judgement handed down yesterday

FEDERAL COURT OF AUSTRALIA
Hodges v Waters (No 2) [2013] FCA 877
Citation:
Hodges v Waters (No 2) [2013] FCA 877
Parties:
CHARLES HODGES & MARK HODGES AS TRUSTEES OF THE CHARLES HODGES SUPERANNUATION FUND v ANDREA JANE WATERS, KPMG, WELLINGTON INVESTMENT MANAGEMENT LIMITED, OCTAVIA LIMITED (ADMINISTRATOR APPOINTED), GUY HUTCHINGS, JOHN ARTHUR WHATELEY, JACK SIMON DIAMOND, CRAIG ROBERT WHITE, DEBORAH BEALE, STEVEN KRIS KYLING, STUART ROBERTSON PRICE, MICHAEL GORDON HISCOCK, MICHAEL CHRISTODOULOU KING and PAUL JOSEPH MANKA
File number:
NSD 324 of 2009
Judge:
PERRAM J
Date of judgment:
29 August 2013
Catchwords:
PRACTICE AND PROCEDURE – Representative proceedings – Application for Merck orders – Whether appropriate to make orders in the circumstances
Date of hearing:
7 August 2103
Place:
Sydney
Division:
GENERAL DIVISION
Category:
Catchwords
Number of paragraphs:
9
Counsel for the Applicant:
Mr M B J Lee SC, Mr W A D Edwards
Solicitor for the Applicant:
Johnson, Winter & Slattery
Counsel for the First and Second Respondents:
Mr J R J Lockhart SC, Mr J A Arnott
Solicitor for the First and Second Respondents:
Allens
Counsel for the Tenth Respondent:
Mr T Marskell
Solicitor for the Tenth Respondent:
Wotton + Kearney
Counsel for the Eleventh Respondent:
Mr S A Goodman
Solicitor for the Eleventh Respondent:
Kelly & Co Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 324 of 2009

BETWEEN:
CHARLES HODGES & MARK HODGES AS TRUSTEES OF THE CHARLES HODGES SUPERANNUATION FUND
Applicant
AND:
ANDREA JANE WATERS
First Respondent
KPMG
Second Respondent
WELLINGTON INVESTMENT MANAGEMENT LIMITED
Third Respondent
OCTAVIA LIMITED (ADMINISTRATOR APPOINTED)
Fourth Respondent
GUY HUTCHINGS
Fifth Respondent
JOHN ARTHUR WHATELEY
Sixth Respondent
JACK SIMON DIAMOND
Seventh Respondent
CRAIG ROBERT WHITE
Eighth Respondent
DEBORAH BEALE
Ninth Respondent
STEVEN KRIS KYLING
Tenth Respondent
STUART ROBERTSON PRICE
Eleventh Respondent
MICHAEL GORDON HISCOCK
Twelfth Respondent
MICHAEL CHRISTODOULOU KING
Thirteenth Respondent
PAUL JOSEPH MANKA
Fourteenth Respondent
JUDGE:
PERRAM J
DATE OF ORDER:
29 AUGUST 2013
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1. The parties bring in short minutes to give effect to these reasons.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 324 of 2009

BETWEEN:
CHARLES HODGES & MARK HODGES AS TRUSTEES OF THE CHARLES HODGES SUPERANNUATION FUND
Applicant
AND:
ANDREA JANE WATERS
First Respondent
KPMG
Second Respondent
WELLINGTON INVESTMENT MANAGEMENT LIMITED
Third Respondent
OCTAVIA LIMITED (ADMINISTRATOR APPOINTED)
Fourth Respondent
GUY HUTCHINGS
Fifth Respondent
JOHN ARTHUR WHATELEY
Sixth Respondent
JACK SIMON DIAMOND
Seventh Respondent
CRAIG ROBERT WHITE
Eighth Respondent
DEBORAH BEALE
Ninth Respondent
STEVEN KRIS KYLING
Tenth Respondent
STUART ROBERTSON PRICE
Eleventh Respondent
MICHAEL GORDON HISCOCK
Twelfth Respondent
MICHAEL CHRISTODOULOU KING
Thirteenth Respondent
PAUL JOSEPH MANKA
Fourteenth Respondent
REASONS FOR JUDGMENT
1 There are two questions for resolution: (a) whether this Court can, and if it can, whether it should order a statement of common issues for the proceedings which includes as common issues the claims of group members who are not named applicants; (b) the proper form of any such orders.

I. Non-applicant Group Members

2 The applicants, who are Charles Hodges and Mark Hodges as Trustees of the Charles Hodges Superannuation Fund, are representative parties under Pt IVA of the Federal Court of Australia Act 1976 (Cth). The group members they represent are persons who, at various times, suffered the misfortune of investing in the MFS Premium Income Fund (‘the Fund’), a failed property trust from Queensland. The point of the representative proceeding is to recover damages from the auditors of the Fund’s compliance plan (‘KPMG’) and some of its officers. The allegations are detailed and, to an extent, complex.

3 The applicants do not include John Alexander Manton and Elia Mary Lynch as trustees for the Manlyn Superannuation Fund although there is no dispute that they are group members.

4 The difference between the Charles Hodge Superannuation Fund and the Manlyn Superannuation Fund is this: the former has at all times kept its unit holding in the Fund whereas the latter disposed of its in November 2008 after the Fund was listed on the Australian Stock Exchange on 16 October 2008.

5 Plainly the issues which arise as to the quantification of their respective losses are going to be different and there is, in my opinion, utility in having this aspect of the matter determined at the initial trial. Although in its oral submissions KPMG faintly suggested that this Court lacked power to order the determination of issues with respect to group members who were not named as applicants this submission was not pursued in its eventual written submissions. The real question is whether considerations of practicality require it. In principle, I accept that they do.

6 KPMG submitted nevertheless that five matters suggested that the claim of the Manlyn Superannuation Fund should not be determined at the initial trial until its trustees first became named applicants or unless they were granted leave to appear. These matters were:

(a) the need for them to indicate a willingness to be included in the proceedings. I do not consider this necessary. Inevitably, the trustees will need to provide evidence in the trial of the course of their ownership of their units.

(b) the need for them to be adequately represented at the trial. I do not consider there is any risk that they will not be.

(c) the need to protect KPMG against any costs risk. I do not consider that the Court would not have power to award costs against them in the event that their claim failed.

(d) the need for them to provide discovery. This is a real concern. Whilst I consider that I probably have the power to order discovery against them, even as non-party group members, I will condition the orders I will make on an undertaking by the trustees to consent to a discovery order.

(e) the need to permit KPMG to take advantage of procedural evidentiary rules such as the rule in Jones v Dunkel. Again, this is probably a unfounded concern, but I will condition the orders I will make on an undertaking by the trustees of the Manlyn Superannuation Fund that they will accept at trial that procedural rules of evidence apply to them as if they were parties.

7 Subject to those matters, I am content to proceed with the common issues being framed in a way which includes the position of the trustees of the Manlyn Superannuation Fund.

II. The Proper Form of Orders

8 The parties provided me with competing orders which, as the parties properly acknowledged, do not appear to differ in substance even if they do so in terms of detail. I favour KPMG’s more detailed orders which appear more precisely to identify the issues. I will indicate a willingness to make orders in the form proposed by KPMG subject to:

(a) the inclusion of the claim of the trustees of the Manlyn Superannuation Fund; and

(b) the undertakings referred to above being provided by the trustees of that fund.

9 The parties should bring in short minutes to give effect to these reasons. There should be no order as to costs. Neither party’s position was without substance and each has succeeded to an extent.


I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.
Associate:

Dated: 29 August 2013