Australia: The GetSwift decision and its implications for competing class actions

In brief: Multiple class actions against the same company have become an increasing feature of the class action space, particularly in securities class actions.

The decision of Justice Lee of the Federal Court on 23 May 2018 in Perera v GetSwift Limited [2018] FCA 732 is the latest decision to address the issue and comes a week before the much anticipated release of the Australian Law Reform Commission's Discussion Paper in its Litigation Funding Inquiry.

Whilst his Honour stressed the fact-specific nature of his decision, the case provides useful guidance on the principles applicable to determining which class action should proceed, and whether to permanently stay, de-class or otherwise manage the other competing class actions.

Ultimately, Justice Lee determined to allow the last of the three competing class actions to be commenced to proceed, after taking what was referred to as a "comparative multifactorial assessment". This involved analysing a range of factors such as the comparative estimates of likely returns to group members, funding models, and the willingness of the legal advisers to contemplate novel ways of managing legal costs and expert evidence. His Honour made orders permanently staying the other two proceedings, and began the process of making a common fund order and settling an opt out notice.

The background

On 19 January 2018, the media reported issues with GetSwift's customer contracts and forecasts, leading to the announcement of a trading halt and then suspension of its shares. When GetSwift recommenced trading, its share price had dropped 82%.
This led to three competing class actions, all in the Federal Court, and commenced in the following order:

  1. The Perera Proceeding, with Squire Patton Boggs, backed by International Litigation Partners No 18 PTE Ltd. The funding agreement provided for a commission between 25% to 40% but, in submissions, they proposed that a common fund order be made with payment of the lesser of 25% of net proceeds or 22.5% of gross proceeds;
  2. The McTaggart Proceeding, with Corrs Chambers Westgarth, backed by Vannin Capital Operations Limited. The funding agreement provided for a funding commission of 10% if proceeds were received by the end of 2018, 20% if received before September 2019, and 30% if received thereafter (in each case, applied to gross proceeds). During submissions, the McTaggart applicants indicated that they would be content with a common fund order which provided essentially the same terms as their funding agreement; and
  3. The Webb Proceeding, with Phi Finney McDonald, backed by Therium Capital Management Limited. The proposed funding model (there was no signed agreement) provided a funding commission that was the lesser of:
    1. a multiple of the expenses Therium paid in the proceedings, being 2.2 times if settlement occurred by 12 April 2019 or 2.8 times if settlement occurred after 12 April 2019; or
    2. 20% of the net litigation proceeds (ie settlement sum less approved professional fees and disbursements).

The Relevant Period in each case was the same and, whilst not identical, the claims sought to be advanced were broadly similar.

Judgment in Perera v GetSwift Limited

In a lengthy judgment that provides a useful history of the class action regime in Australia and the powers afforded to the Court by the Federal Court Act, Justice Lee identified that what was required was a "multifactorial assessment" that required a comparative analysis involving a "broad evaluative assessment and synthesis of all of the factors".

Key factors analysed in multifactorial assessment

The proposed common funding models

As a critical threshold issue, Justice Lee proceeded on the assumption that the case would settle rather than proceed to hearing, based on the fact that no securities class actions in Australia has ever resulted in a final judgment.

Whilst his Honour was hampered by the lack of common assumptions between the three contenders as to issues such as the steps required before mediation, he synthesised the three proposals and compared them, reaching the conclusion that the funding proposal put forward by the Webb parties was more likely to result in a greater return to group members than the others.

The two-tier funding model proposed in the Webb Proceeding was superior: rather than being based on a simple percentage commission, the funding model proposed to link the funder's commission to either legal costs or litigation proceeds, depending on which of the two was lower. Therefore, the funder's risk would increase incrementally as legal costs increased. Justice Lee considered that this would produce a more direct correlation between the amount ventured and the likely return, avoiding the potential for a windfall return in the event that there is a late settlement at a very significant settlement sum, and it would help to facilitate the making of an early common fund order.

Measures for controlling legal costs

In a somewhat novel approach, Phi Finney and Therium suggested a Court-appointed referee to conduct periodic reviews of the reasonableness of the applicant's legal costs (the other parties did not address this suggestion). Justice Lee considered this a very considerable advantage in that it would allow for an iterative process with a referee making interim reports that would address any unnecessary costs at an early stage. It would allow for consideration of, for example, the reasonableness of the proposed approach to discovery.

Measures to control expert costs

Phi Finney and Therium were also the only ones to accept that there was any scope for the Court to appoint (or for the parties to jointly engage) a forensic economist to assist the Court in respect of matters of loss, causation and quantum. Although yet to form any definitive views as to whether to adopt this proposal, Justice Lee considered that it could potentially save significant costs.

Other factors

There were other factors that Justice Lee did not put much weight on because they were of less consequence or largely equal amongst the three competing class actions, which included:

  1. The experience of the law firms and legal resources available;
  2. The state of preparation and order in which the proceedings were commenced: this factor should not be given weight because it could encourage hasty decision-making and poorly thought through pleadings. Although the Webb Proceeding was the last to commence, Justice Lee considered that its funding structure and terms presented real advantages;
  3. The funding resources available including for security for costs: each funder could provide security and would likely have sufficient funds;
  4. The substantive merits of the proceedings generally and of each applicant's case;
  5. The existence of funding agreements (where only the Perera and McTaggart Proceedings had signed agreements): again, of less relevance given the common fund orders; and
  6. The number of group members involved: this should not be given any real weight where common fund orders would be sought. There would also be no prejudice as they could sign up to the class action that proceeds.

The Webb Proceeding to proceed

In circumstances where the Webb Proceeding had proposed innovative ways of seeking to reduce legal costs (the costs referee and a court appointed expert), and given its partly costs-based funding model was superior to the alternatives, Justice Lee held that the Webb Proceeding would continue.

The other Proceedings to be permanently stayed

Justice Lee considered carefully the Court's power to permanently stay the other proceedings or, in the alternative, to declass, consolidate, close the class in the other actions, or order a joint trial. Justice Lee determined that he had the power to permanently stay the Perera and McTaggart Proceedings on the grounds that their continuation would constitute an abuse of process. In circumstances where their claims could still be pursued (in the Webb Proceeding), to allow a duplication of open class actions to proceed "when they perpetuate unnecessary multiplicity...would bring the administration of justice into disrepute".

An early common fund order and an opt out notice

All parties had no difficulty in the Court making an early common fund order. Justice Lee considered that there are significant advantages of making an early common fund order. It would in particular provide for a level of certainty (eg group members can make an informed decision as to whether the funding regime is appropriate at the time of opt out). Further, as a common fund order is an interlocutory order, it can be varied if a matter emerges which materially changes the initial assessment.

The precise terms of the order and the opt out notice is still to be determined and the Perera and McTaggart parties (and their funders) were given leave to appear on the opt out notice issues.

Useful guidance for managing competing class actions

The complications caused by competing class actions are not just an increasing feature in the class action landscape, but a key issue under consideration by the ALRC. Notwithstanding the caution by Justice Lee as to the fact-specific nature of the exercise, the GetSwift decision provides helpful guidance as to the factors to take into account when managing competing class actions, or at least those with significantly similar common issues for consideration, relevant time periods, and case theories.

It also illustrates the willingness of the Courts (and hopefully also the applicants' advisers) to consider constructive ways to manage these cost heavy claims in a way that will hopefully be fair not only to group members but also to the corporate and individual defendants and their insurers. Of particular interest are the suggestions for managing plaintiffs' costs and of novel ways to structure funding agreements.

Amanda Ryding Lucy Chen
Commercial litigation
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions