Competing class actions continue to be in the spotlight in Australia, where it has been just over 26 years since the class action regime was introduced.
Whilst the Australian Law Reform Commission (the ALRC) is currently embarking on an inquiry into litigation funding and class actions, with its final report due in December 2018, jurisprudence is emerging from the Courts to tackle some of the same issues being considered by the ALRC on the commercialisation of law and the oppressive nature of multiple class actions.
A recent landmark case (which will be welcomed by class action respondents generally) has resulted in a financial services company and asset fund manager AMP succeeding in its application to transfer four separate competing class actions from the Federal Court of Australia to the Supreme Court of New South Wales, where one class action was filed. Following the imminent transfer, the Supreme Court is expected to make a decision on how many of the class actions should proceed.
AMP shareholder class actions
Australia operates an "opt out" system, where all potential claimants fall within the defined class upon commencement of an action unless they choose to opt-out when notified of the claim. Despite this, closed class actions have been permitted by the Australian courts with the class being confined to those that have entered into an agreement with a particular litigation funder. This has resulted in many competing class actions in Australia, particularly in the shareholder and product liability space.
In the case of AMP, it was quickly on the receiving end of five competing shareholder class actions filed in May and June 2018 following revelations of alleged misconduct in the current Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Those revelations were in relation to AMP allegedly charging customers fees where no services had been provided, and once made the AMP share price plummeted.
The first of the five class actions was filed in the Supreme Court of New South Wales, followed by four subsequent class actions in the Federal Court of Australia. All actions had different lead plaintiffs and legal representatives, as well as backing from different litigation funders.
Whilst there are nuances applicable to the various claims, each of the competing class actions contain allegations that AMP:
- made false or misleading statements to Australia's corporate regulator in relation to the charging of fees for no service;
- engaged in misleading or deceptive conduct; and
- breached its continuous disclosure obligations in relation to material information under the Corporations Act 2001 (Cth).
Such causes of action are typical in shareholder claims.
In a jurisdictional battle AMP promptly moved to consolidate the claims and transfer all matters to the State court in New South Wales. Competing applications were filed by each of the class applicants in the Federal Court seeking to preserve the claims in that forum, and for the New South Wales action to be transferred there. They did not succeed. On 14 August 2018, the Full Federal Court determined that AMP should be permitted to have each of the four shareholder actions filed in the Federal Court transferred to the State Court.
New South Wales was a natural forum for reasons including that AMP had its registered office in that jurisdiction, it is where the relevant events took place and it is where the relevant documents are situated and will need to be considered.
Implications of the decision
The AMP saga highlights the inter-jurisdictional tension that can arise in Australia between the Supreme Courts of the states and territories and the Federal Court, given they concurrently exercise federal jurisdiction and class action regimes have been introduced in the states of Victoria (in 2000), NSW (in 2011) and most recently Queensland (in 2017). All of the state regimes are largely based on the federal regime, where the Federal Court has historically been the predominant forum for the filing of shareholder claims.
In his lead judgment in AMP, his Honour Chief Justice Allsop of the Federal Court remarked that there are not yet any standing arrangements between Supreme Courts and the Federal Court for a procedural protocol for approaching "competing" proceedings. However, his Honour emphasised his complete agreement with the Chief Judge in Equity in the New South Wales Supreme Court, who had stated (in relation to the competing class actions) that comity between the courts was of utmost importance. Whether or not an official protocol will be developed to deal with such procedural matters remains to be seen.
The AMP decision follow the recent case of GetSwift, delivered in late May 2018, where a single judge of the Federal Court determined that only one class action could proceed whilst two competing class actions were stayed. The New South Wales Supreme Court in AMP is now expected to tackle the same issues of competing class actions that were ventilated in GetSwift.
In the last say that the Federal Court has in AMP, Allsop CJ commented that this decision would involve questions such as class definition, the nature of the causes of action, the terms of any relevant funding agreements and other considerations of the kind considered in GetSwift and other recent decisions of the FCA on competing class actions. His Honour observed that little weight should be given to which class action was "first to the filing gate" as all courts "should be astute to protect the best interests of all group members, not the desires of the promoters and managers of the litigation (in particular, the commercial funders and the lawyers).
Whilst the developing jurisprudence is welcome and likely to continue in Australia, the ALRC is expected to make broader recommendations later this year, given competing class actions increase cost and delay for both prospective class members and respondents.