2015 saw the commencement and settlement of class actions in a
range of areas: shareholder, investor, consumer, product liability,
environment, and government in the Supreme Courts of Victoria and
New South Wales as well as the Federal Court of Australia. The Law
Reform Commission of Western Australia also published its report on
class actions and recommended the adoption of a class actions
regime for that state.
2015 also saw judgments in relation to a number of very significant
class actions issues. The High Court of Australia limited the reach
of the proportionate liability regimes in federal statutes so that
only claims based on misleading or deceptive conduct are subject to
proportionate liability. Other claims based on the same facts will
be determined on the basis that joint and several liability
applies.
Indirect or market-based causation was found to be arguable by the
Full Federal Court in the Arasor shareholder class action. This
approach to causation creates a lower standard than the traditional
direct reliance requirement and if accepted more widely would make
shareholder class actions easier to prove. The Full Federal Court
also found against bank customers in the bank fees class action but
the matter will be finally determined by the High Court in
2016.
The Federal Court declined to make orders to allow litigation
funders to employ a "common fund approach" to
funders' fees so that all group members are automatically
liable to pay a share of any recovery to the funder.
The Supreme Court of Victoria was called to rule on the vexed issue
of Anshun estoppel (whereby a party can be estopped from bringing a
subsequent claim if it could reasonably have done so in prior
proceedings) in the class action context. The class action
legislation states that group members are bound by the outcome of a
class action, even though they are not before the court. However,
whether a group member can be prevented from litigating a claim
that was not part of the class action but related to the class
action claim is less clear. The Supreme Court found that Anshun
estoppel did not apply, but the matter has been appealed.
New Class Actions
2015 saw the commencement of a number of previously mooted
shareholder class actions. QBE, Vocation, Myer, UGL Ltd,
WorleyParsons and MacMahon Holdings were all sued by their
shareholders in 2015. Investigations into potential shareholder
class actions were also advertised in relation to Slater &
Gordon, IOOF, and Iluka. Slater & Gordon, the class actions law
firm, is the subject of a potential shareholder class action
because it is listed on the Australian Securities Exchange
("ASX") and subject to the applicable securities laws.
Investor class actions were also prominent, as claims commenced
involving Provident Capital Ltd and Wickham Securities.
Product liability claims continued in 2015. A class action is being
considered in relation to frozen berries that were subject to a
product recall. Consumer claims have been raised concerning the
painkiller Nurofen and whether misleading statements were made
about how the active ingredient operated. A consumer claim against
the airlines Jetstar and Virgin is also being investigated
regarding "drip pricing" (surcharges added at the end
point of sale which the consumer was not aware of in the advertised
price). If pursued, both of the latter claims will follow on from
successful actions by the Australian Competition and Consumer
Commission.
A class action against the federal government has been commenced in
relation to the Manus Island regional processing centre for asylum
seekers. A class action is being investigated in respect of the
Commonwealth's Home Insulation program that was cancelled in
2010, and another in connection to chemical contamination around
the Williamtown air force base. There have also been claims
involving floods and bushfires such as the Callide Dam flood in
Queensland and the Perth Hills/Parkerville bushfire in Western
Australia.
Judgments and Settlements
Investor Claims. Long-running claims from the
global financial crisis were resolved in 2015. The Storm Financial
class action against the Commonwealth Bank of Australia settled for
$33,680,000, or 55 percent of the group members' claims.
Costs of $10,340,062 were deducted from the recovery. Similar class
actions against Macquarie Bank and Bank of Queensland had
previously settled.
The class action proceedings brought in 2009 on behalf of persons
who purchased units in the MFS Premium Income Fund was settled
along with proceedings brought in 2013 by the fund's present
responsible entity, Wellington Capital. The claims were against the
former auditors and the responsible entity. The class action was
memorably described by Perram J as "a long and drawn out
procedural Stalingrad in which no quarter will be given" and
resulted in 16 interlocutory judgments. The quantum of the
settlement was not disclosed.
The class action by persons holding debentures issued by Australian
Capital Reserve when it collapsed settled for $25 million plus
interest (including legal costs of about $5 million).
December 2015 also saw judgment given in the class action brought
by Trilogy Funds Management Limited (as responsible entity for the
Pacific First Mortgage Fund) regarding losses on fund loans during
2006 and 2007 to Atkinson Gore Agricultural Pty Ltd. It was alleged
that lending decisions made by the defendants were unreasonable
and, amongst other things, failed to follow the fund's lending
criteria. Wigney J delivered judgment in favour of Trilogy Funds
Management Limited. Wigney J made compensation orders against two
of the respondents for $37,214,088.28 plus interest, and against
two other respondents for $6,245,974.93 plus interest.
Consumer Claims. The Cash Converters cases dealing
with pay day lending in New South Wales were settled through the
establishment of a $20 million fund to compensate borrowers and
with the additional payment of $3 million in legal costs. A further
class action against Cash Converters dealing with Queensland
borrowers was commenced in 2015.
Product Liability. The Vioxx class action
settlement which was initially denied approval on 17 May 2013 was
modified and obtained approval in February 2015. The new settlement
overcame issues with the original settlement, which it
was said gave insufficient attention to the relative strength
of group members' claims. The new settlement adopted a points
system which recognised the differential impacts of certain
personal circumstances presumptively predisposing group members to
the occurrence of a heart attack. In another product liability
claim Pfizer settled a class action based on the potential side
effects of the Cabaser and Dostinex tablets that it manufactured
and supplied.
The Bonsoy soy milk product class action involved allegations that
the soy milk contained unsafe levels of iodine. The claim was
settled for $25 million, inclusive of costs and the administration
of the settlement, which left about $16.5 million to be distributed
amongst the group members. The proceedings were brought on a
conditional fee basis with a 25 percent uplift applying.
Environment / Government Claims. The abalone class
action against the State of Victoria reached a settlement but in a
situation where the claim had originally failed at trial and was
being appealed. The State agreed to settle the claim on the basis
that an amount of $2,570,000.00 would be paid for its costs. The
State's costs on a solicitor/client basis were said to be
$6,720,252.30.
The settlement of class actions arising out of the Black Saturday
fires on 7 February 2009 continued in 2015. The Murrindindi fire
class action settled for $300 million with $20 million being paid
in costs and disbursements.
Personal Information Claims. Early in 2015 a class
action settled, which had resulted from information being collected
from potential employees for a joint venture entity to construct a
desalination plant in Victoria. The novel claim saw the defendants
agree to destroy any confidential, private or surveillance
information held in relation to the potential employees.
Personal Injury Claims. The Fairbridge Farm class
action was commenced in the Supreme Court of New South Wales on
behalf of persons who as children suffered injury as a result of
physical or sexual abuse at the Fairbridge Farm School. The class
action settled in 2015 for $24 million. The settlement was approved
by the Supreme Court, but no judgment was published.
High Court of Australia Limits Proportionate Liability Laws to Misleading and Deceptive Conduct
The High Court in Selig v Wealthsure Pty Ltd [2015] HCA
18 determined that the proportionate liability regime in Div 2A of
Pt 7.10 of the Corporations Act 2001 (Cth) and Pt 2, Div
2, subdiv GA of the Australian Securities and Investments
Commission Act 2001 (Cth) ("ASIC Act") only applies
to s 1041H and s 12DA respectively, namely, prohibitions on
misleading or deceptive conduct.
The proportionate liability regime does not apply to other causes
of action for the same loss or damage.
The reasoning will extend to the proportionate liability regime in
Part VIA of the Competition and Consumer Act 2010 (Cth)
such that the regime is similarly limited to claims for loss or
damage based on contravention of the prohibition on misleading or
deceptive conduct in s 18 of the Australian Consumer Law, and does
not apply to other causes of action under the Australian Consumer
Law.
While the High Court has now provided certainty as to the operation
of the proportionate liability regimes in key federal legislation
it is also likely to fuel another round of debate on the proper
limits of proportionate liability.
In 2004 all Australian governments sought to address the "deep
pocket syndrome" whereby professional service providers and
public authorities were targeted in litigation so as to gain access
to their insurance cover. The joint and several liability that
existed at the time meant that a successful plaintiff could recover
their entire loss from any respondent regardless of the
respondent's share of responsibility. This was particularly
attractive when the main entities that were liable were insolvent
or had insufficient assets to meet the judgment. An auditor or
local council may have been responsible for 10 percent of the harm
but could be required to pay 100 percent of the damages claim. This
led to a rise in insurance premiums.
To address the targeting of "deep pockets", joint and
several liability was replaced with proportionate liability for the
causes of action to which the regime applied. This meant that each
respondent was only liable to pay damages to the extent of their
share of the responsibility for the harm.
In Selig v Wealthsure the High Court raised the
counter-argument:1
There is an obvious benefit to wrongdoers from this kind of proportionate liability regime. ... proportionate liability applies regardless of whether a concurrent wrongdoer is insolvent or is being wound up. The risk of a failure to recover from a particular wrongdoer shifts entirely to the plaintiff.
The High Court's finding means that plaintiffs will
endeavour to bring claims on multiple bases so that they are not
subject to proportionate liability and the prospect of being
out-of-pocket if a defendant is insolvent.
As predicted in Jones Day's May 2015
Commentary, the prohibitions on misleading or
deceptive conduct will still be used because they have advantages
over other statutory and common law claims, such as there is no
fault or intention required, and there is no need to show a duty of
care, or breach of that duty, or foreseeability. However, to avoid
proportionate liability other claims based on tort, contract,
equity or statute where joint and several liability applies will be
included. This means that litigation is likely to be longer and
more costly as multiple claims are pleaded and brought to
trial.
The prediction has been proved correct as illustrated by Tamaya
Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm)
[2016] FCAFC 2 where the applicant sought to amend its pleadings to
add a claim based on s 1041E of the Corporations Act 2001
(Cth) because that provision was not subject to a proportionate
liability regime, meaning that the respondent could not
"reduce its liability by reference to its share of the
blame".2
Market-Based Causation Arguable in Shareholder Class Actions
A key battleground in shareholder class actions in Australia is
causation. Increasingly, plaintiffs have sought to argue that the
proper causation standard for these claims should not be direct or
individual reliance in shareholder claims (the most difficult
causation hurdle to jump), but indirect or market-based causation
(a lower hurdle). However, a lower hurdle for causation in
shareholder claims comes with a significant commercial and social
price. The Harvard Law Review described the development of
"dispensing with proof of individualized reliance" in the
United States as "fuel[ing] a multibillion dollar shareholder
class action industry".3 Some recent cases in
Australia suggest that indirect reliance may be gaining
acceptance.
Babcock & Brown. The indirect reliance issue
was contested in the Babcock & Brown shareholder litigation in
the context of a final hearing.4 As events transpired,
because of the grounds on which the plaintiffs failed, Perram J
concluded it was unnecessary for the court to rule on which
causation test should apply.
Nonetheless, the judge (in obiter) expressed the view that if it
had been necessary to rule, it was likely the court would have
accepted indirect reliance as the relevant causation standard. His
Honour indicated that, with qualifications, he would accept that
"a party who acquires shares on a stock exchange can recover
compensation for price inflation arising from a failure to disclose
material required by [the continuous disclosure regime] to be
disclosed".5 The qualifications included that the
relevant statement or omission must be material or have a price
effect (a precursor to disclosure being required) and that a
plaintiff shareholder could not recover if it knew of the
misleading nature of the alleged conduct.
Arasor International Limited. Shareholders in
Arasor International Limited commenced proceedings against
directors and the auditors of the company. The claims related to
statements in or omissions from the following documents and related
conduct:
- A prospectus dated 14 September 2006 in relation to the initial public offering of shares in Arasor in connection with its admission to the official list of the ASX and trading of Arasor shares on ASX's market (September prospectus);
- A short form prospectus dated 23 March 2007 (March prospectus);
- Arasor's 2006 financial statements and its 2007 financial statements; and
- The half-yearly financial statement dated 31 August 2007 released by Arasor to the ASX.
The applicants sought compensation on the following bases:
- Under s 729 of the Corporations Act, for loss or damage "because" an offer of securities under a disclosure document contravenes s 728(1) which prohibits misleading or deceptive statements and omissions of required material;
- Under s 1325 of the Corporations Act, for loss or damage "because" of conduct of another person in contravention of Ch 6D (including ss 728 and 729) and Pt 7.10 (including s 1041H which prohibits misleading or deceptive conduct in relation to a financial product or service);
- Under s 1041I of the Corporations Act and ss 12GF and 12GM of the ASIC Act, for loss or damage occasioned "by conduct of another person" that contravenes s 1041H of the Corporations Act and s 12DA of the ASIC Act – both prohibiting misleading or deceptive conduct; and
- Under s 159 of the FTA, for loss, injury or damage suffered "because of a contravention of a provision of this Act", relevantly, s 9 which prohibits misleading or deceptive conduct.
The statutory wording of "because" and "by"
has been interpreted as necessitating proof of
causation.6
At first instance the applicant sought to amend its pleadings to
delete direct reliance from two categories of causes of action: (i)
those based on misleading statements or omissions in the September
prospectus and in the March prospectus; and (ii) those based on
misleading conduct in relation to financial products, financial
services or in trade or commerce, so as to employ market-based
causation. The Federal Court in determining whether to grant leave
to amend revisited the law on causation.
Farrell J explained that causes of action in the second category
were based on s 82 of the Trade Practices Act 1974 (Cth)
which had been subject to extensive judicial interpretation. The
case law accepts that causation can be proved without direct
reliance by the person who suffered loss, but there must be
reliance in some form, usually by a third party. Her Honour went on
to allow the amendment of the pleading:7
despite the strength of intermediate appellate court authority which requires reliance to be demonstrated as an element of causation where an investor has entered into a transaction to which the claim of misleading or deceptive conduct is relevant, recent High Court authority on s 82 of the TPA and the fact that market-based causation claims relying on ss 1041H and 1041I and their analogues in the ASIC Act in the context of Chapter 6CA have not been considered by the High Court suggest that the state of the law cannot be regarded as so settled that an appropriately pleaded claim would have no reasonable prospect of success.
However, in relation to the first category of claims based on a
misleading prospectus, the deletion of reliance was rejected as the
High Court found that the pleading did not set out any other causal
connection and would, impermissibly, plead only a
conclusion.8 Her Honour also expressed concern that if
reliance was not pleaded, but was ultimately found to be necessary,
then those group members who could prove reliance would be unable
to recover.9
The applicants appealed Farrell J's decision to the Full
Federal Court. The primary judge's decision was appealed due to
confusion over whether the applicants had been denied the ability
to plead market-based causation in relation to ss 728 and 729 of
the Corporations Act 2001 (Cth), the first category of
claims.
The joint judgment of Gilmour and Foster JJ found that the orders
"had the effect of shutting out the applicants from pleading
market-based causation in relation to their ss 728 and 729
case".10 Edelman J disagreed.11
Nonetheless, the Full Federal Court found such a pleading was
arguable as it was neither futile nor likely to be struck
out.12
The joint judgment relied on the Full Court of the Federal Court in
ABN AMRO Bank NV v Bathurst Regional Council (2014) 224
FCR 1 which said that "[t]here is no bright-line principle
that it is insufficient for a plaintiff to prove that some other
person relied on the alleged misleading conduct and that that
person's reliance led to the plaintiff suffering loss".
The joint judgment also pointed to the text of s 729 which does not
refer to reliance and considered that market-based causation may
also be supported by the policy behind the
provision.13
Edelman J found that it was at least arguable that market-based
causation could be employed as a technique of causation without
reliance. His Honour referred to cases that involve misleading
conduct by one trader which leads to customers being diverted from
another trader: Janssen-Cilag Pty Ltd v Pfizer Pty Ltd
(1992) 37 FCR 526. Edelman J also stated that another factor in
favour of market-based causation being arguable was that s 729
permits liability in the case of an omission. Reliance on an
omission was described as "a strain of
language".14
The Full Court also pointed to other recent decisions where
pleadings of indirect reliance had been permitted to proceed or
implicitly endorsed as being arguable, such as Camping
Warehouse Australia Pty Ltd v Downer EDI Ltd [2014] VSC 357;
Bolitho v Banksia Securities Ltd [2014] VSC 8; Earglow
Pty Ltd v Newcrest Mining Ltd [2015] FCA 328; Grant-Taylor
v Babcock & Brown Ltd (in liq) [2015] FCA 149.
The Full Court's decision in Caason Investments Pty Limited
v Cao [2015] FCAFC 94 continues the line of cases that has
endorsed the availability of indirect reliance for proving
causation without actually finding causation proved. Like
Caason, most of the decisions have been interlocutory
judgments dealing with pleading issues where the defendants bore
the usual higher burden of proof compared to the standard burden
applicable at the trial stage. Alternatively they have been obiter
statements in final judgments.
Despite indirect reliance being accepted as being available to
prove causation in shareholder class actions it still remains
unclear as to how that form of reliance will actually be proved.
Edelman J highlighted the need to identify how the causal mechanism
was said to operate—how did the relevant conduct affect the
market price, or what were the links in the chain of
causation?15
The Full Court's decision was analysed in a September 2015
Jones Day
Commentary.
Bank Fees Class Actions Returns to High Court
The high profile bank fees class actions ground to a halt in
2015 with the Full Federal Court overturning the first instance
decision finding that late payment fees were a penalty. However,
special leave to appeal to the High Court was obtained and the
matter was set down for hearing on 4 and 5 February 2016.
The proceedings now before the High Court were originally heard by
Gordon J, when she was a justice of the Federal Court, in 2014.
Gordon J was appointed to the High Court in June 2015. The
proceedings were brought as a class action by Mr Lucio Paciocco and
a company controlled by him, Speedy Development Group Pty Ltd
(SDG).
Mr Paciocco held a consumer deposit account and two consumer credit
card accounts with Australia and New Zealand Banking Group Limited
(ANZ). SDG held a business deposit account. The Applicants sought
to set aside bank fees charged by ANZ because the fees:
- Were penalties, either at common law or in equity; or
- Were the products of unconscionable conduct by ANZ within the meaning of the ASIC Act, ss 12CB and 12CC, or the Fair Trading Act 1999 (Vic) (the FT Act), ss 8 and 8A; or
- Were unjust under the National Credit Code in Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth); or
- Were charged pursuant to contractual provisions that were unfair contract terms under the FT Act, s 32W and the ASIC Act, s 12BG.
ANZ denied the claims made by Mr Paciocco and SDG and contended
that Mr Paciocco and SDG were statute barred from bringing claims
in relation to two of the fees because they were debited from the
account more than six years prior to the commencement of the
proceedings.
Gordon J made the following findings:16
- The credit card late payment fees charged by the ANZ were penalties at common law and in equity;
- The bank customers were entitled to recover from ANZ the difference between the credit card late payment fees paid to ANZ and ANZ's actual loss;
- The non-payment fees, over limit fees, honour fees and dishonour fees were not penalties;
- None of the fees were charged in contravention of various statutory provisions in relation to unconscionable conduct, unjust transactions or unfair contract terms; and
- Mr Paciocco's claims were not statute barred.
Both parties appealed Gordon J's decision. ANZ submitted
that Gordon J erred in finding that the late payment fee was a
penalty and that s 27 of the Limitation of Actions Act
1958 (Vic) applied to two fees (thereby bringing those claims
within time).
Mr Paciocco and SDG contended that Gordon J erred because her
Honour did not construe the fees (other than the credit card late
payment fee) as penalties and her Honour did not find that there
was statutory unconscionability, unjust transactions or unfair
contract terms.
The Full Federal Court, which comprised of Allsop CJ, Middleton J
and Besanko J, overturned Gordon J's finding that the late
payment fee was a penalty but otherwise upheld her Honour's
judgment.
The appeal to the High Court and the respondent's notice of
contention address all three issues below, namely, the penalties
doctrine, the statutory claims and the operation of the statute of
limitations.
A May 2015 Jones Day
Commentary provides a more detailed analysis.
Federal Court of Australia Rejects "Common Fund" for Litigation Funders
In the Allco shareholder class action, an application was filed
by the two applicants/representative parties seeking orders for the
appointment of International Litigation Funding Partners Pte Ltd
(ILFP) as the funder of the class action on the terms of the
litigation funding agreement (reimbursement of legal fees paid to
the lawyers and payment of between 22.5 percent and 35 percent of
any recovery) entered into by some group members.
The making of the orders would have the result that all group
members would be liable to pay the funder's fees (costs
incurred by the funder and a percentage of any recovery) without
having entered into any agreement.
The orders, if made, would remove the need for a litigation funder
to contract with a group member to be paid and therefore allow for
an open rather than a closed class to be employed. An open class is
a traditional opt out class action that includes all group members
who meet the group definition, regardless of whether they have
entered into a litigation funding agreement. A closed class is a
subset of an open class that is achieved by adding an additional
requirement to the group definition that limits the group to those
persons who have entered into a litigation funding agreement with a
specific funder. The closed class made entering into a funding
agreement a pre-requisite to being included in the class action.
The application would create a funding regime similar to the common
fund approach employed in the United States for the payment of
lawyers' fees in class actions.
Wigney J declined to make the orders. The Federal Court found that
the orders, while advantageous to the litigation funder, were not
"appropriate or necessary to ensure that justice is done in
the proceeding" as required by section 33ZF(1) of the
Federal Court of Australia Act 1976 (Cth).
The current decision demonstrates the growing and significant role
that litigation funding plays in relation to class actions. This
can be a positive development through providing the necessary
financial resources to seek access to justice for those with small
claims. However, the judgment recognised explicitly that funders
structure class actions and their funding arrangements in their own
self-interest. Litigation funders aim to make profits for their
investors, they are not a benevolence fund looking to do
good.
The law around class actions has been developed by funders seeking
to advance their interests through favourable precedent
development. The closed class that was approved in the Multiplex
class action is a clear example. Wigney J examined the sought after
orders from the perspective of their impact on group members as a
whole and found that while the orders may assist the funder they
were not in the interests of group members. It must not be
forgotten that the function of class actions is to pursue remedies
for those allegedly wronged—not to make profits for
litigation funders.17
The Allco decision means that litigation funders will in the short
term continue to either employ a closed class definition or seek
orders as part of any settlement to address the existence of
unfunded group members. The latter gives rise to a continuing
debate as to how unfunded group members should be dealt with. Two
broad approaches have been adopted to date. First is an
equalisation order whereby unfunded group members have their
recovery reduced by the amount the funded group members have paid
to a litigation funder. This amount is redistributed across all
group members. The second is the imposition of the funding
agreement terms on unfunded group members so that they must pay the
funder's fee to the funder. The former ensures equality amongst
group members but without a direct payment to the funder. The
second ensures equality but with funder receiving a greater
fee.
In the GPT shareholder class action, Gordon J rejected the second
approach observing that "it is difficult to conceive of a
circumstance in which it would be appropriate"18
and employed the first, in keeping with the approach adopted in the
Aristocrat and Multiplex class actions. However, the second
approach has been employed in two class actions—a shareholder
claim in the Supreme Court of Victoria, and a bank fees claim in
the Federal Court.19
Jones Day's
September 2015 Commentary offers a more detailed
analysis of the Federal Court's decision.
Failed Class Actions: To What Extent are Group Members Bound by an Unsuccessful Outcome?
The extent to which a group member is bound by the outcome in a
class action is of great significance to group members, defendants,
and the justice system generally. The group member will want to
know whether their claims are completely subsumed by the class
action, or are they only bound by the resolution of the common
issues as this will be a central consideration as to whether they
opt out of the class action, or take other steps to protect their
interests. Equally, defendants will be concerned to know if the
class action will resolve all claims against them, except for those
group members that opt out, or whether they may face further
litigation. More generally, the fairness of the class action regime
hinges on all participants knowing the extent to which their rights
are to be determined or not.
The answer to the question "To what extent are group members
bound by an unsuccessful class action?" turns on the
application of the legal doctrines or res judicata, issue estoppel,
Anshun estoppel and abuse of process.
In Timbercorp Finance Pty Ltd (In Liq) v Collins and Tomes
[2015] VSC 461 the Supreme Court of Victoria was called on to
decide whether group members in a failed class action could raise
individual defences in related litigation. The class action was
based on non-compliance with the requirements for a product
disclosure statement and allegations of misleading conduct in
relation to investments in horticultural and forestry managed
investment schemes. A component of the schemes was the provision of
loans to investors. The related litigation involved claims to
recover the loans plus interest and was defended by former group
members who sought to challenge the validity and enforceability of
the loan agreements through defences not raised in the class
action.
The lender, Timbercorp Finance, argued that the defendants were
precluded as a matter of law from raising their pleaded defences,
by Anshun estoppel, and/or because raising the defences constitutes
an abuse of process. Timbercorp Finance did not seek to rely on res
judicata or issue estoppel. It was also accepted that if the
borrowers had opted out of the group proceedings then they would
not be denied the ability to plead their defences.
Timbercorp Finance raised an array of arguments. Central to the
Court's consideration was s 33ZB which provides:
A judgment given in a group proceeding—
(a) must describe or otherwise identify the group members who will
be affected by it; and
(b) subject to section 33KA, binds all persons who are such group
members at the time the judgment is given.
Robson J found that Anshun estoppel and abuse of process did not
apply. Robson J found that s33ZB did not create common law privies,
but rather s 33ZB privies, which has an application similar to
issue estoppel but not Anshun estoppel.20 Put another
way—estoppel on the common issues only. Robson J's
finding was contrary to High Court obiter in Tomlinson v Ramsey
Food Processing Pty Limited [2015] HCA 28 and statements by
Croft J in Clarke v Great Southern [2014] VSC 516.
Unsurprisingly, the decision has been appealed to the Victorian
Court of Appeal.
Jones Day's
November 2015 Commentary on the Supreme Court of
Victoria's decision provides further analysis.
Settlement of Class Actions Involving Trusts
In Hodges v Waters (No 7) [2015] FCA 264 the Federal
Court was required to determine whether to approve a settlement
where beneficiaries or unit holders of a trust alleged claims
against an auditor in a situation where the trustee also had a
claim for the same loss against the auditor. The auditor raised as
a defence the reflective loss principle that means that even though
a unit holder might have a personal loss, he or she may not recover
it if it was reflected in a loss by the trust. The application of
the reflective loss principle, while settled in company law, is
unresolved in Australia in relation to a trust.
Further, as the trustee, some years later, also commenced
proceedings which it sought to settle, the Federal Court was also
asked to deal with a judicial advice application pursuant to s 63
of the Trustee Act 1925 (NSW). The Federal Court was
required to determine whether it had jurisdiction to deal with the
application and, if it did, whether the trustee would be justified
in settling the proceedings.
Perram J considered the settlement from the perspective of the
prospects of each claimants' success and opined:
the most likely outcome to this litigation was that it would be
lost. There was a high risk that the applicants had no standing to
proceed and a good chance the bulk of the trustee's claim was
statute barred.21
The Federal Court did not disclose the quantum of the settlement as
confidentiality was a condition precedent to the settlement of the
class action proceedings under the settlement deed. Based on the
judge's view that the claim was worth $80 million and the
probable, although not certain, outcome that the case would be lost
the payment was considered to be "a good settlement" and
was approved.22
The Federal Court also found that it had jurisdiction to provide
judicial advice and gave the advice that the trustee would be
justified in settling the proceedings.
Jones Day's April 2015
Commentary offers additional analysis.
Footnotes
1 Selig v Wealthsure Pty Ltd [2015] HCA 18 at [21].
2 Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2 at [63].
3 "Class Actions—Presumption of Reliance Under SEC Rule 10B-5 - Halliburton Co v Erica P John Fund Inc" (2014) 128 Harvard Law Review 291.
4 Grant-Taylor v Babcock & Brown Limited (In Liquidation) [2015] FCA 149.
5 Grant-Taylor v Babcock & Brown Limited (In Liquidation) [2015] FCA 149 at [220].
6 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525.
7 Caason Investments Pty Limited v Cao [2014] FCA 1410 at [106].
8 Caason Investments Pty Limited v Cao [2014] FCA 1410 at [111], [120]-[125].
9 Caason Investments Pty Limited v Cao [2014] FCA 1410 at [116].
10 Caason Investments Pty Limited v Cao [2015] FCAFC 94 at [9].
11 Caason Investments Pty Limited v Cao [2015] FCAFC 94 at [92].
12 Caason Investments Pty Limited v Cao [2015] FCAFC 94 at [65], [187].
13 Caason Investments Pty Limited v Cao [2015] FCAFC 94 at [68]-[71].
14 Caason Investments Pty Limited v Cao [2015] FCAFC 94 at [154]-[156].
15 Caason Investments Pty Limited v Cao [2015] FCAFC 94 at [112], [131]-[132], [184].
16 See Jones Day Commentary, " Bank Fees Class Actions in Australia: Customers Recover Credit Card Late Payment Fees That Exceeded Bank's Costs" (February 2014).
17 See Treasury Wine Estates Ltd v Melbourne City Investments Pty Ltd [2014] VSCA 351 at [14].
18 Modtech Engineering Pty Limited v GPT Management Holdings Limited [2013] FCA 626 at [60].
19 Pathway Investments Pty Ltd v National Australia Bank Ltd (No 3) [2012] VSC 625; Farey v National Australia Bank Ltd [2014] FCA 1242.
20 Timbercorp Finance Pty Ltd (In Liq) v Collins and Tomes [2015] VSC 461 at [583]-[585].
21 Hodges v Waters (No 7) [2015] FCA 264 at [89].
22 Hodges v Waters (No 7) [2015] FCA 264 at [92].
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