FEDERAL COURT OF AUSTRALIA

Perera v GetSwift Limited [2018] FCA 732

ORDERS

THE COURT ORDERS THAT:

1.    This proceeding be permanently stayed.

2.    For the avoidance of doubt, the permanent stay of this proceeding does not prevent the applicant making and moving upon any application as a group member in proceedings NSD 580 of 2018 pursuant to s 33T of the Federal Court of Australia Act 1976 (Cth) where he contends that Mr Webb, the applicant in that proceeding, is not able adequately to represent the interests of the group members in that proceeding including, without limitation, in circumstances where Mr Webb has failed to comply with any order relating to security for costs.

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

ORDERS

THE COURT ORDERS THAT:

1.    This proceeding be permanently stayed.

2.    For the avoidance of doubt, the permanent stay of this proceeding does not prevent the applicants making and moving upon any application as group members in proceedings NSD 580 of 2018 pursuant to s 33T of the Federal Court of Australia Act 1976 (Cth) where they contend that Mr Webb, the applicant in that proceeding, is not able adequately to represent the interests of the group members in that proceeding including, without limitation, in circumstances where Mr Webb has failed to comply with any order relating to security for 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 applicant file and serve a statement of claim on or by 4:00 pm on 28 May 2018.

2.    The respondents file and serve a defence to the statement of claim on or by 4:00 pm on 6 June 2018.

3.    On or by 2:00 pm on 7 June 2018, the applicants serve on the respondent and the solicitor for Mr Perera and the solicitor for the McTaggart applicants a copy of a proposed opt out notice and provide a copy to the Associate to Justice Lee.

4.    On or by 2:00 pm on 7 June 2018, the applicants serve on the respondent a copy of a draft common fund order and provide a copy to the Associate to Justice Lee.

5.    The matter be listed for a case management hearing at 9:00 am on 8 June 2018, for the purpose, among other things, of making orders in relation to the form and distribution of the opt out notice and that Mr Perera and the McTaggart applicants, International Litigation Partners No 18 Pte Ltd and Vannin Capital Ltd have leave to intervene, if they so wish, at the case management hearing for the purposes of making submissions as to the form of the opt out notice.

6.    Leave be granted to the applicants to issue a subpoena to ComputerShare Investor Services Pty Ltd in substantially the same form as comprises Annexure “A” to the interlocutory application filed in NSD 226 of 2018 dated 9 March 2018.

7.    Costs of the proceedings to date be reserved.

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

REASONS FOR JUDGMENT

LEE J:

A    Introduction

1    The controversy between the first respondent (GetSwift) and persons who acquired an interest in its listed securities presents for consideration a problem of signal importance relating to the conduct in this Court of Part IVA representative proceedings: the Court’s response to the phenomenon of competing securities class actions.

2    In this matter (to use that word in its constitutional sense), three open class actions have been brought at the instigation of three different firms of solicitors, each with the support of different litigation funders: NSD 226 of 2018 (Perera Proceeding), NSD 440 of 2018 (McTaggart Proceeding) and NSD 580 of 2018 (Webb Proceeding).

3    It is beyond the scope of these reasons to conduct an economic analysis of litigation funding and to deal, in any exhaustive way, with how the commercial opportunities presented to funders, and to solicitors with commercial relationships with funders, intersect with the role of the Court as an arm of government and the roles of solicitors as fiduciaries and officers of the Court in the administration of justice – these are very large and complex topics. What requires present attention is how the Court deals with competing commercial enterprises which seek to use the processes of the Court to make money and the role of the Court in ensuring the use of those processes for their proper purpose and informed by considerations including: (a) the statutory mandate (s 37M(3) of the Federal Court of Australia Act 1976 (Cth) (Act)) to facilitate the just resolution of disputed claims according to law and as quickly, inexpensively and efficiently as possible; and (b) the furtherance of the Court’s supervisory and protective role in relation to group members.

4    I will make orders ensuring that only one of the three current open class actions continues. This result, and the ancillary orders facilitating that result, ensures protection of the Court’s processes and gives effect to the considerations to which I have just referred.

5    Regrettably, these reasons are lengthy because of a perceived need to explain the background as to how the issue of multiplicity of competing class actions has arisen, deal with complex and contested issues as to power deal and then, following a comparative analysis, to make a determination as to an appropriate remedial response. At the outset, however, I wish to emphasise three things.

6    First, as I will explain, other occasions of competing class actions have led to different procedural outcomes (and may well do so in the future); this is, after all, a case management decision rooted in the particular circumstances of the cases subject to case management. Here, the issue has emerged very early, the cases proposed to be advanced are substantially the same, and all interested parties are agreed that grasping the nettle now makes sense (although each of the representative applicants, unsurprisingly, differs as to the particular remedial response for which they advocate). This may not be the case in subsequent cases where apparently competing actions may raise different common issues for consideration, or span different time periods, or advance conflicting case theories (that is, bona fide and not as a stratagem to distinguish one case from another). In some cases there may be a sound reason to think the various promotors of the class action may, without undue delay, come to a consensus as to how the issue of competing claims is resolved which is acceptable to the Court. Each instance of competing class actions needs to be managed by reference to the bespoke circumstances before the Court. Having said this, although this case management decision is focussed on the particular circumstances, for reasons I will explain, the issues with which I am confronted reflect themes which now increasingly recur in what has emerged as the usual form of securities class actions.

7    Secondly, the comparative assessment undertaken below is a multifactorial one reflecting the considerations identified by the parties and also the accumulated experience of how analogous multiplicity issues have been handled by courts in Australia, and also how North American courts have dealt with competing class actions, albeit in the different context of certification. It should be stressed that any principled assessment between class actions is not so crude so as to be determined by reference only to the relative size of the funding commission spruiked in promotional material. It is inconsistent with the principled exercise of judicial power, and also unedifying, for the Court to be perceived as akin to a metaphorical auctioneer going around the room adopting the curial equivalent of entreating: “Are we all done? It’s now going to go under the hammer!” The Court’s role is to quell controversies in accordance with Chapter III of the Constitution and, in doing so, ensure its processes are used for the purposes for which they were designed. To the extent a determination is required as to which open class securities class action goes forward, the weight to be given to a particular relevant consideration, including ‘headline’ commission rates of funders, will necessarily vary depending on the particular circumstances.

8    Thirdly, much of what follows has, as its point of departure, the expectation that this dispute will resolve in the same way as all other securities class actions have done to date: by way of a paction sanctioned by the Court. I have not yet seen a defence, let alone evidence. Ratiocinations premised on this settlement assumption are based on nothing more than empirical evidence as to what is likely, and must not be seen as an indication that this matter is one GetSwift should or will necessarily settle; nor that any settlement will involve the payment of substantial compensation to group members. Moreover, as will be seen, this judgment involves reference to modelling done by reference to various damages scenarios. It should be obvious, but is worth emphasising, that these scenarios have been chosen to reflect various hypotheses based on ranges of damages suggested by the applicants’ solicitors (including estimates which have been disavowed as not reflecting the reality of a particularised claim). Modelling needs inputs and, in the absence of any evidence, nothing should be made of the figures chosen which, at least in part, simply reflect past experience of cases of this sort.

9    I will return to the first two of these matters below, but part of working out how to manage and resolve a perceived problem, is appreciating why it exists. With this in mind, it is useful to start with asking the question: how did we get here? Or, put more particularly, how did the phenomenon of competing securities class actions arise?

B    Contextual Matters

B.1    The Competing Securities Class Action Emerges

10    The first Australian securities class action which bears all the essential characteristics of the genus was the Aristocrat class action (NSD 362 of 2004 Dorajay Pty Ltd v Aristocrat Leisure Ltd). As an illustration of how things have changed, and how the possibility of civil liability to investors for a breach of continuous disclosure obligations has seeped into the legal consciousness, it is well to remember the circumstances that gave rise to that litigation. A senior executive of Aristocrat had brought an action for wrongful dismissal. In the defence, Aristocrat, a listed company, contended that it was entitled to dismiss the executive for a number of reasons, including the fact that he had been responsible for failing to disclose material information to the market of investors in Aristocrat shares. The notion of a listed entity defending a legal proceeding by impliedly admitting that its investors may have been misled is something which seems from another age, and yet it is less than a generation ago.

11    The post-Aristocrat securities class action not only has a common form, but often has a familiar genesis and development. A significant drop in the value of securities is scrutinised to determine whether it is likely that the relevant drop had been occasioned by the late revelation of material information. Premised on assumptions that: (a) the value of the relevant security reflects the expected discounted value of future cash flows to the security holders; and (b) that the security operates in an efficient market, the information released prior to the price-drop is reviewed to ascertain whether it was likely to have caused the market to alter its expectation of future cash flows (hence causing a repricing of the security to reflect these altered expectations). Analysis takes place as to whether there is a sufficient basis for assuming the existence of contravening conduct during a period anterior to the revelation (this will usually involve close consideration of any relevant disclosures and available analyst reports). Further analysis is undertaken as to the size of the potential loss that may be related to the suspected contravening conduct over an identified period (the duration of which is identified by the preceding analysis).

12    Following this, if all the relevant boxes are ticked, the bugle is sounded. Funding terms are discussed and (at least prior to the advent of common funds orders) there is a concerted effort to sign up institutional and other group members. At some time during this developmental stage, an announcement might be made of a potential class action, garnering media attention which may augment the number of affected shareholders who may wish to participate actively in the proposed class action, but also may precipitate a further decline in the price of the securities.

13    Of course, some actions may have different origins, such as an approach by a ‘whistle-blower’ or revelations through public inquiries, and the time needed for the analysis may vary considerably, but to anyone who has been involved actively in securities class actions since their advent, the pattern described above is familiar.

14    I hasten to add that by identifying a commonplace pattern, I do not suggest that the development of the usual form of securities class actions should be looked upon askance. To the contrary, an informed observer would likely recognise that a consequence of these developments has been a heightened awareness among corporations, through their officers, of their obligations to act in such a way as to avoid continuous disclosure breaches and contravention of the norms prohibiting misleading and deceptive conduct. This is not the place to debate the social utility of securities class actions; this would involve a range of considerations which raise complex and collateral assessments (such as, for example, its impact on the price of D&O and ‘Side C’ liability cover), but despite what some would describe as their ‘commercialisation’ and concerns which may arise concerning a premature announcement of a proposed class action that never proceeds, it can be argued cogently that they have served, and continue to serve, a role in not only providing for significant amounts to be paid to investors for claimed losses occasioned by allegations of corporate malefaction (that would, absent securities class actions, never have been paid), but they also have occasioned a private regulatory discipline on the conduct of listed companies and their dealings with the market of investors in their securities.

15    The securities class action has also been important as the vehicle driving the procedural development of Part IVA of the Act. One of these developments is of direct relevance to the present issue. It can be traced back to Aristocrat, where the primary judge, in an interlocutory hearing, took the view that a closed class (which included a criterion restricting composition of the group to those who had retained the solicitors for the applicant) was inappropriate because closed classes had the effect that “the clear legislative intention [of Part IVA] is subverted”: see Dorajay Pty Ltd v Aristocrat Leisure Ltd [2005] FCA 1483; (2005) 147 FCR 394 at 433 [135] per Stone J. That decision was followed shortly thereafter: see Rod Investments (Vic) Pty Ltd v Clark [2005] VSC 449 (Hansen J)) and Jameson v Professional Investment Services Pty Ltd [2007] NSWSC 1437; (2007) 215 FLR 377 (Young CJ in Eq). The heterodoxy that a class defined by reference to a funding or similar criterion was invalid was, however, eventually exposed in Multiplex Funds Management Ltd v P Dawson Nominees Pty Ltd [2007] FCAFC 200; (2007) 164 FCR 275 (French, Lindgren and Jacobson JJ), in essence because of the text of a critical provision within Part IVA, s 33C, which expressly provided that a proceeding could be commenced by only some of the persons who had claims against a respondent.

16    This was a boon to litigation funders. It meant that a class could be constructed of persons who had signed funding agreements with an individual funder, thus eliminating the difficulty of so-called ‘free riders’, that is, persons who had not signed funding agreements but who would be part of any open class. However, like a ‘Whac-A-Mole’ game, where one mole is whacked by a mallet but another pops up, a further problem then emerged – if closed classes were allowed, how did a respondent obtain certainty against additional claims by settling only a closed class? A further procedural expedient resulted: allowing the ‘opening up’ and then ‘closing down’ of a class – this allowed certainty to be delivered to a respondent in settling what had originally been commenced as closed class proceedings (although this, in turn created its own controversies, which now appear to be largely resolved: see Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; (2017) 252 FCR 1 at 20-22 [70]-[76] per Jagot, Yates and Murphy JJ).

17    But how should these arrangements, pursuant to which these funded proceedings were brought, be characterised? The superficial answer was simply as a means by which a proceeding governed by Part IVA of the Act could be conducted to the benefit of group members, the funder and the solicitors. A more complex answer was provided by the Full Court in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11, where the majority (Sundberg and Dowsett JJ) found that the bilateral (or, with the solicitors, trilateral) arrangements pursuant to which these funded class actions were conducted were unregistered managed investment schemes for the purposes of the Corporations Act 2001 (Cth). A majority of the Full Court held that the class action (or, more particularly, the scheme constituted by the agreements which allowed the class action to be funded and maintained) had the following characteristics: (a) the promises given by the group members and the funder were ‘money’s worth’ contributed for the purposes of the litigation funding arrangement made in return for their acquiring rights to share in any judgment sum, and the benefit of the funder’s promises to meet legal costs; (b) the opportunity to prosecute a claim, with virtually no exposure to any costs or outgoings in the event of failure, was a benefit accruing to group members produced as a result of all parties carrying out their obligations under the scheme and that a successful prosecution of those claims would yield financial benefits to group members, the funder and, indirectly, the solicitors; (c) the pooling of contributions, which was effected by the group members making their individual promises available for the purposes and benefit of the scheme and, ultimately, for the funder’s benefit; (d) the litigation funding arrangement was a common enterprise in that there was a shared purpose of pursuing group members’ claims successfully that would then benefit the group members, the funder and the solicitors.

18    The Full Court’s conclusions remain authoritative as a statement of how at least two of the three arrangements put in place for the prosecution of a class action against the present respondent should be conceptualised. This is notwithstanding the fact that unlike Brookfield Multiplex, all of the class actions with which we are concerned are open class. As will be explained, two of the three class actions involve the now familiar arrangement of funding agreements being signed by a number of group members and hence involve contractual relationships similar, but not identical, to those involved in Brookfield Multiplex. The third involves no funding agreements in the conventional sense (as between group members and the funder) but a single agreement to fund the litigation, relying on the Court making a common fund order. This characterisation point is significant in that this type of litigation, unlike conventional litigation, is one where there exists a shared purpose of each of the participants in the enterprise which transcends the representative applicants’ individual purpose to maintain their claim for statutory compensation. It will be necessary to return to thus unusual aspect of Part IVA funded proceedings below. This characterisation is also useful in illustrating that despite their differences, each proceeding, in effect, represents a common enterprise of a commercial character which uses the Court’s processes to obtain mutual benefits for each of the group members, the funder and the solicitors. The use of the processes of the Court in this way is, of course, entirely licit, but it brings into focus the point I made at the outset: the necessity of the Court, in safeguarding its processes, to control the use of those processes for a commercial enterprise and ensure that any such use is consistent with the role of the Court, the just and efficient resolution of claims, and the Court’s supervisory and protective role towards group members.

19    Returning to the background narrative, in May 2010, a Class Order (Australian Securities and Investments Commission, Class Order, [CO10/333], 5 May 2018) exempted funded proceedings from the definition of managed investment schemes and also exempted funders and lawyers from the requirement to hold an Australian Financial Service Licence or act as an authorised representative of a licensee to provide financial services associated with funded proceedings. According to a discussion paper prepared by the New South Wales Office of the Legal Services Commissioner entitled “The Regulation of Third Party Litigation Finding in Australia” (March 2012), this had been immediately preceded by an announcement, by the then responsible Minister, noting that the Federal Government recognised that class actions are already subject to a regulatory regime consisting of legislation, court rules, and the legal profession rules protecting the interests of clients and, as a consequence, that the government did not consider it necessary to impose further regulatory burdens for litigation funders. The result was a reversion to business as usual, allowing conduct of closed class securities actions, and an environment whereby any regulation was as imposed by legislation governing the conduct of class actions and the Court and, indirectly, by the norms governing the conduct of lawyers.

20    An inevitable consequence of the rise of the closed class representative proceedings was the rise of the competing class action. The reason was simple: if a proceeding could be commenced on behalf of only some of the investors, then this allowed a further, differently funded class action to ‘hoover up’ the balance (or a substantial part) of the unsigned class.

21    If one pauses, one might be forgiven for thinking that these developments and, in particular, the emergence of these common enterprises, would not have been expected by those who were responsible for the report of the Australian Law Reform Commission (ALRC) tabled in Parliament in December 1988 entitled ‘Grouped Proceedings in the Federal Court’ (ALRC Report) upon which Part IVA of the Act was largely, but not wholly, based. The original design, as noted in the ALRC Report at [92], was identified as follows:

The main objective of [the class action regime]…is to secure a single decision on issues common to all and to reduce the cost of determining all related issues arising from the wrongdoing. To achieve maximum economy in the use of resources and to reduce the cost of proceedings, everyone with related claims should be involved in the proceedings and should be bound by the result.

(Emphasis added)

22    Consistently with this, in describing the general objectives of the Bill which inserted Part IVA in the Act, the then Attorney-General stated that it would:

provide a new representative action procedure in the Federal Court. The new procedure will enhance access to justice, reduce the costs of proceedings and promote efficiency in the use of court resources…The Bill gives the Federal Court an efficient and effective procedure to deal with multiple claims. Such a procedure is needed for two purposes. The first is to provide a real remedy where, although many people are affected and the total amount at issue is significant, each person’s loss is small and not economically viable to recover in individual actions. It will thus give access to the courts to those in the community who have been effectively denied justice because of the high cost of taking action. The second purpose of the Bill is to deal efficiently with the situation where the damages sought by each claimant are large enough to justify individual actions and a large number of person wish to sue the respondent. The new procedure will mean that groups of person, whether they are shareholders or investors, or people pursuing consumer claims, will be able to obtain redress and do so more cheaply and efficiently than would be the case with individual actions.

(Second Reading Speech by Attorney-General, House of Representatives, 14 November 1991, Hansard, at pp 3174-3175)

23    Given the policy objectives of Part IVA of the Act, the emergence of the notion rejected in Brookfield Multiplex, preventing closed classes by reference to a solicitor or funding criterion, is on one level understandable, because it was clearly anticipated that open classes of those affected by mass wrongs would be the norm and not the exception. The leitmotiv of the ALRC Report was the provision of access to justice to those with claims that could not be pursued practically by ordinary, inter partes litigation; it was not an occasion for consideration being given to the rise of litigation funding which, it must be said, has allowed Part IVA to be used very successfully in prosecuting mass claims. So much so that, according to a leading academic expert in Australia’s class action regime, Professor Vince Morabito (An Empirical Study of Australia’s Class Action Regimes, Fifth Report: The First Twenty-Five Years of Class Actions in Australia (Report, Monash University, 20 July 2017) https://ssrn.com/abstract=3005901), since the introduction of Part IVA in 1992, there have been (at least as at July 2017), over 513 class actions commenced in relation to 335 legal disputes. Of course, a significant number of these proceedings are multiple class actions over the same legal dispute, as is evident from these statistics.

24    The prevalence and commercial attractiveness to funders of the securities class action, compared to other types of class actions, is evident from the following statistics also gathered by Professor Morabito (as provided to the ALRC), on substantive claims advanced in funded Part IVA proceedings filed between the introduction of Part IVA in 1992 and 3 March 2018:

25    This brings us to the final development of which mention ought to be made and which has had the important effect of encouraging the commencement of open class representative proceedings. This was the emergence of the common fund order in Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited [2016] FCAFC 148; (2016) 245 FCR 191 (Murphy, Gleeson and Beach JJ). Rather than the economics of a class action being dictated by the size of sign-up, a common fund order allows an open class representative proceeding to be commenced without the necessity to build a book of group members who have bargained away part of the proceeds of their claim. Instead of addressing the ‘free-rider’ problem by making ‘funding equalisation orders’ (to redistribute the additional amounts received ‘in hand’ by unfunded class members pro rata across the class as a whole), the Court indicated its willingness to fashion a solution whereby the funder, who had borne the risks of the litigation, is recompensed from the common fund of proceeds obtained by the group as a whole.

26    Following on from this, in Blairgowrie Trading Ltd v Allco Finance Group Ltd (recs and mgrs appt) (in liq) (No 3) [2017] FCA 330; (2017) 343 ALR 476, Beach J accepted, in the context of that case, that it was reasonable for the funder to receive a funding commission rate of 30% of the net settlement sum having regard to a range of factors, including those identified in Money Max at 209 [80], being:

(a)    the proportion of group members who had voluntarily accepted the funding agreement, and how the proposed rate under the common fund order compared to the rate recoverable under the funding agreement;

(b)    how the proposed rate compared to other funding commission rates available, and to alternative funding mechanisms;

(c)    the risks assumed by the funder;

(d)    whether the commission to be received by the litigation funder was proportionate to the amount received by the group members; and

(e)    whether group members had an opportunity to opt out of the proceeding, or to notify their objections to the proposed funding commission.

27    Beach J observed that the percentage a funder receives varies from case to case, but most commonly falls within a range of 25% to 40%, and that the proposed common fund order was at the lower end of that range. Had the gross settlement sum been substantially higher, Beach J would have applied a ‘sliding scale’ to the commission rate and accordingly set a lower rate “so that the amount paid to the funder would have remained proportionate to the investment and risk undertaken by the funder” (at 516 [160]).

28    Most recently, in Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 at [159]-[174], Murphy J returned to the topic in the context of a funder seeking a common fund order at a rate of 30% of the gross recovery, which his Honour was prepared to order for reasons which included: first, a common fund order (which involved the funder not seeking the commission rate or project management fees to which it was contractually entitled) left all group members better off; secondly, it represented a simpler and more transparent mechanism for fairly apportioning funding charges; thirdly, group members were able to opt out if they wished; fourthly, the funder’s rate of return was low; and fifthly, it accorded with the Money Max factors referred to above, including that the rate was within the range of the funding rates available or common in the class action litigation funding market and that it was not a large settlement. Common fund orders are sought in this case. I return below to some criticisms of common fund orders and how the common fund order in this case may address some of these criticisms.

29    The developments I have traced, culminating in the prospects of recovery out of a common fund, have now led to the present competitive market where funders and solicitors are in competition for carriage of class actions which they subjectively perceive as having prospects of success and hence the prospect of delivering a commercial return (a conclusion which could no doubt have been drawn by even a moderately interested observer). According to a recent presentation by the President of the ALRC, the Honourable Justice SC Derrington entitled, ‘Litigation Funding Inquiry’ (Speech delivered at the Increased Regulation of Litigation Funding – A Timely Crackdown or a Regulatory Solution in Search of a Problem? Seminar, Monash University, 9 April 2018), approximately 25 funding entities are currently operating in the Australian market. Additionally, according to information provided to the ALRC, approximately one-quarter of class actions that were proceeding through the Court in 2015 and 2016 were related actions. The only available conclusion is that this competitive market for funding and the emergence of open class securities class actions means that this Court is highly likely to continue to be confronted with the spectre of competing funded securities class actions.

B.2    The Procedural Contradiction of Securities Class Actions

30    One matter left out of this historical survey is a characteristic of this type of litigation, which is both striking and singular. That is, that since the Aristocrat class action, there have been over 60 funded securities class actions commenced but not one of these actions has proceeded to the delivery of judgment following a fully contested hearing (albeit two have settled after an initial trial, but before judgment and at least one has settled during the course of the initial trial).

31    It might be thought that there is something odd about Chapter III judicial power being invoked with great regularity without the controversy, in respect of which jurisdiction is invoked, ever being resolved by final determination of contested common issues between the parties. There are a number of reasons why this might be the case. First, such litigation is expensive. Secondly, it involves risk as at least one issue, commonly described as ‘market based causation’, is yet to receive express acceptance by the High Court (notwithstanding its acceptance by Perram J, in obiter, in Grant-Taylor v Babcock and Brown Ltd (in liq) [2015] FCA 149; (2015) 322 ALR 723 at 765-766 [219]-[220]; in the decision of the Full Court (on a pleading dispute) in Caason Investments Pty Ltd v Cao [2015] FCAFC 94; (2015) 236 FCR 322 at 333 [68] per Gilmour and Foster JJ; the decision of Brereton J in Re HIH Insurance Ltd (in liq) [2016] NSWSC 482; (2016) 335 ALR 320; and the relatively recent observations of two Full Courts as to indirect causation in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 224 FCR 1 at 272 [1375]-[1376] per Jacobson, Gilmour and Gordon JJ and Chowder Bay Pty Ltd v Paganin [2018] FCAFC 25 at [61] per Besanko, Markovic and Lee JJ). Thirdly, speaking generally, many cases have involved a real risk for the respondent of proof of contravening conduct, as such costly litigation is likely to be commenced only when the subjective view of those commencing the litigation is that it is likely that contravening conduct will be able to be established; this is because it is only in such circumstances that there is an efficient allocation of the resources of the funder (although, it must be said, these subjective views may well be wrong and a more competitive funding market and the entry of different players may lead to some cases being commenced which would not otherwise have been prosecuted at a more embryonic and ‘risk averse’ stage of the development of securities class actions). Fourthly, connected to the previous point, respondents and insurers have generally been likely to seek to minimise risk by being open to settlement, provided an acceptable sum can be agreed (including in cases of real risk for the respondent where the amount paid cannot be characterised as payment of a ‘nuisance sum’).

32    To this list I would add a further and potentially worrisome reason for cases not proceeding to judgment following an initial trial. By reason of the very nature of the commercial model I have described, a desire exists on behalf of the funders to not only obtain a return, but to obtain that return with celerity. To those acting for applicants, there is a need to be alive to the possibility arising of a conflict between the commercial imperatives and demands of the funder, and the interests of the applicants and group members in maximising the recovery of their claims. To suggest simplistically that there is always an alignment between the funder and group members (because each have an interest in maximising relevant claims) is to fail to appreciate the difference between a commercial enterprise seeking consistent and predictable returns (and management of risk spanning a number of projects), with the position of a group member involved in one action who has a relatively small amount at stake which the group member may be willing to wager on the possibility of a greater return. I recently discussed this issue in Clarke v Sandhurst Trustees Limited (No 2) [2018] FCA 511 at [6]-[7] in the context of a settlement approval in a case where relatively modest damages were sought, and yet costs and funding charges were large compared to the recovery ultimately returned to group members.

33    No doubt this issue could prove a fertile ground for a sophisticated economic and behavioural analysis, but it suffices to note that those acting for applicants have an important role in the administration of justice in ensuring that the interests of group members are not swamped by the interests of funders in obtaining predictable and early returns. This important role is buttressed by the protective and supervisory role that this Court has in approving settlements of such litigation. I stress that, to the extent relevant, the history of settlement approvals suggests that there has been no difficulty and there is no reason whatsoever to doubt the conscientiousness of those commonly acting for applicants, but it might be thought at the very least surprising that this type of litigation never, ever runs to a conclusion. For reasons I have explained, the factors favouring resolution of these types of claims are often powerful, but given that no cases have fully run, one must be alive to the possibility that at least in some cases, the economic interests of funders may have driven or influenced compromise in cases where running the case to judgment may have been better from the perspective of group members. At the very least, the notion of the sliding scale whereby the amount recoverable by a funder increases to reflect the increased risk associated with running a case to a conclusion may serve to operate as an important counterweight in this regard. Further, as I will explain below, the related point is that any funding terms set at the outset of litigation should reflect the reality that these cases never have resulted in a final judgment.

34    The result of all of this is that there is potential procedural contradiction in the way in which securities class actions are conducted and managed. On the one hand, one goes through the solemnity of making orders on the basis that the litigation will be the subject of an initial trial at which contested issues will be determined by the application of judicial power, while on the other hand recognising that this, at least until now, never happens. Vast costs are commonly incurred and often, in the events that happen, are ultimately wasted. In my view, the time has come for the Court to recognise the reality (including in the context of applications such as the present), that securities class actions, at least as presently structured, are overwhelmingly likely to resolve by a bargain, subject to Court approval. To use an imperfect metaphor, managing litigation and incurring legal costs on the basis of an expectation that these cases will run is a bit like a passenger purchasing a railway ticket every day from Eastwood to Central, while knowing it is almost inevitable that they will be getting off the train every day at Strathfield, or, as is unfortunately more commonly the case, at Redfern (for the Victorians in the present matter, one can replace the destinations used in the last sentence with Williamstown Beach to Flinders Street, Footscray and North Melbourne, respectively).

35    In saying this, it must be recognised that the settlements do not happen by accident. A determined, well-resourced respondent will not make a substantial settlement offer unless persuaded that the applicant is prepared, absent settlement, to run the case and is capable of doing so. Settlements also usually reflect a material risk that the applicant will succeed on liability and can establish losses suffered by the class. For a respondent to be persuaded of such a risk usually requires the applicant’s lawyers to undertake substantial work. Similarly, a conscientious applicant will not accept a low settlement offer unless persuaded that there is a significant risk that the case will fail on liability or that the claimed losses will not be established. To be in a position to accept a conditional settlement offer requires work, often very substantial work.

36    Having noted this, the Court is to facilitate the quick and efficient disposition of litigation. In the case of securities class actions which will likely settle, this seems to me to require the Court to take an active role (including by fashioning interlocutory orders as to discovery and evidence) so that if, as anticipated, the case settles, it settles with alacrity or at least as early as practicable, with the minimum of cost for all parties and group members. Moreover, any orders as to common funds ought to reflect the reality of the empirical data as to prevalence of settlement of these cases, bearing in mind that the risk of a funder paying adverse costs of a trial in a securities class action has never once materialised.

37    It is against the background of these historical and contextual matters, that I come to the present issue.

C    The Factual & Procedural History of the Matter

C.1    Pre-Proceeding Background

38    GetSwift is a technology company founded in 2015, listed in 2016, and which relevantly provides software for businesses to manage what are described as ‘last-mile’ delivery functions. After listing, GetSwift, at various times, made announcements to the ASX about agreements and ‘partnerships’ signed with clients. On 11 December 2017, the company announced a $75 million capital raising, at $4.00 per share. On 19 January 2018, the Australian Financial Review reported that GetSwift had allegedly failed to inform the market that its agreements with some customers had been terminated, and further alleged that it had announced the revenue forecasts tied to an agreement with the Commonwealth Bank of Australia prematurely. Shortly thereafter, on 22 January 2018, GetSwift shares were placed in a trading halt, and two days later were suspended from official quotation, pending the company’s response to questions from the ASX. A number of announcements relevant to the company’s suspension from official quotation (including questions raised by the ASX) were then apparently released up to reinstatement to official quotation on 19 February 2018.

39    The evidence on this application suggests that before entering the trading halt on 22 January 2018, GetSwift’s share price was $2.92, however, following reinstatement, it declined to $0.51 as at the close of trade on 21 February 2018 – a total decline of approximately 82.5%.

40    Ms Banton, a partner of Squire Patton Boggs (SPB), a large international law firm, gives evidence that SPB began investigating possible claims against GetSwift on 19 January 2018 and published a ‘Notice of Investigation’ into a potential class action on 2 February 2018 on the SPB website. Its purpose was to seek to bring the SPB investigations and the potential class action to the attention of shareholders who acquired shares in GetSwift in the period 24 February 2017 to 19 January 2018. A dedicated ‘GetSwift Class Action’ webpage and email address were established so that interested investors could register their interest online and obtain more information. Eventually, 103 shareholders chose to register with the SPB (Perera Funded GMs). The Perera Funded GMs are persons who also entered into funding arrangements with a funding entity, International Litigation Partners No 18 Pte Ltd (ILP18).

41    Mr Pagent, a partner of Corrs Chambers Westgarth (CCW), a large national firm of solicitors, gives evidence that on 20 February 2018, a litigation funder, Vannin Capital Operations Limited (Vannin) announced it was investigating a potential class action against GetSwift and its executive directors and invited shareholders who purchased shares in GetSwift between 24 February 2017 and 19 January 2018 to register their interest in the proposed class action. Apparently, 441 investors registered their interest in participating in the class action via the website www.getswiftclassaction.com.au; and 208 investors signed litigation funding agreements with Vannin (McTaggart Funded GMs).

42    Mr Phi, a solicitor with Phi Finney McDonald (PFM), which he describes as a “specialist class action law firm”, gives evidence that prior to 20 February 2018, preliminary steps were taken by PFM to consider and assess the merits of a potential claim against GetSwift. Preliminary discussions also took place between Mr Phi and representatives of Therium Capital Management Limited (Therium) about funding. Mr Phi gives evidence, which I accept, that he decided against announcing a potential class action until after GetSwift resumed trading as, in his experience, announcing a class action prior to the resumption of trading (or even shortly after an alleged corrective disclosure) may allow a respondent to argue that any share price fall was caused, at least in part, by the threat of a class action. He also deferred because: (a) his view was that it was appropriate to review analyst reports and media commentary to form a view as to the precise cause of a particular share price reaction; and (b) his preference was not to announce a class action until after he was satisfied that appropriate funding could be secured on terms he considered were favourable to group members. Despite this initial preference, following the filing of the Perera Proceeding on 20 February 2018, he caused an announcement of PFM’s investigation to be published on PFM’s website and the potential PFM class action was reported by the media the following day.

43    Mr Phi also deposes to a flurry of activity immediately prior to the filing of the Perera Proceeding. On 19 February 2018, two further potential class actions were publicly announced before close of trading that day. The solicitors announcing those potential claims were Gadens and MC Lawyers & Advisers. I pause to note that nothing further has been heard by any party as to these two, at one time, proposed class actions.

C.2    The Competing Actions Emerge and the Court Orders

44    As noted above, the Perera Proceeding was commenced by SPB on 20 February 2018 against GetSwift and Mr Joel Macdonald, an officer of GetSwift. A report was published by the Australian Financial Review the same day reporting that ‘International Litigation Partners’ was the funder. The originating application was listed for a first case management hearing on 23 March 2018, which was then adjourned to 29 March 2018.

45    An overlapping class action, being the McTaggart Proceeding, was issued by CCW on 26 March 2018 against GetSwift, Mr Macdonald and Mr Bane Hunter, the Executive Chairman of GetSwift. Following communication with my chambers, this proceeding was also listed for a first case management hearing on 29 March 2018.

46    On 29 March 2018, following discussion with the parties and a short adjournment, I indicated that I was disposed to make orders facilitating each of the applicants putting before the Court their proposals for how the issue of the competing class actions should be dealt with. The transcript records that there was no opposition to this course by either of the applicants or GetSwift, and orders were made in the Perera Proceeding and the McTaggart Proceeding for the parties, by 4 pm on 9 April 2018, to exchange and then file any affidavit evidence and submissions directed to:

(a)    the manner and form by which security for costs is to be provided in the respective proceedings;

(b)    the details, including any proposed percentage subject to further order, of the terms of any common fund order to be sought in the proceedings;

(c)    whether, subject to the filing of a defence, any issues in the proceeding are suitable for reference to a referee or whether a Court appointed or joint expert be appointed or retained in relation to any issue;

(d)    an estimate by the applicants’ solicitors, on affidavit, of the costs that are likely to be incurred (on the assumption) that issues of contravening conduct and causally related loss are in dispute;

(e)    the number of funded group members and the aggregate number of shares held by all funded group members;

(f)    what, if anything, is proposed to deal with potential overlap between the Perera Proceeding and the McTaggart Proceeding, such as a consolidation of the two proceedings; a permanent stay of one of the proceedings; an order declassing one of the proceedings under either s 33N(1) or s 33ZF of the Act; an order closing the class in one (but not the other) proceeding; or orders allowing a joint trial of both proceedings with each left constituted as open class proceedings;

(g)    in the event a temporary or permanent stay or declassing of a proceeding is proposed, the matters relied upon in support of that contention.

47    I then, again without objection, listed the two proceedings for a further case management hearing on 13 April 2018, with a view to determining any application made by any party relating to the matters the subject of submissions filed pursuant to the orders made on 29 March 2018.

48    In effect, as is evident from these orders, I put in place a process by which each of the then applicants could put their ‘best foot forward’ to come up with a detailed proposal and, if only one proceeding was to go forward, explain why it was that their proceeding should be preferred. To preserve the integrity of the process as to funding proposals, I further noted in the orders that “there should be no discussion between the applicants, the applicants’ lawyers or the funder in this proceeding and the applicant, the applicant’s lawyers or the funder in the Related Proceeding as to the content of the material to be filed and served pursuant to [the orders] until after the exchange provided for by that order”. The parties complied with my orders, albeit slightly late.

49    An unexpected development then arose.

50    Very shortly after the exchange between Mr Perera and the McTaggart applicants, an interlocutory application was filed on behalf of Mr Raffaele Webb seeking orders: that he be granted leave to intervene in both proceedings; for a regime for a notice to group members to be approved; as to distribution of the notice; and for an adjournment of the case management hearing until late May or June 2018.

51    I arranged for the immediate relisting of the matter and a further case management hearing took place on 11 April 2018. At that time, following exchanges between the Bench and the parties, the adjournment of the case management hearing was not pressed and I made orders that Mr Webb have leave nunc pro tunc to intervene in the Perera Proceeding and the McTaggart Proceeding for the limited purpose of appearing at the case management hearing on 11 April 2018, and for the purpose of making any application he wished to make on 13 April 2018. Consistently with the orders earlier made, I ordered Mr Webb to exchange with the other applicants any affidavit evidence, submissions, and any other material related to the same issues which were the subject of the earlier exchange. I again preserved the integrity of the process by not allowing access by Mr Webb or his legal advisers to any material already filed and by noting in the orders that there be no discussions between the applicants. Finally, to prevent any procedural vulgarities that might have arisen as to the status of Mr Webb as an intervener, I indicated that I would grant leave to Mr Webb, on 13 April 2018, to file in Court, and have returnable instanter, an originating application commencing a Part IVA proceeding.

52    It is convenient to interrupt the account of what occurred to deal with a matter that has arisen in written submissions filed after oral submissions on behalf of both Mr Perera and the McTaggart applicants. These applicants submit that Mr Webb obtained some advantage by reason of what occurred.

53    The McTaggart applicants submit that when the Court comes to weigh up the respective advantages and disadvantages of the competing proposals, the Court should take into account “the fact that the Webb applicant enjoyed a process advantage compared with the McTaggart (and Perera) applicants”. This was said to arise because, after setting up what the parties accepted was a “competitive tender” process, Mr Webb’s “late entry put him at a clear advantage” apparently because at the time they submitted their respective proposals, the McTaggart applicants (and Vannin) and Mr Perera (and ILP18) “thought they were in a two-horse race, not a three-horse race, and they bid accordingly. But Webb knew it was a three-horse race, and he was able to bid accordingly”. It is also said that some apparent unfairness was occasioned because whereas Mr Perera and the McTaggart applicants were required to submit their evidence and proposals by 4.30 pm on 9 April 2018, Mr Webb was given until 4.30 pm on 12 April 2018 and this meant that Mr Webb was allowed to incorporate developments between 9 April and 12 April.

54    Mr Perera colourfully submits that allowing persons such Mr Webb (PFM/Therium) to come along “at the heel of the hunt” would “encourage a phenomenon of entrepreneurial lawyers and funders parasitically lying in wait to steal the work product of those who have conscientiously been investigating claims on behalf of real people who have retained them”. The submission continues:

It might be added that what the conduct of Webb/PFM/Therium has led to in this case, is undermining the entire point of the competitive bid process which the Court’s orders put in train. Had it been known at the outset that there were three tenderers, what occurred would likely have been different, just as one does not go to an auction to buy a house expecting to pay the same price if there is only one other registered bidder, as if there are more than one. The market was distorted, and the process will have miscarried to the extent Webb/PFM/Therium’s proposal is considered at all.

55    I reject these submissions for at least seven reasons.

56    First, Mr Webb did not have access to any of the material filed by the other applicants. He (and PFM and Therium) like Mr Perera (and SPB and ILP18) and the McTaggart applicants (and CCW and Vannin), all knew that to the extent the Court was having regard to their respective responses to the topics the subject of the common orders, those responses were to be prepared without contacting or having access to the materials of the other applicants.

57    Secondly, it is notable that the McTaggart applicants’ submissions are silent as to the details of the ‘developments’ which are asserted to have presented Mr Webb with a competitive advantage between the first exchange (between Mr Perera and the McTaggart applicants on 9 April) and the second exchange (between Mr Perera and the McTaggart applicants on the one hand, and Mr Webb on the other, on 12 April). Given Mr Webb did not have access to any of the details of the earlier proposals put forward, no relevant distortion occurred.

58    Thirdly, no complaint whatever was made by the legal representatives of Mr Perera and the McTaggart applicants at the case management hearing on 11 April 2018 as to the orders made on that date binding Mr Webb and the respondents. Ultimately, and more generally, the orders made as to the process to be adopted were not the subject of objection by any party.

59    Fourthly, what was put in place was not some process of bargaining between the Court (in its protective role as to group members) and scheme promotors; the analogy to an auction is, with respect, inapt. Each applicant party was to put its best foot forward. The applicant parties did so, and to the extent I consider relevant, the proposals will be judged on their individual merits. In this regard, the evidence that ILP18 would have approached the process differently in the event a third participant was to be involved (and not just a competition with Vannin) is not to the point. What the orders sought to elicit, among other things, was a considered proposal which best served the twin ends of furthering the overarching purpose and protecting the interests of group members, not the optimal commercial ‘deal’ for the funder pitched at the level to beat (but only just) the commercial ‘deal’ likely proposed by another funder.

60    Fifthly, the notion that Mr Webb has acted in a way which can be accurately described as “parasitically lying in wait to steal the work product” of others is, with respect, not a fair characterisation of what has occurred. Mr Webb did not put up his hand by the time of the first case management hearing and indeed I expressed some criticism of this on 11 April 2018 (when I made it plain that toing and froing between applicant lawyers was not going to defer progress of the substantive proceeding). In defence of Mr Webb, however, Mr Phi provided an explanation of why his attention was directed to attempting to negotiate funding terms (which, on the evidence, only occurred on 4 April 2018) and as to why he deferred the commencement of proceedings. For reasons I will come back to, the evidence revealed that this was time well spent. Moreover, no doubt the orders made by the Court at the first case management hearing were not anticipated by Mr Webb.

61    Sixthly, to the extent relevant, senior counsel for Mr Webb has submitted that the proposal put forward by Mr Webb reflects, at least as to funding rates and budgeted legal costs, those funding terms agreed with Therium and the budget proposed by PFM on 4 April 2018 – well before any orders were made on 11 April 2018.

62    Seventhly, let me assume for a moment that Mr Webb had some unarticulated process advantage. There has been no descent into the detail as to how the supposedly superior and well thought through proposals and submissions made by Mr Perera and the McTaggart applicants would have changed. Each now submits that their respective proposals are superior, if the Court conducts a principled multifactorial analysis. As I noted in the Introduction, to proceed on the basis of an auctioneer procuring further bids would not only be unseemly, but also would undermine what the Court was trying to achieve: each applicant party putting forward considered and optimal funding proposals which, in the view of that applicant party, would best advance the interests of group members.

C.3    The Conduct of the Hearing and Summary of the Proposals

63    When all the proceedings came before the Court for the first time on 13 April 2018, detailed evidence was adduced and submissions were made as to the approach the Court should take to resolve the issue of the competing class actions, the powers of the Court in this regard and the comparative merits of the competing proposals. Indeed, in an attempt to conclude argument, the Court sat late until it became clear that further time was needed to complete submissions. Indeed, as it happened, further argument then spanned three further listings with additional submissions and materials being filed after each listing.

64    By the end of this process, it was possible to summarise the principal contentions of each of the applicants and GetSwift. I will return to the various submissions made by each of the applicant parties of a comparative nature below, but the principal submissions can be broadly summarised as follows.

C.3.1    Mr Perera

65    As to power and the applicable legal principles, it was submitted that neither Part IVA, nor any other part of the Act, gives the Court the power to act as regulator with complete discretion and that the structure and words of the statute delimit ‘regulatory activity’ in two ways: first, the foundation of Part IVA is that representative proceedings can be commenced on behalf of “some or all” persons with claims against the same person (s 33C(1)) without their consent, and group members have the statutory right to choose to opt out (s 33J), necessarily carrying with it a consequential choice to vindicate their rights outside a group proceeding commenced on their behalf. Hence, Part IVA expressly contemplates that there may be more than one proceeding against the one respondent; and secondly, as a consequence of the opt out regime, it is not prima facie vexatious, oppressive or an abuse of process for a group member to commence a separate, individual proceeding (or a separate class action), unless the group member has not opted-out of an earlier-commenced class action: see Smith v Australian Executor Trustees Limited [2016] NSWSC 17 at [22] (Ball J); Oliver v Commonwealth Bank of Australia (No 2) [2012] FCA 755; (2012) 205 FCR 540 at 541-542 [3] and 544 [15] (Perram J).

66    It follows, it was submitted, that the mere fact that a second class action is commenced does not provide a sound basis for permanently staying either the second, or the first, action. Put another way, it was said to be a “logical fallacy” that the mere existence of competing class actions is a principled basis for permanently staying one of them. Mr Perera recognised that these submissions as to power were inconsistent with the obiter views expressed by Beach J in McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd [2017] FCA 947, where his Honour observed that were it not for the fact that a substantial number of group members had committed themselves to litigation funding agreements and retainers in each proceeding before the Court, his Honour would have permanently stayed one of them: [8], [96]-[97]. It was further submitted “it is exceedingly doubtful whether, absent specific legislative warrant, this Court has the power on such grounds to permanently stay a regularly commenced representative proceeding which is not an abuse of process” and that a permanent stay “would be a novel step which would almost certainly be appealed, resulting in significant delay to the effective prosecution of group members’ claims”.

67    As to the appropriate orders to be made, Mr Perera submitted that the Perera Proceeding should proceed as an open class action, and the Court should temporarily stay, or adjourn, the other proceedings until shortly after the date for opt out has passed in the Perera Proceeding and, subject to consideration of the number of persons who opt out, the remedy was then to either close or declass the other proceedings. At least when the McTaggart Proceeding was its only competitor, the contention was that the discrimen for deciding whether to close or declass (under s 33N of the Act) was whether the McTaggart Proceeding had “insufficient registered group members to justify it continuing as a representative proceeding”. This submission, and the further submission that the Webb Proceeding should, in any event, be declassed, necessarily presupposes that the Court has such a power in the present circumstances. This contention is controversial and it will be necessary to return to it below.

68    As to the proposal of Mr Perera as to the conduct of the Perera Proceeding, it had the following components:

(a)    Mr Perera is the representative party, having acquired seven parcels of shares in November and December 2017 (each of which were sold at a profit) and he bought his first loss-making shares on 5 January 2018;

(b)    Mr Perera represents group members (including Perera Funded GMs who comprise 103 members of the class and who acquired 2,575,804 shares in the relevant period);

(c)    the Perera Proceeding is funded by ILP18; this is a special purpose entity and corporations related to ILP18 have monies on trust with SPB;

(d)    both funding agreements and retainer agreements (between the Perera Funded GMs and SPB) have been entered into with each of the Perera Funded GMs;

(e)    the ILP18 funding agreement provides for a commission ranging between 25% and 40% (discriminating between group members on the basis of the amount of shares held) but it is proposed that a common fund order be made which involves payment of the lesser of 25% of net proceeds or 22.5% of gross proceeds (which sum will be capped to ensure that it is an amount not greater than 25% of net proceeds);

(f)    as to a proposal relating to security for costs, Mr Perera indicated that ILP18 was prepared to abide by any order as to security, be it by way of cash deposit, bond or insurance cover;

(g)    no suggestion was made that any substantive question could be referred to a referee or be the subject of evidence from a Court appointed expert.

C.3.2    McTaggart Applicants

69    As to power, the submission made by the McTaggart applicants is that s 33ZF of the Act includes the power to close a class “although it is doubtful whether it permits a permanent stay of a representative proceeding”. The McTaggart applicants point out that the concept of an abuse of process is not at large nor without meaning and it usually is demonstrated when proceedings are instituted for an improper purpose. It is said to be clear from the authorities that the bar for the order of a permanent stay is relatively high, and courts are reluctant to grant them, noting that a party bringing proceedings is entitled to expect them to proceed in the ordinary way in the absence of some countervailing consideration.

70    The ultimate submission is that the McTaggart Proceeding should remain an open class proceeding and the Perera Proceeding should be closed under s 33ZF(1) of the Act. In relation to the Webb Proceeding, it is submitted that Mr Webb should be notified that the McTaggart Proceeding will be an open class, and the Perera Proceeding will be a closed class. Following this notification, if Mr Webb and Therium wish to continue with the Webb Proceeding, this claim should proceed as a single claim heard together with the other proceedings. Although not stated directly, this also presupposes that the Court should proceed to declass the Webb Proceeding.

71    The proposal of the McTaggart applicants as to the conduct of their proceeding had the following components:

(a)    the McTaggart applicants are the representative parties, having bought 151,208 shares starting in September 2017 and, after selling some at a profit, sold all the remaining shares they then held on 19 February 2018, the day trading resumed, which is alleged to have crystallised a loss of $182,223;

(b)    the McTaggart applicants represent group members (including the McTaggart Funded GMs, who comprise 208 members of the class who acquired 1,545,374 shares in the relevant period);

(c)    the McTaggart Proceeding is funded by Vannin which is wholly owned by a substantial corporation known as Vannin Capital PCC, which meets Vannin’s request for funds to finance its litigation funding operations;

(d)    although funding agreements have been entered into between Vannin and each of the McTaggart Funded GMs, no retainer agreements have been entered into between the McTaggart Funded GMs and CCW;

(e)    the funding agreement entered into provides that the funding commission would be 10% if proceeds are received before the end of this year, 20% if received before 26 September 2019 and 30% if received thereafter; the McTaggart applicants did not indicate that they were prepared to make an application for a common fund at the time they initially filed materials in support of their proposal, preferring to abide further developments; notwithstanding this, during the course of oral submissions, it was indicated that the McTaggart applicants would be content with a common fund order which provided for essentially the same terms as in the funding agreement: being 10% of gross proceeds before 31 December 2018, 20% of gross proceeds until a date 42 days prior to the initial trial, and 30% of gross proceeds thereafter;

(f)    as to security, the McTaggart applicants indicated that a sum of $250,000 is presently held in the trust account of CCW and noted that the funding agreement requires Vannin to obtain ATE (After The Event) insurance of an amount well and truly in excess of an amount likely to be awarded for security; alternatively, during the course of oral submissions, it was indicated that the McTaggart applicants were prepared to provide security by way of cash deposit;

(g)    no suggestion was made that any substantive question could be referred to a referee or be the subject of evidence from a Court appointed expert.

C.3.3    Mr Webb

72    As to power, Mr Webb did not contend that the Court lacked power to either permanently stay or declass proceedings in the present circumstances. What was clear was that Mr Webb agreed with both other applicants that only one proceeding should proceed as an open class. As to the appropriate orders to be made, Mr Webb contended that orders should be made allowing the Webb Proceeding to proceed on behalf of an open class and variously submitted directions should be made to either stay, declass or adjourn the other proceedings.

73    As to the proposal of Mr Webb as to the conduct of the Webb Proceeding, it had the following components:

(a)    Mr Webb was identified as the applicant having purchased shares in GetSwift during the relevant period (there was no further evidence as to his purchases);

(b)    there are no funded group members in the Webb Proceeding;

(c)    Mr Webb produced a letter from Therium dated 12 April 2018, in which the ‘Investment Committee’ of another Therium entity represented that it had committed a sum for the purposes of Therium funding the costs incurred by PFM and indemnifying Mr Webb in relation to adverse costs;

(d)    the only retainer agreement entered into is between Mr Webb and PFM; no funding agreement which provides a ‘deadlock’ provision to resolve issues which may arise in the settlement context between Mr Webb and Therium exists;

(e)    the common fund order proposed by Mr Webb would entitle Therium to a funding commission that is the lesser of:

(i)    a multiple of the expenses that Therium has paid in the proceedings, being 2.2 times, if the parties enter into a settlement agreement on or before 12 April 2019, or 2.8 times if there is a successful resolution after 12 April 2019; or

(ii)    20% of the net litigation proceeds (that is, the settlement sum less approved professional fees and disbursements);

(f)    security for costs was proposed to be by way of an ATE policy together with a deed of indemnity but, during the course of oral submissions, Mr Webb indicated he was prepared to put up cash security should the Court so order (although the latter mode of providing security would involve a greater expense which, it was said, would be incurred by group members);

(g)    in relation to issues that may be the subject of references or Court appointed experts, Mr Webb asked the Court to appoint a referee to conduct periodic reviews of the reasonableness of Mr Webb’s legal costs, with only those costs assessed as reasonable being costs included for part-payment of Mr Webb’s legal costs; additionally, Mr Webb accepts that there is scope for the Court to appoint (or for the parties to engage jointly) a forensic economist to assist the Court in respect of matters of loss causation and the quantification of loss and damage.

C.3.4    GetSwift

74    As to power, GetSwift submitted that this Court had an “inherent jurisdiction to stay its proceedings” as either an abuse of process or if the proceedings were unjustifiably oppressive or otherwise brought the administration of justice into disrepute among right-thinking people: see Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75 at 93-94 [28] per French CJ, Gummow, Hayne and Crennan JJ. The categories of abuse of process and vexation or oppression are not closed and are insusceptible of precise formulation. In the context of Part IVA proceedings, that means that the Court has power to stay a proceeding if it is likely that one party will be subject to vexation and oppression where “two extant civil actions are brought in circumstances where one will suffice to vindicate the rights at issue”. Additionally, GetSwift submitted that there was no issue as to power in relation to declassing any of the class actions.

75    As to the issue of discretion, apart from the fact that GetSwift submitted that the appropriate form of security ought to be cash paid into Court, and that GetSwift wished to be heard as to the timing and quantification of security, it recognised that ultimately it was a matter for the Court as to which of the three proceedings should go forward.

C.4    Group Definition and Overlap – A Logical Difficulty

76    Having identified aspects of each proposal in general, and prior to examining the approach that has developed in relation to dealing with competing class actions, I mention a matter which was not the subject of submissions, but creates a logical difficulty in ascertaining whether, as assumed by the parties, there exists a perfect overlap of the classes. This is the issue of class definition.

77    All three class definitions contain a similar ‘causally connected loss or damage’ criterion defining group membership, which are specified as follows (emphasis added):

(a)    In the amended statement of claim filed in the Perera Proceeding: “Suffered loss or damage by, or which resulted from, the conduct of the Respondents, pleaded in this Statement of Claim”.

(h)    In the statement of claim filed in the McTaggart Proceeding: “Suffered loss or damage by reason of the conduct of the Respondents pleaded in this Statement of Claim”.

(i)    In the originating application in the Webb Proceeding: “Suffered loss and damage by or resulting from the contravening conduct of the Respondents as described in the accompanying affidavit”.

78    A logical difficulty presents itself. The argument advanced by all parties contained the implicit premise that all classes were identical, but this is not necessarily the case. There are differences in the way the contravening conduct is identified. Although these differences are minor, it is at least logically possible that loss or damage may have been suffered by one group member arising only from one element of the contravening conduct that is advanced in one proceeding, but not in another.

79    This is but an illustration of a broader logical problem, largely ignored, but which is inherent in this sort of subjective, causative element to a group definition. The argument that a subjective criterion causes practical difficulty was rejected by Wilcox J in Nixon v Philip Morris (Australia) Ltd [1999] FCA 1107; (1999) 95 FCR 453 at 486 [126]-[127] and Moore J in King v GIO Australia Holdings Ltd [2000] FCA 617; (2000) 100 FCR 209 at 226 [45]. In particular, Moore J considered that defining group membership by reference to a loss and damage criterion was unobjectionable.

80    With respect, neither of those cases really grapples with the logical difficulty of a ‘causally connected loss or damage’ criterion. Upon commencement of a Part IVA proceeding, it is necessary to identify group members as required by s 33H, being, in accordance with s 33A, “a member of the group of persons on whose behalf a representative proceeding has been commenced”. A large number of provisions within Part IVA have embedded within them the notion that it is possible to identify, with particularity, during various stages of a proceeding, who in fact are the group members, for example: s 33J (the right to opt out); s 33L (where there are less than seven group members); s 33Q (determination of issues where not all issues are common); s 33R (individual issues); s 33S (directions relating to commencement of further proceedings by group members); s 33T (applications by group members as to adequacy of representation); s 33X (notice to be given to group members of certain matters); s 33ZB (the ‘statutory estoppel’ binding group members to orders).

81    The difficulty with the criterion to which I have made reference is that at no stage is it possible to assert with certainty that a particular claimant is, in fact, a group member as defined by reference to all criteria specified. This must be the case because in the event that it is ultimately found, following a determination of individual issues, that no loss or damage has been suffered by a claimant as pleaded, it follows inexorably that the claimant is not, and never has been, a group member as presently defined. To describe that as a topsy-turvey result would be something of an understatement. In my view, it is necessary to be able to identify the persons whose claims are the subject of the class action at all times during the currency of the class action. The membership of the group is no more than a collection of persons who are identified by name or, if not by name, by the characteristics which allow them to be ascertainable at the time of the commencement of the class action (as required by s 33H) and at all times thereafter.

82    Having noted this logical difficulty, all parties proceeded on the basis that the group membership between all three proceedings is the same, simply because they all are open class proceedings arising out of the same factual substratum. Accordingly, despite my concern that this is an oversimplification, I shall proceed to determine the applications on this basis.

D    Remedial Response to Competing Class Actions: A Survey

D.1    The Australian Experience

83    A survey of competing Part IVA class actions commences with Johnson Tiles Pty Ltd v Esso Australia Limited [1999] FCA 56; (1999) ATPR 41-679. In that case, Merkel J was confronted with three competing class actions. His Honour considered that it would be vexatious and oppressive for the respondent to be subjected to more than one class action and ordered that the first and second proceedings be consolidated and the third proceeding be declassed and stayed. The choice of lawyers was dealt with by allowing two firms of solicitors to stay on the record, but requiring them to engage one set of counsel.

84    The next case deserving mention was the class action against various Centro entities. Two class actions were brought by Mr Kirby, who instructed Maurice Blackburn on behalf of a closed group, and another action was commenced by Mr Vlachos and others which represented the balance of the class, excluding those who were group members in the class actions commenced by Mr Kirby. In this way the three class actions did not have overlapping membership but Finkelstein J observed that they shared a nucleus of operative facts and would result in initial trials raising the same or similar issues. In words redolent of Edward VIII while Prince of Wales, his Honour indicated that “something must be done” and his Honour considered a number of options in Kirby v Centro Properties Ltd [2008] FCA 1505; (2008) 253 ALR 65, including allowing one proceeding to proceed as a test case, consolidation or a joint trial. The suggestion of an independently selected litigation committee was raised which would have solicited the views of group members, information about the experience of the solicitors, fees and the terms of litigation funding. Shortly thereafter, Finkelstein J, for entirely unrelated reasons, disqualified himself from hearing the litigation and when the matter was transferred, the notion of a litigation committee was not pursued and a joint trial took place.

85    Without seeking to be exhaustive, and leaving to one side those cases where there was suggestion that one competing class action amounted to an abuse of process for reasons other than it being duplicative, five further cases call for some examination. The first two of these cases can, however, be dealt with in a relatively summary way.

86    The first is the decision of Ball J in Australian Executor Trustees to which I have already made reference above. This case was not a securities class action and was an ‘outlier’ in the sense that although there were duplicate representative proceedings, the cases advanced in each of the proceedings were sufficiently different that there was a prospect that one case could have won and yet the other may have lost. Although Ball J found it would not be in the interests of justice to let both proceedings continue with overlapping group members, his Honour was not prepared to stay one of the proceedings as it would involve the Court making a choice between two proceedings in circumstances where it was inappropriate to express a view on the merits of the competing claims. In this regard, Ball J indicated that the position may be different if one claim was obviously flawed or the claims brought in one proceeding were a subset of those brought in the other: see [41]. An order was made for the two proceedings to be heard together with evidence in one being evidence in the other.

87    The circumstances arising in the second case, Hassid v Queensland Bulk Water Supply Authority [2017] NSWSC 599, were also singular. This was also not a securities class action and was a case where the problem could be traced to a class action applicant purporting to exclude certain group member claims from being agitated in the proceeding. This course was based on a misapprehension of how group membership in Part IVA proceedings operates. A point I have made elsewhere is that group membership is a collection of persons and not a collection of claims of those persons: see Dillon v RBS Group (Australia) Pty Ltd [2017] FCA 896; (2017) 252 FCR 150 at 163 [58]. Beech-Jones J made orders which had the effect of removing overlapping group members.

88    The third case is Bellamy’s, to which reference has also already been made. Before the Court were two open class actions both of which had a very substantial number of group members who had signed funding agreements (one action had 1500 group members who had signed funding agreements, and the other “over 1000”: see [2]-[3]). His Honour started from the premise that it was necessary to resolve the overlap in class definitions, and then identified five options (at [9]) being:

(a)    “Consolidation”, which Beach J considered inappropriate in the absence of agreement in circumstances where there were different litigation funders and different solicitors: [11]-[14];

(b)    “Declassing”, which Beach J considered was not appropriate in circumstances where s 33N was properly construed as requiring a comparison between a representative proceeding and a non-representative proceeding: [15]-[20] (an issue to which I will return);

(c)    “Wait and see”, the benefits of which Beach J considered were outweighed by the desirability of group members being in no doubt as to their position sooner rather than later, especially where common fund orders were to be sought: [21]-[22];

(d)    “Permanent stay” of one proceeding, which, as discussed below, his Honour considered in some detail but, in the particular circumstances of the case, rejected: [26]-[60];

(e)    “Class closure” in one proceeding, which was the course ultimately adopted: [61]ff.

89    In summary, his Honour determined not to permanently stay one of the proceedings but to close the class in one, allow the other to remain as an open class proceeding, and to have a joint trial of both proceedings. Group members in the closed class were excluded from the open class to avoid overlapping and mechanisms were imposed to minimise duplication of work and expense. As noted above, however, Beach J made plain that but for the fact that a substantial number of group members had committed themselves to litigation funding agreements and retainers in each proceeding, he would have permanently stayed one of them: at [8], [96]-[97].

90    Fourthly, reference should also be made to the decision of Foster J in Cantor v Audi Australia Pty Limited (No 2) [2017] FCA 1042. This involved two class actions commenced by one firm of solicitors and three class actions commenced by another firm. Further related proceedings were also commenced by the Australian Competition and Consumer Commission. All proceedings were being case managed together and the Court had, at the time of the judgment, fixed a hearing date for some issues. Common to all were allegations as to misleading and deceptive conduct and false and misleading representations with respect to motor vehicles. Enough has already been said to indicate that the case management burden visited upon his Honour in relation to such a complex series of cases was considerable. At [38]-[79], his Honour dealt with what he described as the “Overlapping Class Actions Issue”. This issue involved the question of whether the institution of multiple class actions in relation to the same subject matter is an abuse of process, vexatious and oppressive (see [59]). At [60] his Honour observed:

It is by no means clear or accepted in this Court that the continued maintenance of parallel class action proceedings necessarily constitutes an abuse of process (see, for example, the judgment of Beach J in [Bellamy’s] at [36]).

91    At [62], his Honour reproduced the remarks of Beach J in Bellamy’s at [22] where his Honour said:

Now there is considerable wisdom in a wait and see approach in some contexts. And I do not doubt that such an approach has been warranted by other docket judges in other cases. But in my context where there are two open class proceedings, numerous group members signed up in each of the proceedings to different funding arrangements, and the prospect of a common fund application being made in each of the proceedings, it is desirable that clarity be injected sooner rather than later as to the proceedings to go forward and their constitution. This is not only in the best interests of group members in each of the proceedings, whether signed up or otherwise, but also in the interests of the respondent, who should not be vexed or oppressed by duplicate classes prosecuting duplicate claims. Let me elaborate on one aspect justifying the need to resolve these issues sooner rather than later. The applicant in each of the proceedings is proposing to seek a common fund order. Whether I grant such an order and its terms will need to be dealt with at an early point. In those circumstances, it is necessary to resolve the appropriate constitution of each of the proceedings first before dealing with common fund questions. It is undesirable that a common fund order be made in both proceedings. That would create considerable uncertainty for group members. Moreover, the economics of determining whether such an order and its terms are appropriate and in which proceedings would be considerably complicated if I was to endeavour to address the question at the same time in both proceedings as presently constituted. In summary, I do not consider that I can just wait and see what happens.

92    After extracting these remarks, Foster J went on to note that they were of “the most general kind” and that his Honour did not consider that, by making those remarks, Beach J was “going so far as to suggest that the so-called problems of duplicate claims made in more than one set of class actions should be addressed before or as part of the opt out process”. At [74]-[75], Foster J explained by going on to observe:

In my view, it is not helpful in order to resolve particular issues presented by the existence of parallel proceedings in one case to point to general observations made by judges in other cases or even to point to specific solutions deployed by such judges. There can be no “one size fits all” approach to the various problems that may arise in group proceedings under Pt IVA of the Act. Each case must be considered upon the basis of a full and sensible appreciation of the relevant facts involved in the particular case and also by paying due regard to all relevant circumstances in play in the particular case. For the most part, decisions to be made by the Court in dealing with the issues raised from time to time in group proceedings under Pt IVA of the Act are discretionary. While it is obviously desirable that a consistent approach to problems which surface regularly from time to time is highly desirable, there is always scope, in my view, for judges to respond to particular issues differently and yet to still be appropriately exercising the discretion reposed in them. Whilst there may be some common features between cases, it remains the position that different judges may resolve the difficulties with which they are confronted differently depending upon how those judges assess the relevant considerations.

In the present case, I have consistently taken the view that I would permit the two groups of class actions to proceed in parallel for the time being. My decision to adopt that approach was not taken lightly or without due consideration. I do not agree that that decision has unduly vexed the respondents or oppressed them. Nor do I consider that that decision has been productive of undue cost, confusion or delay. To my way of thinking, the approach which I have taken has been a sensible approach to the problem presented to the Court by the existence of two groups of class actions. It may be that, in the future, some further action will need to be taken in order to address problems (which are not present at the moment) caused by the continued maintenance of parallel groups of class actions. This will be a matter to be kept under constant review as the litigation progresses. As is the way with these matters, the Court is attentive to the case management needs of each matter and will not ignore changes to courses of action previously charted which might become necessary as the interlocutory stages of the cases progress.

(Italics in original)

93    Fifthly, Stevenson J in the Supreme Court of New South Wales in TW McConnell Pty Ltd v SurfStitch Group Ltd [2017] NSWSC 1755 was confronted with what his Honour described at [33] as a situation “which is similar to, but perhaps more complex than that considered by Beach J” in Bellamy’s. The context for the issue arising was an application for a common fund order, which was refused. Relevantly for present purposes, an open class funded securities class action alleging breaches of disclosure obligations was commenced against the relevant listed entity and its former CEO. Also before the Court was another competing and overlapping class action, also with an open class, which had been commenced earlier, promoted by another funder but against the listed company only. After both proceedings were issued, the listed entity entered administration, giving rise to a statutory stay with respect to both proceedings as against the company in administration, but allowing the proceedings against the CEO to move forward. The Court noted at [32] that it was “common ground that it would not be practicable for both proceedings to continue to trial as open class proceedings” and at [37] that at “some stage a decision…will have to be made as to how, in the best interests of group members, the progress of [both] …proceedings is to be managed”. However, Stevenson J considered such a decision, in the somewhat unusual facts of the matter before his Honour, would be premature.

94    What the survey of the cases illustrates is a point I made at the commencement of these reasons. That is, at bottom, the remedial response to the issue of overlapping class actions is a case management decision informed by considerations peculiar to the circumstances of the cases which are being managed. I agree with Foster J that one size does not necessarily fit all. There may be circumstances, such as the unusual one that confronted his Honour, where some factors do militate in favour of adopting a ‘wait and see’ approach or others where allowing a short period for a possible acceptable consensus to emerge would be appropriate. There will, however, be cases (for example, where multiple promoters commence essentially similar, funded open class securities actions), where it might be thought delay will only increase cost and uncertainty and would simply defer addressing a problem which affects the processes of the Court and, as a consequence, should be resolved.

D.2    The North American Experience

95    The North American experience needs to be approached with some caution because of the existence of a process of certification of class actions at a pre-commencement hearing. In the United States, r 23 of the Federal Rules of Civil Procedure provides that the court must, at an early practicable time, determine by order whether to certify the action as a class action. Procedural criteria need to be met, including that there are questions of law or fact common to the class and that the representative parties will fairly and adequately protect the interests of the class. Similarly, in Canada, eight of the ten Canadian jurisdictions that have formal class action regimes use certification.

96    Having noted this, issues which arise in North America at the stage of certification, which involve the court exercising a control over whether a particular class action is an effective vehicle to pursue the claims of absent group members, are not dissimilar to the issues that confront a court in seeking to resolve the inefficiencies that result from competing class actions. This was recognised by Beach J in Bellamy’s, where, at [49]-[55], reference was made to the Canadian experience, concluding with the observation that Canadian practice is informative, and that his Honour would have had little difficulty in accepting a ‘carriage motion’ analogue in a scenario where neither of the competing proceedings have a substantial number of group members signed up to funding agreements.

97    A good summary of this ‘carriage motion’ approach can be seen from two relatively recent appellate decisions from the Ontario Superior Court of Justice, Divisional Court, namely Locking v Armtec Infrastracture Inc 2013 ONSC 331; (2013) 303 OAC 299 and Mancinelli v Barrick Gold Corporation 2015 ONSC 2717; (2015) 126 OR (3d) 296. Each provides useful guidance as to the non-exhaustive factors to be applied, which are discussed in Bellamy’s at [58]:

(a)    the nature and scope of the causes of action advanced;

(b)    the theories advanced by counsel as being supportive of the claims advanced;

(c)    the state of each class action, including preparation;

(d)    the number, size and extent of involvement of the proposed representative applicant;

(e)    the relative priority of commencing the class action;

(f)    the resources, experience and competence of counsel;

(g)    the presence of any conflict of interest.

98    What is useful to observe, is that the overriding consideration as to which of two or more competing class actions ought to proceed is, unsurprisingly, the best interests of group members: see Locking at [7] and Mancinelli [15] and [18]. I interpolate that this is not different from the approach taken by Finkelstein J in Centro at 74 [37], where his Honour considered it to be “the only important factor.” In Canada, the test is expanded a little, with the Court’s objective being “to make the selection that is in the best interests of the class, while being fair to the defendants and consistent with the objectives” of the relevant class action legislation, namely “access to justice, behaviour modification, and judicial economy for the parties and for the administration of justice”: see Mancinelli at [15]. It is under the umbrella of this objective (that the Court must consider what is in the best interests of group members), that the non-exhaustive factors referred to above have emerged as relevant to the Court’s determination.

99    In balancing these factors, courts in Canada have stated that it is inappropriate to “parse the action finely or overly analyse [the respective actions] for the purposes of comparison but rather to scrutinize each for any glaring deficiencies”: Setterington v Merck Frosst Canada Ltd 2006 CarswellOnt 506; (2006) 26 CPC (6th) 173 at [19] (cited with approval in Locking). Further, in considering the causes of action pleaded in each proceeding, the court need not attempt to determine the ultimate success of a claim, only whether one is “fanciful or frivolous”: Gorecki v Canada (AG) 2004 CarswellOnt 1266; (2004) 47 CPC (5th) 151 at [14] (cited with approval in Setterington at [19] and Locking at [7], [8]); see also Locking at [19]. However, in the event that there is little difference between most of the relevant factors, it may be necessary for the court to conduct a more detailed and nuanced analysis of the nature and scope of the causes of action and case theories advanced, “because there is no other way to properly distinguish between the actions and chose the proceeding that is in the best interests of the class”: Locking at [25]; Mancinelli at [41].

100    The position in the United States as to securities class actions also merits attention. The existence of competing securities class actions in that country has to be understood against a backdrop of legislative reform, such as the enactment of the Private Securities Litigation Reform Act of 1995, Pub L No 104-67, 109 Stat 737 (codified as amended in scattered sections of 15 USC) (PSLRA) which relevantly imposed various controls on securities class actions, including more stringent pleading requirements, a stay of discovery pending a motion brought to dismiss the action, and which established a process for appointment of lead plaintiff and lead counsel in securities class actions. Inventive plaintiff lawyers sought to get around the PSLRA’s restrictions by filing state law claims and federal securities claims in state courts. The response was law reform of law reform by Congress enacting the Securities Litigation Uniform Standards Act of 1998, Pub L No 105-353, 112 Stat 3227 (codified as amended in scattered sections of 15 USC).

101    In Smith v Bayer Corporation 564 US 299 (2011); 131 S Ct 2368 (2011), a non-securities class action, the Supreme Court of the United States held a federal district court exceeded its authority when it enjoined a state court from considering a request for class certification when a federal district court had denied a similar class-certification request by a different plaintiff. The Court further held that this is true even if the plaintiff was part of the class for which certification was denied. In doing so, Kagan J remarked upon the problem of “serial relitigation of class certification” but observed that statutory reforms had enabled defendants to remove most significant class actions to federal courts, because a defendant can seek a transfer and consolidate all cases into multidistrict litigation (MDL) pursuant to 28 USC § 1407 (2012). This reform, together with “principles of comity” among federal courts should, it was suggested, minimise conflicting certification decisions (at [16]).

102    A few months ago, in Cyan Inc v Beaver County Employees Retirement Fund 138 S Ct 1061 (2018), the Supreme Court had occasion to consider whether the legislative reforms relating to alleged securities violations stripped state courts of jurisdiction over securities class actions and whether defendants could remove class actions, alleging such violations, from state courts to federal courts. In effect, the Supreme Court held that if a plaintiff chooses to file a state court class action asserting only securities claims arising from a public offering of a listed security, the case will remain in the state court (and hence will not be subject to the procedural requirements imposed on federal courts in securities class actions).

103    This is of significance because in federal courts, as noted above, if competing class actions with overlapping issues exist, a defendant can seek MDL treatment, the object of which is to bring all competing cases together for coordinated discovery and pre-trial proceedings, including determination of class certification issues. The existence of differing fora for securities class actions (state and federal) and the difficulty of coordinating or consolidating related cases has long been the subject of debate in the United States, including the prospect of federal courts enjoining prosecution of a competing class action under the All Writs Act 28 USC § 1651 (2012), and exceptions to the Anti-Injunction Act 28 USC § 2283 (2012): see, for example, the discussion by Andrew S Weinstein in “Avoiding the Race to Res Judicata: Federal Antisuit Injunctions of Competing State Class Actions” (2000) 75 New York University Law Review 1085.

104    In any event, the experience in North America, albeit in a context requiring class certification, demonstrates that the Australian experience of competing class actions is not unique. Nor is the concern that competing securities class actions undermine the efficiency and fairness goals of the class action mechanism by occasioning duplication of effort, waste of private and public resources, and vexation of defendants. What should also be drawn from this comparative exercise may not be quite so obvious but, to my mind, is of real importance. A certification regime allows the court to control the commencement of class actions in such a way as to avoid the problems of duplication and waste. This regime was rejected, on policy grounds, in Australia, because it was thought that protections within the then proposed Bill which, with modification, became Part IVA, gave this Court extensive case management powers to prevent such problems arising (or to resolve problems if they arose). The policy choice in Australia was to adopt a scheme providing ease of commencement (s 33C), tempered by a discretionary ‘control’ mechanism (s 33N and the Court’s other case management powers). But control mechanisms only control if they are engaged. A sophisticated textual and contextual analysis reveals that absent certification, the Part IVA scheme has inbuilt protections and balances, but the system only works if, when problems arise, the Court takes active steps to make use of them and other powers of the Court to solve problems which, in other class action systems, would be addressed at the stage of certification. I will return to this topic when I come to the context relevant to the construction of s 33N of the Act.

E     Remedial Responses: Power & Applicable Principles

E.1    Identifying the Available Responses

105    As noted at [46] above, in the orders made requiring the service of material, various options were identified that may conceivably be available to deal with the competing class actions, being: (a) consolidation of the proceedings; (b) a permanent stay of proceedings; (c) an order declassing two of the proceedings under either s 33N(1) or s 33ZF of the Act; (d) an order closing the class in two proceedings; (e) orders allowing a joint trial of the proceedings with each left constituted as open class representative proceedings.

106    No participants advocated for consolidation or for permitting each open class proceeding to continue to a joint initial trial. Consolidation is impractical absent some agreement between the applicant parties and in this case can be put to one side. For reasons which will become evident in my treatment of the other proposals, the prospect of allowing a joint trial of the proceedings with each left constituted as open class representative proceedings, was rightly seen as an unacceptable option.

107    In addition to these proposals, I raised a further issue during the course of argument and invited further submissions as to whether, independent of notions of abuse of process stays, the Court could restrain two of the applicants from maintaining their proceeding by exercise of the power of courts of equity to manage cases, including the power to enjoin proceedings in order to prevent a multiplicity of suits.

108    Issues of power or legal principle were raised in relation to three of these options, being: a stay of the proceedings in the present circumstances; declassing under either s 33N(1) or s 33ZF of the Act; and the existence of the Court’s equitable power to enjoin proceedings. It is to these issues that I now turn.

E.2    Questions of Power & Applicable Principles

E.2.1    Permanent Stays

109    I have referred at [65] above to the submission made that it is “exceedingly doubtful” in the absence of an express statutory power, that the Court can permanently stay a regularly commenced representative proceeding “which is not an abuse of process” which would have occurred in Bellamy’s but for the existence of a factor absent here (a substantial number of group member funding and retainer agreements). This issue aside, it is, of course, uncontroversial the Court has power to stay a proceeding which constitutes an abuse of process; and debate focussed on whether the existence of a competing class action can provide a valid basis for finding that an abuse of process exists as the precondition to the imposition of a permanent stay. I will come back at [124] below to the concept of a stay absent an express finding of abuse of process, but prior to doing so, I will: first, identify in this section the legal principles that emerge from the authorities relevant to stays on the basis of an abuse of process; and secondly, whether, based on my findings, an abuse exists and whether the proper response is the grant of a permanent stay (which I consider in Section K.1 below).

110    Before dealing with these issues, I will pause to explain why I prefer to use the term ‘implied’ rather than ‘inherent’ when dealing with the Court’s power to control its own processes. As I noted in CPB Contractors Pty Limited v Celsus Pty Limited (formerly known as SA Health Partnership Nominees Pty Ltd) [2017] FCA 1620 at [52]-[53]:

It is well established that only superior courts of record with unlimited jurisdiction are said to possess inherent jurisdiction. In Australia, the High Court, the Federal Court and the Family Court, all of which are superior courts of record, possess defined jurisdiction granted by either the Constitution or statute. As Wilson and Dawson JJ observed in Sterling Industries at 618:

federal courts differ from the supreme courts of the States which, although of statutory origin, are truly designated superior courts because they are invested with general jurisdiction by reference to the jurisdiction of the courts at Westminster.

Although federal courts possess similar powers, it is not, in this sense, inherent. In the same judgment, their Honours held that a declaration by the Federal Court as a superior court of record was to be given effect as far as it could be and that the “vesting of judicial power in the specific matters permitted by the Constitution (see ss. 75, 76, 77) carries with it such implied power as is necessarily inherent in the nature of the judicial power itself” (at 619, emphasis added). Accordingly, although it is less than accurate to say that the Court has an inherent power to grant the relief sought in the Stay Applications, the Court has ample power under s 23 of the FCAA, and by reason of its implied power to control its own proceedings, to grant the relief sought.

(Italics and bolding in original)

111    This implied power to control the Court’s processes includes the power to prevent conduct which, although not inconsistent with the literal application of procedural rules of court, would nevertheless be manifestly unfair or would otherwise bring the administration of justice into disrepute among right-thinking people:  Walton v Gardiner (1993) 177 CLR 378 at 393 per Mason CJ, Deane and Dawson JJ; Jeffery at 93 [28] per French CJ, Gummow, Hayne and Crennan JJ.

112    Abuse of process can take many forms, many of which are presently irrelevant, including: bringing claims that can no longer be determined justly (Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256); or where there has been destruction of evidence (Palavi v Queensland Newspapers Pty Ltd [2012] NSWCA 182; (2012) 84 NSWLR 523); or in circumstances of re-litigation or attempts to litigate issues which could and should have been raised previously (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589).

113    The current examination of abuse of process in relation to competing class actions is novel, but some established categories have a somewhat closer similarity to the issue that presents itself here than others, such as: the bringing of concurrent proceedings in different courts relating to the same subject-matter (Moore v Inglis (1976) 50 ALJR 589) and stays which represent the application of principles relating to forum non conveniens.

114    But what is particularly instructive is a sub-species of the abuse occasioned by instituting proceedings for an improper purpose (Williams v Spautz (1992) 174 CLR 509) in the context of securities class actions which can be seen in a series of cases involving Melbourne City Investments Pty Limited (MCI) and, most recently, the consideration by the Victorian Court of Appeal in being Melbourne City Investments Pty Ltd v Myer Holdings Limited [2017] VSCA 187.

115    In Myer the Court upheld a stay because the applicant’s predominant purpose in bringing the proceeding was to generate income from the proceeding itself rather than to seek compensation for any wrong done to it, or to assist group members by acting as an applicant. Osborn and Ferguson JJA (with whom Whelan JA agreed) examined the applicant’s fundamental argument, which was that it was not an abuse of process to institute and maintain a genuine class action for the purpose of generating income or profit that could be properly earned from that proceeding pursuant to a valid legal process. This, it was claimed, was especially so when that legal process was sanctioned, controlled and regulated, and overseen by the Court such that no amount which might be earned could be received without close scrutiny by the Court, and a formal order being made (at [31]). The reasons for rejecting this argument can be seen at [41]-[52], but importantly those reasons included stating the proposition that when the proceeding is a representative action, the proper purpose is not limited to the determination of the applicant’s claim, but also involves the determination of the common questions for the benefit of group members. It follows that, in class actions, the proper purpose of such an action is the enforcement of the substantive rights of the applicant and laying the groundwork for enforcing the substantive rights of the group members.

116    In another of the MCI cases, Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2016] FCA 787; (2016) 243 FCR 474, Foster J, at 496-510 [97]-[146] surveyed the relevant authorities and, at 510 [147], set out, among others, the following propositions which can be distilled from the leading authorities:

(a)    Notions of justice and injustice must reflect contemporary values if the courts and the administration of justice are to continue to enjoy the confidence of the public (Ridgeway v The Queen (1995) 184 CLR 19 at 75).

(h)    Abuses of procedure usually fall into one of the following three broad categories:

(i)    the court’s procedures are invoked for an illegitimate or improper purpose;

(ii)    the use of the court’s procedures is unjustifiably oppressive to one of the parties or vexatious; or

(iii)    the use of the court’s procedures in the manner contemplated would bring the administration of justice into disrepute (Rogers v The Queen (1994) 181 CLR 251 at 287; PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384 at 613 [3]).

(i)    The onus of proving an abuse in any given case rests upon the party alleging abuse.  That onus is a heavy one (Spautz at 529).

117    Some other observations as to when abuse exists in other contexts do have present relevance. A good indication of the caution that should guide staying proceedings, which, like here, have been regularly commenced, can be seen in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, a case involving principles of forum non conveniens, where the following statement of principle appears at 554 per Mason CJ, Deane, Dawson and Crennan JJ:

First, a plaintiff who has regularly invoked the jurisdiction of a court has a prima facie right to insist upon its exercise. Secondly, the traditional power to stay proceedings which have been regularly commenced, on inappropriate forum grounds, is to be exercised in accordance with the general principle empowering a court to dismiss or stay proceedings which are oppressive, vexatious or an abuse of process and the rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case. Thirdly, the mere fact that the balance of convenience favours another jurisdiction or that some other jurisdiction would provide a more appropriate forum does not justify the dismissal of the action or the grant of a stay. Finally, the jurisdiction to grant a stay or dismiss the action is to be exercised “with great care” or “extreme caution”.

(Emphasis in original)

See also Henry v Henry (1996) 185 CLR 571 at 587 per Dawson, Gaudron, McHugh and Gummow JJ (later applied in Regie Nationale des Usines Renault SA v Zhang [2002] HCA 10; (2002) 210 CLR 491 at 504 per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ).

118    This caution can also be seen in the cases involving two actions being brought where one will lie. In Moore at 593 (Mason J), it was said that the power to stay or dismiss proceedings on the ground that they are an abuse of process is to be exercised with caution.

119    Apart from caution, another feature of abuse of process to be drawn from the authorities is its dynamism in the sense that the categories where abuse arises are not closed. In Batistatos, Gleeson CJ, Gummow, Hayne and Crennan JJ observed that “what amounts to abuse of court process is insusceptible of a formulation comprising closed categories. Development continues” (at 265 [9]). Their Honours emphasised that no “hard and fast definitions” of abuse of process could be laid down, and that this was necessarily so as “notions of justice and injustice, as well as other considerations that bear on public confidence in the administration of justice, must reflect contemporary values and, as well, take account of the circumstances of the case” (at 267 [14]). As was relevantly explained in Jeffery at 93 [28]:

It has been said repeatedly in the judgments of this Court that the categories of abuse of process are not closed…This does not mean that abuse of process is a term at large or without meaning.   Nor does it mean that any conduct of a party or non-party in relation to judicial proceedings is an abuse of process if it can be characterised as in some sense unfair to a party.  It is clear, however, that abuse of process extends to proceedings that are “seriously and unfairly burdensome, prejudicial or damaging” or “productive of serious and unjustified trouble and harassment”.

(Citations omitted)

120    According to GetSwift, an abuse of process is evident here because the use of the Court’s procedures has meant that the Court’s processes would, if more than one open class proceeding continued be being used for an improper purpose. Additionally, such a duplicative proceeding would be unjustifiably oppressive and vexatious and/or the use of the Court’s procedures in the manner contemplated would bring the administration of justice into disrepute. The question to which I will return in Section K.1 below is whether, based on my findings, the present circumstances fall into these or some other category of abuse and whether a stay should be ordered.

121    Before leaving this topic, it is convenient to make three further points.

122    I have referred to the repeated warnings as to the need for caution. There is no doubt that caution needs to be exercised in staying a proceeding permanently, but an important difference exists in the context of ordinary inter partes litigation, and in the context of class actions. In ordinary litigation, leaving aside forum non conveniens stays, the consequence of a permanent stay is that the party whose claim is stayed is shut out from being able to vindicate its rights. Preventing a litigant from vindicating their claim is a very serious step. This consideration does not, however, apply in the same way in the current circumstances. If a permanent stay is granted, this will not prevent the ‘claim’ of the stayed applicants (which have an existence separate from, and anterior to, the proceedings they commenced) being able to be advanced. Those claims can be litigated in the class action that remains and will be resolved, either by settlement approved by the Court or by curial determination. Moreover, each applicant (as a group member in any unstayed class action) has a statutory right under s 33J of the Act to opt out, and then maintain their own individual claim if they so wish. This is not to set at naught the admonitions in the authorities as to caution, but to recognise that one of the reasons why the categories of abuse of process are not closed is that it is a flexible concept which needs to adapt to a multitude of different contexts and circumstances, of which the rise of the competing class action is an example.

123    The second point to be made goes back to Merkel J’s consideration of competing class actions in Johnson Tiles where his Honour found it would be vexatious and oppressive for the respondent to be subjected to more than one class action. I have already explained, however, that in some situations it is not vexatious, oppressive or an abuse of process for a separate class action as can be seen from the example of different types of claims being made in Smith v Australian Executor Trustees: see also Oliver and Bellamy’s. No doubt there will always be some prejudice to a respondent in facing multiple claims, but not only is this possibility of plural actions contemplated in Part IVA but even with competing class actions, the vexation associated with multiplicity does not, in and of itself, arise to the level sufficient to amount to an abuse, unless there is something more which warrants the intervention of the Court.

124    The third point is the concept of a stay being ordered, absent an express finding of abuse of process. In Bellamy’s at [33], Beach J considered there was no doubt that there was power to order a permanent stay, whether in the exercise of the implied power or under the Rules of Court, including in furtherance of the objectives of s 22 of the Act, although his Honour doubted whether the broad power in s 33ZF(1) to “ensure that justice is done in the proceeding” allows for a permanent stay, however, it was unnecessary for his Honour to dwell on such questions. I will return to this topic in Section K.1 below

E.2.2    Declassing

125    Section 33N(1)(c) of the Act relevantly provides that the Court may order that a proceeding be declassed where it is satisfied that it is in the interests of justice to do so because “the representative proceeding will not provide an efficient and effective means of dealing with the claims of group members”.

126    In Bellamy’s, Beach J eliminated or “put to one side” the option of making a s 33N(1) order: at [10]. His Honour had two reasons, one of which went to power, and the other to discretion. I will deal below with the issue of discretion, but for present purposes I will for focus on his Honour’s construction of s 33N(1)(c) (which, for reasons explained by Beach J, is the only subsection of s 33N which is arguably relevant). At [18]-[19], Beach J observed that “[g]enerally speaking”, s 33N(1) requires consideration of the comparator of whether it is in the interests of justice that the proceeding be determined in numerous non-representative proceedings and, as such, the implicit focus in s 33N(1)(c) is on the commonality of issues and whether the representative proceeding is an efficient and effective means to resolve the common issues, rather than resolution by way of individual proceedings. It followed, according to his Honour, that the inquiry is not whether the common issues might be more efficiently resolved by way of a competing class action.

127    Having made these points, his Honour cautioned that the matter is not free from doubt given that s 33N(1)(c) uses the definite article “the representative proceeding”, rather than the indefinite article (cf ss 33N(1)(a), 33N(1)(b) and 33N(1)(d)), such that it is open to argue that it could be satisfied if another class action could efficiently deal with group members’ claims made in the hypothesised to be ‘declassed’ proceeding. However, after noting that s 33N(1)(c) is not focussed on relative efficiency and effectiveness, but rather is expressed in more absolute terms, his Honour was not satisfied it was relevantly engaged in circumstances such as the present.

128    The only other consideration of s 33N in the present context is in Johnson Tiles at 42,677 where Merkel J observed:

In the present matter the principle of oppression and vexation, to which I have referred, must be considered in the context of Pt IVA of the Act. A representative proceeding can be issued without leave of the Court, although the Court can order that a proceeding no longer continue as a representative proceeding under Pt IVA (see ss 33L, 33M and 33N) or that individual issues or issues that are not common issues be determined separately (see ss 33Q, 33R and 33S). Also, the Court has ample power under the inherent jurisdiction, the Rules of Court and the Act (see for example s 33N(1)(d)) to direct which representative proceeding is to continue as a proceeding under Pt IVA where more than one is issued).