Further to our previous review of the Victorian Court of Appeal’s decision in National Australia Bank Limited v Pathway Investments Pty Ltd [2012] VSCA 168 (Pathway Investments), the Victorian Court of Appeal has again considered the circumstances in which it was appropriate to require class action group members to provide particulars and discovery of documents.

Regent Holdings Pty Ltd v State of Victoria [2012] VSCA 221 (Regent Holdings) indicates that class action defendants will be far more likely to obtain orders for particulars and discovery from group members where they can clearly demonstrate that the material will be used to aid settlement discussions. Importantly, Regent Holdings suggests that Pathway Investments will likely to be confined to its particular facts, and will not prevent a Court from ordering group members to give discovery and particulars in an appropriate case.

In Regent Holdings, the trial judge had referred the matter to mediation. The Court of Appeal (Nettle, Redlich and Osborn JJA) unanimously affirmed his Honour’s decision to order 14 group members to give particulars and discovery of documents relating to quantum to facilitate the mediation. Regent Holdings appealed the decision, alleging that the application raised a question of “general public importance of whether and to what extent” group members in class action proceedings should be required to provide particulars and give discovery in relation to quantum.

Regent Holdings

The class action has been brought on behalf of a closed class of 194 group members associated with 44 abalone fishery access licences. The plaintiffs allege that the State of Victoria and Southern Ocean Mariculture negligently allowed the release of a herpes-like virus from an abalone aquaculture farm operated by Southern Ocean Mariculture, causing loss and damage to the group members.

The trial of common issues of fact and law is scheduled to commence on 4 February 2013. The outcome of the trial will likely determine Regent Holdings’ claim in respect of liability and quantum, but will not address the quantum of group members’ claims.

Discovery orders against group members

The Court of Appeal rejected Regent Holdings’ submission that it is a “generally accepted” proposition that a group member should not be required to take any step in a class action until determination of the representative party’s claim. The Court of Appeal noted that this appeared to be based on a “misconception” of the High Court’s decision in Mobil Oil Australia Pty Ltd v State of Victoria, which was a claim brought on behalf of an open class. In proceedings involving an open class:

it stands to reason that there may be group members who neither know of the commencement of the proceeding nor wish it to be brought, or thereby have their rights affected without their knowing or consenting to that being done. The idea that group members need to take no positive step in the prosecution of a representative’s claim to judgment is to be understood in that sense.

Regent Holdings involves a closed class of group members, who are represented by a single firm of solicitors and funded by a single litigation funder. The Court of Appeal described the claim as follows:

the prosecution of the representative party’s claim is more akin to a joint enterprise in which the representative party and the Group members are engaged together with a view to maximising recovery. In such a case, it is not inappropriate for a judge to make procedural orders consummate with that paradigm.

The Court of Appeal accepted his Honour’s observation that the orders were intended to enable the defendants to “make sensible decisions in settlement discussions”. However, the Court of Appeal emphasised that their decision should not be taken as implying that “class members ought generally be required” to provide particulars or to give discovery prior to the determination of the plaintiff’s claim. In cases where mediation will occur prior to trial, however, the Court may order “such particulars and discovery as will provide the defendants with sufficient information to formulate rational settlement offers”.

Pathway Investments is not an authority of general application

Regent Holdings relied on Pathway Investments in support of its submission that discovery orders are not ordinarily made against group members unless there are compelling reasons justifying the need for the order. In relation to the Pathway Investments decision, the Court of Appeal found:

  • Bell AJA’s observations that discovery orders are not ordinarily made against group members unless there are compelling reasons justifying the need for such orders should not be construed as applying to all class actions. There are cases in which the nature of group proceedings is to be given less weight, including Regent Holdings;
  • there is no principle that group members “ought only ever be required to give discovery if it be demonstrably necessary for the determination of a representative party’s claim”;
  • Pathway Investments does not address “the propriety of group discovery for the purposes of a mediation calculated to resolve a proceeding as to both liability and quantum on a closed class-wide basis in advance of the trial of the representative party’s claim”;
  • Pathway Investments addresses specific interlocutory issues of practice and procedure, and is not a decision of general application in relation to discovery orders in class actions.

Consistency with the Civil Procedure Act 2010 (Vic)

The Court of Appeal held that it is “not improper for a judge to make orders for particulars and discovery calculated to facilitate mediation”. The Court of Appeal emphasised that it is desirable that proceedings be settled, and the Civil Procedure Act 2010 (Vic) requires courts and litigants to strive to achieve settlement. According to the Court of Appeal:

Of course, mediation should be conducted without prejudice. But that does not mean that it should be conducted in ignorance. Court ordered mediation is not a game of bluff and bluster in which one party is free to mislead another to conclude that a claim is worth more than it is. It is designed to be an exercise in rational bargaining between relatively well-informed parties aimed at providing just compensation for worthy claims. The more accurate and complete the available information as to quantum, the more likely that rational settlements will be achieved…

The Court of Appeal applied J Forrest J’s decision in Thomas v Powercor Australia Limited (Ruling No 1) [2010] VSC 489 (referred to in our previous alert) in support of their determination that the orders were consistent with the objects and purpose of the Civil Procedure Act.

Key points

The emerging case law concerning discovery against class action group members suggests:

  • Pathway Investments will be confined to its own facts and circumstances, and will not be universally applied;
  • the prospects of a class action defendant obtaining discovery orders from group members will likely increase if there is a closed class and the defendant can clearly indicate that the documents are necessary to facilitate settlement discussions (for example, when mediation is on foot or about to commence);
  • it is less likely that discovery orders will be made against the entire class – a defendant should consider limiting any applicant to information from a select number or “sample” of group members;
  • proposed discovery orders will need to be carefully drafted so that the defendant can clearly demonstrate that the material sought is relevant to quantum; and
  • it may remain difficult for class action defendants to obtain orders for discovery to assess their potential liability (rather than the quantum of any likely damages).

It is yet to be tested whether Regent Holdings could be applied as a decision of general application in relation to discovery applications in class actions. If it is broadly applied, a Court may be more likely to make an order requiring certain group members to give discovery if the defendant could indicate that the material related to the quantum of the claim, and that it would be used in settlement negotiations – regardless of whether settlement negotiations had, or were about to, commence.