked to obtain discovery and then be communicated, their interests would, in effect, evaporate upon payment to Firmstone & Feil, as your Honours will see from 102, of $1 million to compensate Firmstone & Feil for the loss of their, as it were, contingent interests in those persons’ entitlement.

GLEESON CJ: How would that be binding on another firm carrying on the same kind of business as Firmstone who came along next week?

MR HUTLEY: Time limitations. Your Honour, this is all done, of course, in the context where - - -

GLEESON CJ: They got in just in time?

MR HUTLEY: Quite, and, with respect, that lies at the heart of both issues in this case, in our respectful submission.

GLEESON CJ: Are these time limitations that cannot be extended?

MR HUTLEY: I apprehend not. Yes, they cannot. They are not subject to the - - -

GLEESON CJ: Because that is only personal injuries?

MR HUTLEY: Yes. So one of the points we say which lies at the heart of this and both aspects of the appeal is the extent to which litigation or right should be treated now as, in effect, fungible instruments of commerce which, in effect, that organisations are able to espy opportunities, particularly take advantage of things like the Limitation Act time, promote a venture and then, in effect, come to court and pretend that they are acting “in the interests of a vast class who otherwise would not be able to enforce their rights”, those rights having existed for usually a pretty lengthy period of time, namely, the time limitation period, and nobody being anguished to exercise them.

So, to take up your Honour Justice McHugh’s observation, from both sides there could be a temptation to cynicism, but the real problem which lies, as we see it, in this whole issue is that to accede to the view of the Court of Appeal in Fostif essentially, as we see it, amounts to the courts accepting that rights now are just instruments of commerce to be, in effect, traded, bought, sold as the, as it were, ingenuity of entrepreneurs consider it.

McHUGH J: Yes, but for the last 25 years or more entrepreneurs have been using litigation as strategic weapons in commercial struggles with really not much concern about the outcome except the value that the litigation has from a strategic point of view.

MR HUTLEY: I accept that completely and it has ever been thus, but what one is now talking is is that entrepreneurs are able to go out, in effect, turn to account other people’s rights and particularly other people’s rights which for good reason or bad have not been agitated often for many years and the courts, in our respectful submission, are being used as the instruments not only to enforce those rights, but really to find out who has them.

Essential to the device being adopted by Firmstones is to start and get discovery, because unless you can get discovery, you cannot find the people to do the deal with. Once you have found the person to do the deal with, you go to them and you offer them the terms. Now, the terms are, because of the limitation periods, an offer essentially one cannot refuse.

Now, I accept what Justice Mason has observed about the courts able to control these things but, with all due respect to his Honour, there is a certain lack of reality in the real sense dealing with these mass cases of the courts becoming actively involved in that procedure. For the very same reason that the individuals have not agitated their rights, because they are not of great significance to them, it is highly unlikely that, in effect, contracts which are productive in the individual case of small amounts of money perhaps to the promoter of the venture but in the vast array produce vast profits are going to be individually the subject of inquiry. But one of the other points - - -

McHUGH J: In any of the cases has it ever been put forward for the continued justification of this public policy that this sort of litigation increases pressure on the courts and adds to the cost of the administration of justice?

MR HUTLEY: Well, your Honour, I do not know of any, as it were, research which has identified the extent to which there is such a burden. If Fostif becomes the law, I think your Honours can take it as almost a moral certainty that a whole new industry is going to take place. One has heard anecdotal stories of the United States of people wandering around businesses sort of setting up class actions like they are going out of style. Now, that - - -

McHUGH J: Given the effect of the Civil Liability Act, lawyers generally might be much in favour of this new field of business.

MR HUTLEY: I do not think your Honour would find anybody at this Bar table who is saying they are personally offended by it, but we are constantly exhorted by your Honours not to take our interests totally into account in making these decisions. What we say is our case and this offer and this transcript in relation to what Mr Firmstone was seeking to do is just a classic exemplification of the problems attendant on this commercial approach to rights.

The second point is, as an adjunct to determining these questions, a very important question exists, in our respectful submissions, precisely what the relationship is between an organisation which takes upon itself the roles of a representative and unnamed, unknown classes of an indeterminate size during the course of that litigation. Until one ascertains and this Court identifies with precision precisely what that is, the evils with which we are concerned cannot precisely be assessed. One of the difficulties, we submit, with the Court of Appeal’s judgment is that they really have not confronted that conversion of rights into instruments of commerce. That is something which, in our respectful submission, this Court ought address, for if this is to be the law, then different means of addressing control of litigation probably will have to be adopted.

GLEESON CJ: Do you have a constitutional point?

MR HUTLEY: We do. Your Honour, our point is, shortly, this, that the judicial power of the Commonwealth requires a controversy and it has to be a real controversy and a controversy is not created by, in effect, the promotion of a commercial venture. Trendlen, in effect - - -

McHUGH J: You rely on the statement of Justice Hayne in the Catholic Archbishop’s Case?

MR HUTLEY: Yes. This is, in effect, just a commercial venture. An essential instrument of its perfection is the court being used to find the disputeness. It does not work unless an order for discovery is made, identification of parties who can then, in effect, receive the prospectus and sign up. We say that goes to the heart of the proper role of a court in current conditions.

GLEESON CJ: Does that mean that if special leave is granted there will be a need for section 78B notices?

MR HUTLEY: There would be. Those are our submissions.

GLEESON CJ: Thank you, Mr Hutley. Yes, Mr Gageler.

MR GAGELER: Your Honours, dealing generally with the question of litigation funding, the ultimate issue, in our respectful submission, was correctly and uncontroversially identified by President Mason in the application book in Campbells at page 279, about line 46 where his Honour said:

the court’s basal inquiry should be whether the role of the particular funder has corrupted or is likely to corrupt the processes of the court to a degree that attracts the extraordinary jurisdiction to dismiss or stay permanently for abuse of process.

McHUGH J: But does that not ignore the fact that the courts and public moneys are being used for what is, in effect, a commercial venture?

MR GAGELER: It does not ignore that at all. Indeed, that may be an argument that would be put and it was never put, an argument along those lines, in the present case. Your Honours, the present case is really a very poor vehicle to explore the application of that basal principle to litigation funding in any general sense. It is a very poor case for four reasons. One is that it is not a case in which it was demonstrated or even suggested that any abuse of process had in fact occurred in this litigation. That is a point that his Honour makes on the next page, page 280, at the beginning of paragraph 133.

Secondly, the fact that this proceeding was constituted as a representative proceeding means that it is necessarily continuously, from the very first moment and, in particular, concluding with judgment or at the time of any settlement, subject to judicial supervision. That is another point that his Honour makes at page 271. Thirdly, the causes of action upon which the plaintiff and the represented persons sue are causes of action of the Roxborough nature, that is, they are causes of action in debt. They are traditionally readily capable of assignment.

McHUGH J: His Honour characterised it as money had and received.

MR GAGELER: Money had and received, but actions on the old cause of action indebitatus and capable of assignment. Now, leave aside the slogan of trafficking in litigation, this could well be simply put as factoring in litigation, a traditional and time respected form, if you like, of using court processes for commercial gain.

McHUGH J: But, Mr Gageler, does the case not raise some important questions of general public policy, particularly when you have regard to the fact that there is no equivalent in a number of jurisdictions in this country to the Maintenance, Champerty and Barratry Abolition Act 1993?

MR GAGELER: Your Honour, there are potentially some important questions of public policy that can arise. It is somewhat difficult to say that this is an appropriate case for the reasons that I have given. The last of them, your Honours, is that this is a case where, on the underlying causes of action, given the history of the litigation in Roxborough and the subsequent proceedings in the commercial division of the New South Wales Supreme Court, one would have to say, as President Mason said, this plaintiff and the represented persons really must have very good prospects of success. If one is looking at speculative litigation, this is not it.

To go back to your Honour’s question, there is a difficulty in this Court wading in at this stage of what is necessarily an emerging, evolving area of commercial practice in respect of which intermediate courts of appeal are working through the issues as they arise and in respect of which the legislatures of different jurisdictions have at this stage taken different approaches.

GLEESON CJ: According to Mr Hutley or Mr Archibald, there is actually a publicly-listed company now that is in this business.

MR GAGELER: Correct.

GLEESON CJ: Where would we find its prospectus?

MR GAGELER: I do not think - - -

GLEESON CJ: It would just be interesting to read, that is all.

MR GAGELER: Yes. There was some evidence but it is not actually in the material before the Court.

GLEESON CJ: You would support the reasoning of the Court of Appeal, as I understand it?

MR GAGELER: Very much, yes.

GLEESON CJ: What is the content of this expression “has corrupted or is likely to corrupt the processes of the court”? What does the word “corrupt” mean there?

MR GAGELER: Your Honour, it is difficult to know. I mean, one can accept the possibility of something that would amount to the misuse of the processes of justice to the point they would become a process of injustice.

McHUGH J: It must mean using it for an improper purpose, must it not?

MR GAGELER: Well, I would not want to limit it to that.

GLEESON CJ: What is the purpose of the process of the court?

MR GAGELER: The purposes of the processes of the court, of course, are to provide litigants with remedies for legal wrongs and that is - - -

McHUGH J: Uphold rights.

MR GAGELER: Uphold rights, and there is - - -

GLEESON CJ: Enforce obligations.

MR GAGELER: Another way of putting the same thing, but perhaps a broader and more appropriate way of putting it. Now, if that is the case, what is a litigation funder in principle doing that is contrary to that basic process? Absolutely nothing. Indeed, it is assisting.

McHUGH J: The only thing that seems to me to be said against you is that you are making a gain out of this litigation. That is the only - - -

MR GAGELER: What an unattractive argument, because my client, if the persons – I am sorry, it is not my – because the funder is standing behind - - -

McHUGH J: Just a slip of the tongue I take it.

MR GAGELER: Exploited mercilessly by Mr Hutley.

GLEESON CJ: What happens in this litigation when you have to from time to time ask for an adjournment to get instructions?

MR GAGELER: It is not a problem. It really in practice has not turned out to be an issue so far. But it is an unattractive argument to say that the plaintiff and the represented persons should be denied 70 per cent of a claim if they choose to sign up with a funder so that the applicants here can maintain 100 per cent of the funds that in law the plaintiff and the represented persons are entitled to on the Roxborough cause of action.

GLEESON CJ: This is entirely an opt-in arrangement?

MR GAGELER: Yes.

GLEESON CJ: Would it make any difference if it was an opt-out arrangement?

MR GAGELER: Well, yes, of course. Of course it would be potentially oppressive to the persons who are members of the represented class and, really, that is one of the points about the representative nature of these proceedings meaning that any potential – and it is only a potential – that might exist for some abuse to occur being minimised because of the supervision of the court. Indeed - - -

GLEESON CJ: It is the opt-in aspect of the arrangement that makes discovery crucial, is it not?

MR GAGELER: It could perhaps be done another way, but the opt-in nature of the arrangement – whether it is opt-in or opt-out, your Honour, basic principles of justice say that those persons who are to be represented at the point of final settlement or judgment need to be notified. So whether it is one or the other, if the proceedings are properly commenced on behalf of the represented persons, they need to be notified. The knowledge of who those persons are, of course, is something peculiarly available to the defendants in the principal proceedings, the applicants here, and not to my clients.

GLEESON CJ: So the lawyers start the case and then get discovery to find out who their clients are?

MR GAGELER: Who their potential clients are. They know who the plaintiff is. They know the characteristics of the represented persons. In this case, that is, in the Campbells’ Case, Mr Firmstone’s company had in fact signed up a number but not all persons falling within that class and as he was seeking to sign up others the limitation period was running to a close, hence the proceedings were commenced.

GLEESON CJ: One of the aspects of the matter that troubles me a little – and the trouble is probably in your favour at this stage of the proceedings – is that I have a personal distaste for courts deciding issues of public policy without being fully informed on the facts relevant to the considerations of public policy.

MR GAGELER: Yes.

GLEESON CJ: What do judges know or think they know about what actually goes on in practice in relation to litigation funding?

MR GAGELER: This really feeds into my point, your Honour, that there is a difficulty in really wading in at this stage and speculating as to what the problems might be. The reality is that the only intermediate court of appeal that encountered a problem in respect of a particular litigation funding arrangement was the Western Australian Full Court of the Supreme Court in Clairs Keeley and there were three Clairs Keeley Cases in the same piece of litigation. The first identified a problem which was basically a problem of non-disclosure and a problem with the solicitors in that case.

The second Clairs Keeley Case said that, notwithstanding those problems, the case would be allowed to proceed if certain steps were taken. Those steps were taken in Clairs Keeley (No 3), the proceedings have gone ahead. That is the only case in which there has been a practical problem and it was worked through and corrected. Magic Menu contains nothing in terms of principle or any application of principle which is inconsistent with the approach that has been taken here. Indeed - - -

McHUGH J: It was decided eight years ago and I suppose events have changed - - -

MR GAGELER: But if you look at page 264, President Mason relied upon it here. He also referred to a judgment of the Queensland Court of Appeal in Elfic v Macks, again an endorsement of litigation funding. The problems, if there are any, really are yet to emerge and one should allow them to emerge, if they really exist, before seeking to pronounce in any general way on the questions of public policy.

GLEESON CJ: A very senior American lawyer once said to me when I was in practice, referring I hope to the courts of his own country, “It isn’t what judges don’t know that you’ve got to worry about; it’s what they think they know that’s wrong.”

MR GAGELER: Well, it can be very dangerous, yes, and particularly dangerous here where you really have a developing area of commercial and legal practice. Your Honours, so far as England is concerned, it is simply wrong to say that litigation funding in the form of after-the-event insurance is the product of legislation over there. What is the product of legislation is the ability to go to the court and recover along with your costs or as part of your costs as a successful plaintiff the premium you paid for the after-the-event insurance. After-the-event insurance is you suffer your loss, you then go along to an insurance company and pay a premium which will fund you for the recovery of the loss. If you recover the loss through the court processes, then you get your costs and you get your premium from the unsuccessful defendant. All of that is endorsed. All of that is entirely consistent with the Wolf reforms. What it demonstrates is that public policy in the United Kingdom is absolutely no different from public policy as perceived by the Court of Appeal in the present case.

Your Honours, can I move on. In respect of the absence of any – very much material to work with as to the existence of problems in other cases, your Honours might note what is said at the bottom of page 283 to the top of page 284 of the application book. It is really the last line of 283.

Your Honours, in relation to the Mobil Case, it, in our respectful submission, adds nothing of substance to Fostif and one only needs to look at the notice of appeal in the Mobil Case, which your Honours will find at page 113 through to 115 of the application book, to realise that most of the grounds go to detailed questions of fact, perceived errors in findings of fact made by the trial judge which may - - -

GLEESON CJ: There may be this qualification to what you said, Mr Gageler, and it really relates to the same problem as I raised earlier. The knowledge that courts have of information that may be relevant to questions of public policy in relation to a matter like this may be very limited and, indeed, the information that courts think they have might be wrong.

MR GAGELER: Yes.

GLEESON CJ: At least in the Mobil Case there is that letter which provides an illustration of the sort of thing that happens and it is better for the court, if it is dealing with questions of public policy, to act on the basis of evidence as to the sort of thing that happens than gossip.

MR GAGELER: Yes, of course, we accept that, your Honour. As to the sort of thing that happens, that is the question. If your Honour looks at the letter, page 101 to 102 of the Mobil application book, it is not illustrative of any general or generally possible problem at all. It is a letter that was written in peculiar circumstances where the Mobil proceedings have been
put on hold, where the Fostif proceedings have proceeded, where Justice Einstein at first instance had ruled that they were not properly constituted representative proceedings and where a decision was pending in the Court of Appeal. This was a period of great uncertainty.

In that period of great uncertainty what this letter was doing was broaching the topic of the possibility of a settlement occurring then fully knowing that if the decision of the Court of Appeal was to the effect that they were properly constituted representative proceedings, then a settlement of this nature could not occur. That is acknowledged in the letter itself at page 102. So it is not illustrative of the general problem. If it is illustrative of anything, it is illustrative of the uncertainty and difficulties caused by the ruling of Justice Einstein pending the decision of the Court of Appeal. That is all, if the Court pleases.

GLEESON CJ: Thank you, Mr Gageler. In both of these matters, that is Campbells Cash and Carry Pty Limited v Fostif Pty Limited and the cases that are listed with it and Mobil Oil Australia Pty Limited v Trendlen Pty Limited, there will be grants of special leave to appeal. The parties will be given a day for the argument of the case and we would expect that counsel will agree between themselves on a division of time.

We will adjourn for a short time to reconstitute.

AT 10.20 AM THE MATTERS WERE CONCLUDED