• Daniel Meyerowitz-Katz

NSWSC class actions do not require the plaintiff to have a claim against all defendants

Updated: Jun 24, 2019


There was an interesting decision handed down by Garling J in the NSW Supreme Court last week in Fernandez & Anor v State of New South Wales & Ors [2019] NSWSC 255, saying that the plaintiff in a class action does not need to have a claim against all defendants.

The case concerns a claim made against the State of NSW and various local health districts on behalf of people who have been made to guarantee a patient's debt where the patient was not eligible for Medicare benefits. As the plaintiffs attempt to set aside the guarantees, they have had to join the parties to the guarantees to the claim. However, there are only two named plaintiffs, who each signed a guarantee with one health district, and there are 12 health districts joined as defendants against whom the plaintiffs have no claim (but there would be group members with a claim against each of those districts).

There has not, to my knowledge, previously been a decision on this issue in the NSW Supreme Court. However, there is a vexed history in the Federal Court regarding the question of whether the applicant and each group member needs to have a claim against all respondents.

For a long time, there were two conflicting Full Federal Court decisions on this issue: Philip Morris (Australia) Ltd v Nixon [2000] FCA 229; 170 ALR 487 said that each group member needs a claim against each respondent, whereas Bray v F Hoffmann-La Roche Ltd [2003] FCAFC 153; 130 FCR 317 said that it is sufficient that the applicant has a claim against each respondent, and it is not necessary for each group member to have a claim against each respondent. However, all of the observation on the question were obiter—in Philip Morris, it was not in dispute that each group member needed a claim against each respondent, and in Bray, it was not necessary to decide the question, as each group member did in fact have a claim against each respondent.

The position was resolved by the Full Court in Cash Converters International Limited v Gray [2014] FCAFC 111; 223 FCR 139, which decided that the majority in Bray had been correct, and it is not necessary for each group member to have a claim against each respondent. However, to my knowledge, no one has attempted in the Federal Court to go as far as Garling J went in Fernandez, to say that it is not even required that the applicant have a claim against each respondent.

The decision may be explained to an extent by a quirk of the class actions regime under Part 10 of the Civil Procedure Act 2005 (Cth) ("CP Act") compared with Part IVA of the Federal Court of Australia Act 1976 (Cth). Section 158 of the CP Act says this:

158 Standing

(1) For the purposes of section 157 (1) (a), a person has a sufficient interest to commence representative proceedings against another person on behalf of other persons if the person has standing to commence proceedings on the person's own behalf against that other person.

(2) The person may commence representative proceedings on behalf of other persons against more than one defendant irrespective of whether or not the person and each of those persons have a claim against every defendant in the proceedings.

(3) If a person has commenced representative proceedings, that person retains standing:

(a) to continue the proceedings, and

(b) to bring an appeal from a judgment in the proceedings,

even though the person ceases to have a claim against any defendant.

On the other hand, s 33D of the FCA Act says this:

Standing

(1) A person referred to in paragraph 33C(1)(a) who has a sufficient interest to commence a proceeding on his or her own behalf against another person has a sufficient interest to commence a representative proceeding against that other person on behalf of other persons referred to in that paragraph.

(2) Where a person has commenced a representative proceeding, the person retains a sufficient interest:

(a) to continue that proceeding; and

(b) to bring an appeal from a judgment in that proceeding;

even though the person ceases to have a claim against the respondent.

So the crucial distinction is subsection 158(2) of the CP Act, which has no equivalent in the FCA Act. It does seem as though subsection 158(2) is saying that "the person" who commences representative proceedings may not need to have a claim against every defendant in the proceedings.

However, that reading makes sense in a situation where there are multiple plaintiffs and not all plaintiffs have a claim against each defendant. I struggle a little with the idea that a class action can be commenced where there are defendants against whom no plaintiff has any claim. It seems to me to be inconsistent with subsection 158(1). I also note that, of the Full Federal Court cases that I have mentioned, only Bray was referred to by Garling J in Fernandez.

With that being said, if Garling J is correct on this issue then it makes life much easier for plaintiff lawyers, and makes NSW look very attractive for certain kinds of cases.

#classactions #NSWSupremeCourt #FederalCourtofAustralia #multiplerespondents #civilprocedure

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