High Court's call on competing class actions useful, but more reform needed to bring certainty for all parties

10 Mar 2021

Plaintiffs and defendants in class actions will take some comfort from the High Court's decision in Wigmans v AMP Limited [2021] HCA 7, which has (in a 3-2 decision) affirmed the NSW Supreme Court’s jurisdiction to manage competing class actions by allowing one to go forward and staying the remainder, which should reduce costs for both sides.

But this decision only applies to the NSW Supreme Court: the 3-2 decision and the High Court’s affirmation of a case-by-case approach reinforce the need for the sort of systematic reform many have been calling for.

Multifactorial approach OK – sometimes – for deciding between competing class actions

Ms Wigmans launched her class action in the NSW Supreme Court; she was quickly followed by four others in the Federal Court. The five class actions covered similar, but not identical ground. The four Federal Court actions were transferred to the NSW Supreme Court, where the trial judge applied a multifactorial test that considered:

  • the competing funding proposals, costs estimates and net hypothetical return to members;
  • the proposals for security;
  • the nature and scope of the causes of action advanced (and relevant case theories);
  • the size of the respective classes;
  • the extent of any bookbuild;
  • the experience of the legal practitioners (and funders, where applicable) and availability of resources;
  • the state of progress of the proceedings; and
  • the conduct of the representative plaintiffs to date.

Giving the most weight to the first factor, the trial judge stayed Ms Wigmans' action and three others, and allowed only one to go forward. Ms Wigmans challenged this on the basis that the NSW Supreme Court did not have the power to choose between multiple, properly commenced, class actions.

By 3-2, the High Court disagreed. In doing so Justices Gordon, Gageler and Edelman said:

"there can be no "one size fits all" approach. There is no rule or presumption that the representative proceeding commenced first in time should prevail. In matters involving competing open class representative proceedings with several firms of solicitors and different funding models, where the interests of the defendant are not differentially affected, it is necessary for the court to determine which proceeding going ahead would be in the best interests of group members. The factors that might be relevant cannot be exhaustively listed and will vary from case to case."

The Court also put forward possible alternative approaches to the Court's multifactorial assessment, which were not explored in argument on appeal, including use of special referees (to give insight into the litigation funding arrangements) and contradictors (to act on behalf of group members) or to take "other steps" to address the underlying difficulties and potential conflicts of interest which can arise where one or more funders is involved in representative proceedings.

In this context, the Court also reinforced the need for transparency and disclosure to group members whose rights are affected by the proceedings, principally through the notice procedure under section 175(5) of the Civil Procedure Act 2005 (NSW).

Good, but more is needed to resolve competing class actions

A clear way forward would be good both for ordinary people who need a functioning class actions system to get redress, and defendants who rely on consistency. The fact that a case management issue on class actions has gone to the High Court is proof the aspects of the current system are in need of reform. The High Court's decision still leaves uncertainty as to the approach which will be taken in particular cases to resolving competing class actions.

Even though the High Court affirmed the methods used by the courts below, it is limited to the NSW Supreme Court, and complicated matters by floating other approaches. There is still pressure on the Federal Government to bring in a formal method for the Federal Court to manage competing class actions (and States too). The Joint Parliamentary Committee inquiring into litigation funding recommends that the Federal Court be given an express power to resolve competing class actions and that the Practice Note set out the process for doing so (including a 90 day standstill followed by a selection hearing). Such an approach would be consistent with overseas jurisdictions like the US, Canada, UK and certain European systems, which have some form of "certification" requirement that means Courts make an early decision as to which actions will (and won't) proceed. If there was ever any doubt about the desirability of such reforms (in both Federal and State courts), Wigmans makes it clear that they should occur.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.