As we foreshadowed in The Review: Class Actions in Australia 2013/2014, the scope of cases that may be pursued as class actions has been expanded with delivery of the appeal judgment in the Cash Converters case. The Full Federal Court has now confirmed that there is no requirement under its class action regime that each group member have a claim against each respondent to the proceedings.

Background

Hearing a strike out application on both the adequacy of the pleadings and whether the proceedings were properly constituted under section 33C of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), at first instance Justice Farrell held that while it was necessary for the named plaintiff to have a cause of action against each defendant, each group member did not have to have a claim against all named defendants.1

The Cash Converters matter concerns two class action proceedings brought by Julie Gray:

  • in the first proceeding, against Cash Converters International Limited (CCIL) and two of its subsidiaries (Safrock Finance and Cash Converters Personal Finance, “Lenders”) in respect of personal loans made to her by each of Lenders. Ms Gray brought the actions on behalf of all persons who entered into one or more credit contracts in New South Wales with either of the Lenders and had certain fees or charges imposed; and
  • in the second proceeding, against CCIL, its subsidiary Cash Converters Pty Ltd (CCPL) and a franchisee of CCPL, Ja-Ke Holdings , in relation to cash advances made to her by Ja-Ke Holdings. Ms Gray brought the action on behalf of people who entered into credit contracts under which less than $1,000 was advanced by another CCIL subsidiary, Cash Converters (Cash Advance) Pty Ltd (CC Cash Advance), or a NSW Franchisee of CCPL (including Ja-Ke Holdings).

In both proceedings, the claims include alleged contraventions of the National Credit Code and the ASIC Act.

Section 33C(1) of the Federal Court Act sets out the circumstances in which a representative proceeding may be brought, which include at sub-section (a) where “7 or more persons have claims against the same person”.

In her decision, Justice Farrell canvassed what she recognised to be conflicting authorities on this point:

  • The Full Court of the Federal Court had stated, in Philip Morris,2 that section 33C(1)(a) required every plaintiff and group member to have a claim against all respondents.3
  • A differently constituted Full Court (Carr and Finkelstein JJ, Branson J dissenting on this point) stated, in Bray,4 that not every group member was required by section 33C(1)(a) to have a claim against each respondent (although the representative plaintiff was so required).
  • Single instance decisions were inconsistent in terms of following either Philip Morris or Bray5.

Following a careful and detailed analysis of the varying authorities along with a dissection of the principles associated with determining what was judicially binding and what was not, Justice Farrell held that not all group members had to have a claim against all defendants.

Affirmation on appeal

This decision was upheld on appeal. Looking first at the words of the statute, the Full Court rejected the proposition that section 33C(1)(a) required the plaintiff and each group member to have a claim against each defendants. Rather, the Full Court concluded that the section required no more than there be seven persons with a claim against the same defendant and that, if the usual requirements for joinder could be met, the plaintiff can then join other defendants in respect of whom some group members have claims and some do not.6

The Full Court then considered the earlier authorities:

  • the Full Court noted that in Philip Morris it was common ground between both parties in that case that section 33C(1)(a) required all group members to have a claim against all defendants. As a result, Philip Morris is not binding in this regard because that particular point was not in dispute in the case.7
  • in its discussion of Bray, the Full Court impliedly accepted that the position in that case on section 33C(1)(a) was not binding, but nonetheless explicitly agreed with the approach taken in that case by Justice Finkelstein, who had stated that section 33C(1)(a) “simply does not address the situation where some members of the group, say 10 out of a group of 15, also have claims (that is, causes of action) against some other person which satisfy” the other requirements of section 33C(1).8

This decision is likely to have significant ramifications for the size and complexity of class actions. More actions are now likely to involve multiple defendants. This may lead to complications when it comes to settlement discussions. It will also add to the costs of proceedings, as there will be a multiplicity of parties to deal with.

Nonetheless, there remain hurdles that have to be met in relation to bringing a class action against multiple defendants, as the proponents must still identify:

  • seven or more persons with claims against each defendant; and
  • a person with claims against all defendants to act as the representative plaintiff by whom all of the common issues can be run.

If this can be achieved, such a class action may provide a powerful mechanism for the resolution of consumer claims in particular.