30 Sep 2021

Multiple class actions against one defendant: Victorian Supreme Court sets out a partial solution

By Greg Williams, Stephanie Khan

The Fuller decision gives some guidance on how plaintiffs could jointly run a consolidated class action, but things are likely to get more complicated if one of the consolidating law firms is running the class action on a no-win, no-fee basis and the other is running a funded class action which is a managed investment scheme.

We've previously seen that multiple and competing class actions are problematic. Multiple proceedings expose defendants to additional costs and inconvenience, and consume court resources by requiring courts to manage multiple proceedings on the same topic. However, there is nothing which expressly or impliedly prevents the filing of as second representative proceeding against a defendant.

The Victorian Supreme Court has now given some guidance on how plaintiffs could jointly run a consolidated class action, in a decision which is also the first time that an Australian court has considered the question of multiplicity between competing class actions in the context of a potential group costs order (Fuller v Allianz; Wilkinson v Allianz [2021] VSC 581).

Two competing class actions against Allianz

Jordan Wilkinson and Tracy Ann-Fuller commenced overlapping representative proceedings under Part 4A of the Supreme Court Act 1986 (Vic) against Allianz Australia Insurance Limited  for claims arising out of the sale of "add-on" insurance products to consumers at the point at which they purchased cars or motorcycles from motor vehicle dealers. Amongst other things, Allianz was accused of engaging in misleading and deceptive conduct, and acting unreasonably.

Mr Wilkinson and Ms Fuller made a joint application for consolidation of the proceedings. They sought to be named as joint plaintiffs in the consolidated proceeding, their respective solicitors to be jointly named as solicitors on the record, and the appointment of a "costs referee", who would identify any duplicated work in the consolidated proceeding.  The law firms also undertook to conduct the consolidated proceedings in accordance with a protocol to unify decision-making, counsel teams, administrative processes and the joint conduct of all common aspects of the consolidated proceeding. The intended effect is that the defendants will be dealing as though with a single legal team acting for the joint plaintiffs.

Allianz opposed the application, arguing that the inevitable result of permitting two firms of solicitors to appear on the record would be the inflation of costs, in particular compared to the alternative that one case be stayed and the other allowed to proceed, ie., there should be a beauty parade. However, the Court said that this would lead to some group members possibly not being included in the proceeding that continued. While that consequence could be managed, it would still lead to cost, delay and inconvenience.

Ultimately, Justice Nichols took the view that the proposed orders limiting duplicative costs and precluding recovery by the solicitors of the costs of any duplicated work from group members and from the defendants were an appropriate, necessary and effective protection which made the consolidation appropriate.

What the Fuller decision means for future competing class actions

As the Court noted in Allianz, "multiple representative proceedings against the same defendant on overlapping subject matter do not…constitute an abuse of process, but a problem for courts to resolve." Arguably, the orders made in Allianz, in particular with the appointment of a costs referee, deal with these concerns to some extent.

It is the first time the court has considered competing class actions against a backdrop of a possible joint group costs order, following the introduction of the group costs order regime into the Supreme Court Act 1986 (Vic) just last year. As noted in the judgment, the plaintiffs propose to enter into a Cooperation Agreement that concerns the mechanics of costs sharing between the plaintiffs. It provides, for example, that disbursements will be shared 50/50 between their solicitors, and anticipatory arrangements for distribution of group cost order proceedings, in the event a group costs order is made.

However, things are likely to get more complicated if one of the consolidating law firms is running the class action on a no-win, no-fee basis and the other is running a funded class action which is a managed investment scheme.  This is the position in the current Freedom Foods and Deloitte class action. Given the recent changes to the law requiring funded class actions to be registered as managed investment schemes, Slater & Gordon which is acting against Freedom Foods and Deloitte on a no-win no-fee basis could face "serious consequences" for running an unregistered managed investment scheme if its proceedings were consolidated with the funded class action brought by Phi Finney McDonald, as sought by Freedom Foods and Deloitte. Typically conditional costs agreements are exempt from the managed investment scheme requirements, however, consolidating with a party that is being run under a managed investment scheme may run awfully close to falling short of that exemption. And while it's a grey area, the risk being run is that ASIC takes issue with the arrangement. 

The management of competing class actions, joint group costs orders and consolidation against the backdrop of the changes to the law on funded class actions will develop and we will keep you updated as new decisions are made.

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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.