FEDERAL COURT OF AUSTRALIA

Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107

ORDERS

THE COURT ORDERS THAT:

1.    Leave to appeal be granted limited to grounds 1 to 5 and the relevant parts of the draft notice of appeal stand as the notice of appeal.

2.    The application for leave to appeal be otherwise dismissed.

3.    The appeal be allowed in part (insofar as grounds 3, 4 and 5 are concerned) and order 1 made by the primary judge on 18 December 2018 in the Klemweb proceeding be set aside.

4.    Pursuant to s 37P(2) of the Federal Court of Australia Act 1976 (Cth) the applicants in the Klemweb proceeding and the Impiombato proceeding and the legal representatives acting in those proceedings confer by 10 June 2019, with a view as to ascertaining whether a joint proposal for the consolidation of those proceedings can be agreed (joint proposal).

5.    On or by 13 June 2019, the applicants in in the Klemweb proceeding and the Impiombato proceeding provide to the Associates to Justices Middleton, Beach and Lee and serve either: (a) a minute of order to implement the joint proposal; or (b) notification that a joint proposal is not agreed.

6.    The parties file and serve written submissions as to further relief and the orders for costs for which they contend (limited to three pages) by 14 June 2019.

7.    The further hearing of the appeal be adjourned and subject to further order, the issue of any further relief and any issue as to costs be determined on the papers.

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

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be dismissed with costs.

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

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be dismissed with costs.

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

ORDERS

THE COURT ORDERS THAT:

1.    Leave to appeal be granted limited to grounds 1 to 5 and the relevant parts of the draft notice of appeal stand as the notice of appeal.

2.    The application for leave to appeal be otherwise dismissed.

3.    The appeal be allowed in part (insofar as grounds 3, 4 and 5 are concerned).

4.    The draft notice of cross appeal stand as the notice of cross appeal and be dismissed.

5.    Pursuant to s 37P(2) of the Federal Court of Australia Act 1976 (Cth) the applicants in the Klemweb proceeding and the Impiombato proceeding and the legal representatives acting in those proceedings confer by 10 June 2019, with a view as to ascertaining whether a joint proposal for the consolidation of those proceedings can be agreed (joint proposal).

6.    On or by 13 June 2019, the applicants in in the Klemweb proceeding and the Impiombato proceeding provide to the Associates to Justices Middleton, Beach and Lee and serve either: (a) a minute of order to implement the joint proposal; or (b) notification that a joint proposal is not agreed.

7.    The parties file and serve written submissions as to further relief and the orders for costs for which they contend (limited to three pages) by 14 June 2019.

8.    The further hearing of the appeal be adjourned and subject to further order, the issue of any further relief and any issue as to costs be determined on the papers.

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

ORDERS

THE COURT ORDERS THAT:

1.    Klemweb Nominees Pty Ltd and Vince Impiombato file and serve minutes of orders within 14 days which, to the extent feasible, adopt the model of consolidation orders including the Co-operative Litigation Protocol made in proceedings Southernwood v Brambles Limited VID 972 of 2018.

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

ORDERS

THE COURT ORDERS THAT:

1.    Klemweb Nominees Pty Ltd and Vince Impiombato file and serve minutes of orders within 14 days which, to the extent feasible, adopt the model of consolidation orders including the Co-operative Litigation Protocol made in proceedings Southernwood v Brambles Limited VID 972 of 2018.

2.    The costs of the parties relating to BHP’s cross-appeal be the parties’ costs in the cause.

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

REASONS FOR JUDGMENT

MIDDLETON AND BEACH JJ:

1    On 28 May 2019 the Court made orders disposing of four applications for leave to appeal concerning orders made by the primary judge in three competing representative proceedings being:

(a)    Impiombato v BHP Group Limited, proceeding No. VID 649 of 2018 (the Impiombato proceeding), which was commenced on 31 May 2018. The solicitors for the applicant are Phi Finney McDonald, with the funder being G&E KTMC Funding LLC.

(b)    Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited, proceeding No. VID 1077 of 2018 (the Klemweb proceeding), which was commenced on 31 August 2018. The solicitors for the applicant are Maurice Blackburn Lawyers. There is no external litigation funder.

(c)    Los Angeles County Employees Retirement Association (LACERA) v BHP Group Limited, proceeding No. VID 1218 of 2018 (the LACERA proceeding), which was commenced on 24 September 2018. The solicitors for the applicant are Johnson Winter & Slattery, with the funders being Harbour Fund IV, L.P. and Robbins Geller Rudman & Dowd LLP.

2    The three representative proceedings have been commenced against BHP Group Limited (BHP) on behalf of shareholders in relation to the collapse on 5 November 2015 of the Fundão tailings dam at the Germano mine in Minas Gerais, Brazil. Each proceeding alleges that BHP engaged in misleading or deceptive conduct and breached its continuous disclosure obligations arising from a failure to inform the market of the material risk that the Fundão dam might collapse. Each proceeding is an open class representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the FCA).

3    The primary judge made orders resolving the overlap and competition between these three proceedings in terms of deciding which one should be permitted to go forward. He selected the Impiombato proceeding to go forward, permanently stayed the Klemweb proceeding, and temporarily stayed the LACERA proceeding. The temporary stay of the LACERA proceeding was to enable a consideration by Mr Impiombato as to whether to amend the Impiombato proceeding to pick up the extended group description and claims in the LACERA proceeding.

4    Four applications for leave to appeal against his Honour’s orders were heard by us. First, Klemweb sought leave to appeal against the order permanently staying the Klemweb proceeding. On 28 May 2019 we granted leave to appeal and allowed that appeal in part. Second, Klemweb sought leave to appeal against orders made in the Impiombato proceeding. We also granted leave to appeal and allowed that appeal in part. Third, LACERA sought leave to appeal against the temporary stay order in the LACERA proceeding, but we refused leave to appeal. Fourth, LACERA sought leave to appeal against orders made in the Impiombato proceeding, but we also refused such leave.

5    Further, BHP sought to cross-appeal against the temporary stay order in the LACERA proceeding, contending that this stay should have been permanent. To the extent that it was necessary to deal with this cross-appeal we dismissed it, albeit by orders made in VID 169 of 2019.

6    As a result of our orders it was then necessary to re-exercise the discretion as to which of the Impiombato proceeding or the Klemweb proceeding should go forward, or whether both should go forward in a consolidated form.

7    We gave the Impiombato and Klemweb parties an opportunity to consider that question further, which they have now done. They have proposed a formal consolidation of the Impiombato and Klemweb proceedings, a solution with which we agree and upon which necessary orders will be made subject to further clarification of the consolidation model to be adopted.

8    Further, the Impiombato and Klemweb parties have agreed to amend the proposed consolidated proceeding to expand the group definition and to make the additional claims pleaded in the LACERA proceeding. Accordingly, there is no good reason why the LACERA proceeding should not now be permanently stayed, although in the absence of agreement from LACERA, formal orders will need to be made by the primary judge given that we have already dismissed its application for leave to appeal concerning orders made in the LACERA proceeding.

9    As a result of what has transpired, it is now only necessary for us to give our reasons explaining the orders that we joined in on 28 May 2019, the proposal for consolidation and on costs.

10    We have had the advantage of considering a draft of Lee J’s reasons. We adopt his Honour’s discussion of the background procedural matters (Sections B to D) and agree substantially with his reasons concerning the refusal of leave to appeal by LACERA and the disposition of BHP’s cross-appeal. In relation to the points raised by LACERA concerning what Lee J refers to as the “Comparability Error Contention”, we substantially agree with his analysis (Section E), save that we do not need to descend into any analysis concerning s 33C of the FCA or dwell on any distinction between the identity of group members and the claims of group members. The primary judge properly appreciated the significance of the different periods, classes and claims involved and any further analysis beyond the primary judge’s consideration would be supererogation on our part.

11    Accordingly, it is only necessary for us to explain our reasons concerning the two grounds upon which we granted leave to appeal in the Impiombato and Klemweb proceedings, being:

(a)    the primary judge’s treatment of s 183 of the Legal Profession Uniform Law, which is set out in Sch 1 to the Legal Profession Uniform Law Application Act 2014 (Vic); and

(b)    his Honour’s treatment of the no win/no fee model propounded in the Klemweb proceeding.

12    But before doing so, we should make three preliminary points.

13    First, applications for leave to appeal from the exercise of a discretionary judgment on a matter of practice and procedure require particular caution. And this is particularly so in the context of such applications seeking to challenge the resolution by a trial judge of the case management problems created by competing class actions. Such decisions are a matter of case management involving the exercise of a discretionary judgment. Further, such decisions commonly involve weighing up incommensurable and conflicting considerations. Further, different judges may weigh the relevant considerations differently. Consequently, there may be a range of potential solutions with no one right answer. Undoubtedly, reasonable minds might differ, and it is not enough that we may have a preference for a different resolution to that adopted at first instance. But having said that, the two matters upon which we granted leave to appeal were significant enough to warrant attention at appellate level in this evolving area.

14    Second, the primary judge methodically and correctly identified the principles concerning resolving the choice between competing class actions discussed in Perera v GetSwift Limited (2018) 363 ALR 394; [2018] FCAFC 202 at [44], [119], [121] to [125], [162] to [165], and [274] to [282] per Middleton, Murphy and Beach JJ. There is no need to restate them.

15    Third, as to the power to make common fund orders and the amplitude and dynamism of s 33ZF of the FCA more generally, we do not need to add to what has been said in Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191 at [160] to [175] per Murphy, Gleeson and Beach JJ, Brewster v BMW Australia Ltd [2019] NSWCA 35 at [82] per Meagher, Ward and Leeming JJA and Westpac Banking Corp v Lenthall [2019] FCAFC 34 at [85] to [96] per Allsop CJ, Middleton and Robertson JJ. But it is in the context of common fund orders and funding more generally that it is necessary to say something about why we granted leave to appeal.

Section 183 of Legal Profession Uniform Law

16    The context in which s 183 of the Legal Profession Uniform Law arose before the primary judge was that Klemweb had proposed a funding arrangement to be the subject of a common fund order involving the payment of a contingency fee to Klemweb’s solicitors.

17    Section 183(1) of the Legal Profession Uniform Law provides:

A law practice must not enter into a costs agreement under which the amount payable to the law practice, or any part of that amount, is calculated by reference to the amount of any award or settlement or the value of any property that may be recovered in any proceedings to which the agreement relates.

Civil penalty:    100 penalty units.

18    Section 185(1) provides:

A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void.

19    It is apparent on its face that the prohibition is on the act of a legal practitioner entering into a costs agreement containing a contingency fee. Moreover, the stipulated consequences for infringing the prohibition, in addition to a civil penalty, is that the costs agreement is void.

20    There are a number of matters to be noted. First, as has been pointed out by the Victorian Law Reform Commission, Access to Justice – Litigation Funding and Group Proceedings (March 2018) at [3.95] and [3.96], s 183(1) does not directly prohibit a practitioner from being paid a contingency fee. Rather, the prohibition is on the practitioner entering into a proscribed costs agreement. Second, the relevant stipulated consequence for an infringement is that the costs agreement is void. Third, s 183(1) does not of course directly speak to this Court’s powers under s 33ZF of the FCA or indeed its express or implied powers more generally to order and thereby permit the payment of a contingency fee to a legal practitioner before it as part of any common fund order and out of any settlement proceeds (s 33V) or any judgment (s 33Z). No State legislature could relevantly circumscribe the exercise of Federal judicial power in that respect. Moreover, to the extent of any inconsistency, ss 33V, 33Z and 33ZF would prevail over s 183(1) and, of course, s 79 of the Judiciary Act 1903 (Cth) would have little operation.

21    Now in our view the primary judge was alive to all of these considerations. But he said at [133]:

…However, even if there would be no contravention of s 183(1), it is unlikely that the Court would make a common fund order incorporating the payment to a law firm of a commission on a settlement sum or judgment in circumstances where the clear legislative policy evinced by s 183(1) is against the payment of such a commission. Accordingly, I consider it unlikely that the Court would make a common fund order as proposed in respect of the Klemweb proceeding.

22    A few observations may be made. First, the express legislative policy is against a legal practitioner entering into an infringing costs agreement, rather than being an express policy against the payment of a contingency fee. But an implicit policy tending against such a payment can reasonably be implied from the express legislative policy. Second, although State legislative policy may not directly inform or constrain the exercise of Federal judicial power, including under ss 33V, 33Z and 33ZF of the FCA, it would seem to us that matters of public policy are not irrelevant to the exercise of this Court’s powers including to make a common fund order. And in that context, to consider s 183 and the direct and indirect policy underpinning it is not an extraneous consideration for his Honour to have taken into account. Third, as to the primary judge’s statement that it would be unlikely that the Court would make a common fund order incorporating the payment of a contingency fee to a law firm, that observation should be appreciated in its context. It is a statement of opinion only and concerning a hypothetical future scenario. His Honour was entitled to hold and express such a view which was reasonably open. Now some judges may consider his Honour’s expression of view to be too conservative. Other judges may consider that his Honour showed commendable restraint. There are a spectrum of views upon which reasonable minds might differ. But none of this bespeaks material House v The King error on his Honour’s part.

23    As we have indicated, we granted leave to appeal on this point, but we did not allow the appeal on this aspect. Rather, we only allowed the appeal on the no win/no fee question to which we now turn.

No win/No fee model

24    We would begin by endorsing the observations of Ward CJ in Equity (NSW) who discussed the no win/no fee model in Wigmans v AMP Ltd [2019] NSWSC 603 when comparing different funding models and associated incentives/disincentives in dealing with the selection of competing class actions before her.

25    Her Honour said (at [210]):

In a sense, I consider that the “no win, no fee” model balances the potential incentives and disincentives by putting the risk of the litigation squarely with the solicitors but incentivising additional work (which might be likely to produce a higher settlement sum) by reference to an uplift on fees to be achieved only when the stipulated threshold for a resolution sum is achieved. That said, insofar as it ties remuneration to hourly rates one can also see the creation of an incentive to perform additional (and perhaps unnecessary) work that might not objectively produce any higher net return for group numbers.

26    But her Honour also said (at [216]):

Ultimately, I do not suggest that a “no win, no fee” model will always (or necessarily) lead to the conclusion that such a funding proposal is likely to provide the best return for group members and I do not consider that this should create a precedent going forward as each case will turn on its own facts. However, in the present case the combination of: absence of a separate funding commission; the incentive created by an uplift in fees only once a specified resolution sum is achieved; the comparable return based on standardised assumptions; and the fact that no CFO is being sought (which minimises uncertainty and delay associated therewith), seems to me to point in favour of the combined Komlotex/Fernbrook funding model.

27    But in the circumstances before her, her Honour placed the most weight on the no win/no fee model in making her selection between the competing proceedings (at [354]).

28    A no win/no fee model, like other funding models, is to be considered on its merits and has no necessary privileged status over other funding models. Now true it is that it may not involve the payment of commission to an external funder and may be seen as advantageous in that respect, all else being equal. But if in a model involving an external funder both legal fees and the commission paid to an external funder are together capped at a particular % of total recoveries, then that model may have advantages over a no win/no fee model where there is no overall cap, all else being equal. Other questions may also arise concerning a no win/no fee model in terms of relevant incentives and disincentives and of the capital structure and strength of the law firm in terms of its capacity to meet an adverse costs order, provide security for costs and fund significant disbursements necessary to prosecute the proceeding on behalf of the applicant and group members. Of course, procuring “after the event” insurance may deal with some of these matters, but then the question of the payment of the relevant premium and who will ultimately bear this expense comes into play. All of these matters may need to be considered and compared with any capital advantages of other models where both a legal firm and an external funder are involved. And these were all matters for his Honour to consider.

29    We granted leave to appeal and allowed the appeal on this aspect as we had several difficulties with his Honour’s reasoning at [143] on the no win/no fee model proposed in the Klemweb proceeding.

30    First, it would appear that his Honour considered that a factor against the no win/no fee model was that it was not the preferred model propounded by Klemweb and Maurice Blackburn. But even if that be so, that did not of itself warrant its devaluation. The no win/no fee model still had to be assessed on its merits as a relevant comparator to the Impiombato funding model given that the central question was what was in the best interests of group members. But the parties are in some respects at fault in putting forward multiple models and fall back positions, thereby leading his Honour understandably to compare the preferred models and to give lesser value to fall back positions.

31    Second, his Honour seems to have reasoned that in order for the representative proceeding which was to go forward to be “properly resourced” and for there to be a “level playing field” with BHP, all else being equal a funding model involving both solicitors and an external funder was preferable to a model involving only solicitors, in terms of capital resources to fund the litigation, to meet adverse costs orders and to provide security for costs. But whether this is so requires close examination of the facts and capital structures in each case. In our view, his Honour’s general conclusion had not been sufficiently supported by the material before him.

32    For these reasons we granted leave to appeal and allowed the appeal on this aspect, irrespective of the force of the point made in Mr Impiombato’s notice of contention, and irrespective of the fact that the no win/no fee model proposed in Klemweb was uncapped, although senior counsel for Klemweb sought to address this before us by proposing an undertaking to stipulate an 18% cap. It is not necessary to discuss this matter further.

33    In the ordinary course we would have proceeded to re-exercise the discretion for ourselves, but it is not now necessary to do so given that the Impiombato and Klemweb parties have agreed to a formal consolidation of their two proceedings.

34    We agree with Lee J’s analysis concerning the model of consolidation to be adopted (Section J) and on the question of costs (Section K).

Associate:

Dated:    21 June 2019

REASONS FOR JUDGMENT

LEE J:

35    These are my reasons for joining in the orders made at the conclusion of oral submissions on 28 May 2019 (Sections A to I) and for the additional orders made upon publication of this judgment (Sections J and K).

A    LEAVE TO APPEAL & COMPETING CLASS ACTIONS GENERALLY

36    Although this year marks 70 years since Sir Frederick Jordan died, his work remains of enduring contemporary significance. Most importantly, his Chapters on Equity in New South Wales, reprinted most recently in Sir Frederick Jordan, Select Legal Papers (Legal Books, Sydney, 1983), have had a profound influence on generations of lawyers, textbook writers and judges. A further legacy is his purple passage (oft-cited by intermediate courts of appeal) from In re the Will of F. B. Gilbert (Deceased) (1946) 46 SR (NSW) 318 at 323 guarding against the ready grant of leave to appeal in matters involving matters of practice and procedure. Save for some matters of principle, the bulk of the arguments advanced on these two applications for leave to appeal against orders granting stays of two class actions (and proposed cross-appeals) illustrate the good sense of Full Courts being chary in granting leave to appeal in matters which concern procedure.

37    It is worth starting by quoting from Jordan CJ’s judgment commencing at a point earlier than the usual citation (which is emphasised in the extract) and finishing a little later. The following extract (at 322-323) explains how the constraints in appellate interference change depending upon the nature of the discretion exercised:

…it was said for the applicant, that, since by s. 3 [of the Testator’s Family Maintenance and Guardianship of Infants Act 1916 (NSW)] the question whether any and if so how much provision should be made for an applicant is in terms left to the discretion of the Court, it is only in the most exceptional circumstances that a Court of Appeal could regard itself as justified in interfering with the exercise of a discretion by a judge of first instance – only where he has misapplied the law, or his order is likely to lead to a miscarriage of justice. In this connection, however, I am of opinion that… there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. But an appeal from an exercise of a so-called discretion which is determinative of legal rights stands in a some-what different position. In this class of case, too, a Court of Appeal submits itself to self-imposed restraints, but restraints which, though strict, are some-what less stringent than those adopted in matters of practice or procedure. A Judge dealing with the question of the statutory rights of an applicant under the Testator’s Family Maintenance, etc., Act – whether he is entitled to anything, and if so how much, in respect of those rights – is in a position analogous to that of a Judge trying without a jury issues as to whether the plaintiff is entitled to a common law right to damages and if so to how much. In the latter type of case, it has been laid down… that “the presumption is that the decision of the trial Judge on the facts was right, and that presumption must be displaced, by the appellant.” With the trial Judge’s findings of fact, a Court of Appeal will not interfere unless it comes to a clear conclusion that he was clearly wrong, e.g., where he has adopted a wrong principle, or has clearly overlooked something or accepted evidence inconsistent with itself or with indisputable facts. This is applicable, too, to the inferences drawn by the trial Judge from the facts found by him, and, in particular, to the exercise by him of a judicial discretion in assessing damages. Where these are at large, it is improbable that any two men would arrive at precisely the same figure. Hence, it has been laid down that, although the members of a Court of Appeal might themselves have been disposed to award somewhat more or somewhat less, it is not proper for them to embark upon a re-assessment of the damages in order to arrive for themselves at a compromise upon which they can all agree, unless they are satisfied that the trial Judge has acted upon a wrong principle, or has neglected to take into account something relevant, or has taken into account something irrelevant, or that the amount awarded is so much out of all reasonable proportion to the facts proved in evidence that the award should not be allowed to stand.

(Citations omitted, emphasis added)

38    The reasoning captured in this passage finds reflection not only in later authorities explaining how applications for leave should be determined, but is echoed in cases such as Robinson Helicopter Company Incorporated v McDermott [2016] HCA 22; (2016) 90 ALJR 679 at 686-687 [43], where the High Court (French CJ, Bell, Keane, Nettle and Gordon JJ) observed, by reference to a series of well-known cases, that how an appeal is to be conducted depends upon the nature of the impugned finding: for a recent discussion of these principles, see also Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; (2018) 261 FCR 301 at 306-307 [3] (Allsop CJ) and at 316-317 [45]-[47] (Perram J).

39    The dichotomy between practice or procedure discretions and discretions that determine substantive rights is also embedded in the second limb of the test stated in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399 (Sheppard, Burchett and Heerey JJ), which provides that an applicant for leave must usually show that: first, in all the circumstances, the decision to be appealed is attended with sufficient doubt to warrant its reconsideration on appeal; and secondly, supposing the decision to be wrong, “substantial injustice” would result if leave was refused.

40    Although the distinction between matters of procedure and matters of substance is sometimes elusive in the context of usual, inter partes litigation, it can be even more problematical in Pt IVA proceedings. When a judge stays one class action on the basis that group member claims can be pursued in another class action, it is difficult to see how the substantive rights of the applicant or a group member are affected in a significant way. The applicant may already be within the group definition in the non-stayed proceeding, or will likely be able to become a group member. Moreover, the applicant cannot be shut out from maintaining an individual proceeding. Similarly, a group member in a stayed proceeding will usually be able to pursue their claim in the class action going forward; or can opt-out and then decide to pursue their claim individually. Although many of the submissions assumed group member prejudice if the decision below was wrong, the prejudice was limited to a suggestion that the pursuit of the claims in one proceeding may not be as cost effective as in another (with the exception of a specific subset of group members, to which attention will be directed below). In this respect, without diminishing the protective role of the Court in relation to group members, it must be borne in mind that the potential injustice to be identified on a leave application must be substantial.

41    What complicates matters is that the various substantive rights involved in class actions are complex and go beyond the ability of a person to vindicate or resist a claim. Funded class actions usually constitute a common enterprise with a shared purpose of pursuing group members’ claims successfully but with the allied aim of benefitting others in addition to the group members, being solicitors and (usually) funders.

42    One of the two class actions stayed involves the now familiar arrangement of one funding agreement being signed with the lead applicant with a common fund order being sought (and hence involves contractual relationships somewhat different to those described as a managed investment scheme by a majority of the Full Court in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11); the other stayed action, involves no agreements with a litigation funder, but a retainer and costs agreement operating on a no-win no-fee basis (with an “uplift”) signed by a number of group members, but which would operate differently in the event that a common fund order was made in terms proposed by the applicant.

43    Despite their differences in form, each stayed proceeding represents a common enterprise of a commercial character which hopes to use the Court’s processes to obtain mutual benefits for each of the applicant, group members and third parties.

44    It follows that staying a class action, although superficially a matter of practice and procedure, does have substantive consequences which transcend the interests of the parties themselves. Consequently, depending upon the nature of the discretion exercised, there is often no bright line in funded class actions between a procedural setback and something which might seriously affect substantive rights of co-venturers in the commercial enterprise. But recognising that prejudice might be visited upon a non-party by a procedural decision, is the start and not the end of the analysis.

45    It is necessary to understand the nature of the suggested prejudice. Although the orders of the primary judge did have substantive consequences for those seeking a reward out of the stayed enterprises; this type of prejudice, representing sunk costs, might arguably be thought to be part of the rough and tumble of conducting a business in commercialising litigation which, in the long run and assuming efficiencies of markets, is likely to be factored into price. This is not to say the prejudice is not real, but it is of a particular character. It seems to me this type of prejudice to commercial venturers in litigation is qualitatively different to the type of prejudice experienced by a party to litigation suffering an adverse determination relating to their substantive rights which might arguably be wrong.

46    There is a further prejudice occasioned by competing class actions, that is, the potential increased costs and vexation caused to a respondent. But in the present proceeding, this prejudice is less relevant at the initial stage of consideration of leave, in the absence of a standalone application for leave to appeal by the respondent (BHP). As will be explained below, BHP has served prophylactic draft notices of cross-appeal, in the event leave to appeal is granted to either of the applicants for leave to appeal. Potential prejudice to BHP is said to form the foundation of those contingent cross-appeals.

47    Leaving aside the question of prejudice, a further potential barrier to leave is the nature of the decision itself and the procedural context in which it was made; it is not only a discretionary decision, but an unusual discretionary judgment which involved the judge having to focus on considerations which included giving effect to the protective role of the Court. What the primary judge did was to fasten upon a practical solution to a practical case management problem. The case management decision which is the result of ensuring the processes of the Court and the interests of group members are protected might, properly analysed, defy characterisation as a matter of pure practice and procedure, but is a discretionary decision of a particular kind.

48    As the Full Court (Middleton, Murphy and Beach JJ) explained in Perera v GetSwift Limited [2018] FCAFC 202; (2018) 363 ALR 394 at 429-430 [162], 445 [241], 451-452 [274], such a decision is a matter of case management involving an evaluation, and not a calculus; it involves weighing up incommensurable and sometimes conflicting considerations and it is inevitable that different judges may weigh the relevant considerations differently. It is also a decision made in the context of there being a range of potential solutions and there being no uniquely “correct” answer.

49    As a docket judge’s decision involves an appraisal informed by diverse factors, the ultimate judgment is one upon which reasonable minds might, and often will, differ. In these circumstances, to paraphrase Sir Frederick Jordan, applications for leave must be assessed against the backdrop that it would not be proper for a Full Court to embark upon a re-assessment of diverse factors considered by the primary judge in order to arrive for ourselves at a compromise upon which we can all agree, unless satisfied that the primary judge has acted upon a wrong principle, or has neglected to take into account something relevant, or has taken into account something irrelevant, or that the result is so out of all kilter to the facts proved in evidence that the solution fastened upon should not be allowed to stand. Put in more familiar terms, given that it is necessary to demonstrate sufficiency of doubt in respect of the decision to be appealed, this first limb of the Décor test will not be satisfied, unless there is some real basis for considering that some House v The King (1936) 55 CLR 499 error is able to be established should leave to appeal be granted: at 504–5.

50    It is worth emphasising these points not only because they inform the principled determination of these applications, but because it is likely that competing class actions are not going to go away. Those involved in the commercial enterprise of funded litigation (with long purses and litigious dispositions) should be aware that in accordance with the statutory charge in s 37M(3) of the Federal Court of Australia Act 1976 (Cth) (Act), the power to grant leave will be exercised or carried out in the way that best promotes the overarching purpose, being the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Attempts to transfer exercises of discretion in these case management applications from a docket judge to a Full Court with the result that the “disposal of cases could be delayed interminably, and costs heaped up indefinitely”, must be resisted as being inimical to the overarching purpose: Re Will of Gilbert at 323. Of course, it will be just to grant leave when the cumulative requirements of the Décor test are satisfied (Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; (2017) 252 FCR 1 at 4  [3] (Jagot, Yates and Murphy JJ)), but this should be able to be demonstrated clearly. 

51    As will be seen, these applications for leave, like many others where a discretionary decision is impugned, have sought to dress up quibbles and disagreements with parts of the primary judge’s reasoning, as constituting error. Only three points of substance are made and leave should be granted with regard to two. It follows that in the wake of this judgment, there will now have been two Full Court decisions relating to the case management of competing class actions. The considerable latitude given to docket judges in fashioning a solution is evident. Occasions of competing class actions which have led to different procedural outcomes in the past, will continue to do so in the future – as one would expect given it is a case management decision rooted in the particular circumstances of a given case. In my view, in the light of this guidance, and the flexibility given to docket judges, absent recognisable legal error, considerable hurdles confront those seeking leave to appeal in similar circumstances in the future.

B    RELEVANT BACKGROUND

52    The events leading up to the commencement of three representative proceedings against BHP, and the procedural history is set out in detail in the primary judge’s comprehensive reasons: Impiombato v BHP Billiton Limited (No 2) [2018] FCA 2045; (2018) 364 ALR 162. What follows is a short summary which largely draws upon the background there detailed.

53    The class actions were commenced on behalf of BHP shareholders in relation to a Brazilian mine collapse.  Put generally, the applicants allege BHP failed to inform the market of a material risk of mine collapse and that this failure constituted contravening conduct giving rise to a right to statutory compensation.

54    Each proceeding is brought on behalf of an open class. The proceedings are:

(1)    the Impiombato proceeding, commenced in May 2018 by Phi Finney McDonald and funded by a substantial American funder;

(2)    the Klemweb proceeding, commenced in August 2018 by Maurice Blackburn with no external funder;

(3)    the LACERA proceeding, commenced in September 2018 by Johnson Winter & Slattery and funded by a substantial funder whose business activities are primarily in the United Kingdom.

55    The primary judge considered orders should be made to address the potential overlap.  At the hearing to resolve the appropriate remedial response, the applicants each contended for a permanent stay of the other two proceedings. This was supplemented in the Klemweb proceeding by a number of so-called “fall-back” positions. These were that the Klemweb proceeding: (a) should go forward as an open class proceeding for its identified “relevant period” while the others be stayed in relation to the overlapping period, but otherwise would continue; or (b) should go forward as an open class proceeding, and the others would continue as closed class proceedings; or (c) that it should proceed on a closed class basis.

56    BHP, for its part, asserted that two of the three proceedings ought to be permanently stayed. 

57    After conducting what, with respect, was a careful and thorough consideration of the circumstances and the Full Court’s decision in GetSwift, his Honour determined that the Impiombato proceeding was the “most appropriate” class action to go forward as an open class proceeding and that the Klemweb proceeding be permanently stayed.  In relation to the LACERA proceeding, the primary judge ordered a temporary stay to allow time for the applicant in the Impiombato proceeding to consider potential claims relating to an earlier period covered only by the LACERA proceeding: see 164 [4], 200 [159]. It is this last aspect of the primary judge’s orders which has also attracted the criticism of BHP. As will by now be apparent, applications for leave to appeal were filed by the applicants in the Klemweb proceeding and the LACERA proceeding.

C    RELIEF & THE PROPOSED GROUNDS OF APPEAL

58    In the event leave was granted, the relief sought is that the relevant appeal be allowed, orders be set aside and:

(1)    the applicant in the Klemweb proceeding, primarily seeks an order that the Impiombato proceeding be permanently stayed (prayer 3, draft notice of appeal) but also persists in contending, in the alternative, that the Klemweb proceeding should proceed as a closed class (prayer 5, draft notice of appeal);

(2)    the applicant in the LACERA proceeding seeks orders in the:

(a)    Impiombato proceeding, that the Impiombato proceeding be permanently stayed (see prayer 3 draft notice of appeal); and

(b)    LACERA proceeding, that an interlocutory application seeking a common fund order be listed for hearing.

59    The premise of the relief sought by both the applicant in the Klemweb proceeding and the applicant in the LACERA proceeding is that the order made by the primary judge permanently staying the other proceeding be left undisturbed.

60    As noted above, BHP seeks to protect its position by filing “draft” notices of cross-appeal which are directed at ensuring that only one class action proceeds and, if that class action is not the LACERA proceeding, then the stay of that proceeding become permanent.

61    Dealing first with the Klemweb proceeding, the proposed appeal raises seven grounds which partly overlap. The four principal contentions are that the primary judge erred because:

(1)    for the purposes of comparing the funding terms on offer in the competing proceedings, the primary judge disregarded a “litigation services fee” proposed in the Klemweb proceeding on the basis of a conclusion that the legislative policy evinced by s 183(1) of the Legal Profession Uniform Law, set out in Sch 1 to the Legal Profession Uniform Law Application Act 2014 (Vic) (LPU Law), is against the payment of such a fee (Grounds 1 and 2) (Contingency Fee Contention);

(2)    in circumstances where the alternative no-win no-fee funding arrangement in the Klemweb proceeding was likely to result in a higher percentage of any settlement or judgment sum being available for distribution to group members, there was no basis to conclude that this arrangement was less attractive than an arrangement involving a litigation funder (Grounds 3, 4 and 5) (No-Win No-Fee Contention);

(3)    inadequate consideration was given to the election made by a substantial number of group members, including institutional investors, to enter into a contractual arrangement with Maurice Blackburn, particularly where the primary judge accepted that those group members would likely benefit from a less expensive no-win no-fee funding arrangement in the Klemweb proceeding (Ground 6) (Group Member Choice Contention); and

(4)    his Honour failed to take into account, as a relevant differentiating factor in favour of the Klemweb proceeding, the particular experience and capability of Maurice Blackburn “in achieving high settlements for group members in representative proceedings, including shareholder class actions” (Ground 7) (Better Solicitors Contention).

62    Dealing next with the LACERA proceeding, the proposed appeal raises no less than 14 proposed grounds of appeal, many of which are subdivided into subsidiary grounds, which essentially assert error by the primary judge in rejecting every submission urged by LACERA below. It is unproductive to reproduce them individually and, with some degree of oversimplification attendant upon summary, they can be grouped as follows:

(1)    the primary judge erred in proceeding with a comparison on the basis that the competing proceedings were materially indistinguishable as to claims and class coverage when the LACERA proceeding has a longer claim period and additional causes of action thus giving insufficient weight to this difference and undermining the assessment of the various funding models (Grounds 4, 5 and 13) (Comparability Error Contention);

(2)    the primary judge erred in failing to identify the funding model that “might conduce to a higher dollar outcome for a materially larger claim group” including by failing to take into account that irrespective of what model is put in place, the only legal costs recovered from group members will be as approved as reasonable (Ground 1, 2, 3, 6, 7 and 8) (Funding Model Error Contention);

(3)    the primary judge erred in giving any relevance to book-building (Grounds 9 and 10) (Book-build Error Contention);

(4)    the primary judge applied a wrong principle, and took into account irrelevant considerations in having regard to the “state of preparation” of the three proceedings (Grounds 11 and 12) (State of Preparation Error Contention);

(5)    in addition to the above errors, the primary judge (Ground 14) (Omnibus Error Contention) failed to take into account that:

(a)    the applicant in the LACERA proceeding is a major institutional investor;

(b)    the funders in the LACERA proceeding are a highly experienced global litigation funder and a specialist United States securities class action law firm;

(c)    LACERA’s solicitors have provided a realistic assessment of costs and is content for an order to be made requiring an expert, chosen by LACERA to provide periodic reports as to whether incurred actual costs are reasonable;

(d)    the LACERA funding model, with an “elevator” commission model and no artificial cap on costs, is best suited to motivate the solicitors and funders “to work assiduously to achieve the best outcome for the applicant and group members, and to take responsible risks in that regard”.

63    Finally, BHP, consistently with the limited and contingent relief it seeks, asserts error in the primary judge’s decision to temporarily, rather than permanently, stay the LACERA proceeding (Grounds 1 and 2) in the event another proceeding went ahead. Although BHP maintained it was agnostic as to which class action went forward, given that many of its submissions were directed to ensuring that the proceeding going forward should include group member claims relating to the earlier period presently pleaded only in the LACERA proceeding, its formally neutral submissions, in a practical sense, were broadly supportive of the position advanced by LACERA.

64    Argument proceeded by the applications for leave being heard at the same time as argument on the appeals. This course was convenient because it was thought it may be appropriate for another Full Court to supplement the guidance given in GetSwift. Consistently with my earlier comments about the need for discipline regarding grants of leave in matters such as the present, those involved in class action litigation should not assume this course will be adopted in the future. Given the need to demonstrate error of a particular character, depending upon the circumstances of the case, there is much to be said for an early and discrete leave application. We have been taken to the minutiae of arguments in support of grounds which, in the end, have not warranted a grant of leave. A filter by way of a separate leave hearing would result in more focussed argument thus facilitating the overarching purpose.

65    Having identified the multifaceted attacks upon his Honour’s reasoning, I now turn to separating the wheat from the chaff by initially identifying what arguments can be resolved peremptorily by refusal of leave and, by process of elimination, the three that require detailed analysis.

D    AN ASSESSMENT OF THE GROUNDS GENERALLY

66    At the risk of repetition, as the Full Court also cautioned in GetSwift at 451-452 [274], not only were there a range of solutions open to the primary judge within the exercise of his discretion, but each of the perceived solutions can be said to have some or other problem. Cavilling with factual findings or pettifogging complaints about individual aspects of a broad, multifactorial evaluative exercise does not assist. Many of the grounds amount to no more than asking the Court in its appellate jurisdiction to take a different view from the primary judge in an attempt to re-litigate the entire discretionary exercise undertaken.

67    Leave to appeal was granted in GetSwift because it was “important that some general guidance be given as to the range of factors to consider and the possible options open to a docket judge in dealing with competing open class actions”: at 398 [10]. The Full Court provided that guidance. The primary judge’s decision here was an application of the Full Court’s decision in GetSwift, and the fact that this case involved a different caboodle of relevant factors does not justify appellate review.

68    As to the Klemweb proceeding:

(1)    the primary judge had regard to the election made by a substantial number of group members to enter into a contractual arrangement with Maurice Blackburn; it was one factor among many and leave should be refused to advance the Group Member Choice Contention; additionally, if these group members do wish to make a choice they could always do so (if another class action went forward) by exercising their right under s 33J of the Act by opting-out;

(2)    although there is some factual support in the evidence giving credence to the particular experience and capability of Maurice Blackburn in achieving high settlements for group members including in shareholder class actions, the primary judge was entitled to form the view that each firm of solicitors was entirely capable of instructing counsel in running the case; and no leave should be granted to advance the Better Solicitors Contention.

69    As to the LACERA proceeding:

(1)    the primary judge was plainly aware that it is only reasonable, approved legal costs that can be recovered from group members, and no leave should be granted to advance the Funding Model Error Contention;

(2)    book-building is conducive of wasted costs and should not be encouraged when a common fund order is proposed; it is evident from a review of his Honour’s reasons that book-building was treated as an essentially neutral matter, and no leave should be granted to advance the Book-build Error Contention;

(3)    similarly, the differing states of preparation was hardly a decisive factor in his Honour’s reasoning, and no leave should be granted in relation to the State of Preparation Error Contention;

(4)    there is no reason to conclude that his Honour was not cognisant of (and factored into his analysis) the matters said by LACERA to be relevant considerations including the interesting “elevator” commission model; the Omnibus Error Contention is an attempt to re-litigate the submissions advanced before the primary judge; leave should be refused to do so.

70    This leaves the Comparability Error Contention in the LACERA proceeding; and the Contingency Fee Contention and No-Win No-Fee Contention in the Klemweb proceeding which require detailed consideration.

E    THE COMPARABILITY ERROR CONTENTION

E.1    Observations as to Group Membership and Claims

71    Before coming to the details of the Comparability Error Contention, it is necessary to understand the constitution of each class action and the composition of group membership. It is also beneficial, for the purpose of the argument, to understand how the statutory concept of a s 33C “claim” operates in relation to competing class actions.

72    The LACERA claim period starts in August 2012, while Impiombato claim period starts in October 2013, and the Klemweb period starts in August 2014. The evidence unsurprisingly indicates that a subset of the shares held at the time of the Brazilian mine collapse had been purchased pre-October 2013 during the period covered only by the LACERA proceeding (Initial Period).

73    Indeed, properly analysed, there are four relevant types of group members. First, there are persons who purchased shares in any period covered by the class actions but including at least one purchase of shares between 27 August 2014 and 9 November 2015 (Later Period) being the period covered by all three of the class actions – these persons are group members in all three class actions. Secondly, there are persons who purchased shares only in the Initial Period and did not purchase any shares later and hence are only group members in the LACERA proceeding – these can be called the LACERA Only Group. Thirdly, there are group members who may or may not have purchased shares in the Earlier Period, but who did purchase shares between 21 October 2013 (the date when the Impiombato claim period starts) and 26 August 2014 (being the day before the Klemweb period starts) (Second Period) but not in the Later Period – these persons are covered only by the LACERA and Impiombato proceedings and can be called Non Klemweb Group.

74    But fourthly, there is a group, which one suspects might be the bulk of group members, who purchased shares in the Initial Period but also purchased in the Second Period and/or the Later Period. Depending upon whether these persons are part of the Non Klemweb Group (and hence have purchases only in the Initial Period and the Second Period) or also have purchases in the Later Period (and hence are in all three class actions) – these persons can be called Spanning Group Members.

75    The evidence is opaque as to the proportion of persons who are Spanning Group Members (of whatever type); it is also obscure as to how many persons comprise the LACERA Only Group. It will be necessary to return to the differing positions of the LACERA Only Group and Spanning Group Members below.

76    In understanding the position of these different groups, it is also critical to bear in mind the difference between the identity of group members and the claims of those identified group members: a distinction that, with respect, was sometimes elided during the course of oral submissions. I explained this distinction, in some detail, in Dillon v RBS Group (Australia) Pty Limited [2017] FCA 896; (2017) 252 FCR 150 at 160-163 [49]-[61]. It suffices to note for present purposes that a class comprises persons and not the claims of persons. As I noted in Dillon, the best way of avoiding confusion is by imagining that a list of group members is always a list of names but, when actual names are not used, the “list” of persons is defined by the criterion or criteria specified at the time the group is described.

77    As to the “claim” of each of those persons, to use the statutory concept embedded in s 33C of the Act, the relevant “claim” of a person has the characteristics identified in 33C: that is, that it has sufficient commonality in the sense that it is in respect of, or arises out of, the same, similar or related circumstances and gives rise to at least one substantial common legal or factual question. When this is appreciated, as Professor Michael Legg and Samuel J Hickey explain in some detail in “Finality and Fairness in Australian Class Action Settlements” (2019) 41(2) Sydney Law Review 185 at 190, an individual group member might have the following types of justiciable issues: (a) common issues within s 33C which are pleaded in a class action and identified pursuant to s 33H; (b) common issues within s 33C that are not pleaded in a class action nor identified pursuant to s 33H; (c) individual issues that are part of the claims that give rise to the pleaded common issues; and (d) individual causes of action separate from the claims being pursued in a class action, that is, which are not within the statutory definition of “claim” for the purposes of s 33C.

78    If we use the example of a particular Spanning Group Member in the unstayed (and presently unamended) Impiombato proceeding, whom I will call Spanning Group Member A, examples of these four types of issues are as follows: (a) whether BHP Shares were “inflated” during the Later Period and recoverable loss was suffered being the difference between purchase price and “true” value; (b) whether BHP engaged in contravening conduct in the Earlier Period during which Spanning Group Member A purchased shares, but in respect of which purchase, no claim is presently pleaded in the Impiombato proceeding; (c) an individualised claim for statutory compensation based on a loss of opportunity available to Spanning Group Member A, which is alleged to have arisen by reason of a purchase in the Later Period; and (d) some separate cause of action arising by reason of a wholly separate event or transaction between Spanning Group Member A and BHP.

79    The first three aspects of the “claim” of Spanning Group Member A, are all within the Impiombato proceeding (and the Klemweb proceeding for that matter). This s 33C claim (which had or may have these different aspects) existed separately from, and anterior to, the class action. Each group member has a singular s 33C claim and, as explained in Dillon, the notion that a s 33C claim the subject of a class action can somehow be bifurcated is irreconcilable with the text and context of Pt IVA. Hence although Spanning Group Member A is a group member in each class action with regard to the entirety of Spanning Group Member A’s s 33C claim, the only causes of action currently pleaded as to the shares purchased in the Earlier Period, is in the LACERA proceeding. To again use the Impiombato proceeding as an example (and assuming no amendments were made and Spanning Group Member A does not opt-out), what is notable is that a decision has been made by Mr Impiombato, as representative applicant, to pursue group members’ s 33C claims in a particular way. Given the relationship of privity between Mr Impiombato and all group members in relation to the s 33C claims, this will then have finality consequences for the entirety of Spanning Group Member A’s s 33C claim, in the event an order was made in the Impiombato proceeding under s 33ZB of the Act, binding all group members remaining after opt-out: see Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; (2016) 259 CLR 212 at 234-235 [49] (per French CJ, Kiefel, Keane and Nettle JJ).

80    When this is understood, an important point of difference between the LACERA proceeding and the two other proceedings, is that any decision which results in the LACERA proceeding being stayed affects the interests of two groups which should be considered separately being: (a) the LACERA Only Group; and (b) the Spanning Group Members.

E.2    The Alleged Error

81    The primary judge recognised the significance of the different periods and classes, but LACERA submits there was “a foundational error” in his Honour’s approach (evident at 193 [131]) of deferring consideration of the significance of the different periods and classes. This is said to have led to distortion of the analyses that the primary judge then undertook commencing at 193 [132]. In short, it is contended that in assessing the competing funding models (and model outcomes) there was no “like with like” comparison: this is because an outcome (by settlement or judgment) in the other proceedings, does not involve any outcome for the entire claim of the LACERA Only Group and for part of the claim of the Spanning Group Members (together, the Affected Causes of Action). This approach is said to obscure what should be the true focus of the inquiry: not a mere cost comparison, but rather identifying what combination of factors provides the best assurance that all group members’ interests will be best served.

82    LACERA submits that this error led to the primary judge concluding that in a range of scenarios the LACERA funding model was likely to result in higher deductions from group member recoveries than the Impiombato model. LACERA makes a detailed critique of this factual finding based on its incomparability argument and modelling flaws, including that the volume and value of affected shares is higher, and that resolution will only be achieved later rather than sooner. This gave rise, it is said, to a flaw in assessing anticipated costs.

83    But the argument has at its core the notion that consideration of the relative length of the claim periods should have been grappled with at the beginning of the analysis, the significance of the Affected Causes of Action should have been recognised and this ought to have informed consideration of the potential outcomes under the different funding proposals in the competing proceedings.

84    Although the length of the relative claim periods is of significance in giving rise to Affected Causes of Action, it must be put into perspective. Securities class actions necessarily involve allegations of misleading conduct or non-disclosure of one form or another. Speaking very generally, the central issue in the case is often: what did officers of the listed entity know and when did they know it? The answer to the question is often (but not always) somewhat nubilated at the commencement of a proceeding. The case usually commences with an information asymmetry between the parties which dissipates as it passes through interlocutory stages, including the service of evidence and discovery.

85    Legal representatives acting for an applicant have professional, contractual and fiduciary duties. Those duties involve advising and assisting the applicant to discharge the obligation to represent the claims of the group members they represent in accordance with Pt IVA and Pt VB of the Act. The Court is entitled to expect that the applicant and the lawyers will not act contrary to the interests of group members as a whole in advancing and dealing with the common aspects of their s 33C claims. It is to be expected that differently represented applicants may responsibly and in good faith come to disparate views about pleadings, claim periods, forensic decisions and case theories in complex litigation. Leaving aside manifest deficiencies in a way a case is pleaded or conducted, often it will be difficult to tell whether a particular decision was sound until the end of the litigation. Having said that, provided there is no reason to think otherwise, the Court should assume that a relevant legal team will reflect regularly upon the conduct of the case and give thought to amendments including refining or including further causes of action and, if appropriate, bringing s 33K applications to augment or restrict the class.

86    Put more directly in the context of this case, the representative applicants in the Impiombato and the Klemweb proceedings have a duty not to act contrary to the interests of their group members, including the Spanning Group Members who have Affected Causes of Action. Although it is correct that neither of these applicants have any duties, at present, to the LACERA Only Group, the important point is that in discharging their duties, including to the Spanning Group Members (and deciding whether to include in the class action their Affected Causes of Action), they will be required to give attention to whether the claim period should be broadened. If the claim period is extended for the Spanning Group Members, this perforce will operate to include the LACERA Only Group in the class.

87    Moreover, absent amendment, it is necessary to recall that Pt IVA contains statutory protections for Spanning Group Members who were included in the Impiombato and the Klemweb proceedings without the necessity of their consent (s 33E).

88    Assuming the unamended Impiombato or an unamended Klemweb proceeding was to proceed, if a Spanning Group Member wished to terminate the statutory relationship of privity with the relevant applicant, the group member could do so by adopting one of two courses: first, exercising the right to opt-out (s 33J); or secondly, if the Spanning Group Member perceives that the relevant applicant is not able to adequately represent their interests or is failing to do so, by making an application to the Court to substitute another group member as applicant or make other orders (ss 33T, 33ZF). Such an order could include, for example, a Spanning Group Member asking the Court to appoint a sub-group representative or sample group member to provide a vehicle for determination of the Affected Causes of Action.

89    Although persons in the LACERA Only Group are not presently in the same position, such a person could no doubt entreat an applicant to consider expansion of the class or, in the unlikely event all else fails, commence another proceeding or (again on the assumption it was an unamended Impiombato proceeding or the Klemweb proceeding which was to proceed), seek to amend the group definition in the LACERA proceeding and run that case for the Initial Period only.

90    Despite these manifold possibilities, for those experienced in class actions, all of this seems a tad unrealistic and amounts to conjuring up difficulties which will likely never arise. If upon reflection it is thought a claim exists that should be advanced, then applicants are rarely shrinking violets paralysed by indecision. History suggests that any current vexation at the prospect of arbitrary exclusion of viable causes of action for available periods is likely to be the equivalent of starting at shadows.

91    In other words, to place too much significance on differences in claim periods, not only ignores potential protective responses available to those with Affected Causes of Action, but also the dynamic nature of litigation and the regular incidence of amendment. Moreover, to place any real significance on differing claim periods could present perverse incentives in encouraging the commencement of competing class actions for claim periods longer than those already filed with a view to gaining an advantage in the resolution of the resulting multiplicity issues, rather than being based upon a considered assessment of the underlying merits of the distinguishing claims.

92    As noted above, the evaluative judgment made was multifactorial and, in the circumstances, the primary judge was, with respect, correct to treat the relative length of the claim periods as he did. Moreover, the expedient case management solution adopted was to afford those conducting the Impiombato proceeding the opportunity to undertake further investigation into the earlier claim period and, if so advised, to apply to amend (a process the Impiombato team would have been required to undertake to discharge their obligations to Spanning Group Members in any event). Another docket judge may have taken a different approach, such as granting a permanent stay (as BHP urged), but this does not demonstrate error requiring appellate intervention. There is no reason to conclude it was not open for the primary judge to find it is not possible at this early stage to make an accurate assessment of the quantum of the Affected Causes of Action, and there is no compelling basis in the evidence to suggest that the intrinsic worth of the Affected Causes of Action and the expanded class are factors so significant as to require the LACERA proceeding to continue.

93    Two further points should be made. First, although there is some truth in the contention that the different classes and time periods meant that any comparison, including as to costs, was less than perfect, the sort of task the primary judge was performing was not an exercise in mathematical precision. It was a pragmatic exercise which involved some degree of intuition. Those advocating for LACERA seek this Court in its appellate jurisdiction to undertake this task afresh and substitute our evaluation for that of the trial judge, but that is not our role.

94    The second point relates to a submission made by LACERA that as no amendment was made promptly in the Impiombato proceeding, if an amendment was now sought, the amendment “could be viewed by group members (and BHP) as an expedient directed at locking out the LACERA action rather than advancing a strongly-felt claim”. This submission ought to be rejected. It is commonplace, for reasons already explained, in shareholder class actions for amendments to be made to the statement of claim and the Court would proceed on the basis that any amendment will be bona fide.

95    Finally, although a decision by the Impiombato applicant to amend to expand the claim period has not, it is fair to say, been made with dispatch, there was no reason at the time of oral argument on the appeal to doubt the issue would be considered properly if it became relevant to do so.

96    The Comparability Error Contention potentially raises an issue of importance, but the primary judge’s reasoning was not infected by error and the contention has insufficient merit to warrant a grant of leave. Moreover, whatever prejudice might be said to exist, there is minimal individual prejudice to LACERA, because if it wishes to pursue its individual claim, it can do so by opting-out or pursuing the range of other remedial steps that may be available to it. Leave to appeal should be refused to advance the Comparability Error Contention and, as a consequence, there should be no grant of leave in relation to the LACERA application, which should be dismissed. I will deal separately below with BHP’s contentions as to error in not granting a permanent stay of the LACERA proceeding.

F    THE NO-WIN NO-FEE CONTENTION

97    As noted above, in the Klemweb Proceeding, a common fund order was proposed, incorporating a commission payable to Maurice Blackburn of not more than 15% (for amounts recovered up to and including $150 million) or of not more than 10% (for amounts recovered in excess of $150 million), being inclusive of legal costs and disbursements: see Impiombato v BHP at 193 [132(b)]. The no-win no-fee retainer and costs agreement entered into provided that in the event the Court approved the common fund order, the agreement was to have no operation to the extent of any inconsistency with the common fund order: see page 3 of the retainer and costs agreement.

98    But before dealing with the Contingency Fee Contention, it is convenient to deal initially with the alternative form of order sought, which was described as a “common fund order” incorporating the “no-win no-fee” terms set out in the Maurice Blackburn Retainer, subject to Court approval. In doing so, the first and most obvious point to make is that it is a little difficult to understand why an order was sought in such terms in the first place. As Senior Counsel for the Klemweb applicant recognised, a “common fund order” in the terms proposed was both unnecessary and a misnomer (T162-163); it was open for the Klemweb applicant to have simply indicated to the Court the basis of their retainer to conduct the common work and for an order to be sought later upon a s 33V approval or, if a damages award was made, to seek an order or orders under s 33ZJ.

99    In any event, whatever the form of order putting it in place, as the primary judge recognised at 194 [134], the effect of this arrangement would be that Maurice Blackburn would “carry” its work in progress and fund the disbursements, and in the event of a recovery, Maurice Blackburn would be reimbursed for these disbursements and be paid its fees (with a 25% uplift on 25% of the fees).

100    Unlike the common fund order incorporating a contingency payment which will be examined below, the primary judge accepted (at 194 [134]) that there is no reason, in principle, why the Court would not approve such an arrangement. Moreover, the primary judge proceeded to find at 196 [142(d)] that in many scenarios, the no-win no-fee arrangement “is likely to result in a higher percentage of any settlement or judgment sum being available for distribution to group members, as the arrangement does not require a commission to be paid to a funder”.

101    Pausing there, subject to an issue which will be dealt with below in the context of a notice of contention, this finding was, on the evidence, clearly open. Not only would it be the likely (but not invariable) case in this proceeding, but such a result would be in line with the accumulated experience of the Court regarding settlement approvals. Given that a weighty consideration in the discretionary mix was the likely return to group members (and the relatively neutral significance of other relevant factors), it might have been thought that this would be a decisive factor, but this was not the case.

102    The primary judge concluded (at 196-197 [143]) that “the interests of group members would be best served by the Impiombato funding arrangement” and that the no-win no-fee model in the Klemweb Proceeding “may in some respects be less attractive than an arrangement involving a litigation funder”.

103    This was evidently a result of the two findings of the primary judge at 196-197 [143]: first, that the Impiombato funding arrangement would better achieve a “level playing field”; and secondly, that it was relevant to his Honour’s reasoning at 196-197 [143] that the no-win no-fee funding arrangement was not the “preferred model put forward by Klemweb and Maurice Blackburn”.

104    It is convenient to deal with the second point shortly. The task of the primary judge was made more complicated than necessary by Klemweb and Maurice Blackburn putting forward four different proposals. Having said that, to place significance on the fact that the no-win no-fee model was not the preferred model was to take into account an irrelevant consideration in circumstances where the contingency payment model and no-win no-fee model were presented as true alternatives. Irrespective as to whether his Honour should have disregarded the contingency payment model, in my view, it was necessary to assess the no-win no-fee model on its own terms, as a relevant comparator.

105    It might be thought that this is to elevate a passing comment into something more, but the problem, it seems to me, was that attention was diverted from assessing, on its merits, an arrangement which would result in the highest net returns to group members in most realistic scenarios. As I have remarked elsewhere, this is not to say the court approaches its task as if it were a calculating machine awarding carriage to those who are likely to generate the highest return, but when all other matters in the multifactorial analysis are equal, this is a consideration that must be taken into account. Leaving aside the fact that minimising potential imposts on group members is consistent with the protective role of the Court, it is not to be forgotten that the decision made by the primary judge was to make an order under s 33ZF, being a “civil practice and procedure provision”. Any power conferred by such a provision must be exercised in the way that best promotes the overarching purpose: the just resolution of disputes (including group member claims) according to law and as quickly, inexpensively and efficiently as possible: see s 37M(3).

106    Turning to the first aspect of the reasoning at 196-197 [143], with respect to his Honour, it seems that embedded within it is an implicit finding that is problematical and that amounted, in effect, to a conclusion that a third-party funding arrangement is, other considerations being equal, more advantageous to group members than a no-win no-fee funding arrangement, even where the latter arrangement is likely to result in higher net returns to group members.

107    Unpacking his Honour’s observation as to a “level playing field”, it is apparent the primary judge was referring to the desirable state of affairs described by Lord Woolf MR as “equality of arms”. The primary judge was understandably concerned that there be an equality of resources between the applicant and group members on the one hand and BHP on the other. What is pellucid is that this focus on available resources was not with respect to the ability of the Klemweb applicant to provide security for costs – to conclude otherwise would be contrary to the primary judge’s express finding at 198 [147] that there was no basis to differentiate between the proceedings in this regard. It is apparent that what concerned his Honour was the potentiality of Maurice Blackburn allocating less resources to the conduct of the case when compared to solicitors funded by a third-party. Although unstated, one suspects that allied to this was a concern that solicitors funded by a litigation funder may be more motivated to stay the course.

108    His Honour was, with respect, right to consider this issue. The lodestar for the primary judge was facilitating the overarching purpose (which would necessarily serve the interests of group members). In that regard, the Full Court in GetSwift at 452 [277] confirmed that, in resolving multiplicity questions, the Court should focus on:

…selecting the proceeding with a funding and costs models likely to best motivate the applicant’s solicitor and funder to work assiduously to achieve the best outcome for the applicant and group members and to take responsible risks in that regard.

109    On the evidence, however, there was nothing that suggested that the no-win no-fee model was unlikely to serve as anything but an incentive towards Maurice Blackburn working assiduously to achieve the largest possible recovery for group members. There was also nothing in the evidence that would suggest that the no-win no-fee model had any flaw that would mean that the playing field would be tilted against group members because such a model may result in some want of resources being allocated to the matter or would create an incentive not to pursue the claims of group members with vigour.

110    Aside from the fact that this would be contrary to the professional obligations of experienced solicitors, to the extent that there was any evidence, it pointed in the opposite direction: it disclosed that Maurice Blackburn had conducted the Kilmore East-Kinglake Bushfire class action, the Murrindindi Bushfire class action and the DePuy ASR Hip Implants class action on a no-win no-fee model and secured, by use of this model, the three highest class action settlements in Australia to date.

111    Notwithstanding the careful approach to this and other issues evident in the reasons of the primary judge, it seems to me that there was no foundation in the evidence to conclude that the existence of a third-party funder in the Impiombato proceeding offered any particular advantage to group members (or to adapt his Honour’s description, restored greater equilibrium to the pitch). This aspect was central to his Honour’s reasoning at 196-197 [143]. Indeed, when the supposed benefit of the third-party funder is put to one side, there is considerable force in the submission that the only distinguishing feature of substance between the no-win no-fee model in the Klemweb proceeding and the competing funding arrangement in the Impiombato proceeding (and the LACERA proceeding) was the likely net return to group members. In this regard, the position here bears similarities to that confronting Ward CJ in Eq in Wigmans v AMP Ltd [2019] NSWSC 603 at [354], where her Honour placed significant weight on the fact that the no-win no-fee model proposed in that matter, involving no funding commission, would likely provide, on most scenarios, the highest net return for group members, or at least around the highest.

112    In these circumstances, with respect, the primary judge erred in the exercise of his discretion in reaching the conclusion at 196-197 [143]. This conclusion is sufficient to require that leave be granted, for the appeal in the Klemweb proceeding to be allowed and for the discretion to be re-exercised. Notwithstanding this, it is appropriate, given its general importance, to deal with the other argument advanced by the Klemweb applicant, which potentially warrants leave.

G    THE CONTINGENCY FEE CONTENTION

G.1    Why the Ultimate Conclusion of the Primary Judge was Correct

113    This contention foundered by reason of the primary judge concluding that it was “unlikely” the Court would make a common fund order incorporating payment to a law firm of a commission on a settlement sum or judgment: at 194 [133]. For reasons I will explain, although I do not share the views which informed his Honour’s conclusion, I do agree with the conclusion that the Court would be unlikely to make the order proposed.

114    To explain why the proposed order was flawed, the starting point is to focus on its precise terms, as set out in annexure “BWD-1” to the affidavit of Brooke Dellavedova sworn on 16 October 2018 (Order). The Order has the following components relevant to the claims of the group members:

(1)    it defines “Proceedings” broadly, such that the proposed contingency payment would apply not only to include the Klemweb proceeding but also “any other proceedings or process as part of or consequent on [the Klemweb proceeding] (including any alternative dispute resolution processes engaged to resolve some or all of the [claims of group members])”;

(2)    it also defines “Resolution Sum”, being the amount in respect of which the contingency payment is calculated, not as a common fund obtained on any settlement, but rather including “the gross… amounts, or the market value of any goods or services, for which some or all of the [group member claims] are Settled, or for which judgment is given, including the value of any favourable terms of future supply of goods or services, any interest and any costs recovered pursuant to a Costs Order in favour of the Applicant or by agreement”; and

(3)    it provides that if a group member obtains either an individual settlement or any judgment in relation to their claim, the group member, by cl 4.2 is required to “treat any money, other asset or benefit received” as the Resolution Sum; and cause the money, or an amount being the reasonable market value of the asset or benefit, “to be delivered to [Maurice Blackburn] to be dealt with as part of the Resolution Sum”.

115    The potential difficulties of the Order go well beyond mere drafting issues (such as, for example, the curiosity of calculating a particular Resolution Sum for an individual group member by reference to previous costs orders obtained by the applicant and any interest on other composite or individual Resolution Sums). The problem here is more fundamental. As can be seen, the Order spans beyond a common fund obtained during the Klemweb proceeding but also travels beyond the proceeding itself. Moreover, in relation to individual proceedings by group members (after the initial trial and any declassing) the Order proposes a form of injunction (partly mandatory in nature) requiring the group member to refrain from doing some things and being required to do others, including the delivery up of money or the monetary equivalent of assets received to Maurice Blackburn. This order binding the group members, made in their absence, would nonetheless, by virtue of r 41.04 of the Federal Court Rules 2011 (Cth), be required to be complied with, and if not obeyed, the failure would potentially give rise to serious consequences. As can be seen, the Order effectively assumes a contingency payment is appropriate in circumstances where Maurice Blackburn was acting as solicitors in another proceeding brought by a group member to vindicate the individual claim of the group member (such that the contingency payment would be the only basis of the solicitors’ remuneration in undertaking that role on behalf of a client).

116    None of these matters were explored by the parties before the primary judge nor, more broadly, did the parties explore the difference between how the Order would work if a common fund (comprising an overall settlement) was obtained, and how it would work if the case did not settle.

117    Moreover, his Honour was not assisted by the Klemweb applicant beyond pointing out: (a) that s 183(1) of the LPU Law did not (and does not) prohibit the payment of an amount pursuant to a common fund order in a Pt IVA proceeding, rather, s 183(1) only prohibited a law practice entering into “a costs agreement under which the amount payable to the law practice, or any part of that amount, is calculated by reference to the amount of any award or settlement or the value of any property that may be recovered in any proceedings to which the agreement relates”; and (b) that Maurice Blackburn did not propose to enter into such a costs agreement (with the retainer providing for a no-win no-fee arrangement).

118    It is regrettable the primary judge did not receive the benefit of detailed argument because his Honour then proceeded, in these circumstances, to determine the argument solely by finding that “the clear legislative policy evinced by s 183(1) is against the payment of such a commission”: at 194 [133]. As a consequence, the primary judge did not compare a properly framed common fund contingency proposal to the funding arrangement in the Impiombato proceeding.

119    As noted above, given the deficiencies in the terms of the Order, the primary judge was correct to conclude that it was unlikely to have been made. Having said that, I respectfully disagree with his Honour’s view that s 183(1) evinces any legislative policy preventing or inhibiting the making of a properly formulated common fund order which operates so as to make a payment to solicitors upon the happening of a contingency.

120    To explain why it is necessary to examine, in a level of detail not canvassed before the primary judge, the principled basis for the making of common fund orders.

G.2    Common Fund Orders Generally

121    All parties proceeded below on the basis that if a common fund order was to be made, it was to be made under s 33ZF of the Act. This is understandable because, as this Court has recently emphasised, this generally worded power should not be narrowly construed nor confined by fine distinctions: see Cash Converters International Limited v Gray [2014] FCAFC 111; (2014) 223 FCR 139 at 144-145 [23]; Ethicon Sàrl v Gill [2018] FCAFC 137 at [49]. It allows the Court to “shape the procedures and principles applicable to representative actions against an assessment of all connected circumstances” (see Westpac Banking Corporation v Lenthall [2019] FCAFC 34 at [89]) and make any order the Court thinks appropriate to ensure justice in the proceeding. 

122    In two cases delivered subsequent to the primary judgment in this matter, the Full Court (in Lenthall) and the Court of Appeal of New South Wales (Brewster v BMW Australia Ltd [2019] NSWCA 35 (Meagher, Ward, and Leeming JJA)) examined common fund orders. The Full Court case was an appeal, by leave, against the making of a common fund order. As to both cases, special leave to appeal has been granted by the High Court but, needless to say, we must apply the law as it presently stands.

123    In both Lenthall and Brewster (with minor differences not presently relevant) the appellants argued that: (a) upon its proper construction, s 33ZF of the Act (or the State cognate) did not permit the Court to make a common fund order, either at all, or at least prior to the conclusion of the proceeding; (b) a common fund order did not constitute an exercise of, and was therefore beyond, judicial power; and (c) the making of a common fund order, was unconstitutional as permitting an acquisition of property on other than just terms contrary to s 51(xxxi) of the Constitution. Both Courts rejected each of these arguments and, in the course of doing so, provided some general explanation of the bases for the making of such orders including, in the case of Lenthall, by making the point that Pt IVA is a novel procedure with equitable roots: see Lenthall at [85].

124    As is evident from Lenthall at [15]-[16], there is a difference between: (a) the construction of a statutory provision (which clothes the Court with power to make an order) and identification as to whether the pre-conditions to the exercise of the power are present; and (b) the consideration of the informing principles which make it appropriate that judicial power be engaged to make the order. It is necessary to explain this further.

125    There are six textual aspects of s 33ZF which merit attention as being identified as pre-conditions to its exercise, or which emphasise its breadth and flexibility: first, the power may be exercised on the Court’s own motion; secondly, the Court is empowered to make “any” order of the relevant kind; thirdly, the power is enlivened where the Court “thinks” the order is necessary or appropriate in the relevant sense; fourthly, it is sufficient if the Court thinks the order is “appropriate”; fifthly, “justice” is a broad concept which encompasses both procedural and substantive justice; and sixthly, the notion of justice concerns justice “in the proceeding”, that is, the Court must be satisfied that there is a particular issue or problem in the proceeding that needs to be addressed and that the order is “directed at resolving some issue or problem that has arisen or would, but for the order, arise”: Blairgowrie Trading Ltd v Allco Finance Group Ltd [2015] FCA 811; (2015) 325 ALR 539 at 560 [112].

126    Given the breadth of the discretion (fixed solely by reference to the notion of justice “in the proceeding”), those words are given content by both Pt IVA (which defines the nature of representative proceedings) and general principles which relate to the issue that has arisen (and which is proposed to be addressed by the order). In the present context, both the statutory framework of Pt IVA generally and how equitable principles apply in the context of common funds, provide the necessary scheme of reference for consideration and assessment of what might be thought as appropriate to ensure justice is done. This scheme of reference means the exercise of the power is not arbitrary nor a matter of “unfettered individual opinion” but is subject to the “usual restraints applicable to courts in their exercise of judicial power”: see Cominos v Cominos (1972) 127 CLR 588 at 599 (Gibbs J) and 604-605 (Stephen J).

127    As was further explained in Lenthall, this Court, as a court of equity, will apply fundamental equitable doctrines and principles in the execution of its jurisdiction including the underlying maxim that equity is equality which informs a range of equitable principles and remedies.  At [103] the Full Court made reference to a decision of the House of Lords, National Bolivian Navigation Company v William Millar Wilson (1880) 5 App Cas 176, which concerned the proper order for costs in representative proceedings brought in Chancery. The final order in respect of the costs of the representative party provided for all his costs, charges and expenses to be taxed and paid out of the fund to be distributed to the represented persons because “it was just and fair and a reflection of equity being equality”: at [103], see also Daniell’s Chancery Practice (Stevens and Sons, 6th ed, 1884) at 1239.

128    Although not required to be examined in Lenthall, a series of cases in the United States stand for the same proposition: that is, that the foundation for the historic practice of granting reimbursement for the costs of litigation “is part of the original authority of the [C]hancellor to do equity in a particular situation”: Sprague v Ticonic National Bank 307 US 161 (1939) at 166. Indeed, after making reference to observations in the second edition of Daniell’s Chancery Practice at 1381-1410, Frankfurter J in Sprague referred to the “power of equity in doing justice as between a party and the beneficiaries of his litigation”: at 167. Relying upon equitable principles, it is well established in the United States that a court may order that the financial burden of legal fees is to be spread “proportionately among those benefited by the suit”: Boeing Company v Van Gemert 444 US 472 (1980) at 478. Thus, as was said by Powell J, in delivering the opinion in the leading case of Boeing, the common fund doctrine reflects the traditional equitable practice, which rests on the perception that persons who obtain the benefit of an action without contributing to its cost are unjustly enriched: at 478.

129    The common fund doctrine as developed in the United States allows lawyers to approach the court for a fee from a fund in addition to the fee contracted: Central Railroad & Banking Co v Pettus 113 US 116 (1885) at 127, and, consistently with its equitable roots, the fund concept was “employed to realize the broadly defined purpose of recapturing unjust enrichment”: Dawson, J P, “Lawyers and Involuntary Clients: Attorney Fees From Funds” (1974) 87 Harvard Law Review 1597 at 1597; see also Bercaw, J D, “The Common Fund Doctrine: An Overview” (1989) 14 Journal of the Legal Profession 203 at 204; Legg, M, Reconciling Litigation Funding and the Opt Out Group Definition in Federal Court of Australia Class Actions – The Need for a Legislative Common Fund Approach (2011) 30(1) Civil Justice Quarterly 52; (although as Professor Silver explained in “A Restitutionary Theory of Attorneys’ Fees in Class Actions” (1991) 76 Cornell Law Review 656 at 657, a coherent theory explaining why class action lawyers are entitled to be paid for getting in a fund has been somewhat controversial).

130    It is beyond the scope of this judgment to dwell further on these matters but the first step for a party explaining why a properly framed order should be made, one would think, would be to examine the jurisprudential basis for such an order including explaining why it might be thought to be consistent with equitable principles that a person who benefits from another’s efforts in producing a fund is obliged to provide appropriate value in return, as is reflected in the underlying principle that it would be inequitable for the person who has created or realised a valuable asset, in which others claim an interest, “not to have his or her costs, expenses and fees incurred in producing the asset paid out of the fund or property created”: Thackray v Gunns Plantations Ltd [2011] VSC 380; (2011) 85 ACSR 144 at 154-155 [41] (where Davies J described the principle in the different context of an assertion of an equitable lien); see also IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq) [2009] FCAFC 9; (2009) 253 ALR 240 at 254-257 [63]-[78] (North, Emmett and Rares JJ)). The second step would be to explain why such an order, directed to a circumstance of a common fund and being restitutionary in nature, would not give rise to problems of incoherence with any relevant statutory policy. This was not done, nor even attempted.

G.3    The Primary Judge’s Reasoning

131    The primary judge at 194 [133] commenced by identifying the relevant issue: whether the funding arrangement proposed by Klemweb, which involves the payment of a commission to solicitors, is likely to be approved or accepted by the Court as part of the making of a common fund order?

132    The primary judge then set out the provision of the Victorian statute law which prohibits a law practice from entering into a costs agreement providing for a contingency fee and the civil penalties for contravention of the norm.

133    After recording the submission of Klemweb, repeated on appeal, that there would be no contravention of Victorian statute law, his Honour neither accepted nor rejected this submission. Rather, the critical reasoning was that the primary judge considered it to be “unlikely” that a common fund order incorporating the payment to solicitors of a contingency fee out of “a settlement sum or judgment” would be made by the Court. This was because “the clear legislative policy evinced by s 183(1) is against the payment of such a commission”.

G.4    Evaluating the Contingency Fee Contention

134    Three aspects of the primary judge’s reasoning should be commented upon.

135    First, although his Honour did not find it necessary to determine the question of contravention, the answer to the question of whether there would be a contravention, in my view, is clear. Any notion there would be a contravention of the Victorian statute must be rejected because: (a) if a Court exercising Chapter III judicial power required the common fund to be dealt with in a particular way because the Court thinks it appropriate to ensure justice in the proceeding, then the fund is to be dealt with in that way; and (b) as an ordinary matter of statutory construction (even leaving aside any special rules of construction relating to penal statues), it cannot be said that by enjoying any benefit under the common fund order that the “law practice” entered into any costs agreement of any type.

136    Secondly, there is the centrality to the primary judge’s reasoning of notions of legislative policy. Of course, consideration of legislative policy usually arises in the context of a court seeking to interpret a statutory provision. A good example is National Rugby League Investments Pty Limited v Singtel Optus Pty Limited [2012] FCAFC 59; (2012) 201 FCR 147 (Finn, Emmett and Bennett JJ) where, in a copyright case, the Full Court had to deal with the meaning of the word “make” in the Copyright Act 1968 (Cth). At 148 [25], in considering legislative policy, the Court observed:

In varying guises and to differing extents, this has been a tool of statutory interpretation for many centuries. Its historical exemplar was the doctrine of the “equity of the statute”: see Nelson v Nelson (1995) 184 CLR 538 at 552-554; Comcare v Thompson (2000) 100 FCR 375 at [40]-[43]. Its principal modern manifestation is in that form of purposive construction enjoined by s 15AA of the Acts Interpretation Act 1901 (Cth). However, if the apparently confined words of a statute are to be given a more extended scope, not only must they be capable as a matter of language of sustaining such an extension, there must also be some indication in the legislation, its purpose and context of whether, and if so how, the legislature would wish to extend what, on its face, is the confined scope of the statute or of a section of it: see Woodside Energy Ltd v Federal Commissioner of Taxation (2009) 174 FCR 91 at [51].

137    What is being suggested here is somewhat different. It is not “policy” being used as informing the construction of a provision of a statute, but rather what might be described as an issue of coherence: whether a prohibition operating in a different realm of discourse should inhibit the ability of a Court exercising a broad discretion to make orders it thinks appropriate to ensure justice in the proceeding, relevantly, as to what deductions should be made out of any common fund. 

138    Of course, the approach of using policy in this way can risk the danger of decontextualising the underlying rationale for a penal provision operating in a quite different area. As has been said, in the law, policy can be difficult magic, the “first resort is to its words be they expressed in a statute or as the statement in the cases of a rule of the common law… Policy divorced from law has no voice in the courts”: see The Hon Justice French, R S, “Dolores Umbridge and the Concept of Policy as Legal Magic” (Australian Law Teachers’ Association — National Conference Perth, 24 September 2007).

139    Focussing on the context of Pt IVA proceedings, it is not apparent to me why a properly formulated common fund order that relates, in its operation, to a common fund and involves a contingency payment to a solicitor could not, in some cases, be appropriate to ensure justice in some Pt IVA proceedings. Part IVA has its own policy which includes allowing small claims to be run together efficiently and providing access to justice. To the extent any policy considerations are relevant, these policy objectives of Pt IVA are not foreign to what is proposed as a matter of theory. Why common fund orders of the type proposed might (if properly framed) be considered appropriate can be illustrated by focussing on recent experiences of the Court in s 33V applications which involve deductions for both legal costs and funding commissions, which have been of very real concern: see, by way of example, Santa Trade Concerns Pty Limited v Robinson (No 2) [2018] FCA 1491 (where out of a settlement of $3 million, the amount deducted was $2 million, being $1.5 million in relation to legal costs, and $500,000 by way of funding commission: see [4]-[5]); Clarke v Sandhurst Trustees Limited (No 2) [2018] FCA 511 (where out of a settlement sum of $16.85 million, an amount approaching $10 million went to legal costs and funding charges: see [2], [4]); Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 3) [2018] FCA 1842 (where out of a settlement of $12 million, approval was sought for $4.57 million for legal fees, and $7.98 million for the funder which, if the application had been allowed, would have resulted in class members receiving approximately 2% of the settlement: at [5], [11], [14]); and Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 (where out of a settlement of $19.25 million, an amount of approximately $13.33 million went for legal costs and funding charges: see [6]).

140    In circumstances where there is real doubt about the ability to intervene with contractual promises given to funders absent any complaint by the contractual counterparty (see the discussion in Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289 at [18]-[52], a case where $92 million was paid to a litigation funder and over $20 million to lawyers), the practical benefit of common fund orders has been to maintain control over disproportionate deductions from modest settlements, prevent windfalls, and ensure the court’s protective and supervisory role in relation to group members is given effect. It was not in contest on the applications, and it is consistent with the evidence before the primary judge, that the amount proposed to deducted from any fund by the contingency payment suggested in this case, is significantly lower (as a percentage) than has historically been the case for costs and funding commissions approved in securities class actions funded pursuant to funding agreements: see also the comments of the Victorian Law Reform Commission in its report Access to Justice – Litigation Funding and Group Proceedings (March 2018) at [3.68], [3.74] and [3.96].

141    Subject to being properly framed (which the Order was not), I do not consider it unlikely that a common fund order incorporating a contingency payment could be made. When one has regard to the equitable roots and restitutionary basis of common fund orders, it is not apparent why a common fund order incorporating a contingency component is antithetical to doing justice in a Pt IVA proceeding in an appropriate case.

142    The problem here was that the Order moved away from a deduction from a common fund brought into court and potentially, at least, became a mechanism for remuneration for doing legal work for individual group members. Because of this, the policy considerations invoked by the primary judge assume importance because the operation of the Order becomes unhinged from its only apparent justification, which reflects the equitable practice of ensuring persons who obtain the benefit of an action without contributing to its cost are not unjustly enriched at the successful litigant’s expense. The implicit assumption by those drafting the Order, that the same principles which operate in relation to a claim on a common fund also operate when a solicitor seeks to recover an amount representing costs from an individual amount recovered by solicitor’s client is misconceived. This misconception seems, at least in part, to have been caused by equating the position of a solicitor with that of a funder (which is never restrained from being paid upon the happening of a contingency). Because the Order has a potential field of operation beyond a common fund, very real issues arise as to conceptual coherence because, as a means of payment for individual legal work, the Order may very well serve to stultify a relevant statutory policy as his Honour concluded: see the Hon Keith Mason AC QC, “Strong coherence, strong fusion, continuing categorical confusion: The High Court’s latest contributions to the law of restitution” (2015) 39 Australian Bar Review 284 at 296-297. In any event, given the way the matter was argued below, these potentially complex issues were wholly unexplored.

143    Although the Contingency Fee Contention does raise important issues and should be subject to a grant of leave, because of the terms of the Order, there was no error in the primary judge reaching the conclusion that it was unlikely that the Order would be made.

H    THE NOTICE OF CONTENTION & BHP’s CROSS CLAIM

144    Having granted leave to appeal in the Klemweb proceeding limited to grounds 1 to 5 in the draft notice of appeal (which raised the No-Win No-Fee Contention and the Contingency Fee Contention), the notice of contention filed by Mr Impiombato needs to be addressed and the cross-appeal filed by BHP in the Klemweb proceeding needs to be considered.

145    The sole ground of contention was that the primary judge erred in finding that the no-win no-fee arrangement in the Klemweb proceeding was likely to result in a higher percentage of recoveries, where the commission payable in the Impiombato proceeding is expressed as a maximum of “less than 18%” of gross recoveries, inclusive of costs and disbursements: see 171 [37], 196 [142(d)].

146    The notice of cross-appeal asserts that the primary judge erred by declining to order a permanent stay of two of the three related class actions and the primary judge “ought to have ordered a permanent stay of either the LACERA proceeding or the Impiombato proceeding, in addition to ordering a permanent stay of … the Klemweb proceeding”.

147    Dealing with the notice of contention, there are two points to make. First, although it is correct that the commission payable in the Impiombato proceeding was not fixed at 18%, there is no doubt that his Honour was alive to this subtlety. Any commission would need to be the subject of approval and potential variation (it was, after all, an interlocutory order). But there was a point in setting a “headline” figure. It would provide a benchmark allowing group members to have an understanding of what the Impiombato applicant would be likely to seek on an approval application for the purposes of assessing opt-out or taking other steps in the proceeding. Secondly, there is little doubt 18% would have been the percentage sought by the Impiombato applicant if the circumstances of any settlement permitted, and the primary judge was simply reflecting the fact that the no-win no-fee arrangement was likely to be less than 18% of a settlement amount in most (but not all) scenarios.

148    Dealing with the cross-appeal, it reflects BHP’s core contention that only one competing class action should go ahead. Allied to this was its submission that if a class action was to go ahead, it should be one where all claims would be involved, including the Affected Causes of Action. For reasons already canvassed above, irrespective as to what class action goes ahead, the entire s 33C claim of group members are included in Impiombato and Klemweb proceedings, other than those of the LACERA Only Group. For the reasons set out at [50]-[60], the primary judge did not err in this aspect of his broader analysis, nor, more particularly, was it an error to order a temporary stay to ascertain whether the position of the LACERA Only Group would be resolved by amendment.

I    THE ORDERS OF 28 MAY 2019

149    Given the temporary stay of the LACERA proceeding remains unaffected and the Klemweb applicant was successful in demonstrating error in relation to the No-Win No-Fee Contention, the issue arose, in relation to the competing Impiombato and Klemweb proceedings, as to whether it was appropriate for the Full Court to remit the competing applications for stays back to the primary judge, or re-exercise the discretion afresh. The latter course, in my view, is the most cost effective and expedient way of proceeding. Further, given that the decision should not be driven solely by the likely net return to group members and it is now likely to be of benefit to group members to retain the benefit of knowledge accumulated by those conducting the Impiombato proceeding, I did not consider it appropriate simply to stay the Impiombato proceeding without exploring whether some other course may be preferable. Accordingly, I joined in orders made at the conclusion of oral argument which included orders that: (a) pursuant to s 37P(2) of the Act, the applicants in the Klemweb proceeding and the Impiombato proceeding and the legal representatives acting in those proceedings confer by 10 June 2019, with a view as to ascertaining whether a joint proposal for the consolidation of those proceedings can be agreed (joint proposal); and that (b) by 13 June 2019, those applicants provide a minute of order to implement the joint proposal, or notify the Full Court that a joint proposal is not agreed.

J    RE-EXERCISE OF DISCRETION & RELIEF

150    In accordance with the orders made on 28 May 2019, a joint proposal as contemplated was served, as were written submissions as to further relief.

151    The Joint Consolidation Agreement provided outlines the terms upon which the two applicants have agreed to consolidate the Klemweb proceeding and the Impiombato proceeding. The two applicants will both remain representative applicants and both Phi Finney McDonald and Maurice Blackburn will jointly represent all group members who have not signed a retainer with either firm. Both firms will continue to represent those group members who are their clients.

152    A hybrid funding model has been proposed, whereby Maurice Blackburn will act on a no-win no-fee basis, charging a 6.25% uplift, while Phi Finney McDonald will continue to work pursuant to its existing terms of engagement, deferring a portion of its fees, subject to a 25% uplift upon resolution. The hybrid funding model guarantees that at least 85% of any gross recovery will be available for distribution to group members. As consideration for its agreement to fund the consolidated proceeding, the funder will receive an amount not exceeding 15% of the gross recovery, for amounts up to and including $150,000,000, and an amount not exceeding 10% for amounts in excess of $150,000,000. This includes reimbursement of costs and disbursements, and including payment to Maurice Blackburn of its no win no fee professional fees.

153    Consistently with the expectation expressed above that those conducting a proceeding going forward would likely amend, the consolidated proceeding is to include the Affected Causes of Action. Needless to say, subject to the matter discussed in the next paragraph, this means that BHP is now likely to face one proceeding (subject to the opting-out of any group members).

154    The one complication, which seems more a matter of form rather than substance, is the temporary stay of the LACERA proceeding. The temporary stay has meant that those within the LACERA Only Group had their interests protected pro tem and will now have their claims advanced in the consolidated proceeding. Having dismissed the application of leave to appeal in the LACERA proceeding, no occasion arises for the Full Court to make an order transforming the stay of the LACERA proceeding from being temporary to a permanent one, and this is a matter that we ought to leave to the docket judge. Although no submissions were made relating to this issue by the applicants in the Klemweb proceeding and the Impiombato proceeding (joint applicants), there is sufficient procedural flexibility available to ensure, should it be thought appropriate, that any prejudice caused by the expiry of a limitation period after commencement of the LACERA proceeding but prior to the date of the amendment occasioned upon the consolidation, will not operate so as to prejudice the interests of the LACERA Only group.

155    For my part, consolidation of the type proposed is a sensible course consistent with the overarching purpose subject to the Court being satisfied that granting leave for two firms to be on the record for the joint applicants is appropriate in the interests of justice. The Minute of Order provided by the joint applicants provides an appropriate procedural mechanism for effecting consolidation. Having said that, making orders finally effecting consolidation requires the Court to be satisfied that future conduct of the consolidated proceeding is likely to be consistent with the interests of group members and the overarching purpose.

156    BHP does not object in principle to consolidation but points to a proposed order provided to the Court whereby the joint applicants propose filing and serving what is described as a “cooperative litigation protocol within 28 days”. As BHP rightly points out, it is difficult to conclude now whether this foreshadowed cooperative litigation protocol will sufficiently address the need to ensure that group members and BHP are not prejudiced by duplication of legal work; increased overall legal costs; increased wastage of Court resources; and potential delay.

157    As the Full Court observed in Perera v Getswift at 452 [274(a)] “serious inefficiencies and wastage of costs as solicitors from different firms, often with no love lost between them” can arise by “checking each other’s work and arguing about the many forensic decisions that are involved in large and complex litigation”. Prior to consolidation being finally ordered, it seems to me the Court must be satisfied these sorts of problems will not develop. This state of satisfaction is relevant to the exercise of the discretion to make the orders proposed to effect consolidation, and this issue ought not to be punted down the road to be addressed later.

158    Recently, in a not dissimilar circumstance, Murphy J made consolidation orders and in doing so approved the terms of a Cooperative Litigation Protocol in the Brambles Class Action (proceeding VID972 of 2018).  The rationale for the orders is evident upon a review of them.

159    In that matter, two securities class actions were commenced with very similar allegations but with slightly different claim periods. The respondent proposed a carriage motion be heard with the “losing” case to be stayed.  In circumstances where each of the respective solicitors and funders had signed up class members with claims of approximately $100 million, his Honour, in the exercise of his discretion, did not take the path of a “winner takes all approach”.  Consolidation resulted and in the orders made by his Honour, potential duplication of costs and waste is addressed in four ways:

(1)    first, the consolidation orders provide for one set of counsel, one address for service and communication, joint interlocutory applications, joint retention of expert witnesses, one set of discovery by the respondent;

(2)    secondly, the orders provide for a litigation committee to be established responsible for making the major strategic decisions, managing the litigation and allocating the tasks between the solicitors with “the primary determinant of the allocation of work to be the interests of the group members” having regard to: (a) skills and experience; (b) the objective of ensuring that the total legal costs are reasonable and proportionate; and (c) the objective of minimising, to the greatest extent possible, the legal costs incurred to overlapping or duplicated work and requiring the solicitors to work together to achieve this end; and

(3)    thirdly, a Costs Referee was appointed to conduct an inquiry every four months as to whether there is unnecessary or excessive duplication in the work being performed; the Costs Referee is to provide a short report to the Court on a periodic basis stating whether there is such duplication and making any recommendation for reducing duplication.

160    There is much to be said for consistency in these matters to the extent it is practicable. With respect, the orders made by Murphy J in the Brambles Class Action adequately address the legitimate concerns of a respondent as to consolidation and also safeguard the interests of group members. The appropriate course is to require the joint applicants to bring in orders (including a Cooperative Litigation Protocol) within fourteen days which, to the extent practicable, mirror those made in the Brambles Class Action. Having said that, for my part, to the extent confidentiality orders are sought as to any Cooperative Litigation Protocol, attention should be paid (as was evidently not the case on these applications), to the fact that the primary objective of the administration of justice is to safeguard the public interest in open justice and the Court must be satisfied that any confidentiality order is necessary to prevent prejudice to the proper administration of justice (s 37AG(1)(a) of the Act), and that “necessary” is a “strong word”: Hogan v Australian Crime Commission [2010] HCA 21; (2010) 240 CLR 651 at 664 [30].

K     COSTS

161    At the conclusion of the hearing on 28 May 2019, orders were made dismissing the LACERA applications for leave with costs. In the proposed orders provided by the joint applicants subsequent to the hearing, the following orders were proposed:

12.    There be no order as to costs as between Impiombato and Klemweb with respect to the costs of and incidental to the applications for leave to appeal in proceedings VID58/2019 and VID169/2019.

13.    [LACERA] pay Impiombato’s costs and Klemweb’s costs of and incidental to the applications for leave to appeal in proceedings VID59/2019 and VID127/2019.

14.     BHP pay Impiombato’s costs and Klemweb’s costs of and incidental to its cross-appeal in proceedings VID59/2019, VID127/2019 and VID169/2019.

162    LACERA acknowledged that its applications for leave had been refused with costs, but submitted that since Klemweb was not a party, there is no basis upon which LACERA should be visited with Klemweb’s costs of the appeals and Klemweb has not identified any costs attributable to those appeals that were not in fact its necessary costs of preparing its own appeals. These submissions should be accepted. Costs were ordered on the usual basis that they followed the event. Already paying the costs of their unsuccessful applications, LACERA should not then also be visited with any other costs burden. This includes the Impiombato applicant’s costs of proceeding VID59 of 2019 (being the application for leave to appeal from the orders of a temporary stay of the LACERA proceeding). Until the proposed consolidation, the Impiombato applicant stoutly resisted providing any undertaking to amend to include the claims of the LACERA Only Group, and LACERA’s efforts have belatedly resulted, at the very least indirectly, in a beneficial outcome for that group, which Mr Impiombato had formerly resisted. Much time at the hearing was wasted on argument related to this topic, which would have been avoided in the event a prompt decision had been made as to amendment to include the Affected Causes of Action.

163    As to the cross-appeal (not, as the proposed order describes, “cross-appeals”), as explained above at [46], drafts were served contingently, in the event leave to appeal was granted to either of the applicants for leave to appeal. BHP’s position was consistent: if it was to be sued, it unsurprisingly wished to face one proceeding which included all relevant claims – ultimately this outcome has been achieved, or will likely be achieved. The parties’ costs of BHP’s cross-appeal should be their costs in the cause.

Associate:

Dated:    21 June 2019