Lecture 7- Class Actions PDF

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Lecture 7- Class Actions Jurisdiction 101  

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Generally speaking, the competence of a court to entertain an action or other legal proceeding; The scope of a court’s power to examine and determine facts, interpret and apply the law, make orders and declare judgement: Wardley Australia Ltd v WA (1992) 175 CLR 514. A court’s jurisdiction is limited by both subject matter and territorial reach.

Subject Matter Jurisdiction:  

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This refers to the nature of disputes which may be adjudicated upon by a particular court; State and territory supreme courts have been given a general or inherent jurisdiction which enables them to determine almost all civil disputes except for matters that fall within the exclusive federal jurisdiction (e.g. under Native Title Act Cth). The Federal Court and HCA have more limited subject matter jurisdiction based on their particular roles as federal courts; they cannot be overwhelmed with cases The federal court mainly deals with matters arising under Cth or national scheme legislation; e.g: trade practices, bankruptcy, family law, income tax law, corporations. Sometimes the state and territory Supreme Courts also have jurisdiction under these federal statutes; e.g. s18 Competition and Consumer Act (Cth)—misleading and deceptive conduct.

Territorial Jurisdiction:   

The jurisdiction of a court may be limited by geographic area; Generally speaking, ‘territorial jurisdiction’ refers to the territorial limits within which the orders of a court can be enforced or executed. Courts may also have in personam jurisdiction over a defendant who is outside the jurisdiction and is validly served…

Jurisdiction quiz: 1. Who has jurisdiction for a claim for $80,000 in damages for breach of contract made in ACT?  ACT Magistrate’s Court 2. Who has jurisdiction over a claim for native title land based in Newcastle NSW under the Native Title Act (1993)?  Federal Court 3. Who has jurisdiction over a claim to remove a caveat over real property based in NSW? NSW Supreme Court (a claim over property, so supreme court) 4. Who has jurisdiction over an appeal against an assessment by the Commissioner for Taxation?  AAT (Administrative Appeals Tribunal) Class Actions & Representative Proceedings Examples of Class Actions:    

Uber Takata Airbags Neurofen Mesh inserts

Lecture 7- Class Actions   

Manus Island/Nauru Cigarettes Dust diseases

Representative Proceedings:   

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This is the general way to describe when someone is representing a group of people, not only on behalf of one party (lead plaintiff). Definition where many people have the same, similar or related claims, so they are represented by one party on the record; This is a GENERAL term describing situations where a party takes proceedings not only on its own behalf but on behalf of others; class actions are more specific, and the term is not as old. Mobil Oil Australia Pty Ltd v Victoria (2002) describes the relationship between the plaintiff and the group. Why have these forms of proceedings?

The judicial economy goal -

Saving costs on multiple proceedings; Ensuring consistent outcomes for similar or related claims;

The access to justice goal -

Aggregating small value claims make them more valuable and thus worthwhile to pursue; Less risk of getting a cost order against only you (the cost is spread across the group);

The behaviour modification goal -

Addressing the way corporations handle these sorts of situations; The threat of a class action has been a major reason why corporations have changed some of their behaviour to avoid this potential outcome. ‘class action’ sometimes referred to as ‘the private Attorney-General’; BUT must be careful not to overly deter…

History of Group Proceedings:    

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1901 - Equity - Bedford v. Ellis 1910 - Common Law - Markt and Co. Ltd. v. Knight Steamship Co. Ltd 1966 - Redraft of Rule 23 Federal Rules of Civil Procedure (US) 1988 - 1992 - Back in Australia - Australian Law Reform Commission ‘Group Proceedings in the Federal Court’ leading to insertion of Part IVA into the Federal Court Act 1976 (FCA)(1992) 1995 - Revived by the High Court in Carnie v Esanda [11.1.3C] 2000 - Part 4A Supreme Court Act 1986 (Vic) Further fillip after the High Court recognised litigation funding in Fostif v Campbell’s Cash and Carry in 2006 2011 - Part 10 Civil Procedure Act 2005 (NSW) 2016 - Part 13A Civil Proceedings Act 2011 (Qld)

Lecture 7- Class Actions What is a Class Action? 

The term ‘class action’ is not a technical term, it is a generic term…usually refers to the opt-out configuration but not always; it is common vernacular.

Differentiate between: 

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Opt-out Procedure where the represented persons are described—people who fall into the description are included in the group (therefore bound by the judgement) unless they elect to opt out (s33E Federal Court Act). - ALL people who fall into the description are automatically included in that class; - AND they are bound by the decision/judgement (unless they opt-out) - The identity of all plaintiffs is not known by the court unless they are described in the open class. Opt-in Procedure to be included in the group a person must elect to be represented by providing their consent in writing; unless they have so elected they will not be bound by the judgement (rr266-267 CPRs (ACT)). - The plaintiffs who have opted-in are generally listed in a schedule to the main claim in the court, but there is only one primary plaintiff.

Why the difference is important: Res Judicata 

Applies to people who have elected to be represented in opt-in proceedings but to the group at large in opt-out proceedings;

Limitation Periods  

Express provisions in rules or legislation can suspend the limitation period for the entire group for opt-out proceedings; BUT the representative procedure must be properly engaged. If the court orders that they cannot continue as representative proceeding the claims of the group members may be statute barred. Representative Proceedings—The General Approach

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The jurisdictional step - has the representative procedure permitted by the relevant rules or legislation been validly engaged? The discretionary step - should the representative proceedings be allowed to continue? See examples: - HCA in Carnie v Esanda 1995 (CB 11.1.3C) - Majority inCarnie at p405 - Toohey and Gaudron JJ at p415 - McHugh J in Carnie v Esanda at p427 cited with approval by the High Court in Campbell’s Cash and Carry v Fostif

Lecture 7- Class Actions Opt-In Procedures: Carnie v Esanda (HCA) (1994) 

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The plaintiffs were farmers who had obtained credit from the defendant to purchase farm equipment and sought a declaration that certain agreements (variation agreements) were in breach of the Credit Act 1984. The plaintiffs sought to represent all other persons who had entered into variation agreements with the defendant under Part 8 r 13 of the Supreme Court Rules (the equivalent of ACT r 266) the defendant challenged the plaintiff’s pleading in so far as it sought to plead a representative action. The NSW Court of Appeal treated the proceedings as a class action and considered that the relevant rule (Part 8 r 13) would not support such a proceeding.

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Toohey and Gaudron JJ at 415 (p466 CB) “Proper approach is to ask whether the procedure which the appellant’s wish to adopt is within the rule (jurisdictional step) if it is, a subsidiary question arises whether the Supreme Court should exercise its discretion to “otherwise order” and so prevent the continuance of the proceedings in that form (discretionary step)”

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Mason CJ Deane and Dawson JJ at 404-405 CLRs (p 463 CB) “A significant common interest in the resolution of any question of law or fact arising in the relevant proceedings … Once the existence of numerous parties and the requisite commonality of interest are ascertained the rule is brought into operation subject only to the exercise of the court’s power to order otherwise.”

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McHugh J at 427 CLRs (referred to by Brennan J pp 464-465 CB) … [a] plaintiff and the represented persons have “the same interest” in legal proceedings when they have a community of interest in the determination of any substantial question of law or fact that arises in the proceedings. Other factors may make it undesirable that the proceedings should continue as a representative action, but that is a matter for the exercise of discretion, not jurisdiction [This is my favourite test in this case]

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The jurisdictional step - has the representative procedure permitted by the relevant rules or legislation been validly engaged?

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The discretionary step - should the representative proceedings be allowed to continue? Opt-Out Procedures Federal Court

The threshold tests under s33C (establishing jurisdiction)  

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How many must be in the class? - ‘7 or more persons’ The commonality of the claims - ‘same, similar or related circumstances’ + ‘substantial common issue of law or fact’: Wong v Silkfield CB [11.2.15C] - Must be a substantial commonality between the claims; of ‘substance’. Need to establish a ‘community of interest’ – Carnie v Esanda Against the same person: Cash Converters International Ltd v Gray (2014) 314 ALR 154

Lecture 7- Class Actions 

Nature of relief sought: - Should be beneficial to all the members of the class – early tendency to seek injunction or declaratory relief in the first instance rather than damages. Damages now more common.

The Discretionary Step: Should the proceedings continue as representative proceedings? –s33N  

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Court may order that proceedings already started be discontinued as representative proceedings A ‘declassing order’ under s33N - in the interest of justice that the group proceedings not continue because – - cost of group proceedings likely to exceed cost of separate proceedings - group proceedings will not provide an efficient and effective means of dealing with the claims of the group - it is otherwise inappropriate Court has to consider practical issues such as what evidence is needed to resolve the common issues compared to the individual issues Bright v Femcare (2002) 195 ALR 574 A declassing order is not often awarded, as it is usually easier to simply settle the case.

Bright v Femcare (2002) 195 ALR 574 o Concerned the Filshie Clip which is a device used to occlude the fallopian tubes in women to stop them conceiving. It was alleged that the Filshie Clip was not properly calibrated, so it opened up. o There was a group of 61 women in the class and this was divided into 2 groups. Group A had fallen pregnant as a result of the inadequate operation of the clip. Group B had not fallen pregnant but had to undergo further investigation or sterilization procedures. o Clearly there is a significant difference in the damage suffered by the 2 groups of women but was is sufficient for the court to order that the proceedings not continue as a representative proceeding? o Justice Stone at first instance found that it did o On appeal this judgment was overturned by the Full Court which held that some common issues could be dealt with under the Part IVA procedure such as the operation of the clip. The disparate issues could be dealt with later. The Full Court stated that it is better to determine an issue once rather than 61 times Section 33V  

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Settlement or discontinuance must be approved by the Court Federal Court Class Actions Practice Note GPN-CA – principal task of the court is to assess whether the proposed settlement = a fair and reasonable compromise of the claims made and in the interests of group members Court acts ‘akin to a guardian of the unrepresented group members’ ASIC v Richards [2013] FCAFC 89 at [7]

Lecture 7- Class Actions Litigation Funding and Class Actions:  

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Arguments about free-riding – class members who were not contractually bound to pay the LF’s fees nevertheless could get part of the settlement Proliferation of closed classes where the class was described to those who had signed a litigation funding agreement (LFA) with the LF – accepted in Multiplex v P Dawson Nominees Pty Ltd (2007) 164 FCR 275 Concern about the decline in open classes under the opt out scheme envisaged by Parliament No serious regulation of litigation funding by Parliament yet (confirmed by ALRC Report No 134 – 24 January 2019) Federal Court took the lead by requiring: Filing of the LFA before the first case management conference (GPN - CA para 4.1) Making common fund orders (CFOs) – under this order all class members have to pay the LF fees but court determines the appropriate rate of commission at the conclusion of the action (under s33V): Money Max Int Pty Ltd v QBE [2016] FCAFC 148 Works by the LF giving an ‘undertaking’ ALRC has recommended that the Federal Court be given an express statutory power to make common fund orders (Recommendation 3, p 96) CFOs recently upheld by joint sitting of Full Federal Court inWestpac Banking Corporation v Lenthall [2019] FCAFC 34 and NSW Court of Appeal in Brewster v BMW Australia Ltd [2019] NSWCA 35 See also Vince Morabito,, ‘An Evidence-Based Approach to Class Action Reform in Australia: Common Fund Orders, Funding Fees and Reimbursement Payments’ (SSRN Scholarly Paper ID 3326303, Social Science Research Network, 31 January 2019)...