12 Jun 2014
Furthering the reach of class actions: Gray v Cash Converters
by Ross McInnes, Nina Markovic
Gray points to a more expansive reading of the class action requirements, but the issue will probably need to be determined once and for all by the Full Federal Court.
In class actions with multiple respondents there has been a long-running controversy (at least in the Federal Court and Victoria) about whether each group member must have a claim against each respondent. Conflicting Full Court authority has shrouded the issue in uncertainty for many years.
The most recent decision on the point – Gray v Cash Converters  FCA 420 – prefers an expansive reading of the class action regime, which will further the reach of class action litigation and make them easier to pursue.
Section 33C(1) of the Federal Court of Australia Act 1976 (Cth) (and corresponding provisions in Victoria) outlines the requirements that must be satisfied for the commencement of a representative proceeding under Part IVA of the Act. One of those requirements is that a minimum of seven or more persons must have a claim against "the same person".
While it is clear that group members must have a claim against at least one respondent, there has been controversy over whether all group members must have a claim against each respondent, where there are multiple respondents to a proceeding. In the Federal Court and Victoria, which both have similar class action regimes, there has been ambiguous and conflicting authority.
Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 was the first appellate decision to consider the issue. Justice Sackville stated that "s 33C(1)(a) requires every applicant and represented party to have a claim against the one respondent or, if there is more than one, against all respondents".
This decision was then followed by single judges in the Federal Court until Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317. In that case, Justices Carr and Finkelstein disagreed with Philip Morris.
In McBride v Monzie Pty Ltd (2010) 189 FCR 301, Justice Finkelstein held that his own decision in Bray had overruled Philip Morris.
So far, single judges have been reluctant to follow the reasoning of Justices Carr and Finkelstein in Bray, and the prevailing view appeared to support the findings in Philip Morris. However, the most recent decision in Gray v Cash Converters suggests the tide may be turning.
Ms Gray brings two class actions against companies in the Cash Converters group
Ms Gray commenced two representative proceedings against Cash Converters and related companies and franchisees on behalf of herself and on behalf of persons who entered into contracts for personal loans and cash advances with Cash Converters.
The statement of claim in the personal loans action included persons who entered into personal loans with either Safrock Finance Corporation (QLD) Pty Ltd or Cash Converters Personal Finance Pty Ltd, both subsidiaries of Cash Converters International Pty Ltd.
The definition of Group Member in the cash advances action included persons who entered into credit contracts with Cash Converters (Cash Advance) Pty Ltd and franchises of Cash Converters Pty Ltd, both subsidiaries of Cash Converters International Pty Ltd. Ms Gray's own cash advance contracts were entered into with Ja-Ke Holdings Pty Ltd, a subsidiary of Cash Converters Pty Ltd.
Ms Gray made claims in relation to the fees and charges debited under the contract, as well as the interest rate charged by the lenders, which is alleged to have exceeded the legal cap set in accordance with the Credit (Commonwealth Powers) Act 2010 (Cth).
Although the respondents to the two actions were not party to the other proceeding, an application was made for the two proceedings to be heard together.
Cash Converters International and Cash Converters Pty Ltd applied to strike out the proceedings.
Interpretation of section 33C(1)(a)
The respondents contended that the proceedings were not instituted properly within the meaning of section 33C(1)(a) as the applicant and group members did not have claims against each of the respondents party to the relevant proceeding. In support of this contention, the respondents sought to rely on Philip Morris.
Justice Farrell considered the issue and conflicting Federal Court authorities and held that Philip Morris had been overruled by Bray:
"I consider that [Justices Carr's and Finkelstein's] interpretation of the meaning of s 33C(1)(a) is more consistent with the policy of Part IVA and better facilitates the overarching purpose of civil practice and procedure set out in s 37M of the Federal Court Act."
Is this the last word on the meaning of "claims against the same person"?
Justice Farrell's reference to the policy of Part IVA and the overarching purpose of civil practice and procedure point to a more expansive reading of the Part IVA requirements, which would make it easier for class actions to be pursued.
Unfortunately however, the decision in Gray is unlikely to be the last statement on the issue. With unresolved Full Court debate, the issue will probably need to be determined once and for all by the Full Court.
 In New South Wales the debate does not arise. Section 158(2) of the Civil Procedure Act 2005 (NSW), clearly provides that applicants are not required to have a claim against each respondent.