Case
Implications
Comment
In October 2011 the full court of the Federal Court of Australia overturned a damages award in the VIOXX class action, confirming once again that issues of causation are no less difficult to prove in large-scale class actions than in individual proceedings.
Case
In March 2010 a single judge of the Federal Court awarded A$287,000 in damages to the representative plaintiff in an action against Merck's Australian subsidiary. This marked the world's first successful class action ruling in relation to arthritis drug VIOXX.
However, in a lengthy judgment the full Federal Court overturned the primary judge's ruling that VIOXX had made a material contribution to the representative applicant's heart attack. The judges noted that although, in product liability and negligence cases of this nature, it is rarely a matter of absolutes, it had not been established that it was more probable than not that Mr Peterson's taking of VIOXX had caused his heart attack. Therefore, although VIOXX could not be excluded as a cause of his heart attack, he had other risk factors and there was no way of establishing which of these had caused the heart attack.
The appeal court also upheld the trial judge's findings that negligence and misleading and deceptive conduct, and claims under the Australian consumer protection laws in respect of fitness for purpose and merchantable quality,(1) were not questions common to the class and must be determined on a case-by-case basis depending on the individual circumstances of each claimant.
Implications
The decision has obvious implications for the representative plaintiff, who has since had a costs order made against him in relation to the appeal, albeit stayed pending a possible further appeal to the High Court of Australia.(2) However, it will also impact on the ease with which other group members can have their claim favourably determined, particularly where there are other risk factors that could have caused their heart attacks.
However, the decision is unsurprising, as it confirms the traditional approach to issues of causation in Australia. In this regard, the court provided a useful excursus on the test for causation under Australian law, summarising the test as requiring a plaintiff to show that the defendant's act or omission was a necessary condition of his or her injury. It is not enough for a plaintiff to show that the wrongful conduct increased a risk of harm, particularly when other risk factors are present. Rather, a plaintiff must go further and establish that the injury would not have occurred but for the wrongful act or omission.
The court also noted that other common law jurisdictions, such as Canada and the United Kingdom, have relaxed the requirements of causation in recent years, which explains the different results issued in respect of similar factual matrices.
Comment
The full court's decision demonstrates that product liability class actions can be expensive to run and also face difficult questions of both medicine and law. In this respect, the court's decision may have implications for the thalidomide class action launched in the Victorian Supreme Court in June 2011.
While product liability claims were prominent among proceedings filed when the class action mechanism was first introduced in Australia, challenges such as those identified by the court are one reason why today class actions are used more frequently for shareholder disputes, based on indirect causation arguments that seek to avoid individual reliance.
For further information on this topic please contact Peta Stevenson or Moira Saville at King & Wood Mallesons by telephone (+61 2 9296 2000), fax (+61 2 9296 3999) or email ([email protected] or [email protected]).
Endnotes
(1) Sections 75B, 75D and 75AD of the Trade Practices Act 1974 (Cth), now the Competition and Consumer Act 2010 (Cth).
(2) An application for special leave to appeal to the High Court was filed by the plaintiff's solicitors in November 2011, and is expected to be heard by mid-2012.