By Michael Legg and Joshua Kang -
Snapshot
- Australian courts have broad powers to make orders to manage cases of multiple representative proceedings, or class actions, brought against the same defendant(s) if it is in the interests of justice to do so.
- In Smith v Australian Executor Trustees Limited; Creighton v Australian Executor Trustees Limited [2016] NSWSC 17, the Supreme Court of NSW addressed the problem of two partially overlapping classes. Group members were allowed to decide which class action they would opt out of, or the court would make orders removing them from the class action they had not affirmatively joined.
- The decision shows, at least in New South Wales, a reluctance on the part of the Court to select a class or consolidate proceedings, where there are differences in funding arrangements and case strategy.
Australian Executor Trustees Limited (‘AET’) was the trustee for holders of debentures issued by Provident Capital Limited (‘Provident’) under the provisions of Chapter 2L of the Corporations Act 2001 (Cth) (‘the Act’). Following the collapse of Provident in 2012, two class actions were brought by the beneficial debenture holders against AET for the recovery of loss and damage under s 283F of the Act arising out of alleged breaches by AET of duties it owed to them under s 283DA.
Concurrent class actions
The class action first in time (the ‘Creighton class action’) was brought by an open class (the ‘Creighton Class’), through Slater & Gordon on a conditional fee basis.
If successful, members of the Creighton Class would be billed for Slater & Gordon’s professional costs and disbursements, a 25 per cent premium on professional fees and the costs of the insurance Slater & Gordon took out to cover its indemnification of the class members.
The second class action (the ‘Smith class action’) was brought by a closed class (the ‘Smith Class’), comprising a category of debenture holders who had signed an agreement with a litigation funder. If successful, members of the Smith Class would pay between 30 per cent and 40 per cent of the amount recovered, a share of the legal costs and a share of the management fee of $5,000 per month to its litigation funder.
The Smith Class had already been successful in seeking orders for the preparation of the matter for hearing, including summonses and orders for the production of certain documents, under s 596A of the Act, which provides for the mandatory examination of a corporation’s affairs where the corporation is in external administration.
Whilst both class actions were in substance concerned with the same event and there was a substantial overlap in pleadings and evidence relied upon between the class actions, there were also substantial differences.
One such difference was the difference in dates by which each class action alleged that AET should have taken steps consistent with its duties under s 283 of the Act to ensure a receiver
was appointed for Provident; this distinction resulted in a difference in the loss claimed.
The Court found that there was little prospect of the legal representatives of each class cooperating with one another.
