SECTION ONE

The Review Class Actions in Australia

2014/2015 Contents Introduction “A big year for new actions, settlements and development of legal practice” “Directors need to develop strategies to In this, our fourth annual report on class action developments in Australia, we reflect upon significant judgments, events and issues of note arising between 1 July 2014 avoid a class action in the and 30 June 2015. first instance and, second, This year, total class action settlements were just shy of $1 billion. This large total prepare for a coordinated was primarily made up of the settlements of the Black Saturday class actions relating to the Kilmore East/Kinglake and the Murrindindi/Marysville bushfires, totalling almost 03 Introduction approach in the event one $800 million between them, with the balance from securities class actions. does emerge” A number of notable judgments have also been handed down in the past 12 months, Australian Institute of Company Directors including the first judicial consideration of the indirect causation theory of loss in Action Plan for Class Actions: securities class actions, as well as clarification by the High Court on proportionate 04 Key themes ASX Roundtable Summary Paper 2015 liability. It was also a year in which two class actions representing largely retail investors or consumers – the actions in relation to Vioxx and Great Southern – produced minimal SECTION ONE returns for group members, suggesting that the class action mechanism will not always 06 Headlines deliver results. In the past year, issues relating to the role of lawyers and funders remained centre stage. SECTION TWO In this year’s report we consider a number of these decisions, the possible introduction of contingency fees by lawyers and look at the status of the Australian third party litigation 15 Litigation funding funding market. As the report goes to print, at least 33 new class actions have been launched in the SECTION THREE 12 months to June 2015, up significantly from previous periods. Securities, financial product and investment claims were just under half of all new class action filings 21 Entrepreneurial lawyering (2013/2014: 52%). While in previous periods we have seen claims against construction comes under sustained attack companies facing issues in meeting forecasts, as the conditions of the global economy have continued to change, we are now seeing a trend in claims against mining and SECTION FOUR mining services companies. There has also been a rise in new claims relating to natural disasters, proceedings against government authorities and mass consumer claims. 25 Claims against the state There are at least 29 other class actions under ongoing consideration. The year 2015/16 looks set to be another eventful year for class actions in Australia. SECTION FIVE We hope you find this report informative. 27 Settlements — the closing act

SECTION SIX 31 Class action procedure — Moira Saville Alexander Morris key developments Partner Partner King & Wood Mallesons King & Wood M/allesons SECTION SEVEN 36 Global developments

SECTION EIGHT Peta Stevenson Patricia Matthews 40 Outlook Partner Special Counsel King & Wood Mallesons King & Wood Mallesons

2 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 3 Key themes

The closing act - Settlements

––– Frequently after trial commences Dramatis personae ––– Continuing scrutiny by the courts ––– Confidentiality – amount, reasons and litigation funder’s fees ––– ‘Deep pockets’ ––– Listed companies ––– Government ––– Event-based actions Waiting in the wings

––– Common fund approach Centre stage ––– Contingency fees ––– Licensing of litigation funders

––– Lawyers as plaintiffs ––– Competing class actions continue ––– Failing cases

4 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 5 SECTION ONE SECTION ONE Headlines

Landmark year for settlements that class actions are not only becoming an against WorleyParsons (forecast accepted aspect of commercial litigation in earnings, discussed further in section Types of Claims With almost a billion dollars paid out in Australia, but are also thriving. three); against UGL Limited (disclosure Australian class action settlements in the regarding profits from a joint venture While securities, financial product and year to 30 June 2015, it is not surprising of a power station in the Northern Securities Consumer protection investment related class actions collectively that class actions are seen as a key risk for Territory); against traffic forecaster Arup ƒƒBillabong ƒƒEuropean River Cruise constituted just under 50% of all new Australian directors and boards and that in relation to the failed BrisConnections ƒƒBrisConnections ƒƒForex v Westpac actions, they continued to dominate the ƒƒMyer – Melbourne City Investments they continue to draw new protagonists project; and against Billabong (forecast ƒƒOpen class credit card late fee actions – leaderboard, with 16 new actions filed in ƒƒNewcrest Citibank, ANZ, Westpac to the Australian market. Total settlement earnings). payouts in 2014/2015 were approximately the 12 months to June 2015: ƒƒTreasury Wines Estate – Maurice Blackburn ƒƒPizza Hut – Pricing strategy ƒƒTreasury Wines Estate – Melbourne City Investments ƒƒSt George Employee Bonus $950 million across 12 actions. ƒ Financial products/investments: six Securities: ten actions were filed ƒ ƒƒVocation – Mark Elliott ƒƒ class actions were filed in relation to 10 alleging breaches of the continuous ƒƒVocation – Slater & Gordon 7 financial products or investments, with Number of new actions filed – disclosure obligations and/or ƒƒWorleyParsons – Mark Elliott a claim filed against ANZ (collateralised a steady rise misleading or deceptive conduct (five ƒƒUGL – Melbourne City Investments debt obligations); against RBS of which have a common link through In the 12 months to June 2015, at least 33 (warrants); against, amongst others, class action proponent Mark Elliott), Investment claims new class actions were filed in the Federal BankSA (alleged knowing assistance Environmental events including against Myer (financial ƒƒBankSA Court and the Supreme Courts of Victoria in a Ponzi scheme); against a number ƒƒCallide Dam flood results); against Newcrest Mining Ltd ƒƒCoffs Harbour City Council v ANZ and NSW. This represents a huge rise in of Fitch entities (synthetic collateralised ƒƒDeception Bay flood ƒƒGloucester Shire Council v Fitch Ratings (gold production forecast); two actions 6 6 class actions commenced, as we saw debt obligations); against Australian ƒƒJack River bushfire ƒƒProvident Capital against Treasury Wine Estates Ltd (TWE) ƒƒMickleham-Kilmore bushfires 18 filed in the 12 months to June 2013 and Executor Trustees (in its role as trustee ƒƒRBS (write-downs); two actions against ƒƒSpringwood bushfire 17 in the 12 months to June 2014 covered of Provident Capital); and a second 2 2 ƒƒThe Trust Company (Banksia) 1 Vocation (disclosure regarding extent ƒƒWivenhoe Dam floods by our second and third reports, suggesting action in respect of Banksia, against its of government funding), and a third 1 King & Wood Mallesons, The Review – Class trustee The Trust Company. Actions In Australia 2013/14 (24 July 2014), 6. reportedly being investigated; a claim Of the remaining 17 class actions: Government Human Rights ƒƒLive Cattle Export Ban ƒƒChristmas Island detention Natural disasters and events: six ƒƒ ƒƒASIC re Storm Financial ƒƒManus Island detention New class actions filed actions related to catastrophic events, of which three are flood-related (the 33 class actions against Seqwater, SunWater and the State of Queensland ƒƒ Consumer claims: seven consumer ƒƒ Claims against the State: two class in relation to the 2011 floods in class actions were filed, including actions were filed against government Queensland (the Wivenhoe Dam against tour company, Scenic Tours, - a claim against the Commonwealth proceedings), the class actions issued in relation to a European river cruise; Government in relation to the 2011 in the Victorian Supreme Court against against Westpac, in relation to alleged ban on the exportation of live cattle to Sunwater in relation to the Callide Dam unconscionable conduct and breaches Indonesia; and against the Australian flood of February 2015, and against of the code of banking practice by Securities and Investment Commission 18 17 Thiess in relation to the Deception Bay not providing international money (ASIC), for alleged negligent conduct flood of May 2015) and three relate to transfer businesses with reasonable and misfeasance in public office by major bushfires (the Jack River bushfire, notice before closing their accounts; by failing to act in a timely manner against the Mickleham-Kilmore bushfires and former employees of St George bank in Storm Financial. We discuss these the Springwood bushfires). relation to an employee bonus scheme; actions further in section four. a claim by franchisees against Pizza Public interest and human rights: ƒƒ Hut franchisor Yum! Foods; and “open two actions against the Commonwealth class” actions against ANZ, Citibank concerning the Christmas Island and and Westpac (which includes claims Manus Island Detention Centres. against St George and BankSA) in relation to bank fees (these follow on 2012/2013 2013/2014 2014/2015 from the “closed class” actions filed in 2010 - see later in this section).

6 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 7 SECTION ONE SECTION ONE

Who is picking up the tab? Competing class actions – seen competing actions proposed or ƒƒ Treasury Wine Estates: In November Maurice Blackburn filed a closed class as an abuse of process, MCI filed a new no resolution launched against: 2013, solicitor Mark Elliott filed a class claim against TWE in connection with action in December 2014 (see section Of the 33 class actions filed in the action against TWE in the name of his market disclosure prior to the 2013 three). The two TWE proceedings are Listed education provider, Vocation: 12 months to June 2015, publically Parallel (or competing) class actions, ƒƒ investment vehicle, Melbourne City announcements. While the MCI action currently being heard together. A class action against Vocation was first available information indicates that 13 in which law firms and funders issue Investments Pty Ltd (MCI). In July 2014, was subsequently permanently stayed of these actions had third party litigation proceedings against the same defendant, filed by Mark Elliott in November 2014, funding in their early stages (39.4%) appear to be on the increase. To date, the alleging continuous disclosure breaches Table 1 Class action settlements July 2014 – June 201534 (2013/2014: 25.9%). courts have allowed such actions to proceed. and misleading and deceptive conduct. In February 2015, Slater & Gordon filed Class action Respondents Allegations Settlement sum (damages) Costs The increased rate of funding reflects In 2013/14 we saw multiple actions a class action claim against Vocation. Bonsoy Soy Milk Spiral Foods Pty Ltd Product liability Settled for $25M (including costs) Approx $7M – to be both the number of claims being pursued proceeding against Treasury Wines A third class action, being investigated 2 (approved 7 May 2015) assessed by costs and the growth in number of litigation Estates and Macmahon Holdings. In the by Maurice Blackburn, is reportedly registrar funders active in the Australian market. We 12 months to 30 June 2015, we have close to proceeding. At present, these consider developments in the past year in Storm Financial Bank of Queensland Breach of contract, $22.1M Undisclosed 2 King & Wood Mallesons, The Review – Class proceedings are progressing in parallel. misrepresentations, (approved 16 December 2014) relation to litigation funding in section two. Actions In Australia 2013/14 (24 July 2014), 7-8. unconscionable conduct Cabaser Pfizer Australia Pty Ltd Failure to warn or provide Undisclosed Undisclosed adequate warning (approved 25 May 2015) Great Southern Great Southern Finance Pty Misleading or deceptive conduct $23M (including costs) $20M Class Actions – Who is funded? Ltd (in liq) (approved 11 December 2014) Colliers/Hudson Colliers International Misleading or deceptive conduct Undisclosed Undisclosed Consultancy And Valuation Pty (approved 11 December 2014) Limited Leighton Leighton Holdings Limited Misleading or deceptive conduct $69.45M (including costs) $4.15-4.19M Holdings (approved 25 August 2014) 2 0 Octaviar/MFS Andrea Waters as auditor of Negligence, (breach of duty Undisclosed Approx $7.87M Non funded* the Fund’s compliance plan of care); breach of auditor’s (reportedly settled for > $20M)3 under and other partners of obligations, breach of statutory (approved 8 Dec 2014) Callide Dam KPMG duties of responsible entity Christmas Island Wellington Investment Coffs Harbour City Council v ANZ Management Ltd Deception Bay Octaviar Ltd 1 3 Gloucester Shire Council v Fitch Ratings Forex v Westpac Westpac Banking Corporation Unconscionable conduct No financial settlement Jack River bushfire (approved 5 January 2015) Manus Island detention Mickleham-Kilmore bushfires Kilmore East/ AusNet Electricity Services; Breach of statutory duty, $494M (including costs) $60M approved as Myer – Melbourne City Investments Kinglake Black UAM; CFA; State of Victoria; negligence, nuisance (approved 23 December 2014) fair and reasonable Saturday Secretary to the Dept of Funded Treasury Wines Estate – Melbourne City Investments bushfire action Sustainability & Environment Pizza Hut – Pricing strategy Billabong Provident Capital Murrindindi/ AusNet Electricity Services; Negligence $300M (including costs) $20.1M approved as BrisConnections Springwood bushfire Marysville UAM; CFA; State of Victoria; (approved 27 May 2015) fair and reasonable. Open class credit card late fee actions Black Saturday Secretary to the Dept of St George Bank Employee Bonus – Citibank, ANZ, Westpac bushfire action Environment & Primary WorleyParsons – Mark Elliott European River Cruise Industries UGL – Melbourne City Investments Live Cattle Export Ban 4 The Trust Company (Banksia) Thiess Australian Security and Wrongful acquisition and misuse No financial settlement No order as to costs BankSA (knowing involvement in Ponzi scheme) Investigations Pty Ltd of confidential information (approved 10 March 2015) Vocation Limited – Mark Elliott Treasury Wines Estate – Maurice Blackburn Bruce Townsend ASIC re Storm Newcrest Forex v Westpac Stephen John Conrad Vocation Limited – Slater & Gordon Wivenhoe Dam floods *or funding not disclosed Vioxx Merck Sharp & Dohme Negligence, TPA (misleading $497,500 All orders for (Australia) Pty Ltd, Merck & and deceptive conduct, goods (approved 26 February 2015) costs made in the RBS Co Inc not merchantable quality/fit for proceeding prior to purpose) the date of settlement approval set aside

3 www.propertyobserver.com.au/financing/tax-and-legal/32789-mfs-octaviar-class-action-against-accounting-firm-kpmg-settled 4 Note: proceedings against first respondent Thiess were settled 17 July 2013. The 2015 settlement arose from proceedings against the second, third and fourth respondents.

8 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 9 SECTION ONE SECTION ONE

The big one (billion) took a period of more than 10 years for the trial: not only is that expensive, it locks Table 2 Significant securities class action settlements same aggregate amount to be reached in other litigants out from the court for a In the 12 months to June 2015, class Settlement Settlement securities class actions. substantial period because of judicial Company Nature of allegations Date Amount action settlements nudged the $1 billion resourcing of the proceeding. mark. This was largely made up of Notwithstanding the aggregate quantum GIO Misleading representations in takeover, reinsurance losses, business risk 2003 $112M bushfire class actions, with the record of the settlements in 2014/2015, the very If the merits of an action are not there, Tracknet Misleading statements in prospectus, business risk 2004 $4.3M $500 million settlement seen in the Black late settlement of the Great Southern the class action mechanism will not assist class actions (with settlement notified and the fallout will be magnified because $3M (reported, Saturday Kilmore East/Kinglake class Concept Sports Continuous disclosure, misleading statements in prospectus, forecast 2006 terms confidential) action (AusNet and others) and the Black to the court just before judgment was of the associated costs. While class Harris Scarfe Misleading or deceptive conduct, continuous disclosure, corporate collapse 2006 $3M Saturday Murrindindi/Marysville action delivered) has highlighted that significant actions can generate large settlements having settled for $300 million (AusNet and public and private resources can be and large legal fees, for individual Telstra Continuous disclosure, business risk 2007 $5M others). These are the largest class action expended on a lengthy proceeding and consumers or small retail investors these Aristocrat Continuous disclosure, profit downgrade 2008 $144.5M settlements seen in Australia to date, and trial in which the plaintiffs risk failing to cases (along with the Vioxx class action make out essential elements of their and the abalone virus proceedings),6 Approx. $20M dwarf the settlements in securities class Downer EDI7 Continuous disclosure, profit downgrade 2008 (confidential) actions in the same period, which remain causes of action. This case, and the provide a reminder of the odds involved in collapse of the Timbercorp class action large-scale litigation. Village Life well below levels seen between 2008 and (Fig Tree Developments) Misleading statement in prospectus, continuous disclosure, forecasts 2009 $3M in 2014, a similarly substantial failure 2012 following the global financial crisis We discuss the Great Southern following a lengthy trial which also failed Sons of Gwalia Continuous disclosure, misleading or deceptive conduct, corporate collapse 2009 Approx. $70M (see Table 2 below). In fact there were only settlement and other issues in relation to on appeal,5 demonstrate that class AWB Continuous disclosure, business risk 2010 $39.5M two securities class actions settled in the settlements in section five. action litigation can be a high stakes period (Leighton Holdings $69.45 million Multiplex Continuous disclosure, profit downgrade 2010 $110M and Great Southern $23 million). It is worth game. Great Southern involved a 90 day Media World Continuous disclosure, business risk 2010 $0 noting that, while total settlement amounts for 2014/2015 totalled almost $1 billion, it 5 See further King & Wood Mallesons, The Review – 6 These proceedings were dismissed in November OZ Minerals Continuous disclosure, debt position 2011 $60M Class Actions In Australia 2013/14 (24 July 2014), 11. 2013, although subject to appeal. Credit Corp Group Continuous disclosure, profit downgrade 2012 $6.5M Centro Continuous disclosure, debt position 2012 $200M Nufarm Continuous disclosure, profit downgrade 2012 $46.6M NAB Continuous disclosure, business risk 2012 $115M

Significant securities class action settlements Sigma Pharmaceuticals Continuous disclosure as part of rights issue, profit downgrade 2012 $57.5M Transpacific Industries 1200 Group8 Continuous disclosure, profit downgrade 2012 $35M 1.1099b 1.2711b 1.2711b GPT Continuous disclosure, profit downgrade 2013 $75M 1.0349b 1000 White Sands Petroleum Misleading statements in prospectus, continuous disclosure 2014 $3.25M Great Southern Misleading or deceptive conduct 2014 $23M

800 Leighton Holdings Continuous disclosure, misleading or deceptive conduct 2014 $69.45M Total $1.2711B 574.3m 7 8 600 514.3m

400 364.8m 291.8m

200 112.0m 116.3m 116.3m 122.3m 127.3m 0m 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 7 Settled prior to proceedings being commenced. 8 A proposed class action against Transpacific Industries Group for alleged misleading and deceptive conduct was first announced in March 2008. The settlement was significant as it was agreed before proceedings were formally commenced.

10 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 11 SECTION ONE SECTION ONE

Proportionate liability - “Deep pocket” defendants still a key strategic target for plaintiffs

The High Court’s recent decision in not “infect” parallel statutory claims, even Because of Wealthsure, the non- Selig v Wealthsure Pty Ltd9 will mean where the same loss is alleged. apportionable statutory claims may that advisers and insured third parties increase in attractiveness in class actions Accordingly, the apportionment and continue to be strategic targets for class where one or more defendants are contributory negligence defences will be action plaintiffs. insolvent or uninsured. practically irrelevant unless the plaintiff While a court may apportion liability succeeds only on their misleading or Why does the proportionate for misleading or deceptive conduct deceptive conduct or common law between multiple defendants,10 which negligence claim. By analogy, the liability regime not extend limits the exposure of ‘deep-pocketed’ same trend may emerge in respect of to other breaches of the Update on indirect causation A recent judgment by Justice Perram acted in a particular way but for the conduct defendants who may only be responsible misleading or deceptive conduct claims Corporations Act? represents the first steps towards judicial alleged, “it is artificial to speak of reliance in The past year has seen a move towards guidance on the issue.14 The plaintiffs included non-disclosure cases”. On the one hand, for a portion of the plaintiffs’ loss, the under other legislation, including the ASIC The rationale behind section 1041H judicial acceptance of an indirect causation 70 or so entities who had purchased shares this comment suggests the formulation High Court has clarified that defendants Act and the Australian Consumer Law. claims being apportionable, and related theory of loss that may be applied to in Babcock & Brown in 2008, before the of an additional category of cases (like remain exposed to potential liability claims under sections 1041E to 1041G securities class actions going forward. shares dropped from $16.76 to $0.33. The trade competitor cases) in which proof for 100% of a plaintiff’s loss for claims Who benefits from not being apportionable, seems to proceedings involved claims that Babcock of reliance is unnecessary. An alternative grounded on: apportionment? come down to the fact that claims under Intended to overcome the need to prove & Brown failed to disclose certain financial view may be that this dictum flows from sections 1041E to 1041G require a ‘fault’ reliance by each and every group member ƒƒ making false or misleading statements The ability for a court to apportion liability information in breach of its continuous policy considerations that are unique to the element of knowledge or recklessness affected by securities misconduct, the in relation to financial products between defendants usually benefits disclosure obligations. statutory obligation of continuous disclosure which is absent from section 1041H. This theory runs as follows: (Corporations Act, section 1041E); defendants because, generally, no (namely, the need to ensure that a securities was noted by the High Court, with the The case was decided against the single defendant is left with 100% of the ƒƒ the contravening conduct (for example, market is properly informed of non-public ƒƒ inducing persons to deal in financial majority noting that sections 1041E-G plaintiffs on the basis that there was no liability for the plaintiffs’ loss. Conversely, the withholding of disclosable price sensitive information in a timely way) products (section 1041F); or claims involve a “higher level of moral non-disclosure of information of economic plaintiffs tend to benefit where liability is information or misleading or deceptive and which do not necessarily apply to the culpability” than section 1041H claims. significance to potential investors. Justice ƒƒ dishonest conduct in the course not apportioned as a single defendant conduct) resulted in the relevant separate cause of action founded on the Perram nevertheless addressed market of carrying on a financial services with deep pockets can be held liable securities trading at a price higher statutory prohibition against misleading or As noted by the High Court, it is clear based causation. In obiter dicta, Justice business (section 1041G). for 100% of the plaintiff’s loss, with that than they otherwise would have if the deceptive conduct. that the proportionate liability provision, defendant being left to seek contribution contravention had not occurred; Perram considered “whether plaintiffs While this is by no means the end of section 1041L, only applies to a claim from the other defendants (and therefore could recover when it is alleged they Although Justice Perram’s comments the ubiquitous misleading or deceptive caused by conduct done in contravention ƒƒ group members who purchased securities bear the risk that one or more of them bought shares at an inflated price caused are obiter and the judgment is subject conduct claim (which is generally easier of section 1041H.11 This position during the period of contravention did 15 are insolvent). by a listed company’s failure to disclose to appeal, the decision represents an to prove than those listed above), in was reached by applying well-settled so at inflated prices; and information to the market”. His Honour important step in the ongoing debate future we expect class action claims to 12 Non-disclosure class actions will principles of statutory construction. the inflated amount paid represents the found that they could, indicating that concerning the basis for liability in complex be structured to more aggressively focus ƒƒ generally ‘cover all bases’ and bring Justice Gaegler concurred with the loss suffered by group members. he likely would have agreed with the securities litigation and class actions. on non-apportionable claims, effectively claims based on a variety of breaches (for majority, adding that while non-section submissions of the plaintiffs in this regard, circumventing the section 1041L example, combining claims for breach 1041H claims may be based on the The theory has consistently been noting that whilst “reliance is a sufficient proportionate liability regime, particularly of section 674 with claims for statutory same conduct and be part of the same challenged by defendants, who have condition for establishing causation it is not where one or more defendants are misleading or deceptive conduct proceeding, they would not be part of the typically argued that some element of a necessary one”. insolvent or otherwise unable to pay. 13 reliance on the contravening conduct is 15 In a decision just after the end of the review period, under section 1041H and, potentially, same “claim”. Justice Edelman in determining an application Plaintiff firms will proceed safe in the claims under sections 1041E-G of the necessary to show that such conduct His Honour also found that in misleading or for preliminary discovery in relation to a proposed actually caused the loss. Despite these deceptive conduct cases, although a plaintiff class action stated that he took Justice Perram’s knowledge that statutory apportionment Corporations Act). Often, these causes of statement as “endorsing the efficient market and contributory negligence defences will action arise from the same conduct and arguments being live for almost a decade, generally must show that they would have hypothesis as an available mechanism to measure loss.” Bonham v Iluka Resources Limited [2015] FCA relate to the same loss or damage. there is yet to be any conclusive judicial 14 Grant-Taylor v Babcock & Brown Limited (In 713 (15 July 2015) at [72]. The Court in Bonham did 9 [2015] HCA 18, handed down on 13 May 2015. statement as to whether such a theory of Liquidation) [2015] FCA 149. In Caason Investments not have to decide whether a cause of action, in so 10 Per Corporations Act 2001 (Cth) (Corporations 11 Wealthsure at [24] Pty Ltd v Cao [2014] FCA 1410 (December 2014), far as it relies on the fraud on the market doctrine Act) s1041L, in respect of claims based on 12 Wealthsure at [29] loss will be accepted, largely because the Justice Farrell considered an application to amend to establish reliance, was so doubtful in law that conduct in breach of section 1041H. 13 Wealthsure at [57] vast majority of securities class actions a claim to introduce an indirect causation pleading it could not give rise to a reasonable belief that a and permitted the amendment on the basis that it plaintiff may be entitled to relief as direct reliance settle before judgment. was not unarguable. had been pleaded by the representative plaintiff.

12 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 13 SECTION ONE SECTION TWO Litigation funding

Bank Fees – key takeaways

The Full Court decision in the ANZ bank fees class action, After the appeals were lodged, in August 2014 Maurice handed down in April 2015, represents a major setback for Blackburn commenced additional open class actions other class actions based on alleged penalties, including those against five of the major banks. Potential class actions commenced or proposed against other financial institutions, were also mooted in the media by other law firms against telcos and utilities. The decision provides authoritative guidance telecommunications and utilities companies in respect of late on the application of the doctrine of penalties in the context payment fees, and Slater & Gordon commenced a bank fees Litigants may benefit from of exception fees and on the types of costs that can be taken case in New Zealand. increased competition in into account in determining whether fees are “extravagant or the funding of litigation, with unconscionable”. The proceedings also demonstrate how Full Court decision developments in relation to both the class action regime can be employed beyond traditional In April 2015, the Full Federal Court handed down its decision securities or financial product mis-selling claims as a means to litigation funders and the lifting in favour of ANZ and dismissed the applicants’ appeal. The test legal rights held by consumers more broadly. of restrictions on how lawyers Full Court upheld Justice Gordon’s determination that honour, and clients can agree matters To recap dishonour and over-limit fees were not penalties. Furthermore, although the Full Court upheld Justice Gordon’s determination will be charged: Since September 2010, law firm Maurice Blackburn has that credit card late payment fees were payable on breach of commenced closed class actions against 12 Australian banks for contract or in terrorem of an obligation and so were capable • common fund for third party charging “exception fees” to their customers, including over-limit of being penalties, it overturned the determination that the litigation funders fees, honour and dishonour fees and credit card late payment quantum of those fees was “extravagant or unconscionable • removal of the NSW fees. The total class size of all of the proceedings is approximately in amount”. prohibition on success fees 170,000 group members with an estimated $240 million at stake, In coming to its conclusion, the Full Court held that the correct making it the largest collective legal action in Australia.16 • possible introduction of test for whether a fee was extravagant or unconscionable in contingency fees. In September 2012, the High Court in Andrews v ANZ restated amount needed to be assessed as at the date of entry into and defined the law of penalties in Australia, holding that relief the contract on a prospective basis, considering the greatest The “robust litigation funding industry”19 against penalties is potentially available even if a fee is not possible loss that could occur from the type of breach, rather continued to develop in 2014/2015. Most payable on breach of contract. than retrospectively, compared to the actual loss incurred. In notably, this year has seen the hearing of ƒƒ On the other hand, the common fund this respect, the Full Court held that it was permissible to take the second attempt by Maurice Blackburn/ whether the group member had a funding Following the High Court’s decision, a new bank fees class approach would likely increase the race into account evidence of increase in loss provisioning, regulatory International Litigation Funding Partners agreement with ILFP. action (Paciocco v ANZ) was commenced against ANZ to test to file. This may give rise to less well capital and some overhead costs referable to collections. An Pte Ltd (ILFP) at a ‘common fund’ how the redefined doctrine of penalties would apply to bank The Leighton class action ultimately prepared and pleaded actions, which will application for special leave to appeal to the High Court has approach to funding and the release of exception fees, with judgment handed down by Justice Gordon settled, and Maurice Blackburn and ILFP result in more resources (by defendants been filed by the applicants. the Productivity Commission’s access to in February 2014.17 In this decision, the Court held that: made a similar application in the class and courts) being expended on refining justice recommendations. over-limit and honour/dishonour fees charged by ANZ were While the latest decision represents a major setback for the action against Allco Finance Group. The the case pleaded (and, if necessary, on not penalties (as they were payable in return for further other bank fee class actions and the contemplated late payment fundamental questions for the Court at interlocutory applications). accommodation provided by the bank), but credit card late fee class actions against telcos and utilities, the bank fees The second try for a “common fund” approach the December 2014 hearing were whether On 7 August 2015, the Federal Court payment fees charged by ANZ were penalties, as they were proceedings demonstrate how class actions can be used as its case management powers are broad dismissed the application.21 While the Court payable on breach of contract (or in terrorem of a customer’s vehicles for litigating a number of small value claims that would Last year, we reported on a novel enough to encompass the making of concluded that it had power to make such obligations), and were extravagant or unconscionable having otherwise be uneconomical or cumbersome for applicants application brought in a class action such an order and whether (assuming it an order, it declined to exercise its discretion regard to the actual loss suffered by ANZ on the occurrence of to run individually. A credit card late payment fee of $34.50 commenced against Leighton Holdings does have power) it should exercise its to make such orders on the basis that the those fees. per event would ordinarily not justify the commencement of Ltd (Leighton), where Maurice Blackburn discretion to grant such an order (which proposed orders were neither appropriate proceedings, but could lead to significant damages if multiplied would effectively impose commercial The Court found that the late payment fees in question (either sought to have ILFP formally appointed nor necessary to ensure that justice was across a class comprising of thousands of claimants. Further, relationships onto parties who may have $35 or $20 depending on the period) were unenforceable to by the Court as the funder of the class done at this point of the proceeding, given the relative similarities between the fees charged by 20 deliberately elected not to enter into the extent that they exceeded ANZ’s actual loss on each event action. Under the application, ILFP’s and would otherwise be premature and the various banks, it is likely that a final determination of the funding agreements): (which was held to comprise only between $0.50 and $5.50). right to recover its costs, expenses and inconsistent with the statutory class action Paciocco proceedings could lead to early settlements in the remuneration would be approved upfront Justice Gordon’s decision was appealed to the Full Federal On one view, allowing the common scheme. Justice Wigney did not find that other bank fees class actions, which may provide a quicker and and enforceable by an order of the ƒƒ Court by the applicant and was cross-appealed by ANZ.18 fund approach in Australia would the proposed orders would be beneficial cheaper resolution of those claims than individual litigation. Court, rather than under privately agreed facilitate funded class actions, with to or in the best interests of the group contracts. In practical terms, this meant potentially less ‘book building’ of class members as a whole, and indicated that that ILFP would have been able to recover the only clear beneficiaries would be the 16 See www.mauriceblackburn.com.au/areas-of-practice/class-actions/current- members required before filing. It may against all group members, irrespective of 22 class-actions/bank-fees-class-action.aspx. Proceedings against the other banks also provide a solution to the issue of applicants and ILFP. have been stayed pending the outcome of proceedings against ANZ. 17 Paciocco v Australia and New Zealand Banking Group Ltd [2014] FCA 35. 19 Clyde Croft, ‘On the Brink of Regulation: The competing class actions as the financial 21 Blairgowrie Trading Ltd v Allco Finance Group Ltd 18 In late 2014 the National Australia Bank publicly indicated its desire to reach a Future of Litigation Funding in Class Actions’ incentive for a ‘copy cat’ class action [2015] FCA 811 (Allco). settlement in respect of its class action and agreed to orders enabling affected (2014) 88 Australian Law Journal 698, 698. 22 Read more in Neal Bedford, Simon Burnett, Moira members to register to participate in any agreed settlement. 20 The application was made under sections 23 and would be removed. Saville and Peta Stevenson “Common Fund Found 33ZF of the Federal Court of Australia Act 1974 (Cth) Out – Takeaways from the decision in the Allco class and rule 1.32 of the Federal Court Rules 2011 (Cth). action”, King & Wood Mallesons 7 August 2015.

14 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 15 SECTION TWO SECTION TWO

“The “grim reality” is that many modern-day “Leaving the pros representative proceedings and cons to one side, would never be commenced I’d rather briefly take a look at 2. Subject lawyers that charge contingency Damages-based fee arrangements: an Promoting unmeritorious claims The debate continues how the introduction of damage- but for the involvement of fees to potential adverse costs at ongoing discussion The PC Report expressed the view that Responses to the PC Report commercial litigation funders.” the discretion of courts, to facilitate based-billing in the United Kingdom As noted in section three, 2014/15 has contingency fee arrangements would not by government and the legal in 2013 has gone. I say briefly, because Justice Wigney, Allco [225] consistent treatment with litigation seen a number of attempts at creative increase the number of unmeritorious or professional bodies have 23 funders and other third parties. fee structuring by plaintiff firms seeking speculative claims in the Australian market been mixed. While the as I alluded to earlier, the reform has been less than popular. Some have described it 3. Introduce a licensing system for to circumvent professional restrictions on the basis that such claims are less likely Law Council of Australia litigation funders, aimed at ensuring which currently prohibit the charging of to succeed (which is an inherent deterrent). has not formally indicated as “a damp squib”. Other commentators that funders hold adequate capital to ‘contingency’ or ‘damages-based’ fees by While this analysis may apply to small- its position, indicating that have also likened the agreements to a manage their financial obligations and Australian lawyers. scale litigation, it does not necessarily hold it is in consultation with its yeti, in that they “are believed to exist in relation to large-scale litigation such as constituent bodies, Victoria’s meet client disclosure requirements. Litigation funders are not so restricted. in practice but hardly any sightings Notwithstanding this conclusion, the class actions, given that the majority of Attorney-General has recently Central to their business model is the have been made.” Court did leave open the possibility that In relation to the second recommendation class actions settle prior to trial (although indicated support for lifting ability to take a percentage (usually 20- such orders might be made in these above, IMF Bentham has been a long- this trend may be shifting). As such, the ban on contingency Chief Justice Bathurst, 45%) of any class action settlement or NSW Supreme Court28 proceedings in the future, to ensure that term supporter of the further regulation of ‘speculative’ claims might be commenced fees, while NSW’s Attorney- damages awarded in a successful action. the applicants alone did not bear the third party litigation funders in Australia. based on minimal information in the hope General has stated that lifting Clearly, funders have been advantaged burden of meeting costs and expenses, or Other funders operating in the market of improving the claim at the discovery the ban is not under active by the inability of lawyers to compete in that such orders could be made at some would also welcome some form of stage and obtaining an early settlement. consideration in NSW. While offering fee structures of this kind. 28 tailored licencing system for third party It may incentivise plaintiff firms to take Attorney-General Brandis has previously time in some other matter in the future. The quantum of the uplift fee will be a litigation funding companies, to enable “[a] The PC Report has suggested opening on more speculative matters, taking the opposed the introduction of contingency His Honour commented that, while there relevant factor when a Court is faced further strengthening of the industry and the doors to permit contingency fee view that the prospect of substantial fees fees, the Federal Government’s stance is was something to be said for a common with determining whether a proposed fund approach to deal with the “reality providing further protection for the benefit arrangements by lawyers. Such a change outweighs the risk of receiving no fee at presently unclear. 24 settlement is fair and reasonable. In of clients”. Others see regulation as would increase the number of class actions all, or that having a “book” of actions may of commercial litigation funding” in class approving the settlement proposal in restricting options for consumers: in Australia. By introducing a further form of mean they can afford to lose some claims. actions, it would perhaps be preferable The Uniform Law the Kilmore East/Kinglake bushfire class for that to occur as a result of legislative funding for proceedings, contingency fee “While we can cope easily with On 1 July 2015, the Uniform Law replaced action,29 Justice Osborn held that a reform rather than piecemeal utilisation by arrangements may make lower value claims, Liability for costs regulation, others may struggle and the Legal Profession Act 2004 (NSW) 25% uplift fee was not unreasonable judges of discretionary powers under the that may fall under the radar of a third party the size of the funding market does not The PC Report also recommended that (LPA) and the Legal Profession Act as the proceeding was not funded by Federal Court Act 1976 (Cth). litigation funder, viable.26 warrant formal regulation - result may court rules be changed to allow solicitors 2004 (Vic). The Uniform Law creates a a commercial litigation funder.30 In his be very few funders and lack of options using contingency fee arrangements to common legal services market across Honour’s view, had the proceeding been Sliding scale caps The Productivity Commission’s for clients. Australia should follow the be exposed to adverse costs orders or NSW and Victoria and aims to simplify and subject to litigation funding, it is likely that access to justice UK approach - Association of Litigation The PC Report recommends that “sliding security for costs orders, so as to level the standardise regulatory obligations across the group members would have been recommendations Funders, requiring capital adequacy and scale” caps on damages-based billing playing field with litigation funders, who are the legal profession. obliged to pay approximately 30% of the commitment to [a] code of conduct.”25 arrangements be enforced to limit the currently subject to these orders.27 The risk On 3 December 2014, the Federal settlement amount to the funder. maximum percentage lawyers may recover of costs orders being made might provide One change affecting class actions is the Government released the Productivity The Federal Government is yet to respond from retail clients, with a view to avoiding some curb to enthusiasm to employ a removal of the prohibition on uplift fees in It is not obvious that permitting uplift fees Commission’s final report on access to to the report’s recommendations. “excessive remuneration”. It does not damages-based fee arrangement and the NSW. Previously, section 324(1) of the LPA in NSW will reduce the role of ‘traditional’ justice arrangements in Australia following a recommend any equivalent caps in respect exposure to costs consequences is likely had prevented a law practice from entering litigation funding, as it does not appear to 15-month inquiry into Australia’s civil dispute of “sophisticated clients”. Questions arise to be the issue which determines whether into a conditional cost agreement in relation have reduced the number of funded actions resolution system (PC Report). as to how “sliding scale” caps would it provides a viable business option for to a damages claim that provides for the in Victoria. It does, however, offer a different From a class actions perspective, the most work in the class action context if a class plaintiff firms. It also remains to be seen payment of an uplift fee on the successful model of funding and may provide another 31 relevant of the report’s recommendations contains both retail and sophisticated whether, and to what extent, plaintiff outcome of the claim to which the fee method for entrepreneurial lawyers. are to: clients (such as institutional shareholders). firms will be able to reallocate the risk of relates. Under the Uniform Law, however, a potential adverse costs order onto their this limitation is removed (section 182(1)), 1. Remove the existing ban on charging 28 Bathurst speech, citing Peysner, ‘Impact of the clients or insurers. creating consistency between NSW and Jackson reforms: Some emerging Themes’ of ‘damages-based’ or contingency Victoria with a 25% cap on uplift fees. (Report prepared for the Civil Justice Council Cost fees by lawyers (other than in relation 23 See “Productivity Commission’s access to justice Forum, 21 March 2014), 10. recommendations may reshape Australia’s 29 Matthews v AustNet Electricity Services Pty Ltd to criminal and family law matters), litigation funding market” in King & Wood 26 For a contrary view see the speech by NSW [2014] VSC 663. We have previously reported Mallesons Class Action Update: Q4 2014 for a Supreme Court Chief Justice Tom Bathurst on this decision: see the King & Wood Mallesons subject to the introduction of additional more detailed analysis of this report. “Buttered parsnips and a damp squib”, 6 May 27 This would mark a significant difference from Class Action Update: Q1 2015. consumer protection measures. 24 Litigation Lending Services communications with 2015 (Bathurst speech) at [17] (accessed the US position, where lawyers can charge 30 Section 182(2)(b) of the Uniform Law provides that King & Wood Mallesons, 10 June 2015. at www.supremecourt.justice.nsw.gov.au/ contingency fees but there is no default position the uplift fee must not exceed 25% of the legal 25 Harbour Litigation Funding Ltd communications Documents/Speeches/2015%20Speeches/ by which adverse costs orders are made against costs (excluding disbursements) otherwise payable with King & Wood Mallesons, 5 June 2015. Bathurst_20150506.pdf, 12 July 2015). unsuccessful parties. 31 See below.

16 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 17 SECTION TWO SECTION TWO

“Overall, litigation funding promotes access to justice, and is particularly important in the context of class actions where, although action could create additional benefits when viewed from a broader or community-wide perspective, (often inexperienced) claimants might not take action given the scale of their personal 32 33 Spotlight on funders costs and benefits”.33 Litigation funding first entered the class action market in 2006 with the Fostif decision. Over the past decade, Australia has seen an exponential growth in funded class actions and there are now a number of funders operating in this market as well Incorporated Success Minimum as overseas. Funder Listed in Australia Example(s) Website fee claim size Longevity In the past year, we have seen 17 separate Argentum Investment Management Limited N N (UK) Equine Influenza N • • • companies funding or proposing to fund class actions in Australia. Bookarelli Pty Limited N Y Babcock & Brown www.bookarelli.com • • •

Litigation funding appears to be a BSL Litigation Partners Limited N Y Banksia www.banksiaclassaction.com.au/author/admin ≤30% • 1 year successful and repeatable business Claims Funding Australia Pty Limited N Y Allco Finance Group N • • • model, but there is not a lot of publicly available information. For example: only four of these funders had publicly ƒƒ Comprehensive Legal Funding LLC N N (USA) Newcrest www.gordonlegal.com.au • • • available accounts and financial Billabong information; and ƒƒ only two funders – BSL Litigation CVC Litigation Funding Pty Ltd N Y • N • • • Partners Limited and Hillcrest Litigation Harbour Litigation Funding N N (UK) OZ Minerals (Zinifex) www.harbourlitigationfunding.com • > £10m 8 years Services Limited – have publicly Houghton v Saunders available pro-forma funding agreements Kinross Gold on their websites. Hillcrest Litigation Services Limited Y Y Initial funding in Great Southern www.hillcrestlitigation.com.au/profile 30% to 45% • 22 years The past year has also seen interest from IMF Bentham Limited Y Y RiverCity www.imf.com.au 20% to 45% > $5 million ~ 14 years private equity firms in entering the market, Bank fees (ANZ) including CVC Litigation Funding Pty Ltd, Treasury Wine Estates (Maurice Blackburn) although we are yet to it see fund a International Justice Fund Limited N Y • internationaljusticefund.com.au • > $5 million • class action. International Litigation Funding Partners Pte Limited N N (Singapore) Allco • • • 9 years Details of those funders who are or have Vocation been involved in funding class actions in 34 JustKapital Litigation Partners Limited (ACN 088 749 008) Y Y Prospective claim against WorleyParsons (ACA Lawyers) www.justkapital.com.au 40% plus > $10 ~1 year Australia are set out below. costs million

LCM Litigation Fund Pty Limited N Y Prospective claims funded include against Prime www.lcmlitigation.com.au 30% to $5 - $50 17 years “Litigation Retirement and Aged Care Trust and Vodafone 40%. million funders provide Legal Justice Pty Ltd N Y European River Cruise • ~ 30% • ~2 years an important complement to Litigation Lending Services Limited N Y WorleyParsons www.litigationlending.com.au Up to 40% > $1 million 16 years regulatory activity by enabling aggrieved Litman Holdings Pty Limited N Y Sandhurst Trustees www.litman.com.au • • • parties to initiate and Omni Bridgeway N N (Netherlands) Abalone virus omnibridgeway.com 10 to 50% • 30 years maintain claims.”32

32 PC Report, 624. 33 PC Report, 624. 34 This table is based on publicly available information or information provided by the funder in question.

18 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 19 SECTION THREE SECTION THREE Entrepreneurial lawyering comes under sustained attack

• Dual role as lawyer and representative plaintiff is likely to be To date, MCI has launched actions against disallowed due to the need for impartial advice five companies for alleged breach of continuous disclosure obligations.42 • Dual role as lawyer and funder likely to be disallowed if lawyer Mr Elliott’s approach has come under has high degree of control over funder sustained attack from defendants, • Proceedings commenced with the main purpose of generating resulting so far in: legal fees for the lawyer likely to be stayed ƒƒ one proceeding not being permitted to continue while Mr Elliott was both the lawyer on the record and closely Class actions attract greater supervision ƒƒ MCI as the representative plaintiff, but connected with the litigation funder; by the courts, as they bind non-parties with solicitors other than Mr Elliott being (ie class members) to the outcome even on the record;38 ƒƒ two proceedings being stayed as though they play no active role in and abuses of process; and MCI indemnifying the representative have no control over the proceeding. By ƒƒ plaintiff and effectively controlling the ƒƒ one proceeding being dismissed due their nature, class actions are lawyer- action, with Mr Elliott as the solicitor on to MCI having no standing to bring driven such that even the named plaintiff the record;39 and the action. often plays little role in the conduct of the proceeding. Judges are therefore ƒƒ in actions not involving MCI, Mr Elliott No dual role as lawyer and as “effectively discharging a beneficial being the solicitor on the record and/ plaintiff – need for impartial advice supervisory jurisdiction”.35 In some recent or the litigation funder being Mr Elliott or cases, courts have restrained particular companies associated with him.40 TWE and Leighton each made applications lawyers from acting where they are more to have MCI’s Victorian Supreme Court Following its incorporation, MCI purchased involved in the proceedings than the usual actions against them permanently stayed small parcels of shares in 162 ASX listed lawyer/client relationship.36 on the grounds of abuse of process, or companies at an average cost of $600 - alternatively orders restraining Mr Elliott Melbourne City Investments $900 per company. In a finding upheld by from continuing to act for the plaintiff Pty Ltd and Mark Elliott the Victorian Court of Appeal, the Court or preventing the proceedings from concluded that MCI was incorporated continuing as class actions. Hearing the The entrepreneurial ‘business model’ with the primary objective of providing two applications together, Justice Ferguson employed by Melbourne solicitor Mark Elliott Mr Elliott with a means of generating decided that while there was no abuse of has been the basis of a number of recent legal fees: if breaches of the continuous process, the interests of justice required class actions. There are four variations used disclosure regime occurred or could be that orders be made preventing the cases so far by Mr Elliott (some of which overlap): alleged, MCI would then have an action continuing as class actions while both MCI against those companies and could be MCI, a company of which he is the sole was the named plaintiff and Mr Elliott the ƒƒ the representative plaintiff, and Mr Elliott director and shareholder, being the solicitor on the record. According to Her could be the solicitor on the record.41 representative plaintiff in class actions, Honour, it was contrary to the interests with Mr Elliott then acting as solicitor on of justice for both to continue: there was 37 38 Following Ferguson J’s decision in MCI v TWE a real risk that Mr Elliott could not give the record; (No 3), MCI retained new solicitors to represent it in the TWE, Leighton and WorleyParsons detached, independent and impartial Limited (WorleyParsons) actions. MCI’s cases advice taking into account not only the against Myer Holdings Ltd and UGL Limited were commenced with solicitors other than Mr Elliott interests of MCI, but also the interests of acting for MCI. 39 As in the case of Joanne Walsh’s class action group members. In the end, it was Mr against WorleyParsons, where Mr Elliott was Elliott who gave way: MCI remained the 35 Perram J in Mercedes Holdings Pty Ltd v Waters initially the solicitor for Ms Walsh. 43 (No 1) (2010) 77 ACSR 265, 272, [28]. See also 40 As in the case of Lawrence Bolitho’s class action plaintiff and a new solicitor was retained. Vince Morabito, “Replacing inadequate class against Banksia Securities Ltd, in its earlier stages. representatives in federal class actions: Quo Vadis?” In the case of Webster v Vocation Limited, Mr (2014) 38(1) UNSW Law Journal 146. Elliott is the solicitor but the funding arrangements 36 For example, see Melbourne City Investments Pty are not publicly known, nor is it known whether Ltd v Treasury Wine Estates Limited (No 3) [2014] any indemnity has been provided to the plaintiff. 42 These actions have been against TWE, Leighton, VSC 340 (MCI v TWE (No 3)). 41 Treasury Wine Estates Limited v Melbourne WorleyParsons, Myer Holdings Ltd and UGL Limited. 37 For example, MCI’s actions against TWE and City Investments Pty Ltd [2014] VSCA 35 1 43 Melbourne City Investments Pty Ltd v Treasury Leighton began this way. (TWE Appeal Decision). Wine Estates Ltd (No 3) [2014] FCA 340.

20 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 21 SECTION THREE SECTION THREE

According to the Federal Court. An application has already made a fresh interlocutory application for a Backing an alternative plaintiff proceeding48 and eventually the MCI but is employed as a consultant and is a majority, MCI’s “sole been heard in the Federal Court, but not permanent stay of the proceeding against proceeding was dismissed. beneficiary of a trust which owns shares in purpose has only ever yet decided, for a permanent stay on the it. Justice Sifris granted a temporary stay MCI commenced a class action against the incorporated legal practice. Separate proceedings were later launched been to create for itself – in basis of the TWE Appeal Decision.45 MCI’s of the Leighton proceeding on the basis WorleyParsons in December 2013 alleging with Joanne Walsh as representative Since commencing the proceeding, an application for special leave to appeal the that the special leave application in TWE breaches of the continuous disclosure this case, by acquiring a small plaintiff. Initially Mr Elliott was the solicitor amended statement of claim has been TWE Appeal Decision to the High Court had not yet been determined, indicating laws, with Mr Elliott then being the solicitor parcel of shares – a cause for the new action, but subsequently filed which amended the group definition was heard and refused on 15 May 2015.46 that if MCI did not obtain special leave on the record. of action of sufficient merit withdrew. MCI has however indemnified to exclude any legal practitioner or funder or lost the High Court appeal, then his to induce the defendant After the Court of Appeal permanently After a challenge to MCI’s standing to Ms Walsh for all of her legal costs and any providing services to the plaintiff and Honour would grant a permanent stay of company to pay stayed the TWE proceeding, Leighton bring the action, MCI began the process adverse costs orders and has agreed to other group members in the proceeding, the Leighton proceeding.47 of identifying a new plaintiff. In June 2014, Mr Elliott’s fees.” pay her for her time and attention in acting removing any potential for a ‘lawyer as 45 Melbourne City Investments Pty Ltd and Treasury the Victorian Supreme Court found that as plaintiff in the proceedings. plaintiff’ challenge. Wines Estate Limited, Proceeding No. NSD 216/2015. MCI had no standing to bring the action, 46 Melbourne City Investments Pty Ltd v Treasury WorleyParsons has since applied for Wine Estates Limited [2015] HCATrans 116 47 Melbourne City Investments Pty Ltd v Leighton as it did not have a “real interest” in the No dual role as lawyer (15 May 2015). Holdings Limited [2015] VSC 119. orders that the proceeding be struck out as an abuse of process or that it no and funder Proceeding stayed for abuse longer continue as a class action on the The prospect of lawyers funding litigation of process basis that Ms Walsh cannot discharge is also not a new concept. Lawyers acting her function as a representative plaintiff. TWE appealed this decision to the on a ‘no win, no fee’ basis are effectively WorleyParsons is arguing that persons Victorian Court of Appeal. A majority of funding the litigation until and unless a or entities other than Ms Walsh have or the judges on appeal held that the TWE costs order is obtained in favour of their will have control over the conduct of the proceedings were an abuse of process client. Of itself, this has not been seen proceedings, as the terms of the indemnity and permanently stayed the proceedings. as giving lawyers a financial stake in the effectively give control of the proceeding to 51 Accepting the trial judge’s findings that litigation. However, lawyers are prevented others. It also claims that the proceeding MCI had commenced the proceeding by the various professional conduct rules is an abuse of process, arguing that MCI in order to generate fees for Mr Elliott from basing their fees in the litigious has caused it to be commenced and and that obtaining a favourable costs context on a percentage of the award or maintained for the predominant purpose order was MCI’s predominant purpose in settlement (referred to as contingency of gaining a financial benefit or advantage commencing litigation (rather than just a fees). This issue, and the prospects of other than the vindication of legal rights.49 52 by-product of the proceeding), the Court reform, is discussed in section two. This application is yet to be determined. of Appeal reached a different conclusion to Another means of entrepreneurial the trial judge. According to the majority, Scenic Tours – an unsightly route lawyering has, however, emerged. MCI’s “sole purpose has only ever been to In the class action against Banksia create for itself – in this case, by acquiring The class action recently launched against Securities Ltd, Mr Elliott represented the a small parcel of shares – a cause of tour company, Scenic Tours, for boat representative plaintiff, Mr Bolitho (MCI action of sufficient merit to induce the cruises which turned into bus trips50 is in a is not involved). During the course of the defendant company to pay Mr Elliott’s different category to the MCI class actions. proceeding, a company was incorporated fees.” The fact that Mr Elliott was no longer One of the passengers affected (and and entered into a litigation funding the solicitor on the record by the time therefore a potential group member) was Mr agreement with Mr Bolitho. Mr Elliott was the appeal was heard did not affect the Tim Somerville, founding partner of the law an indirect shareholder and director, and outcome.44 On the same day as the Court firm Somerville Legal retained to represent the wife of the senior counsel retained for of Appeal delivered its judgment, MCI the representative plaintiff. Mr Somerville Mr Bolitho by Mr Elliott was also an indirect commenced fresh proceedings (which is no longer a partner of Somerville Legal, shareholder of that company. One of the closely resemble the stayed proceeding), defendants made an application for orders 48 Melbourne City Investments Pty Ltd v WorleyParsons with new solicitors in the Victorian Limited [2014] VSC 303. See King & Wood restraining the plaintiff from continuing Supreme Court, which it subsequently Mallesons, The Review – Class Actions In Australia 2013/14 (24 July 2014), 17. 51 Kelly v Willmott Forests Ltd (in liquidation) [2012] had transferred to the NSW registry of the 49 Walsh v WorleyParsons Limited [2015] VSC 135. FCA 1446; Madgwick v Kelly [2013] FCAFC 61. 50 Extensive flooding affected 16 cruises organised 52 See our 2013/2014 report for a discussion of the 44 For a more detailed discussion of the TWE v MCI by Scenic Tours in 2013 involving up to 1,730 attempt by Claims Funding Australia to co-fund Appeal Decision, see our alert “Lawyer Driven passengers, and a large component of the travel the equine influenza class action run by Maurice Class Actions - a potential abuse of power”, ended up being via lengthy bus trips rather Blackburn: The Review – Class Actions In Australia 24 March 2015. than cruises. 2013/14 (24 July 2014), 15.

22 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 23 SECTION THREE SECTION FOUR Claims against the state

to retain both lawyer and counsel in the In 2014/2015, we have seen a trend of class actions brought alleges that the then Minister for Agriculture, proceeding. Justice Ferguson of the against government entities. While still a small proportion of class Forestry and Fisheries (then Senator Joe Victorian Supreme Court held that both Ludwig) committed the tort of misfeasance should be restrained, as their indirect actions overall, these claims inevitably attract significant attention. in public office on the basis that he (and financial interest in the proceeding posed Despite the growth in the number of government focused claims, the Commonwealth vicariously) acted with a risk to the administration of justice.53 plaintiffs have faced various impediments, including difficulties knowing or reckless disregard in making the The funding agreement was described proving the existence of a duty of care, defining a sufficiently second control order, for reasons including as a means by which lawyers could “skirt certain class and establishing causation. that he was recklessly indifferent to the loss around” the prohibition on contingency that was likely to be caused to producers, fees.54 In a case such as this, her Honour exporters and service providers. took the view that there was a real risk Types of claims Island Detention Centre action against Critical to the success of this application that Mr Bolitho’s lawyers would not be the Commonwealth (negligence); the Claims initiated and continued against are arguments that the Minister was perceived as exercising the requisite levels Christmas Island Sinking of SIEV221 action government defendants in recent years informed of particular issues in the live of objectivity and independence, such that against the Commonwealth (negligence); have been diverse. Most significantly, we export industry, including that the industry they may be influenced by the substantial and the Heritage Estates Worrowing action have seen a number of claims in relation to: had voluntarily proposed measures to financial interest they have that rests on against the Commonwealth, the State of improve animal welfare in the Indonesian the outcome of the case.55 Mr Bolitho ƒƒ Catastrophic events: the Wivenhoe NSW and two local government entities export industry and that the five day gap subsequently retained new solicitors to Dam Flood action against (among (negligent misstatement, misleading and between the two decisions meant that the replace Mr Elliott. others) the State of Queensland, the deceptive conduct, acquisition of property Equine Influenza action against the other than on just terms and seeking Minister was informed of the harm that In the Scenic Tours action, the plaintiff Commonwealth, and the abalone virus judicial review of an order). could be caused by the blanket ban. retained Somerville Legal and entered class action against the State of Victoria, The Government refused an out-of-court into a litigation funding agreement with all alleging negligence. State entities had Misfeasance claims settlement before the claim was filed and a company in respect of which Mr defendant roles in a number of bushfire- we wait to see whether, similar to Pan Somerville’s son is the sole director and The tort of misfeasance, which requires related class actions. Pharmaceuticals, out-of-court mediation shareholder. The defendant sought to an intention by a public officer to cause may occur and lead to settlement, given restrain Somerville Legal from acting for the ƒƒ Misfeasance in public office: harm, or the public officer knowingly the difficulties inherent in substantiating plaintiff, in part relying on Bolitho. Justice proceedings relating to ASIC’s acting in excess of his/her power, is rarely claims of malice against the Minister. Garling of the NSW Supreme Court found investigation of the Storm Financial successful. Nonetheless, such claims are the circumstances to be different to Bolitho collapse and proceedings relating to the on the rise following the settlement of the ASIC and dismissed the application.56 Justice Live Cattle Export Ban. Pan Pharmaceuticals class action in late 2010 between the Commonwealth and Regulators can also be the target of Garling held that the defendant had not In addition, there have been a number of group members alleging misfeasance by misfeasance claims. On 1 December 2014, demonstrated any direct or indirect financial claims with a public interest element in the Therapeutic Goods Administration, Levitt Robinson Solicitors filed proceedings connection between the legal firm and the recent years, including claims regarding which saw group members receive against ASIC alleging misfeasance and funder. Further, Mr Somerville played no the Grand Western Lodge action against $67.5 million (inclusive of costs). negligence, on behalf of victims of the role in the conduct of the proceedings and the State of NSW (negligence); the collapse in 2009 of Storm Financial Limited Bolitho did not stand for a general “family Fairbridge Farm School action against Live Export Ban (Storm), including persons who have interest” principle as a distinct principle of the Commonwealth and the State of already received a settlement from earlier law. The judge rejected the submission NSW (breach of statutory and common The Live Export Ban class action was filed class actions involving Storm. that, in this case, the litigation funder was a law duties to children); the Wotton in late 2014 and concerns two consecutive “stalking horse” to allow lawyers to charge representative action against the State decisions in 2011 by the Federal The claim alleges ASIC knew Storm was 57 contingency fees. of Queensland and Commissioner of the Government to suspend live cattle exports – operating a business model which posed Police Service (alleging insufficient police first, to particular destinations in Indonesia, “substantial risk” to the group members and then for all of Indonesia – after footage for over a year before ASIC took action 53 Bolitho v Banksia Securities Ltd [2014] VSC 582. response and investigation into deaths); King & Wood Mallesons acts for the fifth defendant the Workers with Intellectual Disabilities was broadcast showing images of animal to investigate Storm and that ASIC “has in the Bolitho action, who was the defendant that abuse and maltreatment in Indonesian made this application. action against the Commonwealth a policy of ‘improperly’ preferring the 54 Bolitho v Banksia Securities Ltd [2014] VSC 582. (discrimination); the Christmas Island abattoirs. The group consists of exporters, interests of the Commonwealth Bank … 55 For a more detailed discussion of this decision, see farmers and others in the supply chain. In our alert “Funder and lawyer: is there scope to play Detention Centre action against the both roles in a class action,” 24 December 2014. Commonwealth and Minister (negligence addition to alleging that the second control 56 Moore v Scenic Tours Pty Ltd [2015] NSWSC 237. 57 Moore v Scenic Tours Pty Ltd [2015] NSWSC 237. and breach of statutory duties); the Manus order was invalid, the Federal Court claim

24 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 25 SECTION FOUR SECTION FIVE Settlements — the closing act

“The proceedings were most likely to end in a heavy defeat. Far ahead of consumer interests.”58 ASIC Vagueness and uncertainty of The Manus Island Detention Centre claim Two significant issues have been considered by the Court in the past from being not enough, the has filed an application to have the claims in the political domain is brought on behalf of asylum seekers 12 months in relation to the settlement of class actions, which derive settlement was as good proceedings struck out, which will be taken from Australia to be detained at as it was going to get.”62 heard in August 2015. The past year has seen two claims made by Manus Island Regional Processing Centre from the Court’s supervisory and protective role in class actions: asylum seekers against the Commonwealth in Papua New Guinea during 2012 to Separately, the applicants have made a The secrecy of terms of settlement Where the representative plaintiff has of Australia. These cases highlight a 2014, who allegedly suffered personal ƒƒ freedom of information request to ASIC to - Parties to class actions have generally agreed to a settlement, and no other number of challenges in making claims injury as a result of the negligent conduct obtain the regulator’s internal documents proceeded on the basis that at least group member wants to battle on in the against government, particularly where the of the Commonwealth, G4S and/or 62 and records, including production of the the settlement sum will likely become name of the class, courts are faced with conduct in question has occurred, and Transfield Services. It is claimed that the lists of documents for discovery in ASIC’s public in the course of court approval. a vexing decision when asked to approve In Hodges v Waters, a class action by group members reside, offshore. Government had a duty to take reasonable civil penalty proceedings against former While there have been some instances a proposed settlement. investors in a property trust against the care to avoid foreseeable harm to the Storm directors. The Christmas Island Detention Centre in which settlements have been wholly trust’s compliance auditors, KPMG, detainees in relation to the food, water, claim is brought on behalf of all persons confidential, this may have been more Confidentiality – whose Justice Perram had to determine This is a landmark case as it represents the accommodation and healthcare services who had been detained between 2011 and by accident than design. In the past settlement is it anyway whether to approve a settlement in first class action targeting the adequacy inside the detention centre and security 2014, who were injured or pregnant during 12 months, we have seen parties circumstances where confidentiality of of a regulator’s actions and will explore arrangements at the detention centre. In Settlements are usually confidential between the period and had suffered an injury, or specifically seek to maintain secrecy and the terms of settlement was a condition the internal workings and decision making April 2015, Transfield Services sought to the parties (unless they choose otherwise), exacerbation of an injury, due to the Minister – to an extent – courts agree to protect precedent to the settlement taking place. procedures of the regulator. It is novel in strike out large portions of the claim due however the court approval process for class for Immigration’s or the Commonwealth’s the confidentiality of the commercial In such circumstances, His Honour had seeking to argue a duty of care and, if it to vagueness, although the plaintiffs were action settlements has generally meant alleged failure to provide reasonable bargains struck in settlement discussions. two options: to decline to approve the were to succeed, would be a fundamental granted leave to amend their claims.61 that certain aspects of those settlements care. The defendants are alleged to owe settlement, with the proceeding continuing change in the way that regulators have to ƒƒ Unsatisfactory settlements – We have are not able to be kept confidential. The a common law duty of care to ensure to trial or another non-confidential operate, particularly in light of budgetary now seen a number of class actions extent of confidentiality and the dilemma detention did not cause injury, to provide settlement was entered into; or to approve and policy considerations that fall solely settle on terms that provide minimal that this poses for the court has been a reasonable health care and exercise due 61 Orders made on 22 April 2015 in Kamasaee v the settlement despite the confidentiality within Executive discretion. compensation to group members. recurring theme in cases this year. care and skill in providing this care. The Commonwealth, SCI 2014 06770. issues.63 In that case, each group member Abalone Virus case failure a In an interlocutory hearing in late 2014, the had been told their approximate individual warning against casting the Minister and Commonwealth contended settlement sum, but not the global amount net too wide? that the proceeding was not properly to be paid by KPMG, the details of the constituted as a group proceeding, as distribution arrangements, or the amount The plaintiffs’ loss in the Abalone Virus the class was so “‘vague or uncertain’ of the funder’s fees to be deducted from class action59 is a warning to plaintiffs to that potential group members could not the settlement. As His Honour noted, consider carefully whether cases against reasonably be expected to ascertain, by it was “difficult for them to understand government entities are maintainable. reference to the pleading, whether they precisely how the compensation to be The claim against the State of Victoria are in fact members of the group”60 and allotted to them has been calculated was dismissed by the Victorian Supreme the amended statement of claim failed to and more difficult still to put together any Court on the basis that the plaintiff failed disclose any common question of fact or argument as to why any such settlement to establish that the State defendants law. Justice Kaye refused to take a narrow should be refused.”64 Nonetheless, the owed any duty of care to protect the class approach to defining groups and noted settlement was approved, Justice Perram members from economic loss caused by previous cases allowing group definitions taking the view that the claims were weak an escape of the virus, as well as failing to to have reference to the defendant’s and so settlement was the best option, in prove breach of duty or causation. conduct. His Honour stated that it was circumstances where the court had been too early to determine whether there were able to scrutinise the terms of settlement, sufficiently common questions of fact or and group members could have access law for the case to proceed to trial as a to the settlement terms upon giving a group proceeding, but this would need confidentiality undertaking (only one had careful consideration during the course of done so).65 58 Federal Court proceedings Lock v Australian the interlocutory processes. To date, the Securities and Investment Commission action continues as a group proceeding. NSW 1307/2015. http://levittrobinson.com/class- 62 Hodges v Waters (No 7) [2015] FCA 264 [107]. action-asic-attracts-media-attention/ 63 Hodges v Waters (No 7) [2015] FCA 264 [64]. 59 November 2013, subject to appeal. The full 64 Hodges v Waters (No 7) [2015] FCA 264 decision is Regent Holdings v State of Victoria 60 A S v Minister for Immigration and Border Protection [65]-[66]. [2013] VSC 601. & Anor [2014] VSC 593 (28 November 2014) at [42]. 65 Hodges v Waters (No 7) [2015] FCA 264 [67].

26 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 27 SECTION FIVE SECTION FIVE

“It is …inconceivable that, independently advised, a person [receiving a maximum payout of $4,629.36] would regard that sum as adequate compensation for the In contrast, in Bonsoy the Court took the Lawyers’ fees loss and damage associated with No effective alternative to claims.70 The parties then modified While the criteria for distributing the view that the group members were entitled Courts have not shown a similar a heart attack to the occurrence an inadequate settlement – the settlement agreement and made a settlement amount were fair, it was clear to know why the case had been resolved willingness to maintain confidentiality of which Vioxx made a what is the court to do? fresh application for approval. This time, that Justice Jessup remained troubled by and the basis for the approval, and that in respect of lawyers’ fees. Generally, they satisfied Justice Jessup that the the very modest settlement outcomes in material contribution.” We reported in our 2013/2014 report that this meant it was necessary to delve courts have required full disclosure of settlement sum of $497,500 was fair and this case: into some typically confidential areas to Justice Jessup, Voixx the proposed settlement of the Vioxx class reasonable.71 the quantum of lawyers’ fees and how “It is … inconceivable that, some extent so as to set out the Court’s action had been rejected by the Federal they had been calculated. This is seen independently advised, a person reasons for approval.66 In that case, as is Court – principally on the basis that it did 70 Matthews v AusNet Electricity Services Pty Ltd & as especially important where the costs [receiving a maximum payout of more usual, the overall settlement amount not adequately differentiate between the Ors [2014] VSC 663. A similar approach to legal were to be paid out of the settlement costs was taken when approving the Murrindindi $4,629.36] would regard that sum as ($25 million) was not confidential. respective strengths of group members’ Bushfires class action: Rowe v AusNet Electricity amount (thus potentially affecting the Services Pty Ltd & Ors [2015] VSC 232. adequate compensation for the loss reasonableness of the settlement) 71 Peterson v Merck Sharp & Dohme (Aust) Pty Ltd and damage associated with a heart Funders’ fees (No 7) [2015] FCA 123 [2]-[5]. and group members lacked detailed attack to the occurrence of which 69 Justice Perram was willing to maintain information about the costs. Vioxx made a material contribution.”72 secrecy in respect of the litigation funder’s Generally, courts have required reports from fees on the basis that the confidentiality The judge noted that the representative costs consultants as to the reasonableness of these fees was part of the settlement applicant (who had failed on his own claim) of the costs (which in the Bonsoy class terms. Such an approach is not was exposed to a significant costs liability action accounted for almost $7 million of uncommon. According to Justice Perram, which would likely “dwarf the settlement a total settlement sum of $25 million, and the funder’s fees consuming just over one sum”. Compromising the group’s claims in the Kilmore East/Kinglake Bushfires third of the settlement amount was “the would therefore have been “irresistible”. action formed $60 million of a $494 million flipside of the Faustian bargain constituted The judge noted that this meant that “the settlement) or the appointment of a by the funding arrangements.”67 The fees settlement which the court is now being registrar to examine calculations and were substantial but, the Court accepted, asked to approve has, to say the least, a report to the court on reasonableness. An 73 reflected the commercial risk the funder certain whiff of expediency about it.” exception in the past year was the Great was taking with its own money – without Southern proceedings, where Justice Croft The judge asked the rhetorical question: the funder running that risk and taking refused to subject the costs claimed to any in circumstances where the representative the action, group members would have further scrutiny, a decision affected by the applicant was hardly likely to continue received nothing.68 particular facts (including that costs were to in the role and no other group member be paid from a separate fund rather than a had come forward to replace him, why deduction from the settlement amount, and should he be forced to continue to be were a reimbursement to group members exposed to significant obligations and of fees already paid to their lawyers). risks “in the interests of others who are According to content to remain below the parapet”?74 Hodges v Waters demonstrates that If the settlement had not been approved Justice Perram, the in some instances, while the terms of funder’s fees consuming and the representative applicant no settlement will need to be disclosed to the longer prosecuted the proceeding, it was just over one third of the court and aspects of the terms will need inevitable that at some it would stage be settlement amount was to be communicated to class members, dismissed – then, group members would “the flipside of the Faustian it may be possible to keep the terms of receive nothing.75 bargain constituted settlement confidential so far as the public by the funding is concerned. arrangements.”67

72 Peterson v Merck Sharp & Dohme (Aust) Pty Ltd (No 7) [2015] FCA 123 [6]. 73 Peterson v Merck Sharp & Dohme (Aust) Pty Ltd (No 7) [2015] FCA 123 [9]. 66 Downie v Spiral Foods Pty Ltd & Ors [2015] VSC 74 Peterson v Merck Sharp & Dohme (Aust) Pty Ltd 190 [37]. (No 7) [2015 FCA 123 [11]. 67 Hodges v Waters (No 7) [2015] FCA 264 [104]. 69 Downie v Spiral Foods Pty Ltd & Ors [2015] VSC 75 Peterson v Merck Sharp & Dohme (Aust) Pty Ltd 68 Hodges v Waters (No 7) [2015] FCA 264 [104]. 190 [35], [178]. (No 7) [2015 FCA 123 [12].

28 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 29 SECTION FIVE SECTION SIX As Justice Croft noted, his reasons for Settlement of the Great Southern class judgment following Class action procedure — action proceedings – key takeaways the conclusion of the trial were “the most accurate ‘prediction’ key developments One of the most publicised class action the broader public interest meant that the decisions in 2014/2015 was the Supreme Trial Reasons would be published when as to the trial 79 Court of Victoria’s decision to approve the delivering a judgment on the settlement outcome”. settlement of proceedings commenced approval application. against Great Southern Finance Pty Ltd (Receivers and Managers Appointed) Who should hear an application (In liquidation) (GSFL), a subsidiary of for the approval of a settlement Great Southern Limited (GSL) and a after trial? The past twelve months have seen a number of subtle but important Cherry picking applicants number of related parties.76 Justice Croft approving the settlement was In most instances, if settlement is not In a decision which is likely to benefit the conclusion that all the group members procedural developments which will affect the way class actions The litigation concerned 16 group approved, the proceedings would plaintiffs, the Court in the action against were in a better position by means of the are run, including: proceedings and numerous individual continue and it is generally undesirable for Newcrest endorsed a long-standing practice settlement than if judgment had been • continued freedom on the part of plaintiff lawyers to pick the actions commenced after companies the judge who has been privy to proposed of cherry picking applicants in security- delivered on the basis of the Trial Reasons. in the Great Southern group went into terms of settlement to take the matter to representative plaintiff that best suits them; holder class actions. In such claims, it has They received something via the settlement administration, on behalf of investors who verdict. Consistent with this procedure, • confirmation that a class action can be run against numerous been common for the class to be comprised but would have failed completely had it had acquired interests in GSL’s managed the settlement approval application was largely of institutional investors. Funders gone to judgment.81 defendants without each group member needing to have a investment schemes. The class actions not initially allocated to Justice Croft. After claim against each defendant; and and plaintiff lawyers target institutional alleged that statements in the relevant an initial hearing before Justice Judd, it Release of the Trial Reasons investors because their large shareholdings product disclosure statements for the was decided that Justice Croft would • greater opportunity to join a closed-class action after it is and small numbers make it easier to build schemes were misleading or deceptive. determine the settlement application, There had been no objection to the commenced. an economically viable claim. However, The proceedings were brought against the parties having acknowledged and publication of the Trial Reasons; the only notwithstanding the fact that claims are Reflecting the maturity of Australia’s class class actions because the breadth of the GSFL (whose role was to offer finance to accepted that, should his Honour decline dispute was as to the timing of the release conducted for the benefit of institutional action regime, these developments have case defines the size of the defendant’s investors in GSL’s projects), the responsible to approve the settlement, the judge (ie before or after determining whether to investors, they are invariably fronted by retail been incremental rather than revolutionary, risk and likelihood that a plaintiff will entity for the schemes, directors of would proceed to deliver judgment and approve the settlement). investors, who are more likely to have been but will impact the tactics used by plaintiff be able to prove its case. A number of GSFL, and banks which had financed the publish the Trial Reasons, or publish affected by misleading statements and may One factor behind the release of the Trial and defendant lawyers in seeking to gain significant Federal Court decisions over investors’ investments in the schemes. them to inform the approval process.78 In make more compelling applicants. Reasons was the broader public interest a forensic advantage and settlement the past twelve months have broadened circumstances where judgment was ready in the settlement process. With a large leverage in the course of a class action. the potential scope of class action The applicant in Newcrest is the trustee of Settlement of the proceedings to be delivered, there does not appear number of individuals represented in the proceedings and confirmed the flexibility of a self-managed super fund and a family to be a substantive reason why the trial The proceedings were commenced in proceedings and after the significant the mechanisms which courts can use in trust which acquired a small number of judge should not hear the application, and Defining the claim 2010, with the trial being heard over 90 investment of court resources, there are shaping and managing a claim. shares just prior to the allegedly misleading indeed is an efficient use of resources. The way in which proceedings are sitting days between 29 October 2012 strong arguments for the release of the disclosure being corrected, although 80% and 24 October 2013. On 23 July 2014, defined is a key battleground in most Prospects of success where Trial Reasons, so that parties and the Justice Croft informed the parties that he public can have an indication of how would hand down judgment and give his judgment prepared complex issues raised in the case were reasons for decision (Trial Reasons) on Here, the Court was in the unique position likely to be decided. 25 July 2014. Later that day, the parties of holding the most informed view on the informed his Honour that they had reached respective strengths and weaknesses Implications for companies a settlement. On 11 December 2014, of the parties’ positions in the litigation. settling class actions Justice Croft approved the settlement. The As such, the usual process of the court The public nature of class actions means approved settlement provided for insurers receiving confidential submissions on the that a company’s response to the claim will to pay $23.8 million, which included costs prospects of success by counsel for the always be scrutinised. From a defendant’s of $20 million. After costs, it was estimated parties was not as important. As Justice perspective, settling a class action that the settlement would equate to an Croft noted, his reasons for judgment removes the risk of an adverse judgment, estimated return to each group member of following the conclusion of the trial were reduces legal fees and minimises the $16.79 for every $10,000 invested.77 “the most accurate ‘prediction’ as to the diversion of company resources. By trial outcome”.79 Timing of the settlement settling the proceedings at such a late Although a court is not to substitute its own stage, however, the outcome of litigation The case illustrates that settlement remains view for that of counsel in circumstances is no longer hypothetical in that a party’s open to parties up until the time judgment where the court is not fully cognisant of all decision to settle can be compared to the is delivered – but there are implications for the issues,80 one of the primary bases for draft reasons for decision (if published). such a late settlement. Justice Croft held Class action parties should therefore be that considerations of transparency and 78 Clarke v Great Southern Finance Pty Ltd aware that settlement at such a late stage (in liquidation) [2014] VSC 569 at [7]. 79 Clarke (as trustee of the Clarke Family Trust) & may result in the judgment being published 76 Clarke (as trustee of the Clarke Family Trust) & Ors v Great Southern Finance Pty Ltd (receivers and thus be exposed to comparisons to Ors v Great Southern Finance Pty Ltd (Receivers and managers appointed) (in liquidation) (Ruling and Managers Appointed) (in liquidation) & Ors No. 3) [2014] VSC 584. the outcome in the judgment. [2014] VSC 516 (Great Southern). 80 Darwalla Milling Co Pty Ltd v F Hoffman La Roche 77 Great Southern at [71] Limited (No 2) (2006) 236 ALR 322 at 332 [30]. 81 Great Southern at [148].

30 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 31 SECTION SIX SECTION SIX

of the shares during the relevant time were Claims against multiple defendants in Multiplex, (which had set the limits As a result of this decision, funders and Pre-action discovery The case shows that preliminary discovery 82 held by institutional investors. Newcrest In a case which confirms the flexibility of group definition by reference to plaintiff lawyers will be able to file closed Potential plaintiffs are also making can be a powerful tool for plaintiff applied to the court for an order that of class actions in dealing with multiple funding agreements/solicitors’ retainers class proceedings at an earlier stage, in increasing use of pre-action (or preliminary) lawyers — not only were the applicants the individual claims of two institutional respondents, the Full Federal Court entered into at the commencement of the knowledge that they can continue discovery to obtain documents from in the Wickham case able to obtain a 86 investors be determined first, before the decided it is not necessary for all group proceedings), it has the potential to to build their book after filing and seek potential targets to build their case. In the large amount of information before filing claims of other class members (including members to have claims against each and be a powerful tool for plaintiffs if the an amendment, provided the group proposed Wickham Securities class action, their case, they were able to obtain a the applicant). This was on the basis that every respondent in a proceeding. circumstances can be replicated. definiton does not allow people to come the applicants used preliminary discovery preliminary endorsement of aspects the number of institutional shareholders progressively within an ambulatory class of their claim at an early stage before In the Standard & Poor’s class action, the to assess the strength of their claim. meant that the case of the lead applicant In the Cash Converters proceedings (now definition. It also means that defendants they had incurred significant costs, with Federal Court considered an application and the evidence of its director had settled), the classes consisted of people may have to wait longer in closed class Wickham had appointed Sandhurst proceedings subsequently commenced on to amend the group definition to include limited applicability to the circumstances who paid fees under credit contracts cases to get a firm picture of the extent of Trustees to hold various rights for investors 15 July 2015. further class members who had entered of the class members behind the claim. with Cash Converters, its franchisees their potential liability. as part of an ill-fated note offering. into a litigation funding agreement after Not so lucky were potential plaintiffs in In particular, Newcrest argued that the and another company. The applicant had Following Wickham’s collapse, prospective the commencement of proceedings. The the class action proposed against Iluka applicant’s case was a poor vehicle for claims against each of the respondents, applicants sought preliminary discovery Court allowed the amendment, focussing Resources. Just prior to publication of facilitating an adjudication of the issues in but not all members of the class had of 39 categories of documents from on the difference in the mechanism used this report, the Federal Court rejected an the proceeding as it was not in a position entered into an agreement with each Sandhurst to enable them to determine — the Court held that a class definition application for preliminary discovery on the to lead evidence relevant to the manner of the respondents. The respondents whether to commence proceedings. which expressly allowed for opting in basis that: in which investment decisions were argued that this was insufficient and that Sandhurst argued against production on after commencement (impermissible) was made by institutional group members, the case could not proceed against all of the basis that the claim was futile. The the Court was not satisfied that different to an extension of the class to ƒƒ who, it was argued, were likely to have the respondents, in light of the decision in Court rejected this argument, holding that there was a reasonable basis for 84 additional group members by amendment made investment decisions employing Philip Morris. the prospective applicants had met the the proposed representative plaintiff (permissible).87 Based on this decision, a methodology quite different to that of low threshold for preliminary discovery, to reasonably believe that the The Full Court held that it is sufficient if it is possible for a group definition to be the applicant. which requires a reasonable belief that representations on which he relied the applicant has a claim against each amended post-commencement to include relief may be available, reasonable inquiries were misleading or deceptive or that The Court rejected this argument, holding respondent and there are at least six or people who have signed funding agreements resulting in insufficient information and Iluka failed to make a subsequently that applicant was entitled to frame its more other people within the class who after that time. Justice Rares stated: 85 a belief that the respondent is likely to required disclosure, noting that “a cable action as it saw fit and that the court have claims against each respondent. the only sensible operation that can have documents which would assist. This of belief cannot be woven exclusively would only intervene to make orders for As a result, a respondent can be joined to be given to s 33K(1) and (4) is that outcome was upheld on appeal to the Full from threads of mere speculation or advance determination of particular claims a class action even if a number of group 88 those provisions permit an amendment Court in February. conjecture, nor do unfocussed feeble to avoid injustice. It was not persuaded members do not have a claim against it. such as that sought here to be made, rays add up to illumination”; and that such injustice would arise in light of The case has significant consequences The case is significant for two reasons: provided that the amendment operates the degree of commonality between the for contract and consumer protection the application would have been forthwith and, by doing so, closes the ƒƒ consistent with the low threshold for ƒƒ cases of institutional and non-institutional cases where there are similar factual refused in any event in the exercise of newly described class or identifies an granting preliminary discovery, the investors, the absence of a relevant circumstances but multiple contracting the Court’s discretion, as there was already closed class in the same way Court ordered production of a large impact on settlement and the absence of parties, or where unrelated parties engage evidence that a decision to commence as occurs when proceedings under amount of material, which will assist the prejudice to the defendant.83 The decision, in conduct which is factually similar and proceedings had already been made Pt IVA initially are commenced. applicants in framing their claim. which could be expected to apply a large affects overlapping classes of consumers. (with particular reference to publications number of securities claims, confirms It has the potential to lead to larger and ƒƒ the Federal Court delivered a detailed by the prospective plaintiff’s lawyers).89 that plaintiff lawyers have significant more factually complex class actions. 44 page judgment, and the Full Court produced a similarly detailed 35 page latitude in choosing the representative 86 Multiplex Ltd v P Dawson Nominees Pty Ltd plaintiff, even where they do not reflect the Adding group members to a closed [2007] FCFCA 200 (in which case the decision judgment on appeal, which both necessitated the commencement of a further circumstances of the class as a whole. class claim class action). In Multiplex, the group was defined addressed (on a preliminary basis) the (inter alia) as those who had entered into a litigation strength of the applicants’ claim. Finally, the Federal Court has confirmed funding agreement as at the commencement of that group members can be added proceedings, with the group becoming fixed at commencement. This was distinguished from the to a closed class claim after it has situation in Dorajay Pty Ltd v Aristocrat Leisure commenced. While this represents only a Ltd [2005] FCA 1483, in which Justice Stone held that a definition of group membership that was 88 Sandhurst Trustees Limited v Clarke [2015] FCAFC 82 The applicant has previously been the named slight shift from the position understood triggered by the signing of a funding agreement 21. See also Erutuf Pty Limited v Westpac Banking plaintiff in class action proceedings run by Slater & and retaining particular solicitors was inconsistent Corporation Limited [2014] NSWSC 1679, in which Gordon (also the lawyers in the Newcrest action) 84 Philip Morris (Australia) Ltd v Nixon [2000] FCA 229; with the opt-out nature of Part IVA (the group orders for preliminary discovery were granted by against Sigma Pharmaceuticals Ltd. (2000) 170 ALR 487. continuing to float after commencement). the NSW Supreme Court in proceedings relating to 83 Earglow Pty Limited v Newcrest Mining Limited 85 Cash Converters International Ltd v Gray [2014] 87 City of Swan & Anor v McGraw-Hill Companies Inc loans used for the allegedly unregistered Famularo [2015] FCA 328. FCAFC 111. & Ors (2014) 223 FCR 328. managed investment scheme. 89 Bonham v Iluka Resources Ltd [2015] FCA 713.

32 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 33 SECTION SIX SECTION SIX

Fixing the number of closure typically takes place at a late stage Closing the class early that class closure should be ordered to group members in the proceedings or as a component Defendants often seek to close the class facilitate settlement. The Court held that of the judgment or settlement orders early, so they can determine the number it was inappropriate to close the class In every opt out class action there comes and, once it happens, it tends to be final. of group members and likely exposure for before pleadings had closed and that the a point when class members have to take This year a number of cases tested the the purpose of settlement. This year, the settlement of a parallel class action was a positive step and identify themselves boundaries of when class closure orders Supreme Court of Victoria in the Downer not a sufficient reason to require the group as someone who has an interest in a 90 are appropriate. EDI class action endorsed leaving the class members to identify themselves. judgment or settlement. If a class member open until a relatively advanced stage in fails to opt out of the class and fails to By contrast, in a class action conducted proceedings. It followed a growing body of register they are bound by the decision or in the NSW Supreme Court against case law which has rejected an argument settlement but are not entitled to any of Rolls Royce over an engine failure commonly advanced by defendants the rewards. In most class actions, class which forced the return of a flight to Singapore, Justice Beech-Jones went the other way and ordered class closure in advance of discovery and further proposed mediation.91 The case provides an important example as to when the ‘necessary for settlement’ argument might succeed. In Rolls Royce, the Court considered the decisive consideration to be that there was a prospect of significantly disproportionate costs being incurred, as the plaintiff was seeking to run a large and complicated case for what After the settlement was reached but before Facing the final curtain might ultimately prove to be small number the approval hearing, two groups of class of group members. In the Court’s view, members objected to the settlement and In the past 12 months, we have seen at those costs could be avoided by orders sought to opt out, on the basis that it would least two class actions fail in their entirety. for class closure at an early stage on the bind them to repay loans and they would ƒƒ In the claim by landowners in the basis that it would substantially advance not be able to raise individual defences to Heritage Estates Worrowing, the claims settlement discussions, notwithstanding enforcement. They argued the settlement were dismissed on the basis that no the relatively early stage of the proceeding. was beyond the scope of the proceedings cause of action was established against These cases suggest that the decision in which they had decided to participate. the Commonwealth. The Court held that whether to permit early class closure so The Court held the group members were there was no acquisition of the land held as to promote early settlement is heavily not entitled to opt out in response to the by them in the Heritage Estates nor was case-dependent. settlement, because the provisions about there any sterilisation of their interests in the validity of the loan agreements should that land in contravention or impairment Opening the class after settlement not have come as a surprise, they were of the Constitutional guarantee provided given an opportunity to opt out earlier in the At the other end of the spectrum, the to the group members by s 51(xxxi) of proceedings and they had an opportunity 93 Supreme Court of Victoria rejected an The Constitution. to object to the approval of the settlement.92 application to re-open the class after The settlement was ultimately approved ƒƒ In a case brought by Israeli academics settlement in the Great Southern claim so over their objections on the basis that their allegedly affected by the implementation as to allow unhappy group members to claims would have failed at trial. of a boycott, divestments and opt out. Apart from the modest settlement sanctions campaign, the court ordered amount, the settlement also acknowledged by consent that the proceedings be the validity and enforceability of the plaintiffs’ dismissed for lack of standing as loans, which were at issue in the proceedings. against the remaining applicant.94

93 Esposito v Commonwealth of Australia 90 Camping Warehouse Australia Pty Ltd v Downer [2014] FCA 1440 EDI Limited [2015] VSC 122. 92 Clarke v Great Southern Finance Pty Ltd 94 Shurat HaDin, Israel Law Center v Lynch, 91 Lam v Rolls Royce PLC (No 3) [2015] NSWSC 83. (in liquidation) [2014] VSC 569. NSD2235/2013, orders 16 July 2015.

34 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 35 SECTION SEVEN SECTION SEVEN Global developments The French connection In October 2014, the “loi Hamon” bill came into force and France became the ninth European Union Member State to introduce a form of class actions, a new regime known as “action de groupe”. The “action de groupe” regime applies only Trends in class action-type in the field of consumer and competition Update from Germany law, is a purely opt-in regime, and public interest litigation in China While the German legal regime traditionally damages are only available for financial The framework for class actions, known does not provide for class actions, a specific loss. Similar to other French actions, the as “joint litigation” in the People’s Republic type of mass action has arisen in German statute of limitations is five years from of China, has been in place since the competition litigation in which companies the date of harm suffered or discovered. initial promulgation of the Civil Procedure are assigning their claims for damages Only individual consumers may be group Law of the P.R.C. (CPL) in 1991. Recent allegedly suffered from cartel activity to members, not corporations (including amendments to the CPL provide for a special purpose claims vehicle which foreign entities), and only authorised joint litigation in areas of public interest bundles the claim together with those of consumer associations (there are 16 at related to “pollution to the environment” others and sues the cartelist(s) in combined present) are authorised to bring class and “damage [to the] legitimate rights proceedings for the total damages incurred actions on behalf of individual group and interests of consumers at large”, with by the assignors. While this practice has members. The law also enables authorized certain “designated institutions” given the been subject to some criticism, a recent consumer associations to initiate a authority to institute proceedings.95 judgment confirms that claim vehicles have mediation procedure. standing in German courts. Recent promulgations have provided To date, five actions have been brought much needed clarity and guidance on Despite the absence of a specific class under the “action de groupe” regime. the basis for standing and the evidence action regime, Germany continues to The first case was determined on 19 May needed to meet the threshold for case be considered an attractive place for 2015, with Paris Habitat and SLC – CSF acceptance,96 and as a result the past claimants to bring cartel damages actions. signing a settlement under which Paris year has seen an increase in accepted Cartelists are jointly and severally liable for Habitat will compensate 100,000 tenants cases of public interest litigation related to damages (as in Australia); cost risks for and change its behaviour. environmental protection in particular. claimants are limited as statutory refunds In relation to damages, there are two The possibility of extending the are available; claimants can benefit from the Companies doing business in China innovations of particular significance: current French class action system to binding effect of decisions of competition should be aware that: ƒƒ the CAT will have the power to “make environmental claims or health-related authorities across the EU (along with final the designated authority is bringing an award of damages in collective claims is due to be reviewed in September appeal decisions); the defendant has the ƒƒ there is a growing number of cases actions for a variety of environmental- ƒƒ UK developments proceedings without undertaking an 2016. A draft law relating to the burden of proving the passing-on-defence; being brought by individual plaintiffs related claims and, given the assessment of the amount of damages modernization of the healthcare system indirect purchasers have standing if they against companies/retailers under the As we noted in last year’s report, the UK environmental challenges facing China recoverable in respect of the claim in France, which aims to extend the class can establish they have suffered damage recently amended recent amendment now has both opt-in and opt-out collective and increasing public awareness, it of each represented person.” Such action system to health-related claims, (requiring a passing-on scenario on the part to the Consumer Rights Protection actions for competition damages claims. may be expected that growth in such assessments of individual losses are was passed by the French Parliament of the direct purchasers); and a relatively Law (CRPL) in respect of consumer From October 2015, the Competition environmental public interest joint proving a significant burden and hurdle on 14 April 2015 and is now before the high rate of interest can be claimed from the products. As such, it may simply be a Appeal Tribunal (CAT) will be able to certify litigation will continue upward. in the ongoing Emerald air cargo French Senate. date of the first occurrence of the damage. matter of time before the designated claims as eligible for inclusion in collective litigation and this amendment is likely authority – possibly with the support proceedings if it considers that they “raise 95 National People’s Congress of the People’s to significantly facilitate the bringing Republic of China, Civil Procedure Law of the and expertise of the “class action” the same, similar or related issues of fact P.R.C., adopted 9 April 1991, last amended or law and are suitable to be brought in of claims. 31 August 2012, effective 1 January 2013, Art. 55. litigation bar in China – increases the 96 National People’s Congress of the People’s Republic number of cases filed. collective proceedings.” Factors it will in an opt-out proceeding where not all of China, Consumer Rights Protection Law of consider in determining which claims ƒƒ the People’s Republic of China, last amended on of the damages awarded have been With the additional guidance provided 25 October 2013, effective 15 March 2014, Art. 47; are suitable to be brought in collective claimed by the represented persons, Supreme People’s Court of the People’s Republic by the recent promulgations, as well of China, Interpretations of the Supreme People’s proceedings include whether it is possible the CAT “may order ... that all or part Court on the Application of the “Civil Procedure Law as growing demands for protection of to determine for any person whether they of any damages not claimed .... is of the People’s Republic of China”, as promulgated the environment and for the interests of on 30 January 2015, effective 4 February, Art. 284; are or are not a member of the class, the instead to be paid to the representative Supreme People’s Court of the People’s Republic of consumers, it appears likely that we will size and nature of the class and whether the China, Interpretations of the Supreme People’s Court in respect of all or part of the costs or see a rise in public interest class action- on Issues Pertaining to Application of Laws in the claims are suitable for an aggregate award expenses incurred by the representative Trial of Civil Cases Regarding Environmental Public type joint litigations in China in 2015 and in of damages. The draft Competition Appeal Interest Litigation, promulgated on 6 January 2015, in connection with the proceedings”. effective 7 January 2015, Articles 1 and 18; and the future. Tribunal Rules, which will flesh out the bones National People’s Congress of the People’s Republic With that one amendment, the of China, Environmental Protection Law of the of the statutory regime, also specifically legislature has facilitated opt-out People’s Republic of China, last amended on 24 April envisage “sub-classes” within a class. 2014, effective 1 January 2015, Art. 58 (EPL). actions in the UK to be realised.

36 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 37 SECTION SEVEN SECTION SEVEN

United States – “no injury” plaintiffs must have suffered an “injury-in- collection, dissemination and reporting New Zealand class action class actions? fact” for standing to be established. of US consumer information), alleging developments that Spokeo posted false information In early 2015, the Supreme Court of the An eagerly awaited Supreme Court about Robins which would negatively Despite repeated calls for the introduction United States granted certiorari in the case decision has the potential to either affect, among other things, his credit and of a new legislative model, the New of Spokeo, Inc v Robins No. 13-1339, exponentially increase, or effectively limit, insurance. The Ninth Circuit court did Zealand Parliament has stalled in passing which will decide whether a Court can the ability of class actions to be filed not find that Robins had suffered actual a specific procedural regime for class confer what is known as “Article III relating to the breach of federal statutes. damage but held that Spokeo’s violation actions. At present, litigants seeking to standing” where there has been a mere institute group proceedings must bring As we discussed last year, while Australian of the Act was adequate for Robins to violation of a federal statute, without any their claim by way of representative action, class actions merely require the existence establish standing. concrete harm suffered by a plaintiff. provided for by the High Court Rules of one common issue of fact or law, under This decision almost single-handedly The decision of the Supreme Court to which require either the consent of each the ‘predominance test’ US courts must sparked the filing of multiple class actions hear the case follows the Ninth Circuit’s person in the same interest or specific be satisfied that common questions of law based on the FCR Act, with reports of 29 decision in February 2014 that the plaintiff court direction. or fact predominate over individual class FCR Act class actions being filed in the first 97 had established standing under the Fair member questions. However, Article fourth months of 2014 alone.98 Multiple While New Zealand courts have been willing Credit Reporting Act (FCR Act) without III of the US Constitution establishes the statutes authorise private rights of action, to set the ‘same interest’ threshold relatively any more than a speculative injury. Robins basic requirement for any claim, being that and this decision opened the flood gates of low, a number of limitations have prevented initiated a class action against Spokeo for class actions relating to breaches of federal an influx of class actions including: 97 Comcast Corp v Behrend, 569 US _, 133 S Ct violating the FCR Act (which regulates the 1426 (2013) at 6. statute despite no concrete damage having ƒƒ the fact that costs follow the event, been suffered by plaintiffs. Interestingly, the United States (by way of its Solicitor ƒƒ the continuing existence of the torts General) put forward an amicus curiae brief of maintenance and champerty, with the view that the petition for a writ of hampering the growth of a litigation 99 Class actions proposed to date certiorari be denied, citing its belief that funding market, and Despite these limitations, the number of concrete harm had indeed been suffered ƒƒ uncertainty about the use of opt-in and representative actions in New Zealand by the public dissemination of inaccurate 100 opt-out mechanisms. has been on the rise, including the Feltex personal information. However, the extensive litigation (allegations of a misleading ramifications of this case for multiple prospectus, funded by Harbour Litigation parties subject to federal statutes led major Funding), a proposed claim against South companies such as Facebook, Google, and Canterbury Finance concerning the LDC Yahoo to put forward amici curiae briefs in Finance collapse (breach of continual support of Spokeo’s petition that the writ of disclosure obligations), the ‘Fair Play on certiorari be granted. Fees’ litigation over alleged penalty fees The case is likely to be heard later this year. charged by banks, action against Southern We wait to see whether the US courts will Response insurers for alleged delays in the 99 By recognising the fundamentality of access to put a stop to parties initiating class actions justice, the Court has concluded that litigation processing of Christchurch Earthquake involving allegations of statutory violations funding will not be caught by maintenance or claims and a case brought by the Service champerty if the court is satisfied that there is an where these breaches have not caused arguable case for rights warranting vindication, that and Foodworkers Union on behalf of there is no abuse of process and that the funding 25,000 caregivers in relation to wage the plaintiffs any concrete harm. proposal is approved by the court: Saunders v Houghton (No 1) [2010] 3 NZLR 331. However, discrimination. Also underway is preparation many unresolved questions remain including the degree of control a funder may exercise over the for the ‘leaky homes’ lawsuit against James litigation, whether a funder may terminate funding Hardie and other cladding manufacturers, at its discretion and whether the court should be able to regulate the amount a litigation funder while kiwifruit growers have made a receives, with the source of the court’s power to negligence claim against the Minister for control proceedings still in controversy. 100 Saunders v Houghton (No 1) [2010] 3 NZLR 331; Primary Industries as a result of devastation Credit Suisse Private Equity LLC v Houghton [2014] 1 NZLR 541. In addition, while personal from spread of the Psa bacteria. 98 See Petition for a writ of certiorari by Spokeo Inc at injury claims have often been the trailblazer in other page 12. sblog.s3.amazonaws.com/wp-content/ jurisdictions for establishing the class action model, uploads/2014/05/13-1339-Spokeo-v-Robins- in New Zealand proceedings for personal injury are Cert-Petition-for-filing.pdf barred by accident compensation legislation.

38 King & Wood Mallesons The Review – Class Actions in Australia 2014/2015 39 SECTION EIGHT Outlook

On the radar ƒƒ Judgments: judgment is reserved in Proposed class actions in the Montara oil field off the coast of the De Puy hip implant class action, Western Australia in 2009; and in relation Key upcoming events include: where hearings commenced on A large number of matters are currently to the Hazelwood Coal Mine fire in stated to be under investigation by Significant appeals: application for 2 March 2015 and ran for 16 weeks. February 2014. ƒƒ plaintiff law firms, or reported in the special leave to appeal to the High ƒƒ Settlements: the approval hearing media as potential class actions. While ƒƒ Consumer claims: against builders and Court in respect of the Bank Fees class for the proposed settlement of much of this is necessarily speculative, others involved in the development of the action against ANZ. The Abalone Virus the Fairbridge Farm proceedings Docklands Lacrosse Building following a in the next 12 months we anticipate lapsed in January 2015. While the 2014 such facts should be prima facie evidence class action appeal is expected to be ($24 million), is set for hearing on fire which spread rapidly in the building seeing a number of new securities class Bill was shelved, the new Government had capable of use in later proceedings, heard by the Victorian Court of Appeal 21 August 2015, the approval in November 2014; against Pasminco by actions filed, as well as further actions previously given bi-partisan support to the including private actions. Presently, section in 2016, following the 2014 dismissal hearing of the proposed $1.85 million Boolaroo property owners for damages issued as a result of catastrophic events legislation and it is likely to re-appear later 83 of the Competition and Consumer Act of the claim against the Victorian settlement of the wrongfully imprisoned allegedly caused by the town’s former and against government organisations. this year. 2010 (Cth) has been interpreted such that Government alleging a failure to require children class action against NSW lead smelter; against Samsung in Announcements have included: only those findings of facts derived from appropriate biosecurity. Police, the approval hearing of Cash relation to washing machine house fires; Despite the Western Australian Law Securities: actions against the Forge contested hearings are capable of having Hearings: the class action by Converters in relation to allegations ƒƒ ongoing investigations and assistance Reform Commission stating in its ƒƒ Group, Macmahon Holdings Limited, such effect. residents of Palm Island against that it charged high interest rates to regarding financial advice given by 2013/2014 annual report that its final Iluka Resources Ltd and QBE. the State of Queensland and the vulnerable customers (to be heard NAB, ANZ, CBA and Macquarie Private report on representative proceedings This recommendation, if adopted by the Police Commissioner alleging racial 12 October 2015, proposed settlement ƒƒ Other investment claims: by Wealth; and by consumers who have would be provided to the Attorney General Government, has potential implications discrimination in relation to conduct of $20 million plus $3 million in costs), investors against Macquarie Investment contracted Hepatitis A after eating frozen to table to State parliament at the end for class actions. It will make it easier for in investigating a deadly riot in 2004 and the approval hearing of Willmott Management Limited (on behalf of berry products. A number of claims of 2014, the Commission has not yet prospective class action plaintiffs to bring regarding events on Palm Island in Forests (proposed settlement of investors in van Eyk Blueprint Series announced against telecommunications released the report. Most stakeholders, proceedings for damages that follow 2011 (from 7 September 2015); the $3.1 million in relation to costs only, funds); and Westpac (in relation to loans and utility companies and against HSBC including the Law Society of Western regulatory enforcement action by the action against McGraw-Hill in relation heard on 23 July 2015). used for the allegedly unregistered and GE regarding late fees appear to Australia, expect that the Commission ACCC, removing the need to prove the be on hold pending the High Court’s will suggest the enactment of a legislative same facts again. As well as reducing to the ratings given by Standard Since the review period closed on Famularo managed investment & Poor’s to Lehman-issued CDO scheme). decision in the latest bank fees case. regime that is substantially similar to the cost, such a change could also increase 30 June 2015, we have already seen the 103 products (October 2015); the Banksia Federal Court regime. It remains to be plaintiffs’ bargaining power in negotiating settlement in the CBA/Storm class action Government organisations and In the month since the review period closed, class action, brought on behalf of ƒƒ seen whether a class action regime will be settlements in competition and consumer approved, with claimants receiving a gross public interest claims: by Nexus we have already seen class actions filed by holders of debentures (likely to be in recommended and if so, when it will be related class actions. settlement of $33.68 million, representing Energy shareholders against ASIC, investors against Sandhurst Trustees (which 2016); hearing of the class actions implemented in WA. approximately 55% of the loss of the among others, for an alleged breach oversaw the failed investment fund Wickham It is not clear whether the Government will against traffic forecaster AECOM in group member calculated under the ASIC of duties to shareholders in allowing Securities), in relation to a 2013 bushfire in accept the recommendation. The ACCC the RiverCity motorway class action The Harper Review – how Compensation Model and attributed to Seven Group Holdings to proceed with Snake Valley, near Ballarat, in relation to the initially expressed concerns that extending (29 August 2016); Newcrest (February class actions may benefit CBA, less a pro rata amount in respect of its takeover of the company; against destructive bushfire in Perth’s hills in January the effect of section 83 in this way may 2016); the trial of the Springwood 101 the applicants’ costs of the proceeding; the Western Australian Government 2014, a second class action regarding side The competition policy review undertaken reduce incentives both for parties to report bush fire class action is listed for the approval of the settlement of the by traditional owners regarding effects from the use of prolapse mesh, this by the Harper Panel has loomed large contraventions under the ACCC’s immunity 15 February 2016; Provident Capital BrisConnections class action against traffic multiple de-registrations of cultural time against American Medical Systems, and on corporate agendas over the past policy and for parties to settle investigations (commencing 7 March 2016); Scenic 102 forecaster Arup , and the approval of sites; a class action brought by the a fresh class action against Cash Converters 12 months, with the business community once commenced due to the use that Tours (April 2016); Mickleham-Kilmore the settlement in the action against CBA Tasmanian Sexual Assault Support alleging that it circumvented interest rate awaiting the Government’s response to the could be made of agreed facts. However, bushfires (expected to commence in relation to investments in synthetic Service against a convicted paedophile; caps on consumer credit by charging hefty panel’s 56 recommendations. the ACCC has since signalled support May 2016); the TWE action run collateralised debt obligations, reportedly against the Federal Government by brokerage fees. for the recommendation, deciding that it by Maurice Blackburn is listed to One recommendation could change the returning 32.5% of the $140 million in about 50 councils across Australia could “facilitate greater access to justice, commence 5 September 2016, with the climate for competition and consumer losses, plus costs. alleging unconstitutionality of GST being New class action regimes – particularly for businesses that have been TWE class action filed by MCI expected related class actions. The Panel has 104 imposed on local councils on the basis we wait impacted by anti-competitive conduct”. to be heard at the same time if it is recommended that, contrary to the current that they should be considered part The Government’s response is expected permitted to run; Equine Influenza (June In 2014, the Queensland Government position, when proceedings brought by of the state; and a claim of negligence this quarter. 2016); and the Wivenhoe Dam class sought to introduce a class action statutory the ACCC are settled and declarations of by homeowners in the Adelaide Hills action (commencing 18 July 2016). regime, largely based on the Federal Court contravention and other orders made on 104 Marcus Bezzi, ‘Balancing public and private regarding a flood prevention scheme. interests – The ACCC perspective on the Harper model. However, whilst the Justice and the basis of a statement of agreed facts, Committee Reforms’ (Paper presented at the 2015 Other Legislation Amendment Bill 2014 Competition Law Conference, Sydney, 30 May 101 Sherwood v Commonwealth Bank of Australia ƒƒ Natural disasters/events: a class 2015). See ACCC, Immunity and Cooperation (No 5) [2015] FCA 688. action on behalf of Indonesian fishermen made it to the Parliamentary Committee, 103 Martin del Gallego and Alastair McLachlan Policy (10 September 2014, see www.accc.gov.au/ 102 Bulense Holdings Pty Ltd v Arup Pty Ltd [2015] “Representative proceedings reform in Western publications/accc-immunity-cooperation-policy-for- FCA 726. and seaweed farmers following a leak due to a change in government the Bill Australia”, King & Wood Mallesons, June 2013. cartel-conduct)

40 King & Wood Mallesons “Would easily recommend Profiles to others if they Our Class Actions & had a potential class action” “We know Client quote, 2014 you’ll identify Regulatory Investigations the issues and nail them for us” Client quote, 2014 Practice

Moira Saville Alex Morris Successfully defending class action proceedings requires particular skills and resources to T +61 2 9296 2311 T +61 2 9296 2495 deal with complex legal issues, vast quantities of information, and often litigation both by [email protected] [email protected] Moira Saville specialises in dispute resolution in the areas of class Alex Morris specialises in corporate regulatory inquiries, litigation individuals and the class in multiple jurisdictions. It also requires subject matter expertise actions, professional liability, regulatory investigations and special and commercial disputes. in complex corporate, competition and public and product liability areas. commissions of inquiry. Our track record in this area is one of innovation and ingenuity. Antitrust We offer a specialised class actions team with the subject matter ƒƒ British Airways – Defending a class action alleging global experience, skills and commitment needed to help navigate a cartel conduct in the air cargo industry, following our role Peta Stevenson Patricia Matthews difficult path through complex negotiations and litigation. as Asia-Pacific counsel in respect of investigations and prosecutions by competition regulators in the region. T +61 2 9296 2492 T +61 3 9643 4221 From the initial stages of regulatory investigations to enforcement [email protected] [email protected] proceedings and third party actions for damages, clients come ƒƒ Chemtura – Acting in a class action in the Federal Court Peta Stevenson specialises in competition law, advising on regulatory Patricia Matthews specialises in commercial to our integrated team for our relationships with regulators, of Australia alleging a price fixing cartel in relation to rubber investigations, proceedings and prosecutions through to follow-on litigation, including large contractual innovative use of court process and track record of success. chemicals. The action was settled by agreement between the damages claims including class actions. disputes and insolvency matters. parties, which was approved by the Court. Tier One, We make cases more manageable, less of a distraction for the Dispute organisation, cheaper, painless and less risky from a case and overall business perspective. Infrastructure Resolution Seqwater – Acting on the class action arising out of the We have a proven track record in delivering successful class ƒƒ Asia Pacific Legal 500, 2010/2011 Queensland floods. 2015 action strategies, including approach to proceedings, knowledge Contacts of opponents and a track record of early resolution. ƒƒ Gladstone Port – Successful strike out of a class action claim alleging damage to marine life from dredging in the Port for King & Wood Mallesons has worked on some of the largest and Sydney LNG facilities on Curtis Island. most complex class action matters in Australia, including: Karen Coleman Alex Morris Moira Saville Peta Stevenson Roger Forbes T +61 2 9296 2110 T +61 2 9296 2495 T +61 2 9296 2311 T +61 2 9296 2492 T +61 2 9296 2150 M +61 407 943 065 M +61 412 878 650 M +61 407 241 824 M +61 438 289 743 M +61 409 575 565 Securities, financial products and investments Product liability [email protected] [email protected] [email protected] [email protected] [email protected] Aspen – Defending class action proceedings in the Federal Australian bank – Defending a class action brought by ƒƒ ƒƒ Court alleging negligence and misleading and deceptive Brisbane Melbourne Perth customers affected by the collapse of Storm Financial. conduct regarding the sale of a pharmaceutical product. Justin McDonnell Chris Fox Domenic Gatto Patricia Matthews Michael Lundberg Global bank – Defending a class action relating to warrants. T +61 7 3244 8099 T +61 3 9643 4116 T +61 3 9643 4460 T +61 3 9643 4221 T +61 8 9269 7107 ƒƒ Bristol-Myers Squibb – Acting in a product liability class M +61 417 196 858 M +61 418 270 408 M +61 439 249 987 M +61 407 830 744 M +61 412 970 478 ƒƒ [email protected] [email protected] [email protected] [email protected] [email protected] ƒƒPricewaterhouseCoopers – Acting in Centro securities action in the Federal Court and Supreme Court relating to class actions in the Federal Court involving allegations of silicone breast implants. China failures to disclose information concerning Centro’s debt Huang Tao Richard Wigley Guan Feng position. Class actions comprised 6,000 group members and Other T +86 10 5878 5588 T +86 10 58785588 T +86 21 2412 6000 claims of $1 billion. [email protected] [email protected] [email protected] ƒƒ Alleasing – Acting for a national rental company in class action ƒƒ Brookfield Multiplex – Securities class action concerning the proceedings in the Federal Court alleging misleading and Europe Wembley National Stadium project. Successfully challenged deceptive conduct and exclusive dealing in relation to leasing Rachel Couter Cameron Firth Louise Freeman Sarah Turnbull Elaine Whiteford the plaintiff’s litigation funding arrangements as an unregistered contracts. Proceedings settled on a “walk away” basis. T +44 20 7111 2266 T +44 20 7111 2239 T +44 20 7111 2546 T +44 20 7111 2595 T +44 20 7111 2501 managed investment scheme. [email protected] [email protected] [email protected] [email protected] [email protected] ƒƒ Travel agents – Acting for British Airways in relation to a class action commenced by travel agents against a number of airlines over their entitlement to commission payable under standard industry contracts. Acknowledgements Contributors: Mel Anderson, Neal Bedford, Mathew Briggs, Simon Burnett, Elouise Davis, Annabel Deans, James Emmerig, Sam Goldsmith, Leah Grolman, Bronte Lambourne, Marina Lauer, Rachel Loftus, Hannah Luxford, Will Mason, Nicole Parlee, Andrew Parrish, Hannah Phua, Caroline Rodgers, Suraj Sajnani, Matt Sherman, Megan Smith, Aarthi Sridharan, Chong Tsang, Rebecca Williams, Derek Wong International contributors: Helge Aulmann (Munich), Marc Lévy (Paris), Tilman Siebert (Munich), Natasha Tardif (Paris), Michaela Westrup (Munich), Elaine Whiteford (London), Richard W. Wigley (Beijing) Design/production: Claus Huttenrauch, Pamela Kemp, Helen Pearce, Alana Sun, Elizabeth Yao

42 King & Wood Mallesons SECTION ONE

About King & Wood Mallesons

As the first and only global law firm to be headquartered in Asia, King & Wood Mallesons is connecting Asia to the world, and the world to Asia. With unparalleled depth of both inbound and outbound capability, KWM is uniquely placed to support regional clients as they internationalise and international clients as they look to invest or expand into Asia. Strategically positioned in the world’s growth markets and financial capitals, the firm is powered by more than 2,700 lawyers across more than 30 international offices spanning Asia, Australia, Europe, the Middle East and North America. King & Wood Mallesons is the only law firm in the world able to practise PRC, Australian, Hong Kong, English, US and a significant range of European laws as an integrated global legal brand. KWM is providing clients with deep legal and commercial expertise, business acumen and real cultural understanding on the ground where they need it most.

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August 2015

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