Campbells Cash and Carry Pty Limited v Fostif Pty Limited [2006] HCA 41

What the court decided

The High Court had held State tobacco licence fees invalid as duties of excise, and later held that retailers that had paid them to wholesalers on particular invoicing terms could recover amounts not remitted to the taxing authority [24]. Firmstones Pty Ltd, a company whose sole director was Mr Adrian Firmstone, wrote to tobacco retailers seeking authority to recover those amounts for a success fee of one third of any money received [25]–[26].

On 30 June 2003 Firmstones caused summonses to be issued in the Supreme Court of New South Wales, seven of which gave rise to these appeals [29]. Gummow, Hayne and Crennan JJ took as typical the proceedings brought by Fostif Pty Limited, a retailer, against its wholesaler, Campbells Cash and Carry Pty Limited [29].

Fostif sued on behalf of itself and all retailers who had paid Campbells the fee and had not recovered it [30]. No other retailer was named, and the summons provided that others would become plaintiffs only by signing and returning an opt-in notice [31]. Fostif sought discovery of those retailers' names and addresses from Campbells so that opt-in notices could be sent [32].

Among other conclusions, Einstein J found that the funding arrangements were against public policy and an abuse of the court's process [34]. His Honour ordered that the proceedings not continue as representative proceedings and dismissed the discovery and opt-in applications [36]. The Court of Appeal (Mason P, Sheller and Hodgson JJA) set aside his orders and directed that the proceedings continue on that basis [37]. The wholesalers then appealed to the High Court by special leave [38].

Gummow, Hayne and Crennan JJ held that the power to commence representative proceedings depended on numerous persons having the same interest in them when they were commenced [51]. No retailer had opted in at that time [51].

The summons claimed a money judgment for Fostif and made no other claim [56]. No declaration was sought on a question common to the class, which distinguished the statement of claim in Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 ('Carnie') [58]. Their Honours concluded that neither at commencement nor when Einstein J made his orders were there numerous persons with the same interest, which was reason enough to find error in the Court of Appeal's orders [60]. It followed that the orders Fostif sought for discovery and opt-in notices were not to be made [96].

Callinan and Heydon JJ reached the same conclusion, holding that the shared interest had to be an interest in the proceedings themselves and had to exist when they began [214]–[215]. Their Honours regarded the declaration claimed in Carnie as central to its outcome, and held that no comparable declaration could legitimately have been claimed here [225]–[226]. Five Justices therefore held that the requirements of the rule were not met [60], [221]–[226].

Gleeson CJ dissented on this question, saying he was unable to distinguish Carnie and would uphold the Court of Appeal on that point [2], [9]. Kirby J also dissented, reasoning that the required interest is a generic precondition existing before proceedings are commenced, not confined to how they are later pleaded [158], [164].

The funding question arose only if the rules were validly engaged [39], but Gummow, Hayne and Crennan JJ went on to consider it [60]. Their Honours reasoned that, because the Maintenance, Champerty and Barratry Abolition Act 1993 (NSW) abolished the crimes and torts of maintenance and champerty and preserved only the rule on when a contract is treated as illegal or against public policy, any wider rule of public policy lost its footing [86].

In their Honours' view, seeking out potential claimants, taking control of the litigation and pursuing a significant profit did not, alone or in combination, warrant condemnation as contrary to public policy or as an abuse of process [88]. They asked why a feared corruption of the court's processes was not sufficiently addressed by existing abuse of process doctrines, and noted that no reason had been offered for thinking the rules on lawyers' duties insufficient [93]. They concluded that the funding arrangements were not a ground to stay the proceedings [96].

Gleeson CJ agreed with those reasons on the funding questions [1], and Kirby J agreed with their conclusion on that issue [146]. Five Justices were therefore of the view, not necessary to the orders, that the funding did not warrant a stay [1], [60], [96], [146]. The joint reasons noted that questions of illegality and public policy may still arise when deciding whether a funding agreement is enforceable, leaving that question open [67], [92].

Callinan and Heydon JJ said it was unnecessary to decide the point, but expressed the minority view that the proceedings were an abuse because of several factors in combination [230], [267]. Their factors included Firmstones' profit motive, its soliciting of retailers who would not otherwise have sued and its control [269]–[270], [277].

In each matter the Court allowed the appeal with costs, set aside the Court of Appeal's orders of 31 March 2005 and in their place ordered that the appeal to that Court be dismissed with costs [97]. Callinan and Heydon JJ agreed with those orders [291]. Gleeson CJ and Kirby J would have dismissed the appeals with costs [22], [211].

Why it matters

The case concerned the representative proceedings rule then in force in New South Wales, and Gummow, Hayne and Crennan JJ cautioned that the outcome under that rule was not necessarily the outcome under other courts' rules [40]. Their Honours contrasted the bare terms of that rule with the opt-out and other provisions that the Federal Court of Australia Act 1976 (Cth) makes in Part IVA [47]. Kirby J recorded that the rule had been repealed after the Court of Appeal's decision and before the appeals were decided [122]. Readers should check the current position in Victoria.

On the rule point, Gummow, Hayne and Crennan JJ tested the originating process by its parties, issues and relief [55]. Because Fostif sought to represent only retailers who actively chose to be bound, they reasoned that it could not be said that there was any person, let alone numerous persons, whom it would represent [59].

On funding, their Honours reasoned for jurisdictions with legislation to the same effect as the New South Wales Act, leaving open the position where maintenance and champerty may remain torts or crimes [85].

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.