The High Court upheld a decision of the Victorian Court of Appeal to allow defences to be pleaded by group proceeding members which ostensibly raised issues that had been the subject of earlier group proceedings.

In Issue

Anshun estoppel may not prevent a group member raising his or her individual claims in a separate proceeding.

Background

The respondents, Mr Collins and Mr Tomes, were members in a group proceeding commenced under Part 4A of the Supreme Court Act 1986 (Vic) against several defendants, including Timbercorp Finance Pty Ltd (Timbercorp Finance), in relation to agribusiness managed investment schemes (group proceeding). Many investors (including the respondents) entered into loan agreements to finance their investments. The group proceeding was unsuccessful. Timbercorp Finance then commenced recovery proceedings against the respondents alleging they were in default of their loan agreements.

The relevant question was whether Mr Collins and Mr Tomes were precluded from raising certain defences on account of their membership in the group proceeding on the basis that the claims ought to have been raised and determined in the group proceeding, in accordance with the principle in Port of Melbourne Authority v Anshun Pty Ltd (Anshun).

Decision at trial

At first instance, Robson J found that the respondents were not precluded from raising any of their defences.

Issues on appeal

Leave was granted by the Court of Appeal to appeal that decision however, the appeals were dismissed.

Decision on appeal

The High Court found against Timbercorp Finance. In particular, the argument that an Anshun estoppel is based upon the degree of similarity between the issues in the group proceeding and the defences in this proceeding, was rejected.

It was made clear in Anshun that there could be no estoppel “unless it appear[ed] that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it”. In this instance, it could not have been expected that the respondents would raise individual issues about their loan agreements in the group proceeding, where the common issues were undisclosed risks and misrepresentations affecting the entry of investors into the schemes. That was so, notwithstanding that one of the representations sought to be relied upon by Mr Tomes was similar to that made by the lead plaintiff in the group proceeding.

The High Court found that, having regard to the structure of Part 4A, the lead plaintiff in the group proceeding was not the privy in interest of group members, such that he should have sought to have the respondents’ individual claims included for determination in the group proceeding. More generally, such an expectation misunderstood the ability of the respondents to have their individual claims decided and the considerable case management powers given to the Court by Part 4A to determine which matters were heard and when.

The submission by Timbercorp Finance that Mr Collins’ and Mr Tomes’ defences constituted an abuse of process which was capable of application in circumstances where the use of the court’s procedures would be unjustifiably oppressive to a party, or would bring the administration of justice into disrepute, was rejected. In so finding, the High Court stated that there was nothing in the statutory scheme or the nature of group proceedings that suggested that the respondents should have raised their individual claims in the context of the group proceeding. Indeed, Part 4A recognises that individual claims may need to be resolved in separate proceedings.

Implications for you

The High Court’s decision gives rise to the prospect of defendants having difficulty in achieving finality by way of group proceedings and paves the way for group members whose individual claims are not before the Court (as common questions of law or fact) to seek to litigate those claims in separate proceedings.

Timbercorp Finance Pty Ltd (in liquidation) v Collins & Anor; Timbercorp Finance Pty Ltd (in liquidation) v Tomes [2016] HCA 14