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Class actions – competing class actions

In Wigmans v AMP Limited & Ors [2021] HCA 7 (10 March 2021) the High Court was required to consider whether the Supreme Court of New South Wales had the power to choose between competing group proceedings as to which to allow to proceed on any basis other than on a “first-in-time” basis.

In April 2018, AMP executives gave testimony to the Financial Services Royal Commission to the effect that AMP had deliberately charged some of its clients fees for no service and that it had misled ASIC as to the extent of its conduct. Following this testimony, the value of AMP shares on the Australian Stock Exchange dropped sharply.

Subsequently, and in quick succession, five separate open class representative proceedings were commenced on behalf of AMP shareholders who had invested in AMP during the periods of time in which they allege the company should have disclosed the information, revealed at the Royal Commission, to ASIC.

The first of these representative proceedings was brought by the applicant (Wigmans). The last two group proceedings commenced were brought by the second respondent (Kolotex) and the third respondent (Fernbrook). Kolotex and Fernbrook later consolidated their proceeding (the Kolotex/Fernbrook proceeding).

The head plaintiffs for each group proceeding brought an application to permanently stay the other group proceedings. The primary judge ordered that all of the group proceedings, save for the Kolotex/Fernbrook proceeding, be permanently stayed.

Ostensibly, the primary judge made this order pursuant to ss67 and 183 of the Civil Procedure Act 2005 (NSW) (CPA) (which respectively empowers the court to stay proceedings and empowers the court to make any order the court thinks necessary to ensure that justice is done) and the inherent power of the Supreme Court (which encompasses both powers).

The primary judge approached the determination of the stay applications by an assessment of the potential benefits expected to flow to group members in each representative proceeding. The trial judge proceeded by reference to the case management principles contained in the “overriding purpose” provided in s56 of the CPA and adopted a “multi-factorial analysis” of the kind endorsed by the Full Federal Court in Perera v GetSwift Ltd (2018) 263 FCR 92 at [195].

The eight factors, identified by the primary judge, as relevant to the determination of the stay applications included: the net hypothetical return to group members; the proposal for security for AMP’s costs; the nature and scope of the causes of action advanced; the size of the respective classes; the extent of any bookbuild (that is the process of joining a sufficient number of members with a sufficient claim value to make the funding of the group proceeding commercially viable); the experience of the legal practitioners and funders and the availability of resources; the state of progress of the proceedings; and the conduct of the representative plaintiffs to date.

Applying these factors, the trial judge favoured the Kolotex/Fernbrook proceeding because of its superior proposal with respect to the provision of security for AMP’s costs and the proceeding was to be funded by the lawyers themselves on a “no win, no fee basis”.

Wigmans appealed unsuccessfully to the Court of Appeal of New South Wales. The Court of Appeal found no error in the primary judge’s reasons, although the court considered that the determination of the stay applications ultimately turned on whether the ends of justice required such a remedy rather than case management principles.

Wigmans then appealed to the High Court. In a narrow 3:2 split Wigmans’ appeal failed. Kiefel CJ and Keane J (in the minority) did not consider that either the CPA or the Supreme Court’s inherent power to prevent abuse of its processes authorised the Supreme Court to chose between group proceedings.

Their Honours also expressed the view at [15] that the court’s “fundamental function as the independent arbiter of the merits the merits of the group members’ claims as between them and the defendant sits awkwardly with the assumption, without legislative direction, of a role whereby the court makes a reputational investment in the choice of sponsor”.

Their Honours stated at [43] that the courts below should have determined the stay applications by reference to the principle that it is prima facie vexatious to commence an action if an action is already pending in respect of the same controversy in whch the same relief is available. And, on that basis, given that the Wigmans proceeding was first in time, the Kolotex/Fernbrook proceeding should have been stayed.

The majority (Gageler, Gordon and Edelman JJ) reached a very different conclusion. The majority considered at [73] that s67 of the CPA was a broad power, unconstrained by any particular criteria, other than having regard to the overriding purpose set out in s56.

Similarly, the majority concluded at [94] that the common law does not support a first-in-time rule or presumption. Instead, the majority observed, multiple suits remain to be resolved by the exercise of the court’s discretion informed by all the relevant circumstances and referred to the approach adopted in equity as illustrated in cases such as McHenry v Lewis (1822) 22 Ch D 397.

Accordingly, the majority held at [118] that there was no error in the primary judge’s approach but noted that that this was not the only manner in which a court might have resolved the issue. It is convenient to note here that the majority, also expressed the view at [86] and [97] that the “first-in-time”, for which Wigams contended, would be “unworkable” and would lead to “an ‘ugly rush’ to the court door”.

Dr Michelle Sharpe is a Victorian barrister practising in general commercial, real property, disciplinary and regulatory law, 03 9225 8722, email msharpe@vicbar.com.au. The full version of these judgments can be found at austlii.edu.au.

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