First in not necessarily best dressed when it comes to competing class actions
- Whether the first-filed class action will be given preference to proceed against other competing class actions that arise out of the same controversy.
As a result of evidence given by AMP executives at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, five separate class actions were commenced on behalf of AMP Shareholders within 5 weeks of each other. Each of the class actions were made on the basis that the company had breached its continuous disclosure obligations and misled its shareholders in that shares were said to have been purchased at inflated prices. Although each of the proceedings related to the same controversy and had significant overlap, they were not identical. The first-filed proceedings were commenced on behalf of Marion Wigmans (Wigmans’ proceeding).
NSW Supreme Court and Court of Appeal proceedings
At first instance, Ward CJ in Eq approached the determination of stay applications filed by each class by assessing the relative potential benefits expected to flow to group members from each of the competing class actions using a multi-factorial analysis. Her Honour ordered that Wigmans’ proceeding and two of the other actions be permanently stayed, and proceedings brought by Fernbrook (Aust) Investments Pty Ltd and Komlotex Pty Ltd be consolidated. Notably, the consolidated proceedings which were able to proceed offered a “no win, no fee” funding model.
The appellant then appealed to the NSW Court of Appeal, arguing that a competing class action proceeding must show that the first-filed proceeding was ‘clearly inappropriate’ in order to stay that first-filed proceeding. However, the Court of Appeal considered that the sequence of filing competing class actions is less relevant when they are commenced in relatively quick succession. The appellant then sought to appeal to the High Court of Australia on the following grounds:
- the NSW Court of Appeal erred in failing to apply a presumption that it is prima facie vexatious and oppressive to commence an action if an action is already pending in respect of the same controversy; and
- the Court of Appeal erred in refusing to grant leave to appeal in respect of whether the primary judge erred by acting upon the assumption that the proceedings brought by different classes of plaintiffs had an equal chance of achieving each possible settlement or judgment outcome within the range of possible outcomes, and should have found that in doing so, the primary judge had erred.
Decision of the High Court of Australia
A 3:2 majority of the High Court of Australia (Gordon, Gageler and Edelman JJ) dismissed the appeal. Their Honours considered that there was no “one size fits all” approach to determining which competing class action should proceed. However, they did not accept the appellant’s argument that there is a rule or presumption that the class action commenced first in time should prevail. Instead, they took the view that it is necessary for the Court to determine which proceeding going ahead would be in the best interests of group members. To that end, the majority found that the factors which may be considered cannot be exhaustively listed and will vary from case to case.
The High Court majority’s decision affirms the multi-factorial approach taken by New South Wales and Federal Courts, which involves a competing class action ‘beauty parade’. This decision leaves room for uncertainty as to the approach that a Court would take in particular cases to determine which competing class action will proceed. However, the Court will prefer the proceeding which is in the best interest of the group members. It is likely that the proposed litigation funding model would be an important factor, as it was in these proceedings.
This article was authored by Patrick Johnson.