Federal Court of Australia

Williams & Kersten Pty Ltd v National Australia Bank Limited (No 3) [2023] FCA 1328

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 37P(2) of the Federal Court of Australia Act 1976 (Cth), by 7 February 2024, the applicant provide to the respondent and the Associate to Justice Lee:

   (a) a copy of a draft pleading, prepared in accordance with the overarching purpose, which counsel briefed to appear in the matter contend is the case that will go to any initial trial; and

   (b) affidavit evidence explaining that adequate funding has been secured in order to take the matter up to an initial trial.

2.    By 4pm on 27 October 2023, the applicant provide to the Associate to Justice Lee a draft opt out notice.

3.    The applicant pay the respondent’s costs of today.

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

LEE J:

A    INTRODUCTION AND BACKGROUND

1    As explained in my two earlier judgments, this class action has been the subject of extraordinary delay: Williams & Kersten Pty Ltd v National Australia Bank Limited [2022] FCA 1254; Williams & Kersten Pty Ltd v National Australia Bank Limited (No 2) [2023] FCA 668 (second judgment).

2    By way of background, the unsatisfactory state of this litigation to date is generally attributable to the conduct of the applicant’s case. It is partly explained by issues in securing funding in the early stages of the proceeding and, more recently, dissention between the applicant and the funder, 421LF LLC (funder).

3    In my second judgment (at [21]–[24]), delivered in June 2023, I indicated as follows:

21    I will make a direction under s 37P(2) of the FCA Act that certain of my previous timetabling orders be vacated and that on or by 5pm on 26 July 2023, the applicant provide to my Associate and the NAB a draft pleading.

22    I then intend to list the matter at 9:30am on 4 August 2023. By 2 August 2023, NAB should indicate whether or not it opposes the grant of leave. If it is possible to do so on 4 August, I will deal with any application for leave to amend and make orders belatedly readying this matter for hearing.

23    I explained today that an order under s 37P(2) of the FCA Act is a matter of some significance. The applicant (and those acting for it) are on notice they have a final chance to get their house in order. I reminded the applicant today that if a party fails to comply with an order made under s 37P(2), s 37P(5) empowers the Court to make such order as the Court thinks appropriate, including dismissing the proceeding in whole or in part (see s 37P(6)(a)).

24    Needless to say, this class action, commenced almost four years ago, should not be allowed to languish any longer.

4    Regrettably, the difficulties persist. These reasons explain the course I propose to take to prioritise the interests of group members which already appear to have been compromised, notwithstanding the important duties owed to group members by the applicant and its representatives.

B    RECENT DEVELOPMENTS

5    The applicant engaged new solicitors in June 2023 and new counsel more recently still (although it should be noted the identity of counsel briefed to take the matter to trial remains unclear).

6    On 26 July 2023, I made orders deferring the date by which the applicant was to provide a draft second further amended statement of claim (draft pleading) and listed the interlocutory application for leave to amend the pleading (amendment application) for hearing in August 2023.

7    When the amendment application came before the Court, it was apparent the evidence filed by the applicant in support of the application was deficient. As a result, I made orders allowing for further evidence to be filed and adjourning the amendment application to a date to be fixed.

8    In September 2023, the funder wrote to the Court raising concerns as to the applicant’s ability to represent the interests of group members and sought a relisting. There was some suggestion the funder would terminate the funding agreement unless certain steps were taken by the applicant. I am now told commercial discussions are currently underway with both the existing funder and a new funder to secure ongoing funding.

9    At a case management hearing on 4 October 2023, the funder appeared seeking leave to intervene in the proceeding and foreshadowing an application seeking an order pursuant to s 33T of the Federal Court of Australia Act 1976 (Cth) (FCA Act) for replacement of the representative applicant, to be brought by a (yet to be identified) group member. I made orders granting leave to the funder to intervene on a limited basis and listing the matter today for any such replacement application to be heard or, in the event no such application was made, to hear the outstanding amendment application.

10    On 18 October 2023, my Associate received a communication from the funder’s solicitor in the following terms:

Dear Associate

We refer to the above matter and the orders made on 4 October 2023 by his Honour (Orders), pursuant to which 421LF LLC (Funder) was granted leave to intervene in the proceeding for the purpose of bringing its interlocutory application …

Despite the Funder’s best efforts to identify a lead for a Replacement Application (as defined in the Orders), the Funder has not yet confirmed a proposed replacement lead and a group member is not therefore in a position to file a Replacement Application by 5pm today in accordance with the Orders. Consistent with comments of the Funder’s counsel at the case management hearing on 2 October 2023, the Funder respectfully requires further time to identity a proposed replacement lead to finalise a Replacement Application and evidence in support.

(Emphasis in original).

11    I did not accede to this request (which was opposed by the applicant and the National Australia Bank (NAB)) for two reasons.

12    First, the orders made on 4 October spoke for themselves. Those orders contemplated the fact that a replacement application may not be made and set out the course to be taken in such a scenario.

13    Secondly, my concerns in relation to the conduct of this proceeding have only intensified over time. I determined it would not be in the interests of group members to defer matters again without receiving a more detailed update on the underlying causes of ongoing delay.

14    Related to this second point, it must be borne in mind that the importance of the Court’s protective and supervisory role in relation to group members should not be understated. At all stages during the currency of a representative proceeding, the Court must be alive to the interests of group members and, as part of the case management function, monitor whether the proceedings are conducted by a representative in a way which best facilitates the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: Australian Securities and Investments Commission v Richards [2013] FCAFC 89 (at [7]–[8] per Jacobson, Middleton and Gordon JJ); LCM Funding Pty Ltd v Stanwell Corp Ltd [2022] FCAFC 103; (2022) 292 FCR 169 (at 175 [22] per Lee J).

C    THE COURSE TO BE TAKEN

15    The NAB urges me to deal with the amendment application today. In all the circumstances, I do not think it would be an efficient use of the Court’s time and resources for me to do so. I have reviewed the draft pleading and the submissions of both parties. It appears my entreaties for the applicant to simplify its case have largely fallen on deaf ears.

16    I need to ascertain whether this is a case that is going to be progressed seriously, is to be adequately funded and is to be properly run to an initial trial. It seems to me that if sufficiently experienced counsel came into the matter, the applicant’s representative case could be refined significantly.

17    In the circumstances, it is necessary to take the unusual course of notifying group members as to the present state of affairs. Opt out has not yet occurred and I propose to settle an opt out notice which provides an explanation as to why the Court considers this case has thus far been conducted in a wholly unsatisfactory manner.

18    A dismissal of this proceeding will have a prejudicial effect on group members, including meaning that a number of claims, currently the subject of suspension of limitation periods, would be lost forever. It is necessary to explain to group members why this case needs to get on track urgently with proper representation and funding and, if this does not happen, there is a very real risk the case will founder, and the interests of group members will be adversely affected.

D    CONCLUSION AND ORDERS

19    By reason of the demands on my diary, I cannot relist this proceeding until February 2024. This will be a period almost five years since this case was commenced. On any view of it, this is unacceptable. As I have noted, responsibility lies with those conducting the case on behalf of the applicant (recognising, of course, that funding has been problematical, counsel appearing today has only come into the matter very recently and the applicant’s current solicitors have only been on the record since June 2023).

20    Accordingly, I will make a further order pursuant to s 37P(2) of the FCA Act, requiring the provision of the following by 7 February 2024:

(1)    a copy of a draft pleading, prepared in accordance with the overarching purpose, which counsel briefed to appear in the matter contend is the case that will go to any initial trial; and

(2)    affidavit evidence explaining that adequate funding has been secured in order to take the matter up to an initial trial.

21    Two further matters should be noted.

22    First, my orders and these reasons should not be seen as suggesting I have formed the view that it will be appropriate for the applicant to continue as the representative applicant. If a replacement group member wishes to be substituted as the applicant, then provided they have secured funding and proposed a pleading by that date, I would be disposed to hear any replacement application at that time.

23    Secondly, unless the applicant gets its house in order and complies with the s 37P(2) order and satisfies me on proper evidence that a properly formulated case will run to an initial trial, I would be disposed to entertain an application by the NAB to dismiss the proceeding with costs. Group members will be notified of this prospect in the notice I will settle in Chambers.

Associate:

Dated:    1 November 2023