Group definition amendments in representative proceedings

Ethicon Sàrlv Gill; Gill v Ethicon Sàrl (No 3) [2018] FCAFC 137; (2019) 369 ALR 175

The decision of the Full Court of the Federal Court, and the separate decision of Lee J, in the Ethicon Sàrl class action, provide a useful diptych of modern-day class action jurisprudence relating to amendments to group definitions. These cases also provide a reminder of the bespoke nature of Part IVA (and its analogues) and why analogies drawn from inter partes litigation may confuse, rather than illuminate, issues. Together, the cases remind practitioners that real care and attention should be taken when amending group definitions.

The Ethicon Sàrl class action relates to three representative applicants who, together with group members, were surgically implanted with pelvic mesh implants (the Implants). Whilst the impetus for this case note was the decision of Lee J, in order to place that in context, it is necessary to consider the earlier decision of the Full Court.

Ethicon Sàrl v Gill [2018] FCAFC 137 (Allsop CJ, Murphy and Lee JJ)

The principal issue for consideration related to an amendment altering the description of group members and a decision to permit that amendment to take effect from commencement of the proceeding in 2012.

Upon commencement of the proceeding, the originating application and statement of claim described the group members as “persons (Group Members) who had surgery performed on them in Australia to implant one or more of [the Implants]”. The group definition had no temporal limitation.

The group definition was amended iteratively between 2013-2015.

In 2018, the applicants sought amendments to the group definition to capture persons who “at any time (including after the commencement of these Proceedings)” met the specified criteria. The trial judge permitted the amendments changing the “cut-off date” for claimants meeting the criteria for group membership to a date just prior to the commencement of the trial in July 2017. The trial judge held (but no order was made to the effect) that the amendment took effect from the commencement of the proceeding.

These were the decisions that were the subject of the appeal and were referred to as the “cut-off date” issue and the “relation-back date” issue. The representative parties cross-appealed, asserting that the “cut-off date” ought to have been the date of judgment, or approval of any settlement, alternatively the date when leave was granted to make the definition amendment. Ethicon Sàrl sought leave to appeal and contended, in part, that the definition amendment should take effect from the date of amendment.

The Full Court noted that argument before the trial judge had proceeded on an incorrect premise as the parties had paid little regard to how previous amendments to the definition of group members (all with no temporal limitations) operated to capture the claims of all persons who met the criteria specified in those definitions at the time the amendments had been made.

Their Honours surveyed a fundamental conceptual underpinning of Part IVA, namely pursuant to s 33A, a group comprises persons and not the claims of persons. Claims exist separately from persons: para [25].[1] As such, when the proceeding was commenced it was on behalf of an identifiable class of persons, being: (a) persons who had surgery performed in Australia; and (b) where the surgery was to implant the Implants.

The effect of the amendments to the group definition were not so much that persons were excluded, but rather, that the existing class was augmented each time the amendment was made: para [28]. That meant that at the time of the application before the trial judge in 2018, the relevant group definition was that which existed by reason of the amendments in 2016 (and not the definition existing at the time of the commencement of the proceeding in 2012, or some other date).

As to the “cut-off” date and whether it ought to be a date in the future, their Honours observed that it was inimical to the statutory opt-out scheme for group membership to change automatically upon some future event and in a manner that provided no certainty as to who comprised the group. Their Honours held it was sufficient that the date chosen by the trial judge was open and provided a certain group definition. It did not matter that another date could have been chosen.

On the “relation-back” issue, their Honours held the amendment ought to have taken effect from the date of the amendment. Their Honours observed that particular attention ought to be paid to group definition amendments and without laying down an inflexible rule, the default position is that an order amending a group definition has effect from the time the definition is changed, consistently with the requirements of class certainty: para [52].[3]

Gill v Ethicon Sàrl (No 3) (2019) 369 ALR 175 (Lee J)

Whilst judgment in the principal trial was reserved, an application was made by the representative parties for leave to expand the group definition to a date to be fixed. The application was heard by Lee J. After a contested application, his Honour made orders granting leave.

It is usual practice in class actions for there to be an initial hearing on the identified common questions, usually relating to liability and the loss and damage of the representative party. Contrary to common practice, no “Merck orders” had been made in the substantive proceeding. Such orders identify precisely the common issues to be determined, or common questions, the answers to which will bind all group members (other than those who have opted-out) by what has been described by the High Court as a statutory estoppel.[4] Justice Lee observed that such practice of proceeding without Merck orders was inimical to the overarching purpose and ought not to be repeated: para [12].

In fact, even at the point of hearing before his Honour, there was no agreement between the parties on the common questions. This was driven by a lack of agreement as to the proper scope of the trial.

The representative applicants asserted it was open for the Court to find that all Implants were defective because they all used mesh partly made of polypropylene.

The respondents said that each product had to be approached individually, because of the differences in size, shape, treatment objective and implantation process and changes to instructions for use over time, and it was for the applicants to adduce evidence to establish their case for each of the Implants: paras [14]-[15]. The respondents asserted that to permit the amendment to the “cut-off date” to a date after 2017 was futile because there was no evidence before the trial judge post-2017: para [18]. As his Honour observed, this contention was based on an assumption that the trial judge would necessarily reject the contention that all Implants were defective because they all use mesh partly made of polypropylene: para [34].

His Honour noted that – amongst this disagreement – it was agreed that the case advanced by the plaintiff was one that involved all Implants being defective because they used mesh made of polypropylene (described by counsel for the respondents as “unsafe at any speed”). Given this, there was no reason why the group definition could not be amended to include the claims of group members falling within the definition up until the date of an order for amendment: paras [26]-[27].

Justice Lee noted that whilst a similar amendment application had been made and rejected by the trial judge (which was the subject of the Full Court decision), there was no reason to refuse, at this juncture and at the point where class closure orders had been made,[10] to expand the definition to include all persons up to the date of hearing or a date in the near future. This was particularly so in circumstances where his Honour indicated that he intended to fix the matter for mediation following judgment at the initial trial. In that case, there was no reason why the group should be confined to a past date. This should not be taken as an invitation for serial amendments to group definitions. As his Honour concluded, the discretionary considerations arising on any future application in another context could well be different: para [32].

[1] Citing Dillon v RBS Group (Australia) Pty Limited (2017) 252 FCR 150, at pp 160-161 [50] (Lee J).

[3] One issue that is raised observationally in the judgment, but not determined, is the position of group members who are essentially “amended out” of a group definition and how this affects the extant suspension of limitation periods applicable to the claims of group members to which the proceeding relates, given the Act is silent on this scenario: see [27], [52]. This issue is outside the scope of this case note.

[4]Timbercorp Finance Pty Ltd (in liquidation) v Collins (2016) 259 CLR 212, at [52] (French CJ, Kiefel, Keane and Nettle JJ).

[5]At [12].

[6]See [14]-[15].

[7]At [18].

[8]At [34].

[9]At [26]-[27].

[10]Gill v Ethicon Sàrl (No 2) (2019) 134 ACSR 649 (Lee J).

[11]At [32].

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