Key Points:

The clarification of "claims against the same person" should lead to fewer interlocutory skirmishes in class actions in the Federal Court, and a quicker focus on the real issues in dispute.

The Federal Court has now settled the long-running controversy about whether each group member in a class action with multiple respondents must have a claim against each respondent.

The recent decision in Cash Converters International Limited v Gray [2014] FCAFC 111 establishes that each member of a group does not need to have a claim against each respondent. The decision provides welcome clarity for applicants and respondents alike.

Debate and confusion over group members' claims

Section 33C(1) of the Federal Court of Australia Act 1976 (Cth) requires that in order to commence proceedings under Part IVA of the Act a minimum of seven or more persons must have a claim against the same person. There have been conflicting authorities in the Federal Court and in Victoria as to whether this means that all group members must have a claim against each respondent. The debate does not arise in New South Wales – section 158(2) of the Civil Procedure Act makes it clear that not all group members need to have a claim against each defendant.

In Philip Morris v Nixon (2000) 170 ALR 487, the parties accepted that "section 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".

However, in Bray v F Hoffman-La Roche (2003) 130 FCR 317, Justices Carr and Finkelstein disagreed with the decision in Philip Morris, with the ensuing confusion leading to a slew of inconsistent judgments.

Ms Gray sues Cash Converters

In Cash Converters Ms Gray brought proceedings against Cash Converters on behalf of herself and third parties who had entered into contracts for personal loans and cash advances with various Cash Converters subsidiaries and franchisees.

On the facts Ms Gray and at least six other parties had a claim against each respondent in the proceedings, but not all group members had a claim against each respondent. Cash Converters applied to strike out the proceedings, arguing that section 33C(1)(a) required each member of Ms Gray's group to have a claim against each respondent.

At first instance, Justice Farrell refused Cash Converters' application, holding that she was not bound by the decision in Philip Morris, and that the interpretation of section 33C(1)(a) in Bray was more consistent with the policy of Part IVA and the overarching purpose of civil practice and procedure. Cash Converters appealed Justice Farrell's decision.

Analysis by the Full Court – the debate resolved

Justices Jacobson, Middleton and Gordon looked closely at the express words of section 33C(1)(a), which requires that "7 or more persons have claims against the same person".

Where there is only one respondent, then it is clear that the applicant and group members must all have claims against that respondent. But what does section 33C(1)(a) require when there is more than one respondent? The Court's view was that the requirements of section 33C(1)(a) simply do not address that situation. On that basis, there was nothing in section 33C(1)(a) to prevent an applicant – having satisfied the requirement that there are "7 or more persons have claims against the same person" – from joining other respondents in respect of whom some group members have claims and some do not.

Cash Converters' construction of the legislation was viewed as going beyond this, effectively imposing an additional requirement that proceedings could only brought if 7 or more persons have claims against all respondents. The Court did not agree that that is what section 33C(1)(a) requires.

Looking at the broader context of the Federal Court of Australia Act, the Court recognised that a number of provisions in Pt IVA expressly acknowledge the possibility of having multiple respondents, and variations between claimants in proceedings. These provisions need not have been included if section 33C(1)(a) should be interpreted in the manner suggested by Cash Converters.

The Court then turned to the conflict between the decisions in Bray and Philip Morris. Looking at the reasons for judgment in Philip Morris, the Court noted that both parties in that case appeared to have accepted the stricter interpretation of section 33C(1)(a) without actually arguing the point before the Court at the time. As the correct interpretation of section 33C(1)(a) had not been determined in that case, the Court took the view that the decision in Philip Morris did not enunciate a legal rule that it was bound to follow.

Freed from the restrictions of precedent, Justices Jacobson, Middleton and Gordon endorsed the views of Justice Finkelstein in Bray, and rejected Cash Converters' appeal.

Conclusion

After nearly 15 years of debate the meaning of "claims against the same person" in section 33C(1)(a) of the Federal Court of Australia Act has now been clarified. The clarity is a welcome development in Australia's class action law. It ought to avoid some interlocutory skirmishes in class actions in the Federal Court, so parties can focus on resolving the real issues in dispute between them more quickly.