Anwar et al v. Fairfield Greenwich Limited et al

Filing 1048

DECLARATION of Professor Jonathan Harris in Support re: #775 FIRST MOTION to Certify Class.. Document filed by AXA Private Management, Harel Insurance Company Ltd., Harel Insurance Company, Ltd., Pacific West Health Medical Center Inc. Employees Retirement Trust(On behalf of Itself), Pacific West Health Medical Center Inc. Employees Retirement Trust(on Behalf of All Others Similarly Situated), Pacific West Health Medical Center, Inc. Employee's Retirement Trust, Securities & Investment Company Bahrain, St. Stephen's School. (Attachments: #1 Exhibit 1 through 3, #2 Exhibit 4 Part 1, #3 Exhibit 4 Part 2, #4 Exhibit 5, #5 Exhibit 6, #6 Exhibit 7 and 8, #7 Exhibit 9 through 11, #8 Exhibit 12 through 14, #9 Exhibit 15 through 21, #10 Exhibit 22 and 23, #11 Exhibit 24, #12 Exhibit 25 through 27, #13 Exhibit 28 through 32, #14 Exhibit 33, #15 Exhibit 34, #16 Exhibit 35, #17 Exhibit 36, #18 Exhibit 37 through 39, #19 Exhibit 40, #20 Exhibit 41 Part 1, #21 Exhibit 41 Part 2, #22 Exhibit 42 through 51, #23 Exhibit 52 through 65, #24 Exhibit 66 through 70, #25 Exhibit 71 through 74, #26 Exhibit 75 through 77, #27 Exhibit 78 through 81, #28 Exhibit 82, #29 Exhibit 83 Part 1, #30 Exhibit 83 Part 2, #31 Exhibit 84 and 85, #32 Exhibit 86 Part 1, #33 Exhibit 86 Part 2, #34 Exhibit 87 through 90, #35 Exhibit 91 Part 1, #36 Exhibit 91 Part 2, #37 Exhibit 92 through 103, #38 Exhibit 104 through 106, #39 Exhibit 107 and 108, #40 Exhibit 109 through 113)(Barrett, David)

EXHIBIT 36

zrn

s

THE

COMMONWEALTH
LAW REPORTS
CASES DETERMINED IN THE

HIGH COURT OF AUSTRALIA

EDIIDR

1. D. MERRALLS, Q.C.

VOLUME 182

LBC INFORMATION

1995

SERVICES

398

HIGH COURT

[1994-1995.

CARNIE AND ANOTHER
PLAINTIFFS,

AND

ESANDA FINANCE CORPORATION
LIMITED
DEFENDANT,

ON APPEAL FROM THE SUPREME
H. C. OF A.
1994-1995.

---......-.
1994,

March 3.
1995,

Feb. 23.
MasonCJ.,
Brennan,
Deane,
Dawson,
Toohey,
Gaudronand
McHughll.

COURT OF NEW SOUTH WALES.

Practice Representative action - Persons having same interest in
proceedings - Persons with separate causes of action - Whether same
interest - Supreme Court Rules 1970 (N.S. W), Pt 8, r. 13(1).
Part 8, r. 13(1) of the Rules of the Supreme Court of New South
Wales provided: "Where numerous persons have the same interest in
any proceedings the proceedings may be commenced, and, unless the
Court otherwise orders, continued, by or against anyone or more of
them as representing all or as representing all except one or more of
them."
Two borrowers sued their lender claiming that various matters had
not been disclosed in the contract of loan between them, in
contravention of the Credit Act 1984 (N.S.W.), and that as a result they
were not liable to pay the credit charge for which the contract
provided. They claimed to sue on their own behalf and on behalf of all
other persons who had entered into loan contracts with the lender that
had the same characteristics as their contracts. They claimed a
declaration that no represented party was liable to pay any credit
charge to the lender.
Held, that the plaintiffs and the represented parties had the same
interest in the proceedings and r. 13 authorized their joinder in a
representative action.
Per curiam. Persons having separate causes of action in contract or
tort may have "the same interest" in proceedings to enforce those
causes of action.
R. 1. Flowers Ltd. v. Burns, [1987J 1 N.Z.L.R. 260; Irish Shipping Ltd.
v. Commercial Union Assurance Co. Pic., [1991J 2 Q.B. 206; and Bank
of America National TlUSt & Savings Association v. Taylor, [19921
1 Lloyd's Rep. 484, applied.
Markt & Co. Ltd. v. Knight Steamship Co. Ltd., [1910J 2 KB. 1021,
considered.
Per Brennan and McHugh JJ. The test for determining whether an
action is within the scope of r. 13(1) is whether the plaintiff and the

[1994-1995.

182 C.L.R.]

OF AUSTRALIA.

members of the represented class have a community of interest in the
determination of some substantial issue of law or fact.
Decision of the Supreme Court of New South Wales (Court of
Appeal): Esanda Finance Corporation Ltd. v. Carnie (1992), 29
N.S.W.L.R. 382, reversed.

ApPELLANTS',

RESPONDENT.

fEW SOUTH WALES.

lYing same interest in
action - "Whether same
Pt 8, r. 13(1).
.e Court of New South
rve the same interest in
nenced, and, unless the
ist anyone or more of
except one or more of
tat various matters had
in between them, in
md that as a result they
)r which the contract
ralf and on behalf of all
cts with the lender that
acts. They claimed a
ible to pay any credit
I parties

had the same
zed their joinder in a
If action in contract or
lings to enforce those
260; Irish Shipping Ltd.
2 Q.B. 206; and Bank
tion v. Taylor, [1992]
d., [1910] 2 K.B. 1021,
eterrnining whether an
r the plaintiff and the

ApPEAL from the Supreme Court of New South Wales.

Ainsley George Carnie and Dianne Helen Carnie purchased an
International 711 SP Header with the aid of finance provided by
Esanda Finance Corporation Ltd. ("Esanda"). The parties entered
into a loan contract and a chattel mortgage. The transaction was
governed by the Credit Act 1984 (N.S.W.) ("the Act"). The parties
subsequently entered into a variation agreement under which the
borrowers were to make instalment repayments over a longer period
than under the initial contract. The borrowers sued Esanda in the
Supreme Court of New South Wales claiming that relevant disclosures required by the Act were not made, and that by reason of s. 42
theywere not liable to pay Esanda the credit charge provided for in
the variation agreement. They claimed declarations and orders
flowing from the contravention of the Act. Paragraph 6 of the
statement of claim was as follows: "The plaintiffs bring these
proceedings on behalf of themselves and all other persons ('the
represented debtors') who have: - (a) on or after 28 February 1985
entered into loan or credit sale contracts with the defendant which
were regulated contracts within the meaning of that term in the
Credit Act 1984, (b) each of which contracts has been varied by an
agreement ('the variation agreement') which did not discharge the
original contract, and (i) wherein the total amount payable pursuant
to the variation agreement was calculated by applying the annual
percentage rate under the contract to the net balance due at the date
of variation and the net balance due included unpaid accrued credit
charges, or (ii) wherein the total amount payable pursuant to the
variation agreement included default charges which had accrued
prior to the date of variation but which were not disclosed as such in
the variation agreement, and (c) which variation agreements did not
comply with the requirements of ss. 35 and 36 of the Credit Act
1984." The plaintiffs claimed a declaration that no represented
debtor was required to pay any amount on account of credit charges
in relation to contracts answering the description in par. 6; The
defendant applied for orders that the proceedings be stayed or
dismissed in so far as they purported to relate to a representative
action, and that the statement of claim be struck out in so far as it
purported to plead a representative action. Master McLaughlin
dismissedthe application. An appeal by the the defendant to a judge

399
H. C. OF A.
1994-1995.

'--v-'

CARNIE

v.
EsANDA
FINANCE
CORPORATION
LTD.

400

HIGH COURT

H. C. OF A.
1994-1995.

'--'

CARNIE

ES:~DA
FINANCE
CORPORATION

[1994-1995.

was removed into the Court of Appeal by order of Young J. The
Court of Appeal (Gleeson c.J. and Meagher JA., Kirby P.
dissenting) allowed the appeal and struck out the statement of claim
in so far as it purported to plead a representative action (1). The
plaintiffs appealed to the High Court by special leave.

LTD.

J. Basten Q.C. (with him N. F. Francey), for the appellants. There
is no requirement in r. 13 that there be a common proprietary
interest of some kind between the plaintiff and the represented
parties (2). The fact that the claims arise under separate contracts is
no bar to the use of a representative action (3). Representative
actions have been pursued in relation to claims in tort where each
member of the class has a separate cause of action, but there is a
common ingredient in the cause of action of each member (4). A
representative action is available where persons have claims against
a defendant arising under a statute, but there is no other common
juristic element to link them (5). The rule should be applied flexibly
to the exigencies of modern life as occasion requires (6), and should
be treated as a flexible tool of convenience in the administration of
justice (7). A representative action should be available whenever
numerous persons have bona fide claims against another party and
those persons have the same interest in the proceedings. The latter
criterion is satisfied whenever there is a significant question common
to all members of the class as against the other party. The correct
approach is to consider what is common to the class, not what
(1)
(2)

(1992) 29 N.S.W.L.R. 382.
Duke of Bedford v. Ellis, [1901] AC. 1, at p. 8; Taft Vale Railway Co. v.
Amalgamated Society of Railway Servants, [1901] AC. 426, at p. 443; Mark! &
Co. Ltd. v. Knight Steamship Co. Ltd., [1910] 2 K.B., at p. 1045.
(3) ibid., at pp. 1044, 1026-1027; R. 1. Flowers Ltd. v. Burns, [1987] 1 N.Z.L.R. 260;
Irish Shipping Ltd. v. Commercial Union Assurance Co. Plc., [1991] 2 Q.B. 206;
Bank of America National Trust & Savings Association v. Taylor, [1992]
1 Lloyd's Rep. 484; Palmco Holdings Bhd. v. Sakapp Commodities (M) Sdn.
Bhd., [1988] 2 M.L.l. 624; Vook Keng v. Syarikat Muzwina Development Sdn.
Bhd., [1990] 3 M.L.l. 61.
(4) Prudential Assurance Co. Ltd. v. Newman Industries Ltd., [1981] 1 Ch. 229, at
p. 255; E.M.I Records Ltd. v. Riley, [1981] 1 W.L.R. 923; [1981] 2 All E.R. 838;
Alberta (Pork Producers' Marketing Board) v. Swift Canada Co. (1981), 129
D.L.R. (3d) 411; (1984) 9 D.L.R. (4th) 71; Ranjoy Sales & Leasing Ltd. v.
Deloitte Haskins & Sells, [1984] 4 W.W.R. 706; (1984) 16 D.L.R. (4th) 218;
Kripps v. Touche, Ross & Co. (1986), 7 B.c.L.R. (2d) 105.
(5) Ellis v. Duke of Bedford, [1899] 1 Ch. 494, at pp. 514, 517; Duke of Bedford .v.
Ellis, [1901] AC. 1; Chastain v. British Columbia Hydro and Power Authonty
(1972),32 D.L.R. (3d) 443.
(6) Taft Vale Railway Co. v. Amalgamated Society of Railway Servants, [1901] AC.,
at p. 443.
(7) John v. Rees, [1970] Ch. 345, at p. 370.

994-1995.

182 C.L.R.]

[lg J. The
Kirby P.
t of claim
L (1). The

differentiates the cases of individual members (8). If the court
considers an action is inherently unmanageable,
or that it lacks
necessary powers to ensure control of the proceedings, it can, in the
exercise of its residual discretion, decline to allow the action to
proceed. [He also referred to Yeazell, "From Group Litigation to
Class Action" (9); Yeazell, From Medieval Group Litigation to the
Modem Class Action (10); Alden v. Gaglardi (11); Shaw v. Real
Estate Board of Greater Vancouver (12); Farnham v. Fingold (13);

its. There
.oprietarv
presented
mtracts is

esentatie-,
lere each
there is a
ier

(4). A

against
common
.d flexibly
nd should
tration of
whenever
party and
l'he latter
common
te correct
not what

Northdown Drywall & Construction Ltd. v. Austin Co. Ltd. (14);
Stephenson v. Air Canada (15); Cobbold v. Time Canada Ltd. (16);
Palmer v. Nova Scotia Forest Industries (17); Balsdon v. Good
Shepherd Shelter Foundation (18); Sparling v. Royal Trust Co.
Ltd. (19); and Pasco v. Canadian National Railway Co. (Oregon Jack
CreekIndian Band v. Canadian National Railway Co. (20).]

IS

'way Co. v.
~3;Markt &
Z.L.R. 260;
2 Q.B. 206;
vlor, [1992]
's (M) Sdn.
pment Sdn.
Ch. 229, at
II E.R 838;
(1981), 129
iing Ltd. v.
(4th) 218;
r Bedford

v.

er Authority
1901] AC.,

P. G. Hely Q.c. (with him R. C. McDougall o.c. and
P. R. Whitford), for the respondent. Part 8 aside, the appellants have
no locus to seek a determination, whether by way of declaration or
otherwise, as to the impact of the CreditAct upon contracts to which
they are not parties and in which they have no commercial
interest (21). The appellants have no interest in the alleged
entitlement of others to be discharged from monetary obligations
contractually owed to the respondent or in their alleged entitlement
to recover moneys from the respondent (22). Rule 13 does not.
enlarge the principle of representation
formerly adopted by the
Court of Chancery (23). That principle required all persons materially interested in the subject of a suit to be joined as parties, unless
the class was numerous, in which case a class member could sue or
be sued as the representative of all. Prior to the Judicature Act 1873

(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)

401

OF AUSTRALIA.

Duke of Bedford v. Ellis, [1901] AC., at p. 9.
UC.LA. Law Review, vol. 27 (1980) 514.
(1987) ch. 6.
(1970) 15 D.L.R. (3d) 380.
(1973) 36 D.L.R. (3d) 250.
[1973] 2 O.R. 132.
(1975) 8 O.R. (2d) 691.
(1979) 103 D.L.R (3d) 148.
(1976) 13 O.R. (2d) 567; (1980) 28 O.R (2d) 326.
(1983) 2 D.L.R. (4th) 397.
(1984) 9 D.L.R. (4th) 298.
(1984) 6 D.L.R. (4th) 682.
(1989) 56 D.L.R. (4th) 404; (1989) 63 D.L.R. (4th) 607.
Anderson v. The Commonwealth (1932), 47 CL.R. 50.
Payne v. Young (1980), 145 CL.R. 609, at pp. 614,615.
•
Templeton v. Leviathan Pty. Ltd. (1921), 30 c.L.R. 34, at pp. 43, 76; Duke of
Bedford v. Ellis, [1901] A.c., at pp. 10, 14, 23.

H. c. OF A.
1994-1995.

'-.,-'

CARNIE

ES:~DA
FINANCE
CORP~T~TION

402

HIGH

H. C. OF A.
1994-1995.

COURT

[1994-1995.

(U.K.) persons who had separate causes of action, or whose interests

~

in a suit were distinct and several, could not sue as co-plaintiffs
CARNIE
either at law or in equity, let alone be the subject of a representative
Es:~DA action (24). Rule 2(a) specifies the circumstances
in which persons
FINANCE
having distinct and several claims may be joined as parties in the
CORPORATION
LTD.
same procee d'mgs. Th at ru Ie wou ld not aut hori
onze t he join d er of the
e i
persons sought to be represented as plaintiffs in these proceedings (25). Rule 13 should not be construed so as to enable the
appellants, as of right, to represent without joinder persons who
could only be joined by leave. The terms in which the "class" is
defined reflects the absence of a community of interest, let alone the
"same interest". Ascertainment of those who are members of the
class involves more than a mere matter of identification. A person is
only a member of the class if the application of the Act, in the
particular circumstances of the individual case, enlivens the operation of s. 42. The "class" is dependent upon, and defined by
reference to, the existence of individual causes of action (26). In
Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (27) and

Irish Shipping Ltd. v. Commercial Union Assurance Co. PIc. (28)
those permitted to be represented
could have been joined as
plaintiffs. The parties sought to be represented here have no interest
of any kind in the contractual arrangements between the plaintiff
and the defendant. Rule 13 should be confined to cases where the
person sought to be represented
is a necessary party to the
resolution of the dispute between the plaintiff and the defendant.
Alternatively the person sought to be represented must be one who
could be joined as a party to the same proceedings. It is an abuse of
the representative
procedure to use it in such a way that until
individual causes of action are determined one cannot tell who it is
who is the beneficiary of whatever determination is made in those
proceedings.

1. Basten Q.c., in reply.
Cur. adv. vult.
(24) Daniell's Chancery Practice, 5th ed. (1871), pp. 172-173, 213-214, 255-256;
Smurthwaite v. Hannay, [1894] AC. 494.
(25) Payne v. Young (1980), 145 c.L.R. 609; Marino v. Esanda Ltd., [1986] V.R. 735.
(26) Naken v. General Motors of Canada Ltd., [1983] 1 S.c.R. 72, at p. 99; (1983)
144 D.L.R. (3d) 385, at p. 405; Markt & Co. v. Knight Steamship Co., [1910]
2 K.B., at pp. 1030, 1039, 1040, 1045.
(27) [1981] Ch. 229.
(28) [1991] 2 Q.B. 206.

i

[1994-1995.
hose interests
s co-plaintiffs
.epresentativvhich persons
parties in the
joinder of the
lese proceedo enable the
persons who
the "class" is
, let alone the
mbers of the
1. A person is
~ Act, in the
ens the operf defined by
ction (26). In
Ltd. (27) and
Co. PIc. (28)
en joined as
ve no interest
l the plaintiff
.es where the
party to the
ie defendant.
t be one who
s an abuse of
ay that until
tell who it is
lade in those

r. adv. vult.

L3-214, 255-256;
1986] V.R. 735.
at p. 99; (1983)
ship Co., [1910J

182 C.L.R.]

OF AUSTRALIA.

The following written judgments were delivered:C.J., DEANE AND DAWSON JJ. Subject to the comments
which follow, we agree with the reasons given by Toohey and
Gaudron JJ. for allowing the appeal. We would, however, remit the
·'
f'd'
matter to t h e Court 0 f Appea I for t h e purpose 0 consi enng
. whether an order should be made that the action not continue as a
representative action.
We do not agree with the statement of Kirby P. in the Court of
Appeal that the majority in that Court (Gleeson c.J. and
Meagher J.A.) failed to answer the correct question because their
Honours assumed that the appellants were bringing a class action.
Properly understood, the majority concluded that the particular
procedure adopted by the appellants in this case - which their
Honours happened to characterize as a "class action" - was not
within the Supreme Court Rules 1970 (N.S.W.), Pt 8, r. 13(1). This
conclusion
is
contained
in
the
following
passage
of
Gleeson C.J. (29):
"To say that each borrower has the same interest in the
proceedings as [the appellants], for the purpose of the rule
relating to representative actions, goes well beyond received
notions of the scope and purpose of the rule."
MASON

Whether the present case was or was not a class action is not the
critical question. More than that, it is not a question which is
susceptible of a precise or an instructive answer. The term "class
action" is used in various senses. Sometimes it is employed as a
generic term to comprehend any procedure which allows the claims
of many individuals against the same defendant to be brought or
conducted by a single representative (30). At other times, when the
"same interest" stipulation was thought to preclude the application
of the representative action procedure to actions for damages on the
ground that each individual's entitlement to damages would have to
be independently
assessed (31), the term "class action" was
employed to refer to an extension of the representative action to
cover such actions.
The remaining sense in which the term "class action" is used is by
way of reference to the class action procedures prescribed and
applied in the United States, such as the procedures prescribed by

(29) (1992) 29 N.S.W.L.R. 382, at p. 389. Meagher J.A. agreed with the Chief
Justice in a short concurring judgment.
(30) Australian Law Reform Commission, Report No. 46, Grouped Proceedings in
the Federal Court, (1988) at p. 1.
(31) ibid., at p. 3.

403
H. C. OF A.
1994-1995.
CARNIE

Es:~mA
FINANCE
CORPORATION
LTD.

1995, Feb. 23.

404

HIGH

COURT

[1994-1995.

the Federal Rules of Civil Procedure, r. 23 (32). This is the sense in
'-v-'
which the majority in the Court of Appeal used the term. It would
CARNIE
be unprofitable and difficult to make a precise comparison between
Es:~DA a representative action under r. 13 and a class action under r. 23 but
FINANCE
we see no reason to doubt that the two rules could cover much
CORPORATION
nrovi .
'.
LTD.
common groun. d Th e e I b orate set 0 f provisions con tamed In r. 23
a
would create some differences. But this does not seem to be of
M;~~~e~·.J· much moment for present purposes. What the majority in the Court
Dawson J.
of Appeal thought to be important was that, in the absence of
legislation or a rule of court prescribing an elaborate set of rules
regulating representative actions, a representative action could not
be constituted in the manner contended for by the appellants.
But we do not think that this approach of the majority of the
Court of Appeal can prevail in the face of the language of r. 13(1).
All that this sub-rule requires is numerous parties who have the
same interest. The sub-rule is expressed in broad terms and it is to
be interpreted in the light of the obvious purpose of the rule,
namely, to facilitate the administration of justice by enabling parties
having the same interest to secure a determination in one action
rather than in separate actions. It has been suggested that the
expression "same interest" is to be equated with a common
ingredient in the cause of action by each member of the class (33).
In our view, this interpretation
might not adequately reflect the
content of the statutory expression. It may be it extends to a
significant common interest in the resolution of any question of law
or fact arising in the relevant proceedings. Be that as it may, it has
now been recognized that persons having separate causes of action
in contract or tort may have "the same interest" in proceedings to
enforce those causes of action.
Much as one might prefer to have a detailed legislative
prescription by statute or rule of court regulating the incidents of
representative action, r. 13 makes provision for an action to proceed
as a representative action in a context in which there is no such
legislative prescription. The absence of such a prescription does not
enable a court to refuse to give effect to the provisions of the rule.
Nor, more importantly, does the absence of such prescription
provide a sufficient reason for narrowing the scope of the operation
of the rule, as the Court of Appeal did, without giving effect to the
purpose of the rule in facilitating the administration of justice.
H. C. OF A.

1994-1995.

(32) See Australian Law Reform Commission, Report No. 46, Appendix C, "Other
models for class actions", p. 191.
(33) Prudential Assurance Co. Ltd. v, Newman Industries Ltd., [1981] Ch. 229, at

p.255.

94-1995.

182 c.L.R.]

sense in
lt would
between
'. 23 but
~r much
in r. 23
o be of
e Court
ence of
of rules
iuld not

Once the existence of numerous parties and the requisite
commonality of interest are ascertained, the rule is brought into
operation subject only to the exercise of the court's power to order
otherwise. And that leaves for consideration the question whether
the case is one in which the court should, in the exercise of that
·
h ou ld not contmue as a
.
power, rna ke an order that t he action
s
representative action. Relevant to that question are some of the
Comments of Gleeson CJ. in the course of explaining his concern
about the absence of a detailed legislative prescription. In that
context, Gleeson c.J. mentioned the need to deal with such
important matters as (34): (1) whether or not consent is required
from group members; (2) the right of such members to opt out of
the proceedings; (3) the position of persons under a disability;
(4) alterations to the description of the group; (5) settlement and
discontinuance of the proceedings; and (6) the giving of various
notices to group members.
The question of the importance of those matters, in the context of
the particular case, in determining whether an order should be
made that the action not continue as a representative action is by no
means free from difficulty. However, the Court is not in a position
to deal with them or with the consequences of the absence of a
legislative prescription with respect to them. Indeed, argument has
not been directed to that issue in this Court. The Court should not
embark upon an examination of the question whether such an order
should be made in the absence of such argument and without having
the benefit of the views of the Court of Appeal.
In the result, we would allow the appeal, set aside the orders
made by the Court of Appeal striking out the further amended
statement of claim in so far as it purports to plead a representative
action and remit the matter to the Court of Appeal for
consideration of the question whether it should "otherwise order"
within the meaning of r. 13(1).

of the
:. 13(1).
ave the
l it is to
ie rule,
; parties
~ action
hat the
ommon
r

lSS

(33).

lect the
Is to a
1 of law
(, it has
faction
lings to
~islative
lents of

rroceed
such
oes not
re rule.

OF AUSTRALIA.

10

cription
ieration
t to the

J. The

appellants,
Mr. and Mrs. Carnie
("the
plaintiffs"), plead in their further amended statement of claim
against the respondent, Esanda Finance Corporation Ltd. ("the
defendant"), that the variation agreement into which they entered is
a regulated loan contract within the terms of the Credit Act 1984
(N.S.W.), that it does not comply with the requirements of Pt 3 of
that Act and that the plaintiffs are therefore not liable to pay to the
defendant the credit charge under the variation agreement. The
BRENNAN

:, "Other
1.229, at
(34) (1992) 29 N.S.W.L.R., at p. 388.

405
H. c. OF A.
1994-1995.

'-v-'

CARNIE
Es:~DA
FINANCE
CORPORATION
LTD.

Mason c.r.
Deane J.
Dawson J.

406
H. C. OF A.
1994-1995.

'----'
CARNIE

Es:~DA
FINANCE
CORPORATION
LTD.

BrennanJ.

HIGH COURT

[1994-1995.

allegation that the variation agreement is a regulated loan contract
depends on its alleged non-compliance with at least one of the
requirements of s. 70, compliance with which would have exempted
the agreement from the disclosure provisions of the Act. In
particular, the argument supporting non-compliance draws attention
to sub +S, ()() a whi h rea ds:
1
IC
"The credit provider and the debtor under a credit sale
contract or a loan contract may agree to vary the terms of the
contract in relation to, or to payment of, the amount owing
under the contract if:
(a) the outstanding balance of the amount financed at the
date of the variation is not increased by the variation or is
increased by the variation by reason only of the addition of
an amount referred to in subsection (3)."
The disclosure provision of the Act that was said not to have been
complied with is s. 36 and, in particular, s. 36(1)(e). It was
submitted that, contrary to that provision, the variation agreement
did not contain "a statement of the annual percentage rate in
accordance with section 38". Subject to s. 85 (which authorizes the
Commercial Tribunal to relieve a credit provider from the civil
consequences of non-disclosure), s. 42(1)(b) provides that where "a
loan contract " . is not in accordance with section 36 ... the debtor
is not liable to pay to the credit provider the credit charge under the
contract" .
The facts relevant to these issues are not likely to be in
controversy. But those facts raise the issue of the meaning of the
phrase "the amount financed" in s. 70(1)(a). The defendant, in
accordance with what was said to be its office practice at the time,
added the unpaid credit charges under the plaintiffs' original loan
contract to the principal sum that had been financed under that
contract in calculating "the outstanding balance of the amount
financed" for the purposes of the variation agreement. The addition
of unpaid credit charges under the original loan contract, and the
practice of which it was said to be an instance, are claimed by the
plaintiffs not to be in compliance with s. 70(1)(a). That is because
"the amount financed" is said to consist only in the amount financed
under the original loan contract and to exclude unpaid credit
charges under the original loan contract. It was this issue which
generated the pleading in sub-par. (b) of par. 6 of the further
amended statement of claim which reads:
"The Plaintiffs bring these proceedings on behalf of
themselves and all other persons ('the represented debtors')
who have:(a) on or after 28 February 1985 entered into loan or
credit sale contracts with the Defendant which were

,994-1995.
contract
ae of the
exempted
Act. In
attention
1

redit sale
ms of the
int owing
.ed at the
ition or is
ddition of
lave been
. It was
greement
~ rate in
irizes the
the civil
where "a
ie debtor
mderthe
o be in
rg of the
ndant, in
the time,
ina I loan
ider that
amount
addition
and the
.d by the
because
financed
ld credit
ie which
~ further

182 C.L.R.]

OF AUSTRALIA.

regulated contracts within the meaning of that term in the
Credit Act 1984,
(b) each of which contracts has been varied by an
agreement
('the variation agreement')
which did not
discharge the original contract, and
(i) wherein the total amount payable pursuant to the
variation agreement was calculated by applying the
annual percentage rate under the contract to the net
balance due at the date of variation and the net
balance due included unpaid accrued credit charges,
or
(ii) wherein the total amount payable pursuant to the
variation agreement included default charges which
had accrued prior to the date of variation but which
were not disclosed as such in the variation agreement,
and
(c) which variation agreements did not comply with the
requirements of ss. 35 and 36 of the Credit Act, 1984."
Paragraph 7(2) of the further amended statement of claim seeks,
inter alia:
"A declaration that no represented debtor is required to pay to
the defendant any amount on account of credit charges as
defined in the Credit Act 1984 in relation to contracts as varied
which fall within the class specified in paragraph 6 of this
Statement of Claim."
Counsel for the defendant, supporting the order of the Court of
Appeal, submits that this is not a case in which the plaintiffs can
commence and continue an action as representing the class of
borrowers identified by the criteria pleaded in par. 6. The
submission is based on two related propositions: first, that the
represented persons in a representative action under Pt 8, r. 13(1)
of the Rules of the Supreme Court of New South Wales must have
"the same interest" in the proceedings; second, that par. 6 identifies
the. class in a way that denies any real issue for determination.
Part 8, r. 13(1) reads as follows:
"Where numerous persons have the same interest in any
proceedings the proceedings may be commenced, and, unless
the Court otherwise orders, continued, by or against anyone or
more of them as representing all or as representing all except
one or more of them."

of
debtors')

The defendant submits that the scope and purpose of the procedure
under Pt 8, r. 13(1) is to overcome or to provide an exception to the
practice of the courts of equity that all persons having an interest in
the subject matter of the suit ought to be made parties (35). And, as

loan or
ch were

(35) Templeton v. Leviathan Pty. Ltd. (1921),30 c.L.R. 34, at pp. 43,75-76.

ehalf

407
H.

c.

OF A.

1994-1995.

~
CARNIE

v.

EsANDA
FINANCE
CORPORATION
LTD.

Brennan J.

408

HIGH COURT

H. C. OF A.
1994-1995.

'-v-'
CARNIE

Es:~DA
FINANCE
CORPORATION

LTD.

BrennanJ.

[1994-1995.

each member of the putative class would have a distinct cause of
action arising out of distinct transactions, there is no common
interest in the proceedings. For that reason the class sought to be
represented could not be joined as plaintiffs, nor could their
respective causes of action be joined, in the same proceeding (36).
.
For t h e reasons state db y Too h eyan d Gaudron 11., I would reject
the proposition that the scope and purpose of Pt 8, r. 13(1) is
limited in the manner submitted. Rule 13(1) requires "the same
interest" in the proceeding, not necessarily the same cause of action
nor an entitlement to have or to share in the same relief. I
respectfully agree with McHugh J. that the test for determining
whether an action is within the scope of Pt 8, r. 13(1) is whether the
plaintiff and the members of the represented class have a
community of interest in the determination of some substantial issue
of law or fact. Here, the further amended statement of claim raised
an issue in which there is a community of interest, namely, whether
s. 70(1)(a) permits the inclusion of unpaid credit charges under an
original loan or credit sale contract in the calculation of "the
outstanding balance of the amount financed" for the purposes of
that provision.
However, it is precisely because of the flexible utility of the
representative action that judicial control of its conduct is important,
to ensure not only that the litigation as between the plaintiff and
defendant is efficiently disposed of but also that the interests of
those who are absent but represented are not prejudiced by the
conduct of the litigation on their behalf. The self-proclaimed carrier
of a litigious banner may prove to be an indolent or incompetent
champion of the common cause in the courtroom. As Vinelott J.
said in the course of his judgment in Prudential Assurance Co. Ltd.
v. Newman Industries Ltd. (37), the court must be satisfied that "the
issues common to every member of the class will be decided after
full discovery and in the light of all the evidence capable of being
adduced in favour of the claim". I would add that if, for any reason,
the court is not satisfied that the interests of the absent but
represented class are being properly advanced, the court should
exclude the represented persons from the action (38). That power
can be exercised at any time before the judgment is perfected.
In the present case at the time when the plaintiffs delivered their

(36) Payne v. Young (1980), 145 c.L.R. 609, at pp. 611,614,615,617.
(37) [1981] Ch. 229, at p. 255.
(38) It was the attempt to allow anyone shipper to conduct litigation on behalf of
another without his leave and yet so as to bind him that was branded as a
"fundamental error" by Fletcher Moulton L.J. in Markt & Co. Ltd. v. Knight

[1994-1995.
ct cause of
o common
iught to be
.ould their
ling (36).
-ould reject
r. 13(1) is
"the same
;e of action
e relief. I
etermining
{hether the
;s have a
antial issue
laim raised
ly, whether
s under an
In of "the
urposes of
lity of the
important,
aintiff and
nterests of
.ed by the
led carrier
competent
Vinelott J.
.e Co. Ltd.
i that "the
.ided after
e of being
ny reason,
ibsent but
urt should
hat power
ted.
'ered their

on behalf of
.randed as a
td. v. Knight

182 C.L.R.]

OF AUSTRALIA.

statement of claim, there appeared to be a live issue as to whether,
in the case of a variation agreement, "the amount financed" as that
term is used in s. 70(1)(a) of the Act must exclude credit charges
under the original loan contract. In the course of argument, counsel
for the defendant conceded that if the plaintiffs brought themselves
within sub-pars. (a), (b)(i) and (c) of par. 6 of the further amended
statement of claim, they would be entitled to relief under s. 42. If it
be conceded that the issue relating to the interpretation
of
s. 70(1)(a) is to be determined in favour of the plaintiffs and of all
members of the represented class coming within sub-par. (b )(i) of
par. 6, there can be no doubt that the action is prima facie one
appropriate to be conducted as a representative action subject to the
court's supervision. The concession eliminates any risk that the issue
can be determined adversely to the members of the represented
class coming within sub-par. (b)(i). If it continues as a representative action and that concession is not withdrawn, there will be a
binding declaration in favour of the plaintiffs and all members of the
represented class.
Counsel for the defendant submits, however, that the pleading
which identifies the persons represented is unsatisfactory and really
denies any issue of common interest for determination. He draws
attention to par. 6 of the further amended statement of claim which
does not plead the facts which bring the contracts referred to in that
sub-paragraph within the definition of regulated loan or credit sale
contracts, nor the facts establishing
non-compliance
with the
requirements of ss. 35 and 36. The facts are unique to each contract
but the criterion of the represented class is pleaded as a conclusion
that the contracts of all members of the class answer the description
therein alleged. Counsel further submits that a "variation agreement" falling under sub-par. (b )(ii) of par. 6 might not be
supported by consideration,
though consideration
is needed to
constitute a "loan contract" under s. 3 of the Act. And, finally, it is
said that the credit charges in respect of which Mr. and Mrs. Carnie
seek relief under s. 42 are pleaded as the credit charges under the
variation agreement, but par. 7(2) may be seeking (it is said to be
ambiguous) relief under s. 42 not only in respect of the credit
charges under the variation agreements but in respect of credit
charges under the original loan agreements. However, the plaintiffs

(38) cont.
Steamship Co. Ltd.; Sale & Frazar v. Knight Steamship Co. Ltd., [1910] 2 K.B.
1021, at p. 1040.

409
H.

c.

OF

A.

1994-1995.

'---'

CARNIE

Es:~DA
FINANCE
CORP~r~TION

Brennan J.

I

410

HIGH

COURT

[1994-1995.

182

accept, and intend, that the declaration sought in par. 7(2) relates
only to credit charges under the variation agreements.
CARNIE
The defendant's objections are without substance so far as they
Es:~DA challenge the availability of the representative
procedure. SubFINANCE
paragraphs (a) and (c) of par. 6 simply ensure that the issue of
CORPORATION
•
d h d I'
h .
LTD.
common interest an t e ec aration as to t at Issue are confined to
the issue arising under s. 70(1)(a). And sub-par. (b)(ii) clearly
BrennanJ.
relates to a variation agreement enforceable subject to the Act. The
questions whether the arrangement with the defendant into which
any particular person has entered is a regulated loan or credit sale
contract and whether a particular variation agreement is supported
by consideration will be answered according to the circumstances of
each case. They do not arise and need not be addressed in the
present action except in respect of Mr. and Mrs. Carnie.
However, the defendant's objections are relevant to the second
aspect of Pt 8, r. 13(1): should the action be permitted to continue
as a representative
action? If it be conceded, or held, that
s. 42(1)(b) applies to all variation agreements falling within par. 6,
s. 85 entitles the defendant to apply to the Commercial Tribunal
"for an order increasing the liability of the debtor to the credit
provider". In other words, the application of s. 42(1)(b) could prove
to be a pyrrhic victory for a debtor. The discretionary powers of the
Tribunal are to be exercised according to the individual circumstances of the case. Is it appropriate, then, to permit the action to
continue as a representative action when, in any given case, it will be
necessary to determine whether the person seeking relief against the
defendant has entered into a loan or credit sale contract (39) and
whether there has been a non-compliance with s. 35 or s. 36 (40),
and the ultimate benefit of the litigation to that person will depend
on the prospect of the defendant's obtaining an order under s. 85
increasing the liability of the particular debtor? These are matters
which it is appropriate for the Supreme Court to consider in
supervising the conduct of the litigation.
As these matters were not material to the decision of the majority
of the Court of Appeal once their Honours decided that the
plaintiffs and the represented
debtors did not have the "same
interest in [the] proceedings",
I would agree with the order
proposed by Mason C.J., Deane and Dawson 11. It will be for the
Court of Appeal, appreciating the nature of the interest common to
the plaintiffs and the represented class and evaluating the factors

rele

~9~-~~~'
'--'

(39) Issues arising under sub-par. (a) and arguably under sub-par. (b)(ii) of par. 6.
(40) Issues arising under sub-par. (c) of par. 6.

rep:
of)
rep:

··.·The
1
/?are
"711
Esa
ent:

The
Act
of t
wit!
con
s.3
1

pre!
reSl

be
stru
the
mc(

able
the
dati

pm
first
tim,

ong
con

app
. rea~

(41)
(42)

182 C.L.R.]

~) relates

relevant to the obtaining of substantive relief by each of the
represented persons, to determine (or to direct the determination
of) the question whether the action should continue as a
representative action.

r as they
Ire. Subissue of
nfined to
) clearly
Act. The
Ito which
redit sale
upported
tances of
.d in the

of par. 6.

H. C. OF A.
1994-1995.

~

CARNIE

v.
ESANDA
FINANCE

TOOHEYAND GAUDRONJJ. The order of the Court 0 f Appea 1 0 f
New South Wales from which this appeal is brought reads:
"The Further Amended Statement of Claim filed on 10 August
1990, be struck out insofar as it purports to plead a
representative action."

e second
continue
eld, that
III par. 6,
Tribunal
re credit
ild prove
:rs of the
circumaction to
it will be
.ainst the
(39) and
,36(40),
I depend
der s. 85
, matters
isider in
majority
that the
e "same
Ie order
~ for the
nmon to
e factors

411

OF AUSTRALIA.

994-1995

1

The background
The appellants, Ainsley George Carnie and Dianne Helen Carnie,
are wheat farmers. In March 1986 they purchased an International
711 SP Header. They arranged finance through the respondent,
Esanda Finance Corporation Ltd., and on 27 March 1986 the parties
entered into a loan contract and chattel mortgage ("the contract").
The transaction was governed by the Credit Act 1984 (N.S.W.) ("the
Act"). The contract was a "regulated contract" (41) for the purposes
of the Act (42), thereby requiring disclosures by the credit provider
with penalties in case of default. It was common ground that the
contract complied with the requirements of disclosure set out in
s.36.
The contract showed that the amount financed was $22,000. The
predetermined credit charge of $12,641 was added to that amount,
resulting in a total amount financed of $34,641. Repayments were to
be made in three annual instalments of $11,547. Although the
structure of the contract appears to have taken into consideration
the particular circumstance of wheat farmers, namely that their
income generally comes in annual payments, the appellants were not
able to meet the first instalment due in February 1987. Accordingly
the parties agreed to vary the terms of the contract. That agreement,
dated 19 May 1987, was entitled "Variation Agreement". It is on a
printed form and several of the blanks have figures inserted. The
first item is headed "Outstanding balance of the amount financed at
time of variation" and shows $31,641. This was the amount
originally financed plus credit charges shown in the original
contract, less $3,000 which was apparently paid off the debt by the
appellants at the time of the variation. Additional credit charges by
reason of the variation are shown as $7,529.84. The instalments are

(41) As defined in s. 5.
(42) See s. 30(2).

CORPORATION
LTD.

412

HIGH COURT

H. C. OF A.
1994-1995.

'-v-'
CARNIE

Es;~DA
FINANCE
CORPORATION

LTD.

ci::dhr;nJi

[1994-1995.

set out as being $2,000 due on 27 July, followed by three annual
instalments of $12,390.28due in February 1988, 1989 and 1990.
The appellants' argument is that the figures in the Variation
Agreement are not in accordance with the Act. They contend that
the figure set out as the "Amount financed" is overstated by adding
.
ere d'It ch arges to t he ori
e ongma I amount b orrowe d.wi h a de d uction for
, WIt
a payment made or about to be made, and interest calculated on
that balance. The result, they say, is that the respondent has been
charging interest on part of the original interest rather than on the
amount financed as defined. Whilst this manner of calculation is
permitted under the Act, the transaction must be documented in a
particular way and certain disclosures must be made. The appellants
contend that those disclosures have not been made and say that the
relevant penalties under the Act apply. In particular they say that by
reason of s. 42 of the Act they are not liable to pay to the
respondent the credit charge provided for in the Variation
Agreement.
There is evidence that the respondent had distributed guidelines
to its employees which involved other variation agreements being set
out in the same way. The appellants claim that they are personally
entitled to declarations and orders flowing from the contravention of
the Act. And, central to this appeal, they seek to make this claim on
behalf of all other parties who entered into offending variation
agreements of the same kind with the respondent.
The claim for a representative order

Paragraph 6 of the statement of claim as amended reads:
"The plaintiffs bring these proceedings on behalf of themselves
and all other persons ('the represented debtors') who have: (a) on or after 28 February 1985 entered into loan or credit sale
contracts with the Defendant which were regulated contracts
within the meaning of that term in the Credit Act 1984,
(b) each of which contracts has been varied by an agreement
('the variation agreement') which did not discharge the original
contract, and
(i) wherein the total amount payable pursuant to the
variation agreement was calculated by applying the annual
percentage rate under the contract to the net balance due
at the date of variation and the net balance due included
unpaid accrued credit charges, or
(ii) wherein the total amount payable pursuant to the
variation agreement included default charges which had
accrued prior to the date of variation but which were not
disclosed as such in the variation agreement,
and

94-1995.
~ annual

~O.
'ariation
end that
V adding
ction for
'ated on
as been
1 on the
.ation is
ted in a
pellants
that the
that by
to the
ariation
r

ide lines
eing set
rsonally
ntion of
laim on
ariation

mselves

ve:dit sale
mtracts
eement

original
to the
annual
ice due
icluded

to the
ch had
ere not

182 C.L.R.]

413

OF AUSTRALIA.

(c) which variation agreements
did not comply with the
requirements of ss. 35 and 36 of the CreditAct, 1984."

H. c. OFA.
1994-1995.

'-v-'

The prayer for relief includes a declaratory
order that no
CARNIE
represented debtor is required to pay to the respondent any amount
Es:~DA
on account of credit charges as defined in the Act in relation to
FINANCE
contracts answering the description in par. 6 of the statement of CORP~T~TION
claim. The date 28 February 1985 mentioned in par. 6 is the date
when the relevant sections of the Act commenced.
Toohey
J.
Gaudron J.
By notice of motion the respondent sought various orders against
the appellants. For the purposes of this appeal, it is necessary to
note only the following:
"1. AN ORDER (whether pursuant to the Supreme Court
Rules 1970 Pt 8 r. 13(1) or Pt 13 r. 5 or otherwise) that the
proceedings be stayed or dismissed in so far as they purport to
relate to a representative action.
2. AN ORDER (whether pursuant to the Supreme Court
Rules 1970 Pt 15 r. 26 or otherwise) that the Amended
Statement of Claim filed on 10 August 1990 be struck out in so
far as it purports to plead a representative action."
Thereafter the proceedings followed a tortuous course which it is
unnecessary to detail. They culminated in a decision of the Court of
Appeal (43) (Gleeson CJ. and Meagher J.A., Kirby P. dissenting)
that the further amended statement of claim "be struck out insofar
as its purports to plead a representative action".
The appellants base their claim for a representative
order on
Supreme Court Rules 1970 (N.S.W.) Pt 8, r. 13(1) which is in the
following terms:
"Where numerous persons have the same interest in any
proceedings the proceedings may be commenced, and, unless
the Court otherwise orders, continued, by or against anyone or
more of them as representing all or as representing all except
one or more of them."
Gleeson CJ. was of the opinion that a representative order was
inappropriate in the circumstances of the case. That opinion was
based on a number of concerns. First, that the proceedings were an
attempt to make the rule the foundation of a controversial modern
"class action" for which a rule as simple as r. 13(1) is inadequate.
Another problem was that the history of the rule as explained by
Lord Macnaghten in Duke of Bedford v. Ellis (44) shows limitations
on the concept of persons having the "same interest" in the
proceedings and that to say in this case that each borrower, with her

(43) Esanda Finance Corporation Ltd. v. Carnie (1992), 29 N.S.W.L.R. 382.
(44) [1901] AC. 1.

414

HIGH COURT

~9~-~~~·or

[1994-1995.

his individual contract, has the same interest in the proceedings
~
as the appellants went "well beyond received notions of the SCOpe
CARNIE
and purpose of the rule" (45). His Honour also expressed concern
Es:~DA at the procedural difficulties that would arise if the appellants were
FINANCE
allowed to proceed with their representative action: difficulties of
CORPORATION'
..
.
d entiifyi ng t h ose wh 0 answere d t h e d escnption III par. 6 of the
LTD.
1
statement of claim, of knowing the attitude of such persons to the
TOOhey J.
contractual arrangements they had made with the respondent and of
GaudronJ.
ascertaining their attitude to the litigation. Gleeson c.J. concluded
with this observation (46):
"If class actions of the kind now available in the Federal
Court are to be permitted in New South Wales, (and there are
large policy issues involved in that decision), then this should
only be done with the backing of appropriate legislation or
rules of court, adequate to the complexity of the problem, and
appropriate to the requirements of justice."
Meagher J.A. agreed with the Chief Justice and branded the
course which the appellants wished to take as "seeking to
intermeddle in the commercial relationship between Esanda and its
customers, who may have no desire to be engaged in hostile
litigation with their financier" (47). He saw no "common interest"
between the appellants and those whom they sought to represent.
Kirby P., on the other hand, thought it misleading to describe the
proceedings as a class action. His Honour examined the nature of
such an action at length in order to distinguish it from the
representative action which the appellants wished to bring. Failure
to make the distinction had led, in his view, to a failure to answer
the right question, namely, whether "the procedure adopted by the
[appellants] fell within, or outside, that permitted by the Rules; not
whether it was a 'class action'" (48). Furthermore, in his Honour's
view, there had been "confusion between circumstances which
legitimately enliven the discretionary operation of the Rules, and
circumstances which take the procedure outside the scope of the
Rules" (48). He concluded that, subject to certain amendments to
the statement of claim, the representative action should be allowed
to proceed. In our opinion, the general approach of Kirby P. is
correct.

(45)
(46)
(47)
(48)

(1992) 29 N.S.W.L.R., at p. 389.
ibid., at p. 390.
ibid., at p. 404.
ibid., at p. 397.

1994-1995.

182 C.L.R.]

roceedings
the scope
:d concern
.lants were
ficulties of
. 6 of the
ons to the
ent and of
concluded

The approach to a claim for a representativeaction

e Federal
there are
lis should
slation or
blem, and
inded the
.eking to
:la and its

n hostile
interest"
·esent.
scribe the
nature of
'rom the
~. Failure
o answer
:d by the
.ules; not
Honour's
:s which
des, and
e of the
nents to
allowed
~by P. is

OF AUSTRALIA.

It is necessary to go back to Pt 8, r. 13(1) itself and not merely
assume that it is a class action that the appellants wish to bring and
for which the Rules do not adequately provide. The starting point is
whether the procedure which the appellants wish to adopt is within
- the Rules. I f i . a su b SI iary questron anses, w h et h er t h e Supreme
idi
"
It IS,
Court should exercise its discretion to "otherwise order" and so
prevent the continuance of the proceedings in that form. With
respect to their Honours in the majority in the Court of Appeal,
those two necessary steps appear to have been taken as one.
In ascertaining whether the procedure which the appellants wish
to adopt is within the Rules it is helpful to consider the history and
interpretation of r. 13(1), the ancestor of which is to be found in the
English Rules of the Supreme Court and which appears in various
forms in other common law countries. Rule 13(1) is almost identical
in language with O. 15, r. 12(1) of the English Rules of the
Supreme Court, from which it was clearly taken. The English rule
was in turn derived from an earlier rule which itself was derived
from the practice of the Court of Chancery (49).
Historically the common law courts had no power to hear an
action by a representative
plaintiff. However, in the Court of
Chancery representative actions were permitted in certain cases.
With the merger of common law and equity, the new rules of
procedure scheduled to the Supreme Court of Judicature Act 1873
(U.K.) incorporated the chancery practice (50). That practice was
described by Lord Macnaghten in Duke of Bedford v. Ellis (51) as
follows:
"The old rule in the Court of Chancery was very simple and
perfectly well understood. Under the old practice the Court
required the presence of all parties interested in the matter in
suit, in order that a final end might be made of the controversy.
But when the parties were so numerous that you never could
'come at justice,' to use an expression in one of the older cases,
if everybody interested was made a party, the rule was not
allowed to stand in the way. It was originally a rule of
convenience; for the sake of convenience it was relaxed."
Initially the courts construed the rule narrowly. In Temperton v.
Russell (52) the requirement for those represented to have the

(49) The Supreme Court Practice (1993), vol. 1, 15/12/1; and see Duke of Bedford v.
Ellis, [1901] A.c l.
(50) Rule 10 of the Rules of Procedure. Rule 10 was subsequently replaced in 1883
by O. 16, r. 9 and then in 1962 by the current O. 15, r. 12(1).
(51) [1901] A.c, at p. 8.
(52) [1893] 1 Q.B. 435.

415
H.

c. OF A.

1994-1995.

'--.--J

CARNIE

v.
EsANDA
FINANCE
CORPORATION
LTD.

J~~d~';;nJi.

416

HIGH COURT

H. C. OF A.
1994-1995.

'-v--'
CARNIE

Es:~DA
FINANCE
CORPORATION

LTD.

Toohey J.
Gaudron J.

[1994-1995.

"same interest" was interpreted as applying only to individuals who
had a "beneficial proprietary right" in the matter (53). However, in
Duke of Bedford v. Ellis that narrow approach was rejected by the
House of Lords and, apart from one significant exception (54), in
the cases that followed the general approach to interpretation and
.
.
app li . ate h E ngli h ru 1e b ecame mcreasmg 1y Iib era.1
ication f
IS
1
In Duke of Bedford v. Ellis a number of plaintiffs were permitted
to sue on behalf of themselves and all other growers of fruit,
flowers, vegetables, roots and herbs within the meaning of the
Covent Garden Market Act 1828 (U.K.) to enforce statutory
preferential rights to stands in the market. The plaintiffs sought a
declaration as to the true construction of the Act, an injunction to
restrain the infringement of their statutory rights and an account of
the sums which they had allegedly been overcharged. Lord
Macnaghten, with whom the majority concurred, identified three
criteria which must be satisfied before the representative rule can
apply (55):
"Given a common interest and a common grievance, a
representative suit was in order if the relief sought was in its
nature beneficial to all whom the plaintiff proposed to
represent."
The majority held there was a common interest and it did not
matter that the group was a fluctuating body which would be
difficult to catalogue. It was enough that there was a clear
description of the growers sought to be represented in the Act. The
fact that the plaintiffs were claiming separate and different rights
under the Act did not detract from the practicality of using the
representative procedure.
This broad and liberal approach suffered a setback with the
decision of the Court of Appeal in Markt & Co. Ltd. v. Knight
Steamship Co. Ltd. which had the effect for some time afterwards of
limiting the scope of the representative action to exclude those cases
where the relief claimed was damages and where separate and
individual contracts were involved. In that case the plaintiff shippers
had various goods aboard the defendant's vessel which was sunk by
Russians who suspected it of carrying contraband during the RussoJapanese war. The plaintiffs sued the defendant on behalf of
themselves and the forty-four other owners of cargo for "damages
for breach of contract and duty in and about the carriage of goods

(53) [1893] 1 Q.B., at p. 438.
(54) Markt & Co. Ltd. v. Knight Steamship Co. Ltd., [1910] 2 K.B. 102l.
(55) [1901] AC., at p. 8.

[1994-1995.

182 C.L.R.]

viduals who
fowever, in
cted by the
ion (54), in
etation and
l.

by sea" (56). The majority in the Court of Appeal held that the H. c. OF A.
1994-1995.
shippers did not have the same interest because each contract was
manifestly different. Different defences such as estoppel and set off CARNIE
may have existed so that no representative action could settle the Es;~DA
rights of the individual members of the class.
FINANCE
ive acuons evid
But th e sub sequent hiistory a f representative actions evi ences a CORPORATION
LTD.
greater readiness to sanction them. In John v. Rees (57) Megarry J.
referred to the broad approach of Lord Macnaghten in Duke 01' TOOhey J.
'J
GaudronJ.
Bedford v. Ellis with approval, saying (58):
"This seems to me to make it plain that the rule is to be
treated as being not a rigid matter of principle but a flexible
tool of convenience in the administration of justice."

417

"-v-'

~permitted
rs of fruit,
ing of the
~ statutory
:s sought a
junction to
account of
ged. Lord
ified three
'e rule can

His Honour said this approach was consistent with the language of
the rule which was wide and permissive in its scope while providing
adequate safeguards for the substance and that he "would therefore
be slow to apply the rule in any strict or rigorous sense" (59).
In Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (60)
Vinelott J. traced the history of the rule and its application in the
United Kingdom. He distinguished Markt on its particular facts,
saying (61):
"it is clear on authority and principle that a representative
action can be brought by a plaintiff, suing on behalf of himself
and all other members of a class, each member of which,
including the plaintiff, is alleged to have a separate cause of
action in tort, provided three conditions are satisfied."

levance, a
was in its
oposed to
it did not
would be
s a clear
~Act. The
.ent rights
using the
with the
v. Knight

erwards of
hose cases
arate and
I shippers
lS sunk by
he Russobehalf of
"damages
of goods

OF AUSTRALIA.

•

I

The first condition was that no order could be made if the effect
might be to confer a right of action on a member of the class
represented who would not otherwise have been able to assert such
a right in separate proceedings, or to bar a defence which might
otherwise have been available to the defendant in a separate action.
The second was that the common interest requirement, where there
are separate causes of action in tort, is a requirement for a common
ingredient in the cause of action of each member of the class. In this
case the representative action resulted in a declaration that was
common in terms of relief to all the members of the class: whether a
circular sent to shareholders was misleading and contained
statements that were untrue. The third condition was that it must be
(56)
(57)
(58)
(59)
(60)
(61)

[1910] 2 K.B., at p. 1025.
[1970] Ch. 345.
ibid., at pp. 369-370.
ibid., at p. 370.
[1981] Ch. 229.
ibid., at p. 254.

HIGH COURT

418
H. C. OF A.
1994-1995.

'--v-'

CARNIE

Es:~DA
FINANCE
CORP~T~TION

Toohey J.
GaudronJ.

[1994-1995.

for the benefit of the class that the plaintiff be permitted to sue in a
representative capacity.
Likewise, in R.I. Flowers Ltd. v. Burns (62), McGechan J. of thei
New Zealand High Court held that the fact that claims arose under!
separate contracts was not an objection to the use of a representa-l
tive action. The defendant pleaded defences which, if established,l
would remove any common interest. But at an early interlocutory]
stage of the proceedings the Court was not prepared to elevate thel
'
mere expression of contest by a defendant into an automatic barrierJ
to a representative action, saying (63):
"The traditional concern to ensure that representative actionsl
are not to be allowed to work injustice must be kept in mindJ
Subject to those restraints however the rule should be applie~
and developed to meet modern requirements."
i
In Irish Shipping Ltd. v. Commercial Union Assurance Co.l
Pic. (64) the defendant sought to rely on Markt for the propositionl
that there can be no common interest where there are separate!
contracts and the claim of the plaintiff is damages. Staughton LJ.!
reviewed the English authorities and came to the conclusion that the
law had been reformed by decisions since Markt (65). The case
involved insurance contracts containing a leading underwriters
clause which made it possible to regard the seventy-seven individual
contracts as one contract. However, while this was an important
factor in finding a common interest in this particular case, further
authority has held that this was not the decisive factor (66).
In Naken v. General Motors of Canada Ltd. (67) the
Supreme Court of Canada found the O. 8, r. 13(1) equivalent in
Canada to be "totally inadequate for employment as the base from
which to launch an action of the complexity and uncertainty" as the
one before it. In the Court of Appeal Gleeson C.l. referred to that
decision and appeared to treat the present case as one which fell
within the parameters of that conclusion. In Naken the applicants
sued General Motors on behalf of persons who purchased new 1971
and 1972 Firenza motor vehicles in Ontario and who had not at the
date of the writ sold the cars. Due to a defect the value of the cars
was allegedly diminished by $1,000. The claim was based on (j

I

j

(62)
(63)
(64)
(65)
(66)

[1987] 1 N.Z.L.R. 260.
ibid., at p. 271.
[1991] 2 Q.B. 206.
ibid., at p. 227.
Bank of America National Trust & Savings Association v. Taylor, [1992]
1 Lloyd's Rep. 484, at p. 494.
(67) [1983] 1 S.c.R. 72, at p. 105; (1983) 144 D.L.R. (3d) 385, at p. 410.

1994-1995.
to sue in a
J. of the
'ose under
epresenta;tablished ,
erlocutory
Ievate the
tic barrier

[1

ve actions
t in mind.

)e applied
ance Co.
.oposition
separate
~hton LJ.
n that the
The case
lerwriters
individual
mportant
~, further

:67)

the
valent in
ase from
y" as the
d to that
zhich fell

pplicants
lew 1971
ot at the
the cars
ed on a

182 C.L.R.]

OF AUSTRALIA.

breach of implied and express warranty. The express warranty was
contained in newspaper advertisements. In order to prove their
membership of the class individuals would have had to prove they
had responded to the advertisement. Estey J. gave the decision of
the Court that the case was inappropriate
for a representative
.
.
action. A ca t a Iogue 0 f pro bl ems against sue h a course was I' d
isted,
including the complexity of determining the class which would entail
the Master trying up to 4,932 claims; the lack of authority to award
costs against unsuccessful claimants for membership of the class;
and the possibility of future tort actions for personal injury arising
out of reliance on the defect being estopped.
However, Naken was carefully distinguished by the Alberta Court
of Appeal in Swift Canada Co. v. Alberta (Pork Producers' Marketing
Board) (68). In that case the plaintiffs claimed a declaration of
entitlement to an orderly market and free competition, together
with a claim for damages suffered by the class by reason of the
tortious conspiracy of the defendants to purchase hogs from the
class for prices lower than those which would otherwise have
prevailed. The damages claimed were restricted to the difference on
each transaction made during the period between the price actually
paid and the price which would have been paid under the marketing
system but for the tortious conduct of the defendants. The Court
held that a representative action was appropriate because there was
a common interest in securing a declaration that the activities of the
defendants were unlawful and in recovering the losses sustained by
virtue of those activities. The damages of the class could be
determined by mathematical computation. The defendants would
not be prejudiced by inability to have discovery of all the members
claiming as plaintiffs.
In Shaw v. Real Estate Board of Greater Vancouver (69), Bull J.A.
observed:
"It appears to me that the many passages uttered by Judges of
high authority over the years really boil down to a simple
proposition that a class action is appropriate where if the
plaintiff wins the other persons he purports to represent win
too, and if he, because of that success, becomes entitled to
relief whether or not in a fund or property, the others also
become likewise entitled to that relief, having regard, always,
for different quantitative participations."
.
In our view that observation is apposite to r. 13(1), notwithstanding
the use of "representative action" rather than "class action".

'or, [1992]
(68) (1984) 9 D.L.R. (4th) 71.
(69) (1973) 36 D.L.R. (3d) 250, at p. 254.

419
H. c. OF A.
1994-1995.

'--'

CARNIE

Es:~DA
FINANCE
CORPORATION
LTD.

TOOhey J.
GaudronJ.

HIGH COURT

420
H. C. OF A.
1994-1995.

~

CARNIE

v.

EsANDA
FINANCE
CORPORATION
LTD.

TooheyJ.
Gaudron J.

[1994-1995.

The operation of r. 13(1)

It is against this background that the operation of r. 13(1) falls to
be considered though in the end it is the language of the rule which
must determine its meaning. The critical words are: "Where
numerous persons have the same interest in any proceedings" In
.
.
.
th e course 0 f hi JU dgment Kirb y P. re f erre d to th e requirements
IS
identified by Lord Macnaghten in Duke of Bedford v. Ellis, namely,
t h at a11persons to b e represente d h ave a common mterest, th at they
have a common grievance and that they stand to receive relief
which, in its nature, would be beneficial to all. This, of course, is not
the precise language of r. 13(1) but Kirby P. said (70) that the
present appellants accepted the need to bring themselves within
these criteria and he was content to adopt the same approach. In
this Court the appellants placed greater emphasis on the actual
terms of r. 13, arguing that a representative action should be
available whenever the two prescribed criteria are established,
namely, numerous persons having bona fide claims against another
party and having the same interest in the proceedings.
Although the judgments below and the argument in this Court
focused on r. 13(1), reference should be made to other aspects of
the rule. Sub-rule (4) provides:
"A judgment entered or order made in proceedings pursuant
to this rule shall be binding on all the persons as representing
whom the plaintiffs sue or, as the case may be, the defendants
are sued but shall not be enforced against any person not a
party to the proceedings except with the leave of the Court."
Though any judgment or order will be binding on those for whom a
plaintiff sues, the represented parties are not liable for costs (71).
Sub-rule (6) allows any person against whom a judgment or order is
sought to be enforced to dispute liability "on the ground that by
reason of facts and matters particular to his case he is entitled to be
exempted from the liability".
Objections to a representative order: "same interest"

As Gleeson Ci.l. observed (72): "It is the meaning of the
expression 'the same interest' ... that lies at the heart of the
problem."
The authorities are clear that the fact that claims arise under
separate contracts does not mean that the requirement for the same

(70) (1992) 29 N.S.W.L.R., at p. 394.
(71) Marla & Co. Ltd. v. Knight Steamship Co. Ltd., [1910] 2 KB., at p. 1039.
(72) (1992) 29 N.S.W.L.R., at p. 389.

[1994-1995.

r. 13(1) falls to
the rule which
are: "Where
oceedings." In
: reqUIrements
Ellis, namely,
crest, that they
receive relief
f course, is not
(70) that the
nselves within
~ approach. In
on the actual
on should be
e established ,
gainst another
in this Court
her aspects of
dings pursuant
s representing
he defendants
person not a
he Court."
se for whom a
for costs (71).
ent or order is
round that by
entitled to be

aning of the
heart of the

182 C.L.R.]

421

OF AUSTRALIA.

interest is defeated (73). A refusal to allow a representative action
on this ground is open to the criticism that it looks to the question
of the Court's discretion to allow a representative action to proceed
rather than to the basic question of whether the rule is applicable.
That question, stated in terms of the rule, is this: Do numerous
.
.
.
persons h ave t h e same interest m t h e action w hi h t h e appe IIants
IC
have commenced? If they do not then that is the end of the matter.
If they do, then the action is properly begun and, unless the Court
otherwise orders, it may be continued.
Then it was argued that the same interest was lacking because the
relief might not be beneficial to all members of the class, that some
parties might not want to contend that their variation agreements
were null and void because they had the benefit of the extended
time for repayment provided by the variation agreements and that
they might be content with their arrangements. However, in the
Court of Appeal the appellants, without objection, abandoned the
pursuit of a declaration that the variation agreements were null and
void. Kirby P. would have given leave to amend the statement of
claim so that that claim could be deleted, substituting declaratory
relief that went no further than determining the meaning of the Act
so far as it affects those concerned on matters in which they have a
common interest. In that event those debtors who do not wish to
take advantage of a favourable judgment would be under no
obligation to do so. That is the basis on which the matter was
argued in this Court.
There are many persons who have entered into variation
agreements with the respondent. They have the "same interest" in
testing those agreements against the Act to see if the method of
calculating the amount owed was correct. If that method was not in
accordance with the Act, then those persons have a common
interest in obtaining the relief of being released from liability for the
credit charges. That is, they have the same interest in these
proceedings in the sense that there is a significant question common
to all members of the class and they stand to be equally affected by
the declaratory relief which the appellants seek.
Although each contract will be different in the details of the
amounts involved, this will not eliminate the convenience of finding

H. c. OF A
1994-1995.

~

CARNIE

ES:~DA
FINANCE
CORPORATION

s arise under
t for the same

t

p. 1039.

(73) R. 1. Flowers Ltd. v. Burns, [1987] 1 N.Z.L.R. 260; Irish Shipping Ltd. v.
Commercial Union Assurance Co. Plc., [1991] 2 Q.B. 206; Bank of America
National Trust & Savings Association v. Taylor, [1992] 1 Lloyd's Rep. 484;
Palmco Holding Bhd. v. Sakapp Commodities (M) Sdn. Bhd., [1988] 2 M.L.l.
624 and Voon Keng v. Syarikat Muzwina Development Sdn. Bhd., [1990]
3 M.L.l. 61.

LTD.

Toohey J.
Gaudron J.

422

HIGH

H. C. OF A.
1994-1995.

COURT

a right to a release which is common
Macnaghten said (74):

CARNIE

[1994-1995.:
to all of them. As Lord

"In considering whether a representative action is maintainable
you have to consider what is common to the class, not what
differentiates the cases of individual members."

v.
EsANDA
FINANCE
CORPORATION
LTD.

Identification of class
Toohey J.
Gaudron J.

The respondent contended that there were particular difficulties
in identifying the class which the appellants wished to represent. But
the onus on the appellants is not to identify every member of the
class; rather
it is to identify
the class with sufficient,
particularity (75). They have done this in par. 6 of the statement of
claim. The class is not open ended; it is limited to those persons who
have credit sale or loan contracts with the respondent which have
been varied in circumstances where the variation has been executed
in such a way as to be inconsistent with the Act. Furthermore the'
situation here, unlike cases such as Naken v. General Motors of
Canada Ltd. (76), is one in which the respondent knows or has the'
means of knowing better than anyone else the Duke of members of
the class.

Adequacy of r. 13
As noted earlier, Gleeson CJ. regarded the present case as an!%!
attempt to make r. 13(1) the foundation of a class action. Questions
of nomenclature aside, it is true t~at r. 13 lacks the d~tail of some
other rules of court. But there IS no reason to thmk that the I:'
Supreme Court of New South Wales lacks the authority to give l;i
directions as to such matters as service, notice and the conduct of~.
proceedings which would enable it to monitor and finally to ~'fii
determine the action with justice to all concerned. The simplicity of
the rule is also one of its strengths, allowing it to be treated as a
flexible rule of convenience in the administration
of justice and,
applied "to the exigencies of modern life as occasion requires" (77).
The Court retains the power to reshape proceedings at a later stage
if they become impossibly complex or the defendant is prejudiced.

I

I

(74)
(75)
(76)
(77)

Duke of Bedford v. Ellis, [1901] AC., at p. 7.
ibid., at p. 11.
[1983] 1 S.c.R. 72; (1983) 144 D.L.R. (3d) 385.
Taft Vale Railway Co. v. Amalgamated Society of Railway Servants, [1901] AC.
426, at p. 443.

[1994-1995.

182 C.L.R.]

As Lord

OF AUSTRALIA.

Res J'udicata

1.

aintainable,

s, not what

difficulties
uesent. But
rber of the
sufficient
:atement of
ersons who
which have
m executed
errnore the
Motors of

or has the
nembers of

case as an
, Questions
iil of some
k that the
ity to give
conduct of
finally to
mplicityof
eated as a
ustice and
iires" (77).
later stage
judiced.

" [1901] A.c.

423
H. c. OF A.
1994-1995.

In the course of argument a question arose as to the effect of a
'-v-'
judgment ~n these p:oceedings, if. constituted as ~ representative
CA~NIE
, action. StnctIy speakmg, the question does not anse at the stage ESANDA
, where the issue is whether "numerous persons have the same c FINANCE
herv
.
interest in any procee dimgs". Rat er, i goes to t he rssue whet h er t h e ORPORATION
It
LTD.
Court "otherwise orders" the continuance of the proceedings in that
form. Nevertheless, it is appropriate to say something about the Z:::r':;nJj.
effect of a judgment on the represented persons; it has a bearing on
the outcome of this appeal.
If the action, constituted as a representative action, succeeds those
represented will have the benefit of declaratory relief as to the
meaning of the Act. Whether they choose to take advantage of such
a declaration will be a matter for them. But what if the action fails?
Counsel for the appellant conceded that each of the members of the
classwould be "estopped". Later, in response to a question from the
Court, counsel agreed that "in theory" if the action failed borrowers
withinthe class would lose the right to take advantage of s. 42 of the
Act. Section 42 provides that where there has been a failure to
complywith certain requirements of the Act, particularly relating to
disclosure, the debtor is not liable to pay to the credit provider the
credit charges under the contract. But it may be said that in the light
of such a decision there was no such right in any event.
The relevant principle is stated in the following way by Spencer
Bowerand Turner (78):
"A judicial decision inter partes operates as an estoppel in
favour of, or (as the case may be) so as to bind, ... in the case
of a 'representative' or 'test' action, all members of the class,
whom a party purports to represent therein, ... but not those
who, though alleged to be so represented, insist and establish
that they are not."
In Naken v. General Motors of Canada Ltd., Estey J., in delivering
the judgment of the Court, was clearly concerned as to the
consequences of res judicata for those sought to be represented,
particularly as a fixed sum was claimed for the purchaser of each
motor vehicle though each might "still have rights flowing from the
formal contract of purchase and the warranties and covenants
contained therein" (79). In Zhang v. Minister for Immigration, Local
Government and Ethnic Affairs (80), French J. ordered that
proceedings in the Federal Court should not continue as a

(78) The Doctrine of Res Judicata, 2nd ed. (1969), par. 231.
(79) [1983]1 S.c.R., at pp. 101-102; (1983) 144 D.L.R. (3d), at p. 407.
(80) (1993) 45 F.C.R. 384.

424

HIGH

COURT

[1994-1995.

~9~-~~~' representative
~
CARNIE

Es:~DA
FINANCE
CORPORATION

LTD.

Z~:dhr;nJi

proceeding under Pt IVA of the Federal Coun of
Australia Act 1976 (Cth) because of the implications of res judicata
for other applicants for refugee status.
In the argument before this Court nothing emerged to show that
members of the class in question would be prejudiced by the
.
. h
h
outcome 0 f t h'IS action ot h er t h an III teo bvi
VIOUS sense t at they
would be bound by a judgment acceding to or rejecting the claim for
relief. It would not affect other rights they might have against the,
respondent, for instance a claim that a member of the class had
entered into a contract as a result of misrepresentation
or false ormisleading conduct. If it did appear that other rights would be
affected, it would be a matter for consideration in determining
whether the Court should otherwise order. But it is not al1!i:;
consideration in deciding whether the action is properly constituted.'
in terms of r. 13(1). And, as mentioned earlier, the members of the
class are not liable to the respondent in costs.
~

I

I
~
The appellants have brought themselves within r. 13(1)

'<

The appellants have brought themselves within r. 13(1). There are ~
numerous other persons capable of being clearly defined who have ~
the same interest in these proceedings in that they will be equally ~
affected by the declaratory
relief which the appellants seek.]
Whether, in the end, they take advantage of that relief if granted is i
another matter. But that consideration
cannot disqualify the;
appellants from invoking r. 13(1). However, in reaching a conclusion as to the applicability of r. 13(1), it is appropriate to look a
little more closely at some aspects of the Act.
The implications of the Act for a loan contract
Part 3 of the Act is concerned with "regulated contracts", a term
which is defined (s. 5) to mean "a regulated credit sale contract,
regulated loan contract or regulated continuing credit contract".
The appellants assert their Variation Agreement (and the variation
agreements of others) to be a "regulated loan contract", a term
which is defined (s. 5) to mean "a loan contract to which Part 3
applies". The term "loan contract" is defined (s. 5) to mean:
"a contract under which a person in the course of a business c
carried on by him provides or agrees to provide ... credit to
another person ... in one ... or more of the following ways."
Of the ways that follow, it is necessary to mention only par. (c), "by
varying the terms of a contract under which moneys owed to him by
that other person are payable".
The loan contract to which the appellants and the respondent are

OF AUSTRALIA.

1994-1995

182 c.L.R.]

:/ Court of
es judicata

parties is a loan contra~t f~r th.e purposes of Pt 3 (s. 5). Part 3
specifies a number of obligations III respect to loan contracts. Where
a loan contract does not comply with the requirements of the Act
and is caught by the penalty provision in s. 42, the debtor is not
liable to pay to the credit provider the credit charge under the
contract, su bi
ject to a ng. ht i t h e ere dit provi er to app Iy to t he
t III
It nrovid
commercial Tribunal for an order increasing the liability of the
debtor (s. 85). "Credit charge" is defined (s. 5) as "credit charge
within the meaning of section 11(1)". Broadly speaking, s. 11(1)
identifies the credit charge as the amount by which the amount
payable under the contract by the debtor to the credit provider
exceeds the amount financed. To ascertain the "amount financed" it
is necessary to look to the formula in Sch. 4 to the Act.
Section 85 operates where, by reason of a contravention or a
failure to comply with the Act, a debtor is not liable to pay an
amount otherwise payable. In those circumstances
the credit
provider may apply to the Tribunal for an order increasing the
liability of the debtor to the credit provider. The Tribunal, after
consideration of the relevant circumstances, may determine that the
debtor is liable to pay the amount financed and the whole or part of
the credit charge.
It should be mentioned that s. 70 permits a credit provider and
debtor under a loan contract to vary the terms of the contract if
certain conditions are met. An agreement to vary a contract in
accordance with the section is not a loan contract and hence is
outside the disclosure requirements
of s. 36 (s. 70(5)). The
appellants submitted that their Variation Agreement did not satisfy
the requirements of s. 70 because of a failure to specify correctly
"Outstanding balance of the amount financed at time of variation" (81). But their case does not require them to take themselves
outside s. 70; rather, that is a section which is available to the
respondent if it chooses to rely on it. And, as it happens, during the
course of the argument the appellants agreed that par. 5A of the
statement of claim, which pleaded that the Variation Agreement did
not comply with s. 70 and was therefore "null and void and of no
effect", should be struck out. With the removal of par. 5A of the
statement of claim and sub-pars. (L«) and (Ln) of the prayer for
relief in par. 7, the appellants' case as pleaded is that the Variation
Agreement did not comply with Pt 3 of the Act and therefore they
are not liable to pay the credit charge; that the "represented
debtors" entered into variation agreements which, likewise did not

show that

ed by the
that they
e claim for
igainst the
class had
or false or
would be
~termining
is not a
:onstituted
iers of the

There are
who have
re equally
nts seek.
granted is
ialify the
19 a canto look a

.", a term
contract,
contract",
variation
" a term
ch Part 3

1:
business
credit to
ways."
. (c), "by
:0 him by
ident are

(81) See s. 70(1)(a).

425

~9~-~:~~'
~

CARNIE

ES:~DA
FINANCE
CORPORATION

LTD.

J:::r':;nJj,

426

HIGH COURT

H. C. OF A.
1994-1995.

~

CARNIE

v.
EsANDA

[1994-E

comply with Pt 3; that the appellants are entitled to a decIarat
that they are not liable to pay to the respondent any amount
account of credit charges and that no represented debtor is liabh
pay any such amount.

FINANCE
CORPORATION
LTD.

C

I .

one USlOn

On this footing, those whom the appellants seek to represent h
;~~:r';;:j.the same interest as the appellants. They have entered into h
contracts with the respondent in circumstances where, if
appellants can make good their claim, the variation of tln
contracts was not in accordance with Pt 3 of the Act. Accordinl
they are not obliged to pay any amount on account of credit charg
In terms of r. 13(1) all have the same interest in the proceedin
While it is not known how many other borrowers might wish to t(
advantage of the declaratory relief the appellants seek,
potentially stand to benefit from a successful action.
In view of the conclusion that the decision of the Court of App
was in error in holding that the appellants' action did not fall wit]
r. 13, the appeal should be allowed. It might be said that there is
point in allowing the appeal if, in all the circumstances, the Suprei
Court should "otherwise order" in respect of the continuance of t
proceedings. If the appellants had persisted with their claims i
declarations that the variation agreements were null and void and
no effect, we would be disposed to remit the matter to the Court
Appeal on the basis that the appellants' action fell within r. 13(
and that it was for that Court to decide whether the action shot
continue. However, since the appellants do not persist with t]
particular aspect of their claim, there appears to be no answer
what Kirby P. said at the end of his judgment (82):
"Once these are excised, what remains is a proper case for
representative order. The class of person affected is cle,
defined and now closed. The primary relief sought is
declaration as to the meaning of an Act of Parliament as
affects the members of that claim in respect of which all
them will have a common interest and a common leg
grievance. So far as the orders are concerned, as so amende
they seek relief which is wholly beneficial to all the perso
represented. "
The trial judge has it within his or her power to "otherwise orde
if, as the action proceeds, circumstances make that cour
appropriate.
We would therefore allow the appeal and set aside the orders

(82) (1992) 29 N.S.W.L.R., at p. 403.

OF AUSTRALIA.

1994-1995.

182 C.L.R.]

ieclaration
unouni on
is liable to

the Court of Appeal striking out the further amended statement of
claimin so far as it purports to plead a representative action.

t

)f Appeal

'all within
iere is no
Supreme
tee of the
lairns for
id and of
Court of
r. 13(1)

n should
with this
nswer to
ise for a

is clear,
;ht is a
ent as it
.h all of
m legal
mended,
persons

.l.

,
'.

~order"
course
rders of

H. C. OF A.

1994-1995.
CARNIE

~sent have
into loan
'e, if the
of those
:cordingly,
it charges.
)ceedings.
sh to take
seek, all

I

427

f

McHUGHJ. The question in this appeal is whether "numerous
·.ersons ave the same interest" in the proceedings so that, "unless
h
P
..
.
the court ot herwi
erwise or d" , t hi' p aintiiff s may jom t h em m a
ers
e
representative action brought in accordance with r. 13 of Pt 8 of the
supreme Court Rules 1970 (N.S.W.). In my opinion, the persons
described as "represented debtors" in the statement of claim do
have the same interest as the plaintiffs, and r. 13 authorizes their
joinder in a representative action.
The facts and legislative provisions are set out in the judgment of
Toohey and Gaudron JJ. which also discusses the modern
authorities.
In my opinion, a plaintiff and the represented persons have "the
same interest" in legal proceedings when they have a community of
interest in the determination of any substantial question of law or
fact that arises in the proceedings. Other factors may make it
undesirable that the proceedings should continue as a representative
action, but that is a matter for the exercise of discretion, not
jurisdiction,
In the present case, the represented debtors as well as the
plaintiffshave the same interest in determining whether the method
adopted by Esanda in the calculation of the variation agreement
repayments resulted in a breach of s. 70 of the Credit Act 1984
(N.S.W.) ("the Act"). If that method did breach s. 70, the standard
formvariation agreement used in each case did not comply with the
requirements of s. 36 of the Act. Consequently, s. 42 of the Act
which imposes civil penalties for breach of s. 36 would result in
Esanda forfeiting its credit charges under the loan contracts. The
effectof the breach for each of the represented debtors is no doubt
different from the effect for the plaintiffs. But all of them have a
common interest in determining whether Esanda's procedures in
relation to the variation of a credit or loan agreement comply with
theAct.
The terms of r. 13 are based on the principles that governed the
practice of the Court of Chancery in representative actions (83). In
Duke of Bedford v. Ellis (83), Lord Macnaghten, when considering
the then English equivalent of r. 13, said that there was no reason
for "restricting the rule, which was only meant to apply the practice

(83) Duke of Bedford v. Ellis, [1901] AC. 1, at p. 8.

Es:~DA
FINANCE
CORPORATION
LTD.

428

HIGH

H. C. OF A.
1994-1995.

~
CARNIE
v.
ESANDA
FINANCE
CORPORATION
LTD.
McHugh J.

COURT

[1994-199~

of the Court of Chancery to all divisions of the High Court". fIi
Lordship went on to say:
,
I

"Un.der. the old p~actice the Court required the presence of ai
parties Interested In the matter In suit, In order that a final en,
might be made of the controversy. But when the parties we~!
so numerous that you never could 'come at justice,' to Use
expression in one of the older cases, if everybody i~terested W<u
made a party, the rule was not allowed to stand In the waY'i
was originally a rule of convenience:
for the sake .
convenience it was relaxed. Given a common interest and .

common grievance, a representative suit was in order if th'
relief sought was in its nature
plaintiff proposed to represent."

beneficial

to all whom t1h
;

Rule 13(1) commences with a condition "[w]here numero
persons have the same interest in any proceedings". Being part Of~.
quasi-legislative instrument, the term "same interest" probab,
requires a more exact application than was allowable in applying th,
general principles of the Court of Chancery. Nevertheless, I see
difficulty in holding that the "represented debtors" have the "sam,
interest" as that of the appellants.
i
As long ago as 1837 Frederic Calvert (84) thought that th~
"authorities" in the Court of Chancery justified the statement tha~
~"
"when a large number of persons have a common interest in thd
entire object of a suit in its nature beneficial to them all, one Ot
more of them may sue on behalf of all". It was sufficient that ther~
was "some community of interest between the active litigant and th~
members of the represented group" (85). Furthermore, as Calveri,l
pointed out (86), it was not necessary that the claims of thosej
permitted to join in the suit should be "precisely of the sam~
degree".

n1

Nothing in the application of the principles that guided the;!
practice of the Court of Chancery suggests that that Court would]
have refused to apply its general practice to the kind of sociali
problem that lies at the back of the present action. In Taft Valei
Railway v. Amalgamated Society of Railway Servants (87),~
Lord Lindley, speaking of the rule of court that the House of Lordsi
considered in Bedford, said:
"The principle on which the rule is based forbids its
restriction to cases for which an exact precedent can be found

(84) A Treatise upon the Law Respecting Parties to Suits in Equity (1837), p. 4l.
(85) Yeazell, "From Group Litigation to Class Action, Part II: Interest, Class and
Representation", UC.LA. Law Review, vol. 27 (1980) 1067, at p. 1084.
(86) Calvert, op. cit., p. 36.
(87) [1901] A.c. 426, at p. 443.

182 c.L.R.]

(1994-1995.

I
~ourt". His

I

sence of all
a final end
arties were .\
, to Use an
~rested Was I
the way. It
~ sake of
rest and a
rder if the
whom the

t

numerous
g part of a
,
probably
pplyingthe
s, I see no ••
the "same

!

that the
ement that
rest in the
all, one or
that there
.nt and the
as Calvert
~ of those
the same

t

uided the
nirt would
of social
Taft Vale
vants (87),
~of Lords

.,t
1

OF AUSTRALIA.

in the reports. The principle is as applicable to new cases as to
old, and ought to be applied to the exigencies of modern life as
occasion requires."

H.

c. OF A.

1994-1995.

'-.-'
CARNIE

The procedure of the representative action was "invented by
v.
EsANDA
Chancery in the seventeenth century to cope with disputes between FINANCE
rural tenants and landlords, parishioners and parsons" (88). A CORPORATION
reading of the cases in the eighteenth and nineteenth centuries
LTD.
indicates that the Court of Chancery often allowed the representaMcHughJ.
tive action to be used so that groups of individuals who had suffered
similar wrongs could redress the economic harm which they had
collectivelysuffered (89). In many cases, the Court allowed persons
with the same or common interest to be joined in a representative
action only because the defendant insisted that the suit was bad for
want of parties and it was inconvenient to make all interested
persons parties to the action. In some cases the represented parties
had consented to and encouraged the plaintiff to bring the action as
a representative action. But in other cases the Court allowed the
plaintiff to represent persons with similar interests whether or not
they consented or even knew of the action (90). This was
particularly true of actions arising from the activities of joint stock
companies and friendly societies. In that situation, as Yeazell points
out (91), "the represented must rely on the congruence of their
interests with those of the representatives as the incentive for
effectiverepresentation; the self-interest of the representative rather
than the consent and supervision of the represented drives the active
party".
For much of this century, and notwithstanding the decision and
reasons in Bedford, the courts have given r. 13 and its equivalents a
narrow meaning. But, as the judgment of Toohey and Gaudron JJ.
shows, the recent cases have been more liberal in allowing
representative actions to proceed. In the Age of Consumerism, it is
proper that this should be so. The cost of litigation often makes it
economically irrational for an individual to attempt to enforce legal
rights arising out of a consumer contract. Consumers should not be
denied the opportunity to have their legal rights determined when it
can be done efficiently and effectively on their behalf by one person

orbids its
be found

. p.41.
t, Class and
084.

429

(88) Yeazell, op. cit., p. 1067.
(89) Brown v. Howard (1701), 1 Eq. Rep. 163 [21 E.R. 960]; City of London v.
Perkins (1734), 3 Bro. P.c. 602 [1 E.R. 1524]; Leigh v. Thomas (1751), 2 Yes .
Sen. 312 [28 E.R. 201]; Adair v. New River Co. (1805), 11 Yes. Jun. 429 [32
E.R. 1153]; Hichens v. Congreve (1828),4 Russ. 562 [38 E.R. 917].
(90) Yeazell, "From Group Litigation to Class Action, Part I: The Industrialization
of Group Litigation" U.C.LA. Law Review, vol. 27 (1980) 514, at p. 537.
(91) ibid., at p. 522.

HIGH COURT

430
H. C. OF A.
1994-1995.

'-.,-J

CARNIE

Es:~DA
FINANCE
CORPORATION
LTD.

McHughJ.

[1994-1995.

with the same community of interest as other consumers. Nor
should the courts' lists be cluttered by numerous actions when one
action can effectively determine the rights of many.
The entire object of the present action is to obtain a judicial
determination as to whether the method that Esanda used in dealing
• h
..
.
WIt vananons 0 f 1
oan or ere di sa 1 contracts comp l'Ied With the
It
e
Act. All those persons who come within the class of debtors defmed
in par. 6 of the statement of claim have a community of interest in
the outcome of that determination. In Markt & Co. Ltd. v. Knight
Steamship Co. Ltd. (92), the English Court of Appeal held that
persons did not have the same interest within the meaning of the
rule when they sued for damages arising out of separate and
individual contracts. But it is now well established that the existence
of separate contracts does not prevent the represented persons .
having the same interest as the plaintiff in the action (93).
In Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (94),
however, Vinelott J. said that in "a representative action in which it
is claimed that every member of the class has a separate cause of
action in tort, this condition requires ... that there must be a
common ingredient in the cause of action of each member of the
class". I see no reason to confine the rule to cases where there is a
common element in the causes of action of the plaintiff and the
represented persons. If the plaintiff and the represented persons
have a community of interest in the determination of some
substantial issue of law or fact in the action, they have the same
interest within the meaning of the rule. In such a case, other factors
may require that the court, in the exercise of its discretion, should
"otherwise" order.
Discretion

Since the amendment to the pleadings, the question to be decided
is one of law and applies to the represented debtors' agreements as
well as to the plaintiffs' agreement. The object of the suit is to
obtain a determination as to whether Esanda's procedures when
varying agreements comply with the Act. Everyone
of the
represented debtors has the same interest in that question whether
or not that person wishes to obtain any benefit from an.,
.
fJ
interpretation that is favourable to him or her. The identity 0 ..•.

(92) [1910] 2 K.B. 1021.

(93) Irish Shipping Ltd. v. Commercial Union Assurance Co. nc., [1991] 2 O.B. 206;
Bank of America National Trust & Savings Association v. Taylor, [1992]
1 LIoyd's Rep. 484.
(94) [1981] Ch. 229, at p. 255.

1994-1995.

182 C.L.R.]

ners. Nor

interest between the plaintiffs and those they seek to represent gives H. c. OF A
the plaintiffs the incentive to represent the other debtors effectively. 1994-1995.
'--v--'
Gleeson C.]. thought that, if class actions are to become part of our
CARNIE
litigation procedure, various matters (95) needed to be governed by Es:~DA
rules. However, the present action is not a class action, and, having FINANCE
·
regard to the way that the statement 0 f cIaim has now b CORPORATION
een
LTD.
amended, I do not think that those matters provide any basis for
exercising a discretion to stop the present action proceeding as a McHugh J.
representative action.

when one
a judicial
in dealing
with the
:s defined
nterest in
v. Knight
held that
ng of the
irate and
existence
persons

+

OF AUSTRALIA.

431

Order
I agree with the order proposed by Toohey and Gaudron 11.
Appeal allowed.
Set aside the orders made by the New South Wales
Court of Appeal on 18 November 1992.

Ltd. (94),
I which it
cause of
ust be a
er of the
here is a
and the
persons
of some
he same
.r factors
1, should

Remit the matter to the Court of Appeal for
consideration of the question whether it should
"otherwise order", within the meaning of the
Supreme Court Rules 1970 (N.S. W), Pt 8,
r. 13(1), that the action not continue as a
representativeaction.
The respondent to pay the appellants' costs of the
appeal to this Court and of the appeal to the
New South Wales Court of Appeal.
Solicitor for the appellants, Jeremy Stoljar, Solicitor, Consumer
Credit Legal Centre (N.S.W.) Inc.
Solicitors for the respondent, Corrs Chambers Westgarth.

decided
nents as
uit is to
es when
of the
whether
rom an
.ntity of

Q.B. 206;

ir, [1992]

R.A.S.

t
(95) See Esanda Finance Corporation Ltd. v. Carnie (1992), 29 N.S.W.L.R. 382, at
p. 388: "such important matters as whether or not consent is required from
persons who are to be group members in representative proceedings, the
position of persons under disability, the right of a group member to opt out of
a representative proceeding, alterations to the description of the group,
settlement and discontinuance of proceedings, and the giving of various
notices to group members."