Federal Court of Australia

Carpenders Park Pty Ltd (as trustee of the Carpenders Park Pty Ltd Staff Superannuation Fund) v Sims Limited [2020] FCA 1681

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application filed on 27 August 2020 be dismissed.

2.    The applicant pay the respondent’s costs.

3.    Order 20 made on 21 August 2020 be varied so that it reads:

(a)    The question of how the costs of the Contradictor and any junior counsel chosen by the Contradictor will be treated in a taxation be reserved for further order.

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

RARES J:

1    This is an application to amend the definition of the open class of group members created by the applicant, Carpenders Park Pty Limited, when, pursuant to s 33H of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act), it set out in the originating application the persons comprising the group members to whom the proceeding relates, the nature of the claims made on behalf of the group members, the relief claimed and the questions of law or fact common to those claims.

2    Carpenders claims that the respondent, Sims Limited, caused it (and other group members) loss or damage because the value of their shares in Sims fell due to Sims’ alleged contraventions of, among other provisions, ss 674 and 1041E of the Corporations Act 2001 (Cth) when it issued statements to the market about its business, such as a five year plan and earnings guidance, in the period between 23 July 2014 and 19 February 2016 (the claim period).

3    The originating application defined the group members, as required by s 33H(1)(a), as follows:

5.     The Group Members to whom this proceeding relates are those persons referred to in paragraph 2 of the Statement of Claim, being persons who or which:

(a)     acquired an interest in SGM Shares in the Claim Period;

(b)     suffered loss or damage by, or that resulted from, the conduct of SGM pleaded in the Statement of Claim; and

(c)     were not during the Claim Period, and are not, any of the following:

(i)     a related party (as defined bys 228 of the Corporations Act) of SGM;

(ii)     a related body corporate (as defined by s 50 of the Corporations Act) of SGM;

(iii)     an associated entity (as defined by s 50AAA of the Corporations Act of SGM;

(iv)     a director, an officer, or a close associate (as defined by s 9 of the Corporations Act) of SGM; or

(v)     a judge or the Chief Justice of the Federal Court of Australia or a Justice or the Chief Justice of the High Court of Australia.

4    Carpenders now seeks to amend the description of the group in a way that, on the evidence before me, would appear to reduce it by about 71%.

The legislative scheme

5    Relevantly, the Federal Court Act provides:

22      Determination of matter completely and finally

The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided.

…

33H      Originating process

(1)    An application commencing a representative proceeding, or a document filed in support of such an application, must, in addition to any other matters required to be included:

(a)    describe or otherwise identify the group members to whom the proceeding relates; and

(b)    specify the nature of the claims made on behalf of the group members and the relief claimed; and

(c)    specify the questions of law or fact common to the claims of the group members.

…

33J      Right of group member to opt out

(1)    The Court must fix a date before which a group member may opt out of a representative proceeding.

(2)    A group member may opt out of the representative proceeding by written notice given under the Rules of Court before the date so fixed.

…

33K      Causes of action accruing after commencement of representative proceeding

(1)    The Court may at any stage of a representative proceeding, on application made by the representative party, give leave to amend the application commencing the representative proceeding so as to alter the description of the group.

(2)    The description of the group may be altered so as to include a person:

(a)    whose cause of action accrued after the commencement of the representative proceeding but before such date as the Court fixes when giving leave; and

(b)    who would have been included in the group, or, with the consent of the person would have been included in the group, if the cause of action had accrued before the commencement of the proceeding.

(3)    The date mentioned in paragraph (2)(a) may be the date on which leave is given or another date before or after that date.

(4)    Where the Court gives leave under subsection (1), it may also make any other orders it thinks just, including an order relating to the giving of notice to persons who, as a result of the amendment, will be included in the group and the date before which such persons may opt out of the proceeding.

…

33V      Settlement and discontinuance—representative proceeding

(1)    A representative proceeding may not be settled or discontinued without the approval of the Court.

(2)    If the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court.

…

33X      Notice to be given of certain matters

(1)    Notice must be given to group members of the following matters in relation to a representative proceeding:

(a)    the commencement of the proceeding and the right of the group members to opt out of the proceeding before a specified date, being the date fixed under subsection 33J(1);

(b)    an application by the respondent in the proceeding for the dismissal of the proceeding on the ground of want of prosecution;

(c)    an application by a representative party seeking leave to withdraw under section 33W as representative party.

…

33Y      Notices—ancillary provisions

(1)    This section is concerned with notices under section 33X.

(2)    The form and content of a notice must be as approved by the Court.

…

…

33ZE      Suspension of limitation periods

(1)    Upon the commencement of a representative proceeding, the running of any limitation period that applies to the claim of a group member to which the proceeding relates is suspended.

(2)    The limitation period does not begin to run again unless either the member opts out of the proceeding under section 33J or the proceeding, and any appeals arising from the proceeding, are determined without finally disposing of the group member’s claim.

33ZF      General power of Court to make orders

(1)    In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

(2)    Subsection (1) does not limit the operation of section 22.

(emphasis other than in headings added)

Background

6    Over the course of this proceeding, the parties have taken a number of forensic steps adapting to changes in the understanding of the law relating to the conduct of representative proceedings based on the decision of the High Court in BMW Australia Ltd v Brewster (2019) 374 ALR 627, and two subsequent decisions of the Court of Appeal of the Supreme Court of New South Wales, namely Haselhurst v Toyota Motor Corporation (trading as Toyota Australia) (2020) 101 NSWLR 890 and Wigmans v AMP Limited (2020) 102 NSWLR 199.

7    On 5 July 2019, in accordance with the then existing authorities, I made a common fund order. However, on 11 February 2020, following the decision in Brewster 374 ALR 627, I set that order aside by consent. Since then, Carpenders has explored other ways of achieving some confinement of the members of persons in the group who could be entitled to any judgment sum or settlement payment, resulting in the current interlocutory application.

8    On 21 August 2020, I made orders pursuant to ss 33J and 33X that fixed 16 October 2020 as the date before which a group member, as currently defined, may opt out of the proceeding and I authorised the issue of a notice to group members.

9    The notice came to be framed, at Carpenders’ urging, in a way that offered group members three alternative choices about the next step that could they take in the proceedings: first, to opt out, secondly, to do what Carpenders sought be done, namely, to register, effectively, their interest in taking an active role in the class action by completing a detailed form as to the course of their investment history in shares in Sims, and, thirdly, to do nothing.

10    During the interlocutory hearing on 31 July 2020 to settle the terms of the notice, I expressed disquiet about the potential for group members to have their interests adversely affected by an obligation to either register or be confronted with the potential for Carpenders to seek an order (that it asks be made today) to exclude from the group, henceforth, those who did not either sign a funding agreement or register. At that time, one issue concerned the imminence of the expiry of the limitation period, for persons who engaged in a share trade on, or close to, the inception of the claim period which would occur within about eight days of any order that removed from the group persons who had neither signed a funding agreement nor registered. That is because s 33ZE suspends the running of any limitation period while a representative proceeding is on foot in respect of a person who is a group member. Pursuant to s 33ZE(2), the limitation period will only commence to run again if the person opts out of the proceeding under s 33J. However, s 33ZE(2) does not refer to a person being removed as a group member. Because of the decision to which I have come, I do not need consider whether s 33ZE(2), having regard to s 33ZE(1), applies if a person ceases to be a group member other than by opting out for the purposes of these reasons.

11    The form for registration, attached to the notice, required group members to provide detailed information about their share trading activity in Sims shares during the claim period, and that, if they could not do so, to make a statutory declaration explaining why. Following criticism in the submissions of the contradictor, whom I appointed for the purposes of this hearing based on my concern that the interests of group members should be properly represented by a disinterested third party, Carpenders proposed a new form of notice that made it voluntary for a group member to submit the registration form.

12    The terms of the notice, that I approved under s 33X, explained, somewhat tentatively, what might happen if the class closure order were made, namely that, if a group member did not register in the class by 16 October 2020, he, she or it would no longer be a group member, even if they had not opted out. It said that, if that occurred, the member would need to bring their own proceeding against Sims should they want to seek compensation for the causes of action concerned. The notice also stated that, if the Court were minded to make such an order, it might provide group members with a further opportunity to register, even if they had not done so by 16 October 2020. The notice informed them, correctly, that, if the Court did not make a class closure order, then they would not be affected adversely or at all.

13    The notice was sent either by email or by post to 4,016 group members who had not already signed a funding agreement with Investor Claim Partners Pty Ltd, being the litigation funder supporting Carpenders' claim. Carpenders' solicitor, Bill Petrovski, explained in his affidavit of 23 October 2020 that, in response to the notice, seven group members had filed opt out notices. The affidavit of Sims' solicitor, Jason Betts, affirmed on 6 November 2020, established that, in response to the registration invitation in the notice, a total of 1,203 persons had provided share trading data disclosing, among other things, the date of their share acquisitions and disposals and the number of shares acquired or disposed of, and that 22 "other persons", although indicating they wished to register, had not provided any share trading data.

14    What is signal in Mr Petrovski’s evidence and Carpenders’ submissions is the lack of any explanation whatsoever for its decision to apply to make this significant amendment to change the description of, and consequently to reduce, the group.

Carpenders’ submissions

15    Carpenders argued that it did not need to give such an explanation. It asserted that the scheme of Pt IVA of the Federal Court Act gave the representative party effective control over the conduct of the proceeding on behalf of itself and the group members so that the representative party could determine, not only at the commencement of the proceeding but throughout it, any procedural and substantive steps that would affect the composition of the group, the nature of the claims and the steps that would be taken in pursuit of the litigation. Carpenders contended that the class definition in an originating application could be altered subsequently, under s 33K, at the representative party’s will so as to confine the scope of the proceeding to persons with a claim against a respondent who had also retained a particular firm of solicitors or entered into a litigation funding agreement. It submitted that this asserted authority of a representative party supported its construction of both the ambit of, and the considerations relevant to, the exercise of the Court’s discretion under s 33K. It argued that the proper test for granting an amendment to the group description under s 33K was consonant with what, it contended, was the test under s 33V for the Court to approve a representative party’s discontinuance of the proceeding.

16    However, Carpenders accepted in its submissions that the Court’s test for approval under s 33V has been the subject of differing views in judgments dealing with discontinuance, including, as it noted, the obiter dicta I used in Wotton v Queensland (2009) 109 ALD 534 at 544–545 [36]–[41] (which it submitted were wrong), and the recent decision of Anastassiou J in Babscay Pty Limited v Pitcher Partners [2020] FCA 1610 at [29] (which it submitted was correct). There, his Honour observed that, in cases of unilateral discontinuance, generally, it would not be necessary for a representative party to put detailed material supporting discontinuance of the whole proceeding, including a fully reasoned opinion from counsel addressing prospects of success or, more aptly, the lack of such prospects (at [29]). I note, however, that his Honour said that, if he were wrong, he would approve the discontinuance on the basis that it was in the best interests of group members to do so (at [30]).

17    Carpenders argued that the real test for the Court to apply in considering the approval of a discontinuance under s 33V was whether it was unfair, unreasonable or adverse to interests of group members whose claims might be discontinued and that similar reasoning should be applied to the exercise of the discretion under s 33K(1). It submitted that a representative party could decide what causes of action it would pursue, what evidence would be led, and, accordingly, should be free to choose, and to vary, the composition of the group so long as, in doing so, it did not act in a way that was unfair, unreasonable or adverse to the interests of a person in seeking to exclude them from the group.

18    It contended that there was no adverse impact on the interests of any group members in the present case if its amendments to the definition of group members were accepted. That was because, the argument ran, first, their actual claims would not be affected at all by what was proposed, since the limitation period will still be running by force of s 33ZE at the time the amendment order will take effect. Carpenders contended that the order could be made to take effect sometime hence so that the removed persons, whose limitation periods would expire soon after, will have a longer period to prepare or bring proceedings before the revived limitation period expired. Secondly, the persons affected had already received the notice and had chosen not to take up the opportunity of either signing a funding agreement, registering their interest or actively applying to the Court to oppose the making of the order. It contended that the inference from their inactivity was that it showed that they were not interested in pursuing the proceeding anyway and would not be, or be likely to be, prejudiced by their ceasing to be a group member.

19    Moreover, Carpenders argued, another possible means of ensuring that the interests of group members who would be no longer included in this proceeding if the amendment were granted could be protected was by the giving of a further notice under s 33X, which it proposed should be sent, inviting those members, once again, to register by a time next year to be fixed by the Court. It added that the notice could state that it would be preferable, if a group member wished to register, that they use a draft form that was substantially similar to the one attached to the notice under the 21 August 2020 orders.

20    Carpenders asserted that it followed that the critical consideration for the exercise of the power under s 33K was whether the objective outcome in any way would affect adversely the interests of the group members concerned. It contended that this was because conditions could be included in the amendment order that would enable them to have enough time, before the expiry of a limitation period, to commence proceedings, and so preserve whatever rights they had. It emphasised that, hitherto, those persons had shown no interest in actively pursuing their claims. It submitted that they would be in the same position as they were in immediately before the proceeding commenced early last year. It argued that a group member who had received a notice and taken no action would reasonably be expected to understand that, as a result, the case would not progress in the future in a way that would include or benefit them. Rather, Carpenders contended, persons who had shown real interest in recovering, or seeking recovery of, any losses sustained in their share trading in Sims during the claim period can be assumed to be those who actively responded to the notice by either signing a litigation funding agreement or registering their interest or, alternatively, being one of the seven who opted out.

21    Carpenders argued that it wanted the group to include persons who were actually interested in the proceeding continuing and, consequently, it was happy for the Court to impose conditions on its amendment. It asserted that group members needed to manifest an interest in putting forward their claims at some stage of a representative proceeding and that, therefore, it could be inferred that the persons whom it seeks now be excluded are not interested in putting forward their claim, even though, at present, there has been no resolution of any of the substantive issues.

22    It contended that the Federal Court Act did not assume or require that there would be only one class action in respect of similar conduct. It also submitted that the fear Mr Betts had expressed, that, if the class were narrowed, Sims could be exposed in the future to one or more additional class actions in respect of the same, or substantively similar, subject matter making it more difficult to settle this proceeding, was not borne out by experience of class action litigation to date.

Consideration

23    Part IVA of the Federal Court Act was introduced following a recommendation of the Australian Law Reform Commission. Payne JA, with whom Bell P, Macfarlan, Leeming JJA and Emmett AJA agreed, said of Pt 10 of the Civil Procedure Act 2005 (NSW) (which is substantively an analogue of Pt IVA) in Haselhurst 101 NSWLR at 917 [118]–[119]:

That submission together with others directed to the need for an order to promote settlement turns upon empirical propositions of fact. No evidence was pointed to in their support. No academic literature was relied upon. As the President pointed out in argument, the submissions are falsified by decades of history of representative proceedings in this country:

“Bell P: … settlements occurred in class actions for years, decades even, without this mechanism. The forensic benefits of this mechanism are obvious, for defendants, but you’re putting up that unless this is permissible, settlements[,] which are a desirable thing, will not be able to be achieved.”

There are two significant matters to consider. The first is that the scheme of Pt 10 is inconsistent with an interpretation of s 183 as empowering the court to make orders for pre-settlement class closure. The secondary materials provide that Pt 10 was modelled on and intended to be interpreted consistently, save for some presently irrelevant express exceptions, with Pt IVA of the Federal Court of Australia Act. The Australian Law Reform Commission in its Report 134, Integrity, Fairness and Efficiency — An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (2018), at par 1.54 noted that the federal government implemented the open class regime after careful consideration and quoted the Attorney-General at the time of the passage of the Federal Court of Australia Act amendments introducing Pt IVA as follows:

“It [the regime] ensures that people, particularly those who are poor or less educated, can obtain redress where they may be unable to take the positive step of having themselves included in the proceeding. It also achieves the goals of obtaining a common, binding decision while leaving a person who wishes to do so free to leave the group and pursue his or her claim separately.”

(emphasis added)

24    The Parliament made a conscious choice to ensure that a representative proceeding under Pt IVA would be an opt-out, not an opt-in, action. That is significant in a number of respects for the purposes of this application. First, s 33J creates a right of a group member to opt out, and requires the Court to fix a date before which they may do so. Secondly, s 33K is headed “Causes of action accruing after commencement of representative proceeding”. That heading is a part of the Act: s 13(1) of the Acts Interpretation Act 1901 (Cth). There is no express suggestion in s 33K that it can be used to narrow the group definition. Rather, the heading and s 33K(2) and (4) deal with inclusion of persons or claims accruing after the proceeding has been initiated. Nonetheless, the ordinary and natural meaning of the words “so as to alter the description of the group” in s 33K(1) appears to permit an amendment to narrow it, for instance if particular claims are settled or resolved in a way that requires the group description to be amended. I will assume, without deciding, that s 33K would permit an amendment of the kind Carpenders seeks.

25    Thirdly, the ambit of a provision, such as s 33K, conferring jurisdiction on, or granting power to, a court must be construed on the basis of what Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ said in Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 421:

It is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words.

26    It is also necessary to have regard to the principle of construction of a statutory discretion identified by Stephen, Mason, Murphy, Aickin and Wilson JJ in The Queen v Australian Broadcasting Tribunal; Ex parte 2HD Pty Limited (1979) 144 CLR 45 at 49, where their Honours said:

In the absence of some positive indication of the considerations on which a grant or refusal of consent is to depend, the discretion is “unconfined, except insofar as the subject matter, scope and purpose of the statutory enactment may enable the court to pronounce given reasons to be definitively extraneous to any objects the legislature could have had in view”, to use the words of Dixon J in [Water Conservation and Irrigation Commission (NSW) v] Browning [(1947) 74 CLR 492 at 505]

27    Fourthly, the discretion in s 33K is one of a number of powers that the Federal Court Act confers on the Court to use in proceedings under Pt IVA. These include s 22 (as s 33ZF(2) makes pellucid) as well as ss 33Q, 33V, 33W, 33X, 33Z, 37M and 37N. An amendment is a classic aspect of practice and procedure to which ss 37M and 37N apply. In addition, s 33ZF(1) provides that, in a proceeding under Pt IVA, the Court, of its own motion or on the application of a party or a group member, may make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.

28    I am of opinion that, if the Court is asked to act in a way which may affect adversely the interests of one or more group members, the interests of justice in a group proceeding must inform the exercise of powers such as those in ss 33K and 33V, as I explained in Wotton 109 ALD at 544–545 [36]–[37]. The Parliament enacted Pt IVA without including any requirement that group members take an active part in a representative proceeding. Moreover, ss 33V and 33W require a representative party to obtain the approval or leave of the Court to settle or discontinue the whole proceeding (including for the group members) as well as his, her or its individual claim. Those requirements do not support a construction of a representative party’s authority to conduct a representative proceeding free of constraint as to the interests of group members whose interests may be affected adversely by steps that that party seeks to take up to the time of settlement or a judgment. Rather, the statutory requirement for the Court’s approval or leave reinforce the protective role of the Court once its jurisdiction has been invoked in a representative proceeding.

29    In Phillip Morris Inc v Adam P Brown Male Fashion Pty Ltd (1981) 148 CLR 457 at 489–490, Gibbs J said that s 22 should be construed liberally as conferring a power and a duty, but not jurisdiction, on the Court. He said that the Court’s duty was “to dispose of the matter completely and finally”: see too at 477 per Barwick CJ, at 505–506 per Mason J with whom Stephen J agreed, at 529 per Aickin J. In Thomson Australian Holdings Pty Limited v Trade Practices Commission (1981) 148 CLR 150 at 161, Gibbs CJ, Stephen, Mason and Wilson JJ said that s 22 was a “Judicature Act” provision designed to ensure that the Court could grant relief which is appropriate to both legal and equitable claims and to avoid multiplicity of proceedings. They said that the effect of s 22 was to enable the Court to dispose of all rights, legal and equitable, in the one action so far as that was possible.

30    Crucially, Pt IVA confers on the Court not only jurisdiction to hear representative proceedings, but also a procedure and powers that allow a real multiplicity of claims (such as are dealt with in s 22) that 7 or more persons can each bring in separate proceedings (being those described in ss 33C and 33H) to be dealt with in the one proceeding.

31    One feature of representative proceeding or class action litigation that has recently manifested has been the spectre of multiple such actions concerning the same, or substantially the same, subject matter. The creation or encouragement of such a surfeit of proceedings from the alteration of the present description of the group, as Carpenders’ submissions envisaged, is antithetical both to s 22 and Pt IVA of the Federal Court Act and the Court’s duty to dispose of this matter completely and finally. Indeed, each of Haselhurst 101 NSWLR 890 and Wigmans 102 NSWLR 199 was one of multiple class actions concerning the same substantive issues. Those multiple actions are hardly calculated to result in an efficient use of the Court’s resources if they are unable to be run together in a coherent way: see eg Wigmans 102 NSWLR at 207 [42] per Macfarlan, Leeming and White JJA.

32    Carpenders’ argument, here, is that persons within the group who are adversely affected by being excluded from it, being potentially a significant proportion of the group, subsequently will be able to bring one or more other group proceedings or their own individual proceedings. That argument suggests that granting its application is calculated to create a situation where there can be multiple representative proceedings, not all necessarily in this Court, over exactly the subject matter that Carpenders seeks be excised from this proceeding by its amendment, that Pt IVA and s 22 enable and create a duty for the Court to determine. The creation of that possibility would be antithetical to the duty of the Court, under ss 22 and 37M, to conduct litigation in a way that avoids multiplicity of proceedings, allow resolution of all matters in controversy in the one action, and use the Court’s public resources in an appropriate and efficient way.

33    Here, Carpenders has given no reasoning process whatsoever as to why it wishes to narrow the scope of the group; hence, its argument that relied upon the asserted need for objective identification of unfairness, unreasonableness or adverse consequences to the persons whom it seeks to be excluded from the group as a precondition to its being denied the amendment it seeks. Moreover, its insistence that it, as the moving party in any other litigation, is, in effect, entirely free to conduct the litigation as it chooses is in the teeth of what the High Court held in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, and in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management Pty Ltd (2013) 250 CLR 303 at 321 [51], 323 [56]–[57] per French CJ, Kiefel, Bell, Gageler and Keane JJ. In Aon 239 CLR at 214–215 [102]–[103], Gummow, Hayne, Crennan, Kiefel and Bell JJ considered the nature of matters relevant to the discretion to grant of an amendment saying (at 215 [103]):

Generally speaking, where a discretion is sought to be exercised in favour of one party and to the disadvantage of another, an explanation will be called for.

34    Gilmour, Perram and Beach JJ said in Tamaya Resources Ltd (in Liq) v Deloitte Touche Tohmatsu (a firm) (2016) 332 ALR 199 at 226 [154]–[155] that the nature of the explanation (in that case for delay in applying for an amendment) necessarily will depend on the particular case, but inevitably it is the explanation of the moving party that matters. And in Expense Reduction 250 CLR at 323 [56], the Court said that, while parties continued to have the right to bring, pursue and defend proceedings in a court with similar powers as are in ss 37M and 37N of the Federal Court Act, “the conduct of those proceedings is firmly in the hands of the court. It is the duty of the parties and their lawyers to assist the court in furthering the overriding purpose”.

35    Here, Sims argued that the amendment would be to its disadvantage. But, more pertinently, the amendment is clearly to the disadvantage of those members of the group who are entitled to the rights envisaged by the Parliament in allowing persons, such as Carpenders, to commence a representative proceeding on their behalf and to see it through.

36    Carpenders has not explained why it took nearly three years from the end of the claim period before it commenced this proceeding, other than what I would infer, looking at the matters realistically, was the necessity for it, first, to investigate and satisfy itself that the claim was one which could properly be brought in accordance with the Federal Court Rules 2011 and with the professional duties of those who represent it, and, secondly, to obtain sufficient resources, including, as occurred, financial support in the form of a litigation funder, so that it would be able to meet the significant cost involved. It is clear that this proceeding, as with most shareholder class actions, has been and will continue to be very expensive and detailed, and require considerable investment of time and money to bring to trial.

37    It is not apparent to me why it is necessary or desirable that many current group members, with the entitlement to remain so (having exercised their right not to opt out), should be deprived of that right on the basis, asserted by Carpenders, that there is no objectively unfair, unreasonable or adverse consequence in removing them from the proceeding. If, as Carpenders urged, I were to postpone the time at which the order removing them were to take effect, that delay would need to be for a period sufficient for those persons to engage lawyers and obtain adequate funding to be able to conduct a subsequent proceeding in which their issues, as a consequence, would overlap with those in this proceeding.

38    Removal would serve no legitimate forensic purpose, having regard to the fact that those group members are currently persons whose interests are represented but would cease to be so were they removed.

39    While a representative party in a group proceeding has a significant degree of autonomy in forensic decision-making once it has commenced and defined the ambit of the proceeding, its autonomy is not at large. This is why Pt IVA confers additional, multiple and important powers on the Court to supervise the conduct of the litigation in order to ensure that justice is done in the proceeding, not only as between the immediate parties but having regard to the interests of the group members as a whole. In enacting Pt IVA, the Parliament determined that the Court have roles in determining, specifically, whether the proceeding may be settled or discontinued under ss 33V and 33W, whether any and in what form notices should be given under s 33X, the adequacy of representation of the group members under s 33T, and the granting of an amendment to the description of the group under s 33K.

40    The specific power in s 33K to grant an amendment to alter the description of the group would be unnecessary if an application to amend that description were simply able to be dealt with as an ordinary application to amend a pleading pursuant to the rule-making power in s 59(2B) of the Federal Court Act, Div 16.5 of the Rules and the Court’s ordinary powers in matters of practice and procedure.

41    In Dyczynski v Gibson (2020) 381 ALR 1, Murphy and Colvin JJ in their joint reasons (at 60 [252]) and Lee J in his concurring reasons (at 92 [402]), emphasised that it is well established that the Court has a protective role in relation to the interests of group members. This is because the conduct of a representative proceeding, and the way in which an applicant or others can seek to direct its course, necessarily has an effect on those group members whom Pt IVA provides will be carried along silently until the time at which a settlement occurs or judgment is entered.

42    Carpenders chose to commence this representative proceeding under Pt IVA with an open class in circumstances where, I infer, the funder had understood that a common fund or like order could be made before settlement or judgment, until the High Court’s decision in Brewster 374 ALR 627 changed the previous understanding of the law. However, that has not been put forward as a consideration and I have not taken it into account.

43    In my opinion, the power in s 33K(1) to grant an amendment to the description of the group is one that should be exercised having regard to the interests of justice and all relevant circumstances, revealed by the subject matter, scope and purpose of the Federal Court Act, read as a whole: Ex parte 2HD Pty Ltd 144 CLR at 49. I reject Carpenders’ submissions that those considerations are limited to whether there is any objective unfairness, unreasonableness or adversity in an amended description of the group that a representative party seeks in order to conduct the proceeding.

44    I am of opinion that an application under s 33K to make an amendment that will exclude persons as group members requires the interests of those group members to be taken into account to ensure justice is done. Here, the persons affected by this application have chosen to exercise their right under s 33J not to opt out and to remain in the proceeding. They did so in circumstances where the notice informed them that a contradictor would be able to assist the Court in arguing a case that they should not be excluded. The notice itself left ambiguous what would happen on this application.

Conclusion

45    I do not see it as being in the interests of justice, or in accordance with the Court’s duty under s 22, to make the order for amendment to the group description. For the reasons I have given Carpenders’ interlocutory application must be dismissed with costs.

Associate:

Dated:    16 December 2020