Compliance with CPA obligations in group proceedings material factor in carriage application
Lidgett v Downer EDI Ltd; Kajula Pty Ltd v Downer EDI Ltd; Jowene Pty Ltd v Downer EDI Ltd; Teoh v Downer EDI Ltd [2023] VSC 574
Lidgett v Downer EDI Ltd; Kajula Pty Ltd v Downer EDI Ltd; Jowene Pty Ltd v Downer EDI Ltd; Teoh v Downer EDI Ltd [2023] VSC 574 concerned a class action carriage dispute. The Court applied the overarching purpose in the Civil Procedure Act 2010 (Vic) (CPA) to consolidate three out of four competing proceedings and stay the fourth. This case is notable insofar as the Judge found that most of the ‘usual’ factors that distinguish competing carriage applications were neutral – instead, the determinative factor in granting particular law firms carriage of the consolidated proceedings was their proven track record of cooperating with others in the proceedings, such that they were considered to be more likely to act in the best interests of the group members.
Background
Three of the proceedings (the Jowene, Teoh and Kajula proceedings) were commenced in the Federal Court of Australia and transferred to the Supreme Court of Victoria. The Lidgett proceeding was commenced in the Supreme Court of Victoria.
The Federal Court proceedings were transferred in the context of anticipated applications for group costs orders (GCOs) to be made in the Supreme Court of Victoria (as the legislation governing group proceedings in the Federal Court does not expressly provide for the making of such orders, and there is no Commonwealth legislative equivalent to s 33ZDA, being the relevant power in Victoria in the Supreme Court Act 1986 (Vic)): [30]. Prior to the transfer, the Federal Court proceedings and the Lidgett proceeding had been jointly case managed by the two courts: [4].
Consolidation
Following a conferral process, the Lidgett proceeding plaintiffs agreed to consolidate that proceeding with the Jowene and Teoh proceedings: [21].
The Kajula plaintiff was opposed to consolidation, and sought instead dismissal of the competing proceedings, and to have sole carriage of the matter: [20]. In this regard, the Kajula plaintiff submitted that given there was no proposal for the Jowene and Teoh plaintiffs to be plaintiffs in the consolidated proceeding, then the more appropriate course would be for the Jowene and Teoh proceedings to be dismissed, and for the Lidgett proceeding plaintiffs to amend their pleading: [15]. The Court rejected that argument, finding that the consolidation of the Jowene and Teoh proceedings with the Lidgett proceeding was consistent with both the overarching purpose under the CPA and r 9.12(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic): [19]. In this regard, the Court determined that dismissing the Jowene and Teoh proceedings “would send the wrong message to parties who in the future might be engaged in multiplicity disputes”: [20].
The plaintiffs in the Jowene and Teoh proceedings then sought orders that the costs of their individual proceedings be costs in the consolidated proceeding: [23]-[24]. This was opposed by the Kajula plaintiff, who argued that there was no authority in support of “an order that the costs of plaintiffs who have elected not to contest a carriage application be costs in the consolidated proceeding”: [22]. The Court rejected this argument, determining that the costs orders sought by the Jowene and Teoh plaintiffs were an appropriate exercise of the Court’s broad discretion concerning costs: [26].
GCO and Multiplicity dispute
The Court made a GCO at a rate of 21%, following what was essentially a tender process amongst the law firms involved: [42].
The Court was then required to determine two competing carriage applications, brought by the Lidgett proceeding plaintiffs, and the Kajula proceeding plaintiff. Each of the parties also sought that the other proceeding be permanently stayed: [43].
The Court ultimately found that the factor of most significance in this case was the “track record” of the law firms acting in the two competing proceedings. The Court observed that the practitioners and parties in the Lidgett consolidated proceeding had agreed to work cooperatively in the future conduct of the proceeding, and had already cooperated to narrow the issues in dispute and thereby reduce the burden imposed on the Court’s limited resources by the hearing and determination of the carriage application: [131]-[132]. The Court also accepted that the fact that three proceedings were able to be consolidated by agreement was evidence of the three law firms involved having “a proven track record in this litigation of being able to work cooperatively and in a manner consistent with the overarching obligations in the CPA”: [130]. This was held to be a material factor weighing in favour of the Lidgett consolidated proceeding, as it gave the Court confidence that “in the future those involved will act in the best interests of group members, and will discharge their overarching obligations pursuant to the CPA, likely resulting in savings of time and costs and, as a result, increasing the prospect of a more favourable return to group members: [133], [146]. On this basis, the Court ordered that the Kajula proceeding be stayed, and the Lidgett consolidated proceeding go forward: [148].
The Court otherwise found that many of the factors whichh usually distinguish competing class actions from one another were neutral in this case: [57]. However, there were a number of issues in dispute which bear noting, as they may be instructive in future matters.
One issue in dispute between the parties was the question of whether there ought to be two firms of instructing solicitors or one (as there were two law firms involved in the Lidgett consolidated proceeding). The Kajula proceeding plaintiff submitted that having only a single law firm involved in their proceeding was a factor in favour of allowing that proceeding to go forward: [68]. The Court accepted that there was a higher risk of duplicated costs where two law firms were acting (either jointly on the record, or one acting as agent for the other and carrying out a fixed proportion of the work): [79]. The Court determined that the same risk did not arise where only one law practice was acting, or where a law practice was based interstate but used a locally based firm to act as that firm’s town agent: [79]. On this basis, the Court found that the risk of costs duplication did not arise in the Kajula proceeding, but did arise in the Lidgett consolidated proceeding [79].
That said, the Court ultimately found that as a matter of policy, “it would be undesirable to treat the involvement of more than one firm following consolidation as a negative when compared to a competing proposal which relies on one firm only as the provider of the legal services”: [82]. The Court was satisfied that appropriate safeguards by way of making orders requiring the engagement of a costs referee at the plaintiff solicitors’ expense could ensure that this risk was appropriately managed (and that overall, the involvement of multiple firms was a neutral factor in determination of the carriage dispute): [82].
Another issue in dispute was the question of funding arrangements and resources. The parties devoted “significant attention” to “attacking the financial position and the funders and funding arrangements involved in the proposals of the other”: [82]. However, the Court concluded that this factor was not a basis to distinguish between the competing carriage proposals: [83]. In particular, the Court did not accept the attempted challenge by the Lidgett proceeding plaintiffs to the financial viability of the lawyers representing and litigation funder associated with the Kajula proceeding plaintiff. Specifically, the Court rejected the argument that the litigation funder’s financial position was relevant, in circumstances where, if a GCO was made, the instructing law firm in question (Quinn Emanuel) would be liable to pay any costs to the defendant and give any security the Court required pursuant to s 33ZDA(2) of the Act: [93]. In circumstances where evidence was adduced about the solid financial position of the global Quinn Emanuel partnership, the litigation funder’s financial position was “a non-issue”: [93].
Similarly, the Court rejected the submissions of the Kajula proceeding plaintiff that the funding proposal submitted by Maurice Blackburn as solicitors for the Lidgett plaintiffs needed to be “viewed through the prism of its broader financial exposure; spread across 14 on-going class actions”: [97]. In this regard, the Kajula proceeding plaintiff sought to argue that an outstanding loan facility which was significantly drawn down by Maurice Blackburn “may have a subconscious effect on Maurice Blackburn’s appetite for risk and that it may be appealing to settle a case if approaching the end of the loan period”: [100]. The Court accepted that Maurice Blackburn uses a variety of arrangements to fund proceedings and defray risks and potential financial consequences of doing so. The Court considered that its financial position was not a factor weighing against the Lidgett consolidated proceeding ([102]), and rejected the argument that the existence of the drawn-down loan facility was a matter of significance in the case: [107].
A further issue in dispute was the question of the circumstances and characteristics of the lead plaintiffs in the two proceedings. The lead plaintiff in the Kajula proceeding had made share purchases totalling $272,545.13, which spanned a large part of the claim period – by contrast, the lead plaintiff in the Lidgett proceeding acquired $15,000 in shares near the end of the claim period. The Kajula proceeding plaintiff contended that its case as lead applicant would require the Court to determine questions of causation and liability for the whole time period in issue, whereas questions of commonality might arise in the Lidgett consolidated proceeding in respect of the claim of the lead plaintiff as opposed to the claims of the other group members: [113].
The Court ultimately accepted that “the simplicity and certainty regarding the determination of issues of the Kajula plaintiff whose own case covers the entire period is a factor that weighs in favour of the Kajula proceeding going forward”, but that it was not a material factor overall: [118]. Rather, the Court determined that any risk arising from the Lidgett lead plaintiff’s share purchases not spanning the entire period could be dealt with via case management (for example, by using sample group members).
On a related note, the Court considered that it is undesirable that the individual training, qualifications, experience or circumstances of lead plaintiffs themselves be regarded as a relevant factor in the resolution of a carriage dispute (being a further matter regarding the lead plaintiffs which the parties sought to argue): [123].
