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  • Writer's pictureDaniel Meyerowitz-Katz

Competing Class Actions Getting Hammered

After years of difficult and costly hearings and appeals about which legal team/funder will get to represent the plaintiff where competing class actions have been filed, a sensible solution may have finally been arrived at by the Commercial List Judge of the NSW Supreme Court.

Having apparently lost patience with what Ward CJ in Eq has described as the "unedifying" process of "seeking to adjudicate between the abilities of well-qualified and experienced litigation lawyers to conduct proceedings of this kind" (Wigmans v AMP Ltd [2019] NSWSC 603 at [355]), in a judgment published yesterday regarding competing claims against Lendlease, Hammerschlag J (aka "the Hammer") has indicated that he proposes to hear future competing class actions contests on the papers by way of abbreviated schott schedules that look like this:

As his Honour emphatically stated (see Pallas v Lendlease Corporation Limited; Fletcher v Lendlease Corporation Limited [2019] NSWSC 1631 at [39]): "A lengthy, complex and expensive carriage motion will not happen."

This innovation saves the need for the lengthy affidavits, expert reports, and submissions that plaintiff firms and funders have been filing in competing class action claims to date, not to mention the cost and delay of actually hearing the applications (a number of which have also been appealed).

For those familiar with his Honour's list (about which there have been some recent media reports), it would not come as much of a surprise that significant costs-saving case management innovations are coming from there. The Commercial List has a reputation for being the fastest forum in which commercial disputes can be resolved, which may explain why it seems to have overtaken the Federal Court as the preferred forum for these types of cases. According to Professor Morabito, in the 2018-19 financial year there were 11 shareholder class actions filed in the NSW Supreme Court (up from 5 in the previous year), compared with 8 in the Federal Court (down from 18 in the previous year).

However, the case is notable because, for reasons that I have never quite understood, the Australian Law Reform Commission recommended in its report on class actions earlier this year that the state Supreme Courts should be stripped of jurisdiction to deal with securities class actions or other class actions filed under the Corporations Act 2001 (Cth) or the Australian Securities and Investments Commission Act 2001 (Cth) (see my earlier posts on the ALRC report HERE and HERE). Despite noting that the submissions were overwhelmingly opposed to the suggestion, the Commission concluded at [4.152]:

"4.152 However, with respect to securities class actions in particular, it is also true that the vast majority of those cases have been initiated in the Federal Court. As has been noted by Lee J [in Perera v GetSwift Limited [2018] FCA 732; 127 ACSR 1 at [3], [6]] these are typically complex cases and, as a result, case management jurisprudence has developed in the Federal Court to manage those cases efficiently and effectively. Those practices have not yet developed in the state courts and, as has been highlighted by Chief Justice Allsop [in Wileypark Pty Ltd v AMP Limited [2018] FCAFC 143 at [15]], this raises the spectre of litigants (and their funders) choosing their forum with an eye to obtaining a procedural advantage. Accordingly, the ALRC is of the view that such proceedings should be litigated exclusively in the Federal Court."

I have always had difficulty understanding how the Commission arrived at this conclusion. The remarks made by Lee J and Allsop CJ in the cases that the Commission cited did not support it. Allsop CJ did refer to "a risk of procedural arbitrage", but his Honour did not go so far as to say that that the Federal Court had developed practices that made it a superior forum to the Supreme Court (of which his Honour used to be the President of the Court of Appeal). The only judicial finding of which I am aware on that question (if you can call it that) was what Stevenson J said in Wigmans v AMP Ltd [2018] NSWSC 1045 at [23]:

"Subject to one matter, it was common ground, as is obviously the fact, that there is no juridical or procedural advantage or disadvantage to any of the group members, the Federal Court applicants, or to AMP, in hearing the proceedings in one court as opposed to the other."

It is the case that litigants and their funders choose their forum with an eye to obtaining a procedural advantage. For that reason, many litigants file in the Commercial List of the NSW Supreme Court, where they have the advantage of being case managed by Hammerschlag J. However, that is no more or less so for class actions under the Corporations Act or the ASIC Act than any other case, class action or no, where there is concurrent state and federal jurisdiction, and it is far from clear why litigants in this particular type of case should be denied the choice of forum with which other litigants are provided.

In conclusion, while it is not a great thing for my own personal commercial interests (as someone who could have charged a lot of fees for running carriage motions), Hammerschlag J's innovation in the Lendlease cases seems to be a significant step towards solving the competing class actions problem that has been plaguing Australian courts in recent years.

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