Issue 82 - March 2018
Class Actions Arrive in Queensland

fish_intro.jpgA representative proceeding or class action is “a generic term for a procedure whereby the claims of many individuals against the same defendant can be brought or conducted by a single representative”. [1]

In Queensland, the Limitation of Actions (Institutional Child Sexual Abuse) and Other Legislation Amendment Act 2016 (Qld) inserted Pt 13A into the Civil Proceedings Act 2011 (Qld) so as to make ‘representative proceedings’ available. Part 13A commenced on 1 March 2017. Part 13A is modelled on the Federal Court regime[2] with some alterations. Similar class action regimes also exist in Victoria and New South Wales. [3]

Commencement 

Central to the class action are its representative and aggregative character. For the aggregation and representation to be permitted there needs to be a certain level of cohesion to the claims which makes it both fair and efficient to resolve those claims together. This is addressed through the requirements for commencement and discontinuance.

The requirements to commence a class action in the Supreme Court of Queensland are set out in s 103B of the Civil Proceedings Act 2011 (Qld) which provides that a class action may be started where:

a) 7 or more persons have claims against the same person; and

b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and

c) the claims of all those persons give rise to a substantial common issue of law or fact;

 a proceeding may be commenced by one or more of those persons as representing some or all of them.

The proceeding may be started by 1 or more of the persons on behalf of some or all of the other persons.

Further, the proceeding may be commenced whether or not the relief sought includes claims for damages that require individual assessment and whether or not the relief sought is the same for each person represented. Similarly, the proceeding may be commenced whether or not it is concerned with separate contracts or transactions between the individual group members and the defendants, or involves separate acts or omissions of the defendants done or omitted to be done in relation to individual group members.[4] These provisions aim to resolve or overcome issues which thwarted representative actions in the courts of equity. [5]

Section 103C(1) addresses standing and states that:

A person who has a claim as mentioned in section 103B(1)(a) has a sufficient interest to start a representative proceeding against another person (the "proposed defendant") on behalf of other persons who also have a claim as mentioned in that section if the person has standing to start proceedings on the person’s own behalf against the proposed defendant.

Section 103C(2) adds:

The person may start a representative proceeding on behalf of other persons against more than 1 defendant, whether or not each of the other persons have a claim against each of the defendants in the proceeding.

This provision seeks to resolve what was a long-running controversy in the Federal Court in relation to class actions involving multiple respondents and whether each group member must have a claim against each respondent.[6] Section 103C(2) answers that question in the negative – each of the ‘other persons’ (ie group members) do not need to claim against each of the defendants.

Section 103F makes provision for the inclusion of specific matters in the originating process for a class action as follows:

(1) The originating process for a representative proceeding, or a document filed in support of the originating process, must, in addition to any other matters required—

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

(b) state the nature of the claims made and relief sought on behalf of the group members; and

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

(2) For describing or otherwise identifying the group members under subsection (1)(a), it is not necessary to name or state the number of the group members.

These requirements are designed to demonstrate that the criteria in s 103B have been met. [7] A class action may be unable to proceed if the group or the common questions cannot be adequately defined. [8]

Group Definition

A key characteristic of the Queensland class actions regime is the adoption of the opt out approach to group definition. Section 103D states that generally the consent of a person to be a group member is not required. However, section 103G requires that the court must fix a date before which a group member may opt out of, or exclude themselves from, a class action. The opportunity to opt out is facilitated by section 103T which requires the giving of notice to group members of the right to opt out. If a group member falling within the defined group does not opt out then section 103X provides that they are bound by the outcome of the proceedings.

Class actions traditionally adopted a group definition that sought to include all potential claimants at commencement and then at a later time provided notice of the right to opt out. However, in the Federal Court it was held that s 33C(1) (the equivalent to s 103B in the Queensland regime) permitted a representative party to commence a proceeding where they are representing ‘some or all’ of the group members thus allowing for a proceeding on behalf of less than all of the potential members of the group. [9] This decision then meant that class actions may be commenced with either an ‘open’ or ‘closed’ group definition.

An open group or class seeks to include all group members who have suffered loss or damage caused by the conduct of the defendant. It is the traditional opt out class action. A closed class is composed of a limited or identified number of persons rather than all those who suffered loss or damage as a result of the conduct of a respondent. The group definition often has as an additional requirement, being the entry into a litigation funding agreement with the funder financing the class action, so that only funded group members are included. Under both approaches, the group members must be afforded an opportunity to opt out. [10]

Where an open class definition is employed, the group is usually larger but the identity of some or most of the group will be unknown. To conclude the class action it may be necessary to ‘close the class’, meaning that the group members will be required by court order to come forward and identify themselves. [11] Failing to register will have ramifications for group members, such as not being able to participate in any settlement and having their claim extinguished.[12]

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Discontinuing Proceedings as a Class Action

The threshold requirements of s 103B may be easily met, but a court may still use its discretion under s 103K to order the discontinuance of a representative proceeding. [13]  This section will explain the Federal and Victorian jurisprudence on the equivalent to s103K, namely s 33N.

The Federal Court’s general approach to class actions and discontinuance is explained by Lindgren J in Bright v Femcare: [14]

ordinarily one would expect that, in an attempt to give effect to the legislative intention, a means will be sought, by case management techniques, to enable a representative proceeding to continue to the stage of resolution of the substantial common issues on the basis that after that stage is completed, an order under s 33N or directions under s 33Q[15] will be made ...

Under s 33N, the court of its own motion or on application by the respondent may order that the proceeding not continue as a representative proceeding where it is in the interests of justice to do so because:

(a) the costs that would be incurred if the proceeding were to continue as a representative proceeding are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding; or

(b) all the relief sought can be obtained by means of a proceeding other than a representative proceeding under this Part; or

(c) the representative proceeding will not provide an efficient and effective means of dealing with the claims of group members; or

(d) it is otherwise inappropriate that the claims be pursued by means of a representative proceeding.

The operation of s 33N was summarised by Forrest J in AS v Minister for Immigration as follows: [16]

First, the requirements of ss 33C and 33N are not to be conflated. Provided a claim satisfies s 33C (in that it either has not been challenged or any challenge has been defeated) then the provisions of s 33N (if invoked) dictate whether it can proceed to determination as a class action.

Second, it is not necessary for the representative plaintiff’s claim to determine all, or for that matter even a substantial amount, of the identified common issues.

Third, in carrying out the analysis under s 33N(1), it is necessary that the Court determine:

(a) whether one of the conditions contained in s 33N(1)(a) to (d) have been satisfied; and

(b) then, whether it is in the interests of justice to make an order of discontinuance in relation to that condition.

Fourth, and this relates specifically to 33N(1)(c), it is necessary to consider whether the determination of the representative proceeding is an effective and efficient mechanism to resolve the common issue(s) relevant to the group members to give some utility or benefit to the case continuing to trial as a representative claim. The inquiry is wide and requires the Court to focus on what are (and are not) the commonality of issues agitated in the representative proceeding with those of the group members.

Fifth, in terms of the analysis under s 33N(1)(c) in most, but not necessarily all, cases, it will be necessary to compare the utility of the representative plaintiff’s claim as against that of the prosecution of individual claims by group members.

Sixth, the management of the trial in the context of the agitation of disparate issues which may be irrelevant to the claim of the representative plaintiff is a relevant consideration in determining whether to permit the proceeding to continue as a class action.

Seventh, there is no prescribed time at which an application under s 33N should be made. The authorities, in general, demonstrate that such a determination should not be made until there is a full understanding of the representative plaintiff’s case and how it relates to both the common questions and the interests of the group members. It follows that such a determination may be made after the pleadings have closed, or once outlines of evidence have been exchanged (if that be ordered) or, for that matter, during or at the conclusion of the trial. What is important is that the Court is in a position to assess the requirements of s 33N(1) including, of course, that of it being in the interests of justice to terminate the representative proceeding.

In AS v Minister for Immigration, the representative party, AS, brought a personal injury claim in relation to her detention as an asylum seeker on Christmas Island and on behalf of all persons (adults, minors and pregnant women) held at the detention centre between 27 August 2011 and 26 August 2014 who suffered personal injury because of the failure of the defendants to provide reasonable care for their health and wellbeing (including education for minors) whilst in detention. Forrest J ‘declassed’ the proceeding relying on s 33N(1)(c) because the claim of AS was individual to her and did not involve ‘the consideration of a common thread which permeates the claims of other group members’. [17]  Forrest J contrasted the claim of AS with single event claims such as a bushfire or a product liability claim where the risk giving rise to a duty and breach was common to all group members — ‘that the failure of an electricity conductor may cause a bushfire, or that a product may produce a particular type of injury’. [18]

The existence of individual issues does not prevent a class action from being commenced. However, an imbalance between common and individual issues may lead to a determination that it is in the interests of justice that the class action should not proceed.

Where the court makes an order that a proceeding no longer continue under a class action regime, the proceeding may be continued by the representative party on his or her own behalf against the respondent. [19]

The NSW and Queensland Additions

In NSW the s33N equivalent was buttressed by adding a ground for discontinuance based on the representative party not being able to adequately represent the interests of the group members. [20] This additional ground has been adopted in Queensland. [21]

Adequate representation embodies the ideals of loyalty and common – not conflicting – interests. Inadequacy may also arise because the representative is passive or apathetic. Adequate representation ensures that although a group member’s rights are determined without him or her being present, or afforded a hearing, their interests are before the court because the representative shares those same interests. [22]

The adequate representation ground was considered in the Queensland Floods class action.

The class action was originally brought in the Supreme Court of New South Wales through a closed class that had been commenced in July 2014 (the “Rodriguez proceeding”). A second class action was commenced by Philip Thomas Hassid as the representative party on 9 January 2017. The Hassid class action was unable to obtain litigation funding and orders for the filing of evidence and provision of security for costs were not complied with. In Hassid v Queensland Bulk Water Supply Authority t/as Seqwater (No 2) [2017] NSWSC 1064 the defendants' sought orders that the proceedings, including all of the claims of group members, be dismissed or permanently stayed based on the failure of the representative party to properly prosecute the proceedings, specifically, their failure to provide their affidavit evidence in accordance with the directions, comply with other procedural directions and to provide the agreed security. In the alternative, the Court was asked to discontinue the proceedings as a class action under s 166(1)(d) of the Civil Procedure Act because the relevant representative party was "not able to adequately represent the interests of group members". Beech-Jones J declined to dismiss the claims of group members on the basis that “it would be unjust for them to have any rights that they may have to bring a claim extinguished because the person that just happened to bring the proceedings proved unable to prosecute them properly”. [23]  However, his Honour did discontinue the class action relying on the power in s 166(1)(d) that it was inappropriate that the claims be pursued through a class action due to the extensive defaults of the representative party. [24]

In NSW and Queensland the interpretation of “otherwise inappropriate” has also been affected by an additional provision aimed at ensuring availability of a closed class. The legislation states that it is not inappropriate for a class action to be employed merely because the group does not include all persons on whose behalf the proceedings might have been brought or the persons are aggregated together for as particular purpose such as litigation funding. [25]

Settlement

Unlike regular litigation, a class action cannot simply be settled by agreement between the parties. Section 103R provides that ‘A representative proceeding may not be settled or discontinued without the approval of the court’. Court approval is required because settlement will affect the group members not just the plaintiff and defendant, but some group members may have no legal representation or conflicts of interest may arise. Moreover, the traditional adversarial positions may dissipate as the parties become ‘friends of the deal’. [26]

The criteria for approving settlements in the Federal Court and Supreme Court of Victoria has been discussed on a number of occasions and has crystallised into two main questions: whether (a) the proposed settlement is fair and reasonable having regard to the claims made on behalf of the group members who will be bound by the settlement; and (b) the proposed settlement has been undertaken in the interests of group members, as well as those of the plaintiff, and not just in the interests of the plaintiff and the defendant(s). [27]

When applying for Court approval of a settlement the parties will usually be required to address at least the following factors: [28]

(a) the complexity and likely duration of the litigation;

(b) the reaction of the group to the settlement;

(c) the stage of the proceedings;

(d) the risks of establishing liability;

(e) the risks of establishing loss or damage;

(f) the risks of maintaining a representative proceeding;

(g) the ability of the defendant to withstand a greater judgment;

(h) the range of reasonableness of the settlement in light of the best recovery;

(i) the range of reasonableness of the settlement in light of all the attendant risks of litigation; and

(j) the terms of any advice received from counsel and/or from any independent expert in relation to the issues which arise in the proceeding.

The settlement approval process will also address the payment of legal fees to the plaintiff’s lawyer and the payment of any litigation funding fee. [29]

Trial

‘Ordinarily the trial of the action will be aimed at resolving all common questions together with any non-common questions raised by the applicant’s personal claim (eg. the applicant’s individual claim for damages)’. [30]  For example, in the DePuy ASR Hips product liability class action, Wigney J explained: [31]

In broad terms, the trial concerned the determination of the issues of fact and law that were common to the applicants and group members; primarily those issues that would determine whether DePuy and Johnson & Johnson Medical were liable, under the Trade Practices Act or in negligence, in respect of any loss or damage suffered by the applicants and group members. The quantum of any award of damages, in respect of [the applicants,] Mrs Stanford and Mr Dunsmore, was also to be determined.

Judgment and reasons dealing with the representative party’s claim can provide guidance as to how group members’ claims may be resolved.

Consequently, it is important that the representative party’s claim is an effective vehicle for bringing forth the common issues in the class action.

Conclusion

While class actions are in one sense mere procedural devices for resolving numerous claims, they also alter the usual requirements of civil justice for group members, such as replacing the need for the litigants presence and opportunity to participate with requirements for cohesion of claims, representation by another, the right to opt out, court oversight, the need for settlement approval and the use of notices. Consequently, the group members are often placed in a vulnerable position and the lawyer running the class action and the courts must take account of the group’s interests.

Michael Legg 



* Professor, UNSW Law and Of Counsel, Jones Day.

[1] Australian Law Reform Commission (ALRC), Grouped Proceedings in the Federal Court, Report No 46 (1988) [1].

[2] The Federal Court of Australia Amendment Act 1991 (Cth), provided for ‘representative proceedings’ through inserting Pt IVA into the Federal Court of Australia Act 1976 (Cth). Part IVA commenced on 4 March 1992.

[3] See Supreme Court Act 1986 (Vic) Pt 4A; Civil Procedure Act 2005 (NSW) Pt 10.

[4] Civil Proceedings Act 2011 (Qld) s 103B(2).

[5] Wong v Silkfield Pty Ltd (1999) 199 CLR 255, [12].

[6] In Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 it was held that every group member must have a claim against every respondent whereas in Bray v Hoffman La-Roche Ltd (2003) 130 FCR 317 it was held that it is only the representative of the group who must have a claim against each and every respondent. The issue was resolved by Cash Converters International Limited v Gray [2014] FCAFC 111 that held that each group member did not have to have a claim against each respondent. See John Emmerig and Michael Legg, ‘Full Federal Court Relaxes Commencement Requirements for Australian Class Actions’ (2014) 3 Journal of Civil Litigation and Practice 92.

[7] Wong v Silkfield Pty Ltd (1999) 199 CLR 255, [8].

[8] See Petrusevski v Bulldogs Rugby League Ltd [2003] FCA 61, [23] and [38].

[9] Multiplex Funds Management Ltd v P Dawson Nominees Pty Ltd (2007) 164 FCR 275, [111].

[10] Michael Legg, ‘Ramifications of the Recognition of a Common Fund in Australian Class Actions: An Early Appraisal’ (2017) 91 Australian Law Journal 655, 657

[11] Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98, [74]-[75].

[12] See eg Inabu Pty Ltd v Leighton Holdings Ltd [2014] FCA 622, [17]. See also Michael Legg, ‘The Controversial Class Closure Mechanism: Is it Fair?’, Law Society Journal, April 2016 72.

[13] Bright v Femcare Ltd (2002) 195 ALR 574, [128] and Multiplex Funds Management Ltd v P Dawson Nominees Pty Ltd (2007) 164 FCR 275, [13]-[15], [179]-[192]. Other powers of discontinuance exist in ss 103I and 103J but their equivalents in the other jurisdictions have rarely been relied on.

[14] Bright v Femcare Ltd (2002) 195 ALR 574, [18] citing the order made by French J in Zhang De Yong v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384, 403, 404 and the course followed by Stone J in Vasram v AMP Life Ltd [2000] FCA 1676, [18].

[15] Section 33Q is the equivalent of Civil Proceedings Act 2011 (Qld) s 103M. Both provide the court with power to deal with individual issues, including through the use of sub-groups.

[16] AS v Minister for Immigration (Ruling No 7) [2017] VSC 137, [61]-[67].

[17] AS v Minister for Immigration (Ruling No 7) [2017] VSC 137, [73].

[18] AS v Minister for Immigration (Ruling No 7) [2017] VSC 137, [86].

[19] Civil Proceedings Act 2011 (Qld) s 103L(a); Federal Court of Australia Act 1976 (Cth) s 33P(a).

[20] Civil Procedure Act 2005 (NSW) s 166(1)(d).

[21] Civil Proceedings Act 2011 (Qld) s 103K(1)(d).

[22] Michael Legg, “Judge's Role in Settlement of Representative Proceedings: Lessons from United States Class Actions” (2004) 78 Australian Law Journal 58, 63-64.

[23] Hassid v Queensland Bulk Water Supply Authority t/as Seqwater (No 2) [2017] NSWSC 1064, [24].

[24] Hassid v Queensland Bulk Water Supply Authority t/as Seqwater (No 2) [2017] NSWSC 1064, [26].

[25] Civil Procedure Act 2005 (NSW) s166(2); Civil Proceedings Act 2011 (Qld) s 103K(2).

[26] Kelly v Willmott Forest (in liq) (No 4) (2016) 335 ALR 439, [63].

[27] Australian Competition and Consumer Commission (ACCC) v Chats House Investments Pty Ltd (1996) 71 FCR 250; Australian Securities and Investments Commission v Richards [2013] FCAFC 89, [7]; Matthews v Ausnet Electricity Services Pty Ltd [2014] VSC 663, [34]; Downie v Spiral Foods Pty Ltd [2015] VSC 190, [45].

[28] See, eg, Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2011] FCA 671, [68]–[77]; Pharm-a-Care Laboratories Pty Ltd v Commonwealth (No 6) [2011] FCA 277, [20]–[27], [37].

[29] Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98, [90].

[30] Federal Court, Class Actions Practice Note (GPN-CA), 25 October 2016, [3.2].

[31] Stanford v DePuy International Ltd (No 6) [2016] FCA 1452, [26].