Fiduciary Duties of Representative Parties: Conflicting Case Law and Conflicting Interests

Below is the unedited manuscript of an article that was published in the Australian Law Journal, citation (2022) 96 ALJ 185.

Abstract

There is conflicting authority in Australia as to the whether a representative plaintiff in class actions owes fiduciary duties to group members. A majority of the High Court has said in obiter that the plaintiff does owe such duties, but the Victorian Court of Appeal has said that no such duties are owed, in a decision affirmed by the High Court on other grounds.

This essay attempts to resolve those positions by reference to the principles underpinning the doctrine of fiduciary duties and to the nature and history of representative litigation. It also looks to cases in the United States, where the law on this point is more developed. The essay concludes that there is a strong argument that fiduciary duties are indeed owed by representative parties, and gives some examples of situations where this may be of some significance.

Introduction

1 There is conflicting authority in Australia as to the whether a representative plaintiff in a class action owes fiduciary duties to group members. A majority of the High Court in Wigmans v AMP[1]recently said, in obiter, “the court must recognise that the representative plaintiff in each action typically undertakes fiduciary obligations of a representative party to the members of the group”.[2] Similar observations have been made, also in obiter, by several judges of the Federal Court of Australia in recent years,[3] although there was very little consideration of it prior to about 2018.[4] However, in Timbercorp,[5] the Victorian Court of Appeal found the precise opposite.[6] That decision was affirmed by the High Court, albeit on other grounds.[7]

2 These cases are reviewed below in more detail, and as will be noted, none approached the relevant question by reference to first principles or by analogy to existing categories of fiduciaries. In all of them the existence or non-existence of such duties appears to have been assumed but not considered. There has otherwise been very little judicial or academic consideration of the issue,[8] which is curious given the extent of debate regarding the duties owed by the representative party’s lawyers and funders.[9] While it may be that the lawyers and funders make most day-to-day decisions in litigation,[10] one would expect that the duties of the lawyers and funders would be informed and shaped by the duties of the persons they represent or fund.[11]

3 This article attempts to fill the gap in the analysis where the duties of the representative party are concerned, and to resolve the conflicting Australian authorities on the point. It does so not only regarding class actions, but all forms of litigation in which there is a representative party.

4 Part A defines the key concepts of “representative” litigation and “fiduciary duties”. Part B gives a brief review of the historical development of representative litigation in equity, and concludes that the historical context does point to the existence of fiduciary duties. Part C discusses the modern day contexts in which representative proceedings appear, focusing on jurisprudence in both Australia and the USA. Part D examines the nature and scope of any fiduciary duties if they do exist. Part E concludes that representative parties probably do owe fiduciary duties.

A. Key concepts

A.1. Representative litigation

5 For the purposes of this article, “representative” litigation is defined as a procedural device pursuant to which a person (“representative”) is appointed to represent non-parties in the same interest (“group members”), such that the determination in the representative’s case will resolve the group member claims.

6 Representative proceedings are significant because they are exceptions to two fundamental rules of the English-derived common law.

7 In general, a judicial determination “disposes once for all of the issue, so that it cannot afterwards be raised”.[12] The first rule to which representative proceedings are an exception is that the determination will only apply dispose of the issue “between the same parties or their privies” (“parties/privies rule”).[13] In representative proceedings, the group members may be neither parties nor privies of the representative, but are nevertheless precluded from relitigating issues determined in the proceedings.[14]

8 The second rule is, “where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined”[15] (“necessary parties rule”). This and the previous rule are closely related, in that the rationale for the necessary parties rule is that if all parties are brought before the court, “a final end might be made to the controversy”.[16]

9 As explained below, representative proceedings originally developed as an exception to the necessary parties rule. The exception to the parties/privies rule was necessary in order to make the exception to the second rule effective.

A.2. Fiduciary duties

10 Fiduciary duties exist in a number of accepted categories in which there is a relationship of trust and confidence or confidentiality,[17] such as trustee-beneficiary, agent-principal, solicitor-client, and director-company.[18] While there is no general test for the existence of a fiduciary relationship outside of those categories,[19] a “critical feature” of all such relationships is that the fiduciary undertakes to act for or on behalf of the beneficiary, or in the beneficiary’s interests, in the exercise of a power or discretion which affects the beneficiary in a legal or practical sense.[20] Other relevant factors include the scope for unilateral exercise of the power or discretion concerned, and the extent to which the beneficiary is dependent on or vulnerable to the fiduciary.[21] The ultimate foundation of the relationship is that the fiduciary is obliged to act in the interests of the beneficiary.[22]

11 There are at least two accepted categories of fiduciary which arise in litigious contexts—viz. a court-appointed receiver, who owes fiduciary obligations to those interested in the property under receivership;[23] or a court-appointed liquidator, who owes fiduciary obligations to the company’s creditors and contributories.[24] In both situations the fiduciary position arises by reason of the control given to the appointee over property belonging to others.[25]

12 While the scope of fiduciary duties will vary from case to case, the fundamental rules are that a fiduciary must not, without the fully informed consent of its principal, make or pursue any gain in circumstances whether there is a substantial possibility of a conflict between its interests and those of the beneficiary (the “no profits rule”), or place itself into a position where its interests conflict with those of the beneficiary (the “no conflicts rule”).[26]

13 On an analysis of those principles, a representative party may well owe fiduciary obligations to the represented group. A cause of action is recognised as a species of property,[27] and representative parties are effectively placed in control of causes of action belonging to group members. This control over the litigious rights of others appears analogous at least to the receiver and liquidator positions, which are recognised to be fiduciary. Further, as explained below in Part D, there are a number of contexts in which representative parties may be either in a position of conflict or able to derive an unauthorised benefit by compromising the group members’ rights.

B. Development of representative actions in equity

B.1. Medieval group litigation

14 Conventional wisdom traces the modern representative action back to a procedure “invented by Chancery in the seventeenth century to cope with disputes between rural tenants and landlords, parishioners and parsons”.[28] However, as Professor Yeazell has demonstrated, such actions were in fact transplanted to Chancery from manorial and ecclesiastic courts, where they had existed as far back as the written records go.[29]

15 In medieval English society, most people lived or worked in social and geographic groups. Examples included rural parishes and villages, and urban boroughs and guilds. Those groups were often treated as single entities under the law, such that they could sue through persons holding a particular position or social status, and they could be sued as jointly and severally.[30]

16 One example given by Professor Yeazell is a case in 1199 in which the Rector of Barkway sued the parishioners of Nuthamstead in the ecclesiastical court to establish, inter alia, that the parishioners were obliged to bury their dead in Barkway (and thus pay burial fees to the Rector).[31] In such suits, the parishioners were represented by the churchwardens, who otherwise held a largely administrative role concerning the upkeep of the church.[32]

17 Another example is a case from 1278 in which the township of Hemingford was sued in a manorial court by the Vicar of St Ives, on the grounds that “the beasts of the whole township had destroyed the peas growing upon an acre” belonging to the Vicar. The “whole township” was duly ordered to make amends by the “twelve jurors who answer for the whole township” having to recompense the Vicar for two bushels of peas.[33]

18 In 1328, two men, on behalf of a whole parish, sued another man in manorial court for money they alleged was owed by him to the parish for the support of services in the Hatfield church.[34] Another example is a 1275 case in which “Walter Baron attorney of the township of Graveley” brought a claim on behalf of the township against a stonemason, apparently for negligent construction of a wall (the claim was settled on the basis that the stonemason would tear down and reconstruct the wall).[35]

19 As Professor Yeazell argues, these early group litigants were pre-existing social units who were suing through established representatives.[36] They were bound together by a common social and geographical setting and had a defined governance structure, and the governing body could sue or be sued in the name of the whole. In modern terms, they behaved more like corporations than the group members in a class action, who are disparate groups bound together only by claims giving rise to common questions of fact or law. Indeed, the urban boroughs (but not the parishes or manors) went about obtaining royal charters and eventually became corporations.[37]

B.2. Group litigation in Chancery

20 By the seventeenth century the ecclesiastical courts had been abolished in the Reformation, and manorial courts had lost significance. Meanwhile, the common law courts would not recognise unincorporated groups as litigative entities. The parishes and manorial tenants thus found themselves turning to Chancery for remedies.[38] However, Chancery had by then developed the necessary parties rule.[39] Accordingly, for a manor or parish to sue according to the manorial or ecclesiastic procedure required an exception to that rule.

21 Thus developed the bill of peace.[40] This was, in the words of Lord Nottingham, “[a] bill to settle the customs of a manor wherein a multitude of tenants are concerned”, which could “be exhibited by any three in the name of the rest, so as they produce before the Register a sufficient authority to enable them to sue in the name of the rest, and so as they be responsible for the costs”.[41]

22 A significant case from this period, which has been the subject of much commentary,[42] was Brown v Vermuden.[43] In an earlier suit, Carrier, a vicar of a mining parish, had brought a suit against his parishioners to establishe that they were required by custom to pay tithes of lead ore. The parishioners named four defendants to represent them. Carrier was successful.

23 Some years later, Vermuden, a parishioner, refused to pay the tithe, and claimed not to be bound by the earlier decree because he was not a party or privy to the original suit. He was sued by Brown, Carrier’s successor, for the tithe. Lord Nottingham found in Brown’s favour, on the basis that “[i]f the Defendant should not be bound, Suits of this Nature … would be infinite, and impossible to be ended.”[44]

24 Vermuden is significant because it demonstrates that by 1676 the ordinary position in Chancery was that persons would not be bound by a suit to which they were not party, and that the rural group litigation was a recognised exception to that rule. Further, because the existence of the exception was challenged, the Court had to justify it in principle, and the justification Lord Nottingham gave was that the exception was necessary to prevent a multiplicity of suits.[45]

25 The issue again arose in Brown v Howard,[46] which concerned a suit by tenants of a manor against the lord in relation to the fines payable on the alienation of a tenancy after the death of the previous tenant. It was argued that the suit should not bind the non-party tenants. The Lord Keeper held that “all were bound, though only a few Tenants Parties; else, where there are such Numbers, no Right could be done, if all must be Parties; for there would be perpetual Abatements”.

26 The rural group proceedings were not the only exception in Chancery to the necessary parties rule. Another arose where an otherwise necessary party impractical to join because, for example, they were outside of the jurisdiction[47] or their identity was unknown.[48] Considerations of practicality were also applied to dispense with the necessary parties rule in City of London v Richmond.[49] The City had granted a lease over the water borne by a new pipe. The lessee had assigned the lease on trust and 900 shares had been created in the trust. After the pipe was constructed it carried less water and so produced less income than had been anticipated, and the lessee could became insolvent. The City sued the trustee and some of the shareholders for arrears of rent. It was permitted to proceed in the absence of all of the shareholders on the basis that, “by dividing of it into so many shares”, the trustees “had made it impracticable to have them all before the court.”

27 In Chancey v May (1722) Prec Ch 592; 24 ER 265, concepts and language familiar from the manor/parish cases[50] were applied to the new social phenomenon of the unincorporated joint stock company. There the present treasurer and manager of an joint stock company brought a bill “in behalf of themselves, and all other proprietors and partners in the first undertaking, except the defendants” against the previous treasurer and manager, alleging embezzlements. The defendants demurred because not all the proprietors were joined. The Court disallowed the demurrer on two grounds. First, the suit was brought on behalf of the absent proprietors, “so all the rest were in effect parties”. Second, “it would be impracticable to make them all parties by name, and there would be continual abatements by death and otherwise, and no coming at justice, if all were to be made parties.”.

28 A few years later arose another case where the explanation for the rural group litigation was developed. In Baker v Rogers (1729) Sel Cas T King 74; 25 ER 230 a tenant of a manor brought a bill to settle a customary right but did not purport to act on behalf of the other tenants. The defendant demurred on the grounds that the rationale for manorial cases was that “where several persons have one and the same right, in which they are disturbed” they could apply to the Court such that “one or two determinations will establish the right of all parties concerned on the foot of one common interest”. However, it was necessary either for all parties to be joined or for some to be appointed to represent the rest. Otherwise it would frustrate the point of permitting the suit in Chancery, because there could be as many bills in Chancery as actions at law. King LC accepted those submissions and dismissed the bill accordingly.

29 The representative device was also employed in bills of account, in which one creditor could bring a bill on behalf of all others.[51] An interesting example was Leigh v Thomas,[52] which concerned a bill against a prize agent for an account of prize money[53] brought by two persons with authority from 64 of the ship’s 80 crew members. The plaintiffs claimed to be entitled to two additional shares of the prize money under the terms of their appointment. The defendants demurred. Strange M-R allowed the demurrer on the grounds that creditors could not bring a bill for account unless they represented all other creditors. Because the plaintiffs were “claiming a particular right which they are not intitled to against the proprietors in general”, they could not litigate in the absence of the 16 unrepresented crew members.[54]

30 In a series of cases at the beginning of the nineteenth century, Lord Eldon LC sought to tie these disparate examples together into a unified doctrine.[55] As his Lordship observed, the necessary parties rule was “established for the convenient administration of justice” and thus “must not be adhered to in cases, to which consistently with practical convenience it is incapable of application.”[56] However, to dispense with the rule the court requires so many of the interested persons to be present “that it can be justly said” that the parties “will fairly and honestly try the legal right” between them.[57] These decisions solidified the representative procedure in equity, and the principles articulated by Lord Eldon LC have been followed ever since.[58]

31 It has been argued that these early equity cases recognise that the representative had fiduciary obligations[59]—but that is probably an overstatement, not least because most occurred before the concept of fiduciary duties was fully developed.[60] That said, they do provide some support for the existence of such duties. This may be most apparent from Chancey, where the company officers representing the proprietors were effectively a precursor to the director-company relationship now recognised to be fiduciary. But Lord Eldon LC’s emphasis that the representatives must “fairly and honestly” represent the interests of the group members[61] also echoes the obligations of fiduciaries, especially considering that, as demonstrated by Leigh, the court would not permit a party to act as a representative where there was a potential for conflict of interest.

C. Modern representative proceedings

C.1. Shareholder derivative actions

32 As noted above, the collectivities on whose behalves early representative litigation was brought functioned similarly to corporate bodies. As corporations themselves became more common, it became less necessary for cases to be brought on behalf of unincorporated bodies.[62] Corporations have governing bodies—the officers and directors—which are recognised as owing fiduciary duties to the members as a whole. However, as demonstrated by Chancey in a pre-corporations context, those fiduciaries sometimes fail to act in the members’ interests. That remained the case a century later and, in Wilson,[63] it was established that the company could sue to set aside a transaction to which it was itself a party where that transaction was effected by its governing officers in breach of their fiduciary duties.

33 Shortly after Wilson came the seminal case of Fossv Harbottle.[64] Two shareholders in a company brought a suit on behalf of themselves and all other shareholders except the defendants, against the directors, alleging that the directors had sold their own land to the company at inflated prices. Wigram V-C took Wilson a step further and held that because the power to bring a claim of this type was vested in the directors or the body of shareholders at general meeting, the action belonged to the corporation and, save in exceptional circumstances, individual shareholders had no standing to bring such a claim.

34 Four or five exceptions to the rule in Foss v Harbottle came to be recognised, in which individual members could bring a claim on behalf of a company as a whole, these being: (1) where the company acts ultra vires; (2) where a resolution is passed but a special resolution was required; (3) where the personal rights of the plaintiff are infringed; (4) where there is a fraud on the minority; and, (5) (possibly) where the interests of justice otherwise require it.[65] Such cases have come to be known as “derivative actions”.

35 In Australia, derivative actions are presently governed by statute.[66] As a prerequisite for a derivative action to be brought, the proposed plaintiff (a member or officer of the company) must persuade the court that the company will probably not itself bring the proceedings, the plaintiff is acting in good faith, there is an arguable case, the company has had notice, and the action would be in the best interests of the company.[67] There is also a requirement for the court’s leave before the proceedings are discontinued or compromised,[68] the purposes of which are “to prevent any collusion between the plaintiff and the defendant” and “to oversee the question whether the proposed resolution is in the best interests of the company.”[69]

36 The requirement for the plaintiff to act in the interests of the company in circumstances where there is a prospect of collusion with the defendant certainly suggests the existence of a fiduciary relationship, at least in the Australian statutory context. Further, given that the plaintiff assumes a role normally performed by directors, who owe fiduciary duties, it stands to reason that the plaintiff too would owe such duties. In the US it has been established that this is indeed the case.

37 In Cohen,[70] the US Supreme Court posited that a shareholder who brings a derivative action may be a fiduciary, because “[h]e sues, not for himself alone, but as representative of a class comprising all who are similarly situated. The interests of all in the redress of the wrongs are taken into his hands, dependent upon his diligence, wisdom and integrity.” [71]

38 That reasoning was adopted in Heckmann v Ahmanson.[72]The case concerned an application by shareholders in Walt Disney Productions (“Disney”) for an interim injunction to prevent the dissipation of the profits from a buyback by Disney of shares previously held by the Steinberg Group (“Steinberg”). The buyback occurred in circumstances where Steinberg had commenced a derivative action against Disney seeking to restrain a proposed acquisition of a company called Arvida. Steinberg alleged that Disney’s directors were causing Disney to acquire Arvida for an inflated value and incurring unnecessary debt, to the detriment of the company but for the directors’ benefit.

39 Two weeks after the Arvida litigation was commenced, Steinberg reached an agreement with Disney’s directors pursuant to which Steinberg sold its shares back to Disney at a substantially inflated value. After the buyback was completed, Steinberg ceased to have standing to continue the derivative action, it no longer being a shareholder. Disney raised the funds for the buyback by obtaining a further loan. With Steinbeck’s challenge out of the way, Disney was also free to conclude the Arvida acquisition. In other words, Steinbeck not only failed to restrain what it said was a waste of funds and a needles incurring of debt, it in fact caused Disney to waste yet more funds and needlessly incur yet more debt, to the benefit of Steinbeck.

40 The Californian Court of Appeal, Third Appellate District, cited Cohen as authority that a shareholder bringing a derivative action owes fiduciary obligations to the other shareholders.[73] Their Honours then held that the plaintiffs had demonstrated a reasonable probability that Steinberg had breached those duties by settling the Arvida litigation to its own benefit and to the detriment of the other shareholders.[74]

41 There do not seem to have been any Australian cases in which these issues have been considered. However, there is no obvious reason why an Australian court would arrive at a different conclusion from the Court in Heckmann. The duty Steinberg owed was consistent with principle—it had, by commencing the derivative action, undertaken to act not only in its own interests, but also those of the company. It had taken advantage of that position for its own benefit, and to the company’s detriment. It thus had to account for the benefit it obtained.

C.2. Insolvency

42 Another area in which representative litigation is common is insolvency administrations, particularly in applications for judicial directions[75] by the administrators.[76] Such applications sanction a course of conduct by the administrator, such that the administrator will not be personally liable for breach of duty to the persons interested in the administration. Ordinarily this does not technically determine substantive rights,[77] but in practical terms it often does, because if the money is paid and there is no recourse against the administrator, the transaction cannot be unwound. Further, it can occasionally be appropriate that such applications should determine substantive rights. In any case, the court should make no substantive determination without giving affected parties an opportunity to be heard.[78] Often this will require the appointment of representatives of various interests.

43 For example, in ICS,[79] a liquidator applied for directions that he would be justified in treating certain funds held by the companies in liquidation, purportedly on trust, as assets of the companies because the alleged trusts were shams. The beneficiaries of the trusts were given notice of the liquidator’s application, and one of them was joined as a defendant and appointed to represent the others.[80]

44 In some cases, intervening creditors may be sufficient to represent absent parties even without formal representative orders. For example, in Willmott Forests,[81] the liquidators of a responsible entity for certain managed investment schemes sought judicial directions that they were justified in terminating the project documents in respect of the schemes, thereby extinguishing the schemes members’ rights. Two members were given leave to intervene. One argued that the Court should not give the advice sought, because all the members’ rights were affected and they should have been joined as parties. Davies J rejected that argument, and held that it was sufficient for the two intervenors to have been permitted to participate in the interests of the members.[82]

45 Unlike the other procedures discussed in this article, in these cases the representatives are not claimants but are appointed as defendants. However, where representative orders are made, the representatives do undertake to act in the interests of those they represent. The position may be less clear in cases such as Willmott Forests, in which the intervenors do not necessarily purport to be acting in the interests of anyone but themselves.

46 In the US the intervenors in Willmott Forests would be considered to be fiduciaries. That emerges from Young v Higbee,[83] which concerned what in Australian terminology would be the approval of a scheme of arrangement.[84] The Higbee Company had common shares and preference shares. Two directors claimed to have acquired a debt against the company, and presented a plan for reorganisation pursuant to which the owners of that debt would be awarded new debentures and common shares. Potts and Boag, who held preference shares, opposed the scheme on the grounds that it was too favourable to those directors, and that the debt should be subordinated to the preferred shareholders.

47 The scheme was approved at first instance, but Potts and Boag appealed. After the appeal was commenced, Potts and Boag sold their shares and their rights as appellants to the scheme’s proponents, for an amount substantially higher than the market value of their shares. Another holder of preferred shares, Young, brought a claim against Potts and Boag for an account of profits. The US Supreme Court held that Potts and Boag did owe fiduciary duties, because their interests and those of the other preferred shareholders were “inseparable”, and the outcome of the appeal was bound to have a substantial effect on the interests of the other preferred shareholders. They were not compelled to appeal, but once they did so they necessarily controlled the interests of the other preferred shareholders. Thus it was immaterial that there were no formal representative orders, because “[e]quity looks to the substance and not merely to the form.”[85]

48 In Australia it is unlikely that a situation such as that in Young would arise, because of the requirement that a scheme of arrangement be approved separately by different affected classes of creditors and members.[86] Thus, in all probability, a like scheme would have simply been rejected by the preferred shareholders. However, the reasoning in Young applies equally to situations such as Willmott Forests, where creditors or members put themselves forward to intervene in a manner that would inevitably affect the rights of other persons in substantially the same interest. If their presence as contradictors is sufficient to dispense with the necessary parties rule, their position would likely carry with it substantially the same obligations as would formal representative orders.

49 That is not to say that every contradictor or intervenor will always have such duties. It would be a question of fact in each case whether they act solely in their own interest or whether they purport to act in someone else’s.[87]

C.3. Class actions

50 In Australia, the term “class action” generally applies to a regime recommended by the Australian Law Reform Commission (“ALRC”) in 1988,[88] and since adopted in the Federal Court[89] and some state supreme courts.[90] The ALRC regime was substantially modelled on the USA regime,[91] although the two systems diverge in important respects.[92]

51 A class action provides a vehicle by which the resolution of the plaintiff’s claim also resolves the questions of fact and law common to the claims of the plaintiff and the group members (“common questions”).[93]

52 In Australia, a class action may be maybe “commenced”[94] by a plaintiff on its own behalf and on behalf of group members, where at least 7 such claimants have claims against the same defendant which concern or arise out of the same, similar, or related circumstances, and give rise to at least one substantial common question.[95]The American criteria are more complex.[96] An Australian class action can be commenced provided that the relevant threshold is met, although in certain circumstances it can be “de-classed”.[97] This is a deliberate[98] reversal of the American position, which requires that class actions are “certified” before proceeding.[99]

53 Both systems are “open class”, in that group members are not required to consent to being a part of the class action.[100] In Australia, group members are always given a right to opt out of the class,[101] and must be notified of that right before the trial.[102] In America, opt out rights are given in some cases.[103]

54 The other important safeguard in both systems is the requirement for court approval for the settlement or discontinuance of a class action,[104] which also has accompanying notice requirements.[105] As a matter of practice in Australia,[106] and statute in the US,[107] group members are given the right to object to any proposed settlement before it is approved.

(i) Class actions—USA

55 In view of the US approach in Cohen, Young and Heckmann, it is unsurprising that the US courts have also found that class actions plaintiffs owe fiduciary duties to the represented group.[108] However, the jurisprudence in the US is again significantly more developed than that in Australia. This is discussed in Part D of this article.

(ii) Class actions—Australia

56 This article commenced by discussing the majority obiter in Wigmans[109] and the conflicting findings in Timbercorp.[110] It is worthwhile to examine those decisions in further detail.

57 The dispute in Wigmans concerned competing representative parties that had commenced duplicative proceedings against the same defendant. The substantive issues in Wigmans principally concerned the doctrine of abuse of process and whether there is a presumption that the first in time should proceed.[111] The majority held that no such presumption existed, and which action proceeds should be determined based on all the circumstances of the case. The remarks concerning fiduciary obligations were made in the course of providing guidance as to the kinds of issues that should be taken into account.[112]

58 In support of the existence of fiduciary duties on the part of the representative plaintiffs, their Honours cited two decisions: Tomlinson v Ramsey Food Processing[113] and Dyczynski v Gibson.[114]

59 Dyczynski concerned an appeal by group members in a class action who had been clients of the representative’s lawyers. The lawyers had, without instructions, conceded that the appellants had no standing in the proceedings. The case thus concerned the duties owed by the lawyers to their clients rather than those owed by the representative applicant. However, citing Tomlinson, Murphy and Colvin JJ remarked in obiter that “the applicant has the conduct of proceedings on behalf of the class members and has fiduciary obligations to them”.[115]

60 Tomlinson concerned a factory worker who brought a case against his employer that was inconsistent with an earlier case against the same employer brought by a regulator in relation to the workers in the same factory. The passage from the majority judgment cited in Wigmans and Dyczynski concerned the exceptions to the parties/privies rule.[116] Their Honours referred not only to representative proceedings as an exception, but also to where a person is represented in earlier proceedings by an agent or a tutor or guardian.[117] These exceptions were justified because:

“Each of those forms of representation is typically the subject of fiduciary duties imposed on the representing party or of procedures overseen by the court (of which opt-in or opt-out procedures and approval of settlements in representative or class actions are examples), or of both, which guard against collateral risks of representation”.[118]

61 In other words, their Honours did not conclude that representative parties in class actions have fiduciary duties. Rather, their Honours suggested that the statutory protections afforded to class action group members are as sufficient as a representative’s fiduciary duties to render the group members bound despite not being parties or privies.[119]

62 Thus, it appears that Tomlinson may not stand for the proposition for which it was cited in Dyczynski and for which both were cited in Wigmans. Indeed, in Timbercorp[120]at first instance and on appeal the Court applied Tomlinson to reach the opposite conclusion from that in Dyczynski.

63 Timbercorp concerned actions by a lender to enforce loan agreements against borrowers who had previously been group members in a class action brought against, inter alios, the same lender. The borrowers had obtained the loans to invest in a managed investments scheme operated by the lender’s parent company. The investments had been lost, and a class action was brought on behalf of all scheme members alleging that the operator had engaged in misleading conduct, and the lender had been involved in the contraventions.

64 The class claims failed.[121] The lender then commenced enforcing the loans. In defence, the borrowers sought to have the loan agreements set aside, alleging that the lender induced them to obtain the loans through misrepresentations. The lender asserted that the borrowers were precluded from raising those defences because of the outcome of the class action.

65 Robson J at first instance considered the majority’s decision in Tomlinson, as well as Nettle J’s separate decision, in which his Honour identified “the important characteristics of the established forms of representation” as “that a principal is generally able to control the conduct of an agent, and that the imposition of fiduciary duties on certain kinds of representatives has the effect of guiding the representative’s conduct and providing remedies to the principal on default.”[122] His Honour accordingly held that in a class action the group members are bound only by the statute, and that the representative plaintiff “is not the subject of fiduciary duties owed to group members” and “is not required to consider the wider interests of group members”.[123]

66 The Court of Appeal substantially agreed with Robson J’s analysis.[124] Their Honours expressed the similar conclusions that “[t]he plaintiff was not the agent of the group members; nor was he their fiduciary”, and that the group members “have no enforceable rights against [the plaintiff] in the event that they consider that he has not advanced, or not properly advanced, their unpleaded claims.”[125] Again, this was an important step in their Honours’ rejection of the estoppel and abuse of process arguments.

67 The High Court in Timbercorp affirmed the Court of Appeal’s decision on other grounds, and did not consider the question of fiduciary duties.[126]

68 The Court of Appeal’s decision in Timbercorp regarding fiduciary duties was part of the ratio in that case and thus is binding, at least in Victoria, unless it should be taken to have been overruled by the majority in Wigmans. However, the Court of Appeal decision in Timbercorp does not appear to have been drawn to the Court’s attention in Wigmans—nor, for that matter, in Dyczynski.

69 Further, in none of these cases was there a detailed consideration of whether fiduciary duties were owed, either by reference to general principles or by analogy to the accepted categories. This leaves the state of the Australian authorities in a highly unsatisfactory position. Fortunately, significant guidance may be available in decisions from across the Pacific.

D. Scope and content of the duties

70 Based on the above analysis it is clear that there is at least a prima facie argument for imposing fiduciary duties on a representative party. However, the existence of such duties will necessarily be informed by the extent to which representative parties have opportunities to be in positions of conflict or to derive unauthorised benefits. These practicalities will also inform the scope and content of the duties.

D.1. Compromising claims

71 As discussed above, discussed above Young and Heckmann are cases in which a representative party has been found not only to have owed fiduciary duties to the represented group, but also to have breached those duties. Both concerned a representative which compromised the claims of the entire represented group for its own benefit.

72 It is no coincidence that these present the clearest examples of breaches by a representative of fiduciary duties. One of the main policy reasons in support of representative proceedings is that the individual claims of the group may be relatively small, but on aggregate they are substantial.[127] Accordingly, should the representative party succeed, it stands to gain much less than the opposing party stands to lose.[128] In such circumstances, there is a clear incentive for a representative party to compromise its own claim and the claims of the group to its own advantage and to the detriment of the absent group members, whose interests the representative has undertaken to represent. There is thus a strong argument that equity would impose on the representative an obligation not to take advantage of this position.

73 The representative party also has a significant incentive to settle the litigation rather than proceed to trial, because it is exposed to the entire costs of the action, while the group members are not.[129] A problem of this type arose in Australia in the Vioxx class action. That case concerned the distribution of medications by the respondent pharmaceutical companies which were alleged to have increased the risk that the applicant and group members would suffer myocardial infarctions (or, more colloquially, “heart attacks”).

74 The representative applicant’s claim succeeded at first instance.[130] However, the decision was overturned on appeal, on the grounds that the applicant had not established that his heart attack was more likely than not to have been caused by Vioxx, because there were too many other risk factors that could have led to the same result.[131] He was ordered to pay the costs of the failed trial and appeal.

75 Because the representative applicant had succeeded in establishing liability on the part of the respondents, and had failed only in establishing causation in his individual case, the result left it open for group members who did not have the same risk factors as the applicant to establish their own causation and damages cases against the respondents.[132]

76 The applicant then negotiated a settlement, pursuant to which the respondents would pay a total of $497,500, to be distributed to the 1,660 registered group members such that the living group members would each receive $2,000 and the deceased group members would each receive $1,500. This was rejected by Jessup J because it failed to distinguish between group members with prospects of establishing a claim on causation and those that did not.[133]

77 Some time later a revised settlement was presented to the Court, with the same overall settlement sum being paid, but with the individual circumstances of the group members now being taken into account. The following observations by Jessup J are worthwhile to quote in full:

"The striking feature of the settlement is the size of the overall settlement sum itself. The small number of group members whose entitlement is not to be discounted by reference to any personal circumstances – ie those who will receive a payout at the maximum level – will receive only $4,629.36 each. It is, in my view, inconceivable that, independently advised, a person in such a situation would regard that sum as adequate compensation for the loss and damage associated with a heart attack to the occurrence of which Vioxx made a material contribution. By definition, the claim of such a person would not be retarded by the problems of causation which beset the applicant in the Peterson proceeding in the Full Court.

How this outcome can be reconciled with the need to do justice to those whose claims will become res judicata upon the making of final orders in these proceedings is a subject which has troubled me greatly in my consideration of the applications which are now before the court. …

At the hearing of the s 33V applications, I was informed that the total settlement sum was a “negotiated figure”. Counsel for the applicants was unable to provide any other justification for the figure, or to relate it to the circumstances of those whose claims remain outstanding. But it does not take much imagination to perceive the character of the chips that were on the table during the negotiations referred to. On the judgment of the Full Court, the applicant in the Peterson proceeding was exposed to a costs liability which would, I infer, dwarf the settlement sum. Absent some other expedient, there is little doubt but that the applicant would have been ruined by the enforcement of the respondents’ entitlements in this regard. The temptation for him to compromise the claims of the other group members as a means of extracting himself from this liability would, I infer, have been irresistible. When looked at in this way, the settlement which the court is now being asked to approve has, to say the least, a certain whiff of expediency about it.”[134]

78 Notwithstanding those observations, his Honour determined to approve the settlement, predominantly on the grounds that it was unfair to require the applicant to continue to carry the burden of the proceedings, and no group member had come forward to replace him, despite the group having been fully informed of the outcome of the appeal, and of the proposed settlement.[135]

79 The Vioxx case demonstrates how the recognition that fiduciary duties are owed may help to inform the manner in which representative litigation is approached by the courts. If Jessup J’s suspicion regarding the settlement was correct, the applicant would have breached his fiduciary duties to the group members, unless the group members gave fully informed consent to the settlement.

80 What in fact occurred was that the group members were given notice of the outcome of the proceedings and an opportunity to object to the settlement. Whether that constitutes “fully informed consent” is doubtful. Had there been regard to the applicant’s fiduciary duties, it may have assisted in shaping the content of the notice to the group members, and the applicant may have been required to take more pro-active steps to ascertain whether the group members consented to the settlement, having regard to the benefit the applicant was receiving (the waiver of outstanding costs orders) which was of no significance to them.

81 On the other hand, there may be something to be said for the view that group members, having stood by and allowed the applicant to take substantial risks for their benefit, should not be permitted to complain when the applicant’s decision-making is affected by those risks.

D.2. Forensic decisions

82 It is not only at the stage of settlement that conflicts may arise. As Young J said in Carnie v Esanda Finance at first instance,[136]“the real prejudice” that a represented non-party may suffer “is that the judge hearing the proceedings may not be informed of a point that [the non-party] wishes to raise and that the [non-party] will be bound by the result.” However, his Honour was dismissive of that concern, because “it is up to the judge to ensure that proper argument is put by both sides and that if it is not, by the judge's own researches, to supply the deficiency.”[137]

83 Respectfully, the dismissal of the concern is curious given that a party may be precluded from raising a point because, for example, it serves its evidence too late,[138] or the point was not pleaded.[139] There are in fact American cases which show that forensic decisions made by a conflicted representative can be highly detrimental to the group members.

84 For example, in Hansberry v Lee,[140]a person purporting to act on behalf of the owners of land subject to a covenant which purported to enforce the racial segregation of a particular neighbourhood had established that the covenant was valid based on an assumption that it had received the requisite 95% of the landowners as signatories,[141] when in fact there had only been about 54%, and many of the owners whom the plaintiff purported to represent were opposed to the covenant.

85 Likewise, in Broussard v Meineke,[142]the plaintiffs purported to represent all current and former franchisees in a claim against a franchisor concerning misappropriations from an advertising fund. The plaintiffs elected to seek damages from the defendant (on the grounds that the absence of advertising had reduced their sales), rather than seeking restitution of the fund so the monies could be spent on advertising in accordance with the original intention. However, some current franchisees whom the plaintiffs purported to represent had expressly released their damages claims, and others who had an interest in the ongoing success of the franchise may not have agreed that damages were preferable to restitution of the fund.

86 A similar issue would arise wherever there is a claim against a defendant in financial distress and some group members have an interest in the ongoing viability of its business. This is common in the insolvency context—where creditors who are shareholders, employees, suppliers, or customers of the insolvent may benefit more from the business continuing than having their debts paid quickly—but it also occurs in other scenarios.[143] This may arguably be addressed by opt out rights, but the effectiveness of those as a mechanism for protecting absent group members is questionable.[144]

87 There is thus a very real potential for a representative party whose interests conflict with those of the group members to make forensic decisions which prefer the representative’s own interests, to the detriment of the represented group. As with other situations where fiduciary duties are imposed, this is very difficult to monitor, and it is likely that many of those affected by such conflicted decisions will never know they occurred.[145] Further, it is difficult to conceive of an adequate remedy for a breach of fiduciary duty comprising a failure to plead a particular claim or a failure to serve particular evidence. The courts will generally be reluctant to examine whether a different forensic strategy would have led to a different outcome.[146]

88 It is for reasons of this type that a fiduciary is generally counselled (but perhaps not obliged) to avoid positions where there is a potential conflict of interest, regardless of whether the conflict is acted upon.[147]

89 There is thus a difficult question as to the extent to which a person should be permitted to represent group members with conflicting interests. This arose in two US cases concerning asbestos litigation, Amchem[148] and Ortiz.[149] Both were “settlement-only” class actions, in that the claims had been settled before it was filed, and proceedings were commenced only to obtain the court’s approval of the settlement and thereby to bind absent group members to it. Both were initially certified as class actions, but the certification decisions were overturned on appeal to the US Supreme Court because, inter alia, there was a conflict between the interest of presently injured claimants in receiving immediate payments, and the interest of “exposure-only” claimants (who had been exposed to asbestos but had not yet manifested any symptoms of an asbestos-related condition) in receiving adequate compensation in the future should the need arise.[150]

90 In both cases the US Supreme Court held that such situations should not be permissible, and the group members should have the “structural protection” of representatives whose interests align with theirs.[151] It followed that conflicts of the type arising in those cases ought to be addressed at the certification stage, and judicial oversight of any settlement is not sufficient to protect the interests of group members where they conflict with those of the representative.

91 As is clear from Vioxx, Australian courts have not adopted the approach taken in Amchem and Ortiz.[152] In fact, for the most part that approach has not been followed in the US either, where the courts have tended to confine the Amchem and Ortiz decisions to their own facts.[153]

92 It is worth noting that many of the “exposure-only” claimants, whose interests the Amchem and Ortiz decisions were ostensibly designed to protect, ultimately fared far worse than they would have had the settlements been approved. The ongoing asbestos litigation drove 20 of the 21 defendants in those cases into bankruptcy,[154] meaning the claimants had to join the queue of unsecured creditors. Most waited for years to receive any payout, and some received as little as $0.05 on the dollar.[155] The asbestos litigation thus demonstrates why, as a matter of practicality, it is sometimes preferable to prioritise procedural efficiency over procedural fairness.

93 That said, there are no doubt cases in which it would be preferable for different classes of group members to be separately represented because their interests are in conflict, notwithstanding that common questions arise on their claims. The extent to which this applies will vary from case to case.

D.3. Positive duties?

94 There may be a question whether a representative party owes duties beyond avoiding conflicts of interest or obtaining an unauthorised benefit. Some suggestions to this effect have been made by Lee J in the Federal Court of Australia.

95 In McKenzie v Cash Converters,[156] Lee J suggested that the representative applicant’s fiduciary duties include, in giving instructions concerning an in-principle settlement, “to have regard to the possibility of reducing future costs consistent with facilitating the distribution of the monies pursuant to the settlement if ultimately approved”.[157] Similarly, in Klemweb v BHP[158], his Honour suggested that it is within the scope of such duties to “reflect regularly upon the conduct of the case and give thought to amendments including refining or including further causes of action and, if appropriate, bringing s 33K[159] applications to augment or restrict the class.”[160]

96 The suggestion that representative parties have positive duties to act in the interests of the group members, rather than negative duties to refrain from making an unauthorised benefit or acting in conflict of interest, conflicts with the orthodox position in Australia that fiduciary duties are “proscriptive” and not “prescriptive”[161]—although that position is controversial.[162] It may also be that the representative applicant has duties of the type suggested by Lee J, but that they are more in the nature of a tortious or equitable duty to exercise skill and care, rather than a fiduciary one.[163] It is beyond the scope of this article to resolve these questions.

E. Conclusion

97 The above analysis reveals a strong argument in favour of a representative party owing fiduciary duties to the represented group. This is true both on a “first-principles” analysis and by analogy to accepted categories of fiduciary relationships. It thus appears that the conflict in the Australian authorities would likely be resolved in favour of the majority in Wigmans rather than the Court of Appeal in Timbercorp, although whether that is so remains to be seen.

98 As the American cases show, this is not just an academic question. Representative parties can and sometimes do make forensic decisions that are contrary to the interests of those they purport to represent, or compromise group member claims for their own benefit and to the detriment of the claimants. It is important for representative parties, the lawyers who advise them, and the courts that supervise them, to be alive to these issues in the conduct of any representative proceedings.

[1]Wigmans v AMP Limited [2021] HCA 7. [2]Wigmans v AMP Limited [2021] HCA 7, [117] (Gageler, Gordon and Edelman JJ). [3] See, eg, Dyczynski v Gibson [2020] FCAFC 120; 381 ALR 1, [209]-[210] (Murphy and Colvin JJ); Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 2) [2020] FCA 1355, [24(2)] (Gleeson J); Kelly v Willmott Forests Ltd (in liquidation) (No 6) [2019] FCA 745, [28] (Murphy J); McKenzie v Cash Converters International Ltd (No 3) [2019] FCA 10, [8], [33], [40] (Lee J); McKenzie v Cash Converters International Ltd (No 4) [2019] FCA 166, [14] (Lee J); Liverpool City Council v McGraw-Hill Financial, Inc (now known as S&P Global Inc) [2018] FCA 1289, [69] (Lee J). [4] See, Vince Morabito, “Replacing inadequate class representatives in federal class actions: quo vadis?” (2015) 38(1) UNSW Law Journal 146, 170. [5]Timbercorp Finance Pty Ltd (in liq)v Colins [2016] VSCA 128. [6]Timbercorp Finance Pty Ltd (in liq)v Colins [2016] VSCA 128, [213]. [7]Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; 259 CLR 212. [8]Cf, Vince Morabito, “Replacing inadequate class representatives in federal class actions: quo vadis?” (2015) 38(1) UNSW Law Journal 146, 170. [9] See, eg, Australian Law Reform Commission, Integrity, Fairness and Efficiency—An Inquiry into Class Action Proceedings and Third-Party Litigation Funders, Report No 134 (2018), [7.125], [7.131]-[7.135]; Reynolds v Beneficial National Bank (2002) 288 F.3d 277; Morris A Ratner, “Class Conflicts” (2017) 92 Washington Law Review 785, 800; but cf, Vince Morabito, An Evidence-Based Approach to Class Action Reform in Australia: Common Fund Orders, Funding Fees and Reimbursement Payments (Monash University, January 2019); Susan P Koniak and George M Cohen, “Under Cloak of Settlement” (1996) 82(7) Virginia Law Review 1051; Christopher R Leslie, “The Significance of Silence: Collective Action Problems and Class Action Settlements” (2007) 59 Florida Law Review 71. [10] See, David Rosenberg, "Class Actions for Mass Torts: Doing Individual Justice by Collective Means," (1987) 62(3) Indiana Law Journal 561, 563; Christopher R Leslie, “The Significance of Silence: Collective Action Problems and Class Action Settlements” (2007) 59 Florida Law Review 71, 82; Richard Posner, Economic Analysis of Law (Wolters Kluwer, 9th Ed, 2014), 803-4; Daniel Klerman, “Posner and Class Actions” (2019) 86 University of Chicago Law Review 1097, 1098-9, 111-2. [11]Cf, Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107, [85]-[86] (Lee J) (“The Court is entitled to expect that the applicant and the lawyers will not act contrary to the interests of group members as a whole in advancing and dealing with the common aspects of their s 33C claims.”). [12] Note that this may be by operation of: (1) res judicata, the principle that a cause of action on which judgment is pronounced merges with the judgment, such that it ceases to have an independent existence: Blair v Curran (1939) 62 CLR 464, 531-532 (Dixon J); and cf, Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, [22] (French CJ, Bell, Gageler and Keane JJ) (referring to “cause of action estoppel”, which was said to be “largely redundant” by reason of res judicata); (2) issue estoppel, the principle that an issue of fact or law the determination of which was an essential step in the pronouncement of a judgment cannot be relitigated: Blair v Curran (1939) 62 CLR 464, 531-532 (Dixon J); (3)Anshun estoppel— after Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589—which prevents the raising of an issue of fact or law where the issue was so connected with the subject matter of an earlier proceeding that it was unreasonable not to have raised it in that proceeding: ibid, 598, 602-603 (Gibbs CJ, Mason and Aikin JJ); or (4) abuse of process, which is broader and more flexible than the other doctrines, and applies to any circumstances in which “the use of a court’s procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute”, including in relation to the raising of an issue in subsequent proceedings that ought to have been raised in earlier proceedings but is not precluded by an estoppel: Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, [25]-[26] (French CJ, Bell, Gageler and Keane JJ). [13]Blair v Curran (1939) 62 CLR 464, 531 (Dixon J); UBS AG v Tyne [2018] HCA 45. [14]Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, [39]-[40] (French CJ, Bell, Gageler and Keane JJ); Carnie v Esanda Finance Corp Ltd [1995] HCA 9; 182 CLR 398, 423-4 (Toohey and Gaudron JJ); see generally, Geoffrey C Hazard Jr, John L Gedid and Stephen Sowle, “An Historical Analysis of the Binding Effect of Class Suits” (1998) 146 University of Pennsylvania Law Review 1849. [15]John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1, 131; see also, Cockburn v Thomson (1809) 16 Ves Jun 321; 33 ER 1005, 1007. [16]Duke of Bedford v Ellis [1901] AC 1, 8 (Lord Macnaughten); quoted in Carnie v Esanda Finance Corp Ltd [1995] HCA 9; 182 CLR 398, 415 (Toohey and Gaudron JJ), 428 (McHugh J). [17]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 96 (Mason J). [18]Breen v Williams (1996) 186 CLR 71, 107 (Gaudron and McHugh JJ). [19]Breen v Williams (1996) 186 CLR 71, 106 (Gaudron and McHugh JJ). [20]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 96-7 (Mason J). [21]Breen v Williams (1996) 186 CLR 71, 106 (Gaudron and McHugh JJ). [22]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 99 (Mason J); P W Young, C Croft and M L Smith, On Equity (Lawbook, 2009) [7.30]. [23]Nugent v Nugent [1908] 1 Ch 546; J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2015) [29-145]. [24]Thomas Franklin v Cameron (1935) 36 SR(NSW) 286, 292-6 (Davidson J). [25]Nugent v Nugent [1908] 1 Ch 546; Thomas Franklin v Cameron (1935) 36 SR(NSW) 286, 292-6 (Davidson J). [26]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 102-3 (Mason J); Chan v Zacharia (1984) 154 CLR 178, 198-9 (Deane J). See generally, P W Young, C Croft and M L Smith, On Equity (Lawbook, 2009) [7.270]-[7.380]. [27]Loxton v Moir [1914] HCA 89; 18 CLR 360, 379 (Rich J); see generally, P W Young, C Croft and M L Smith, On Equity (Lawbook, 2009) [8.660]-[8.700]. [28]Carnie v Esanda Finance Corp Ltd [1995] HCA 9; 182 CLR 398, 429 (McHugh J); quoting Stephen C Yeazell, “From Group Litigation to Class Action, Part II: Interest, Class and Representation” (1980) 27 UCLA Law Review 1067; see also, Hansberry v Lee 311 US 32, 41-2 (1940). [29] See generally, Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987). [30] Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 40, 49, 89-90, 94-9. [31] See, Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 38, 47-8; citing N Adams and C Donaghue (eds), Selected Cases from the Ecclesiastical Courts of the Province of Canterbury, c. 1200-1301, (1985) 95 Selden Society 8 (case of Martin, Rector of Barkway v Parishioners of Nuthamstead). [32] Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 49, 114-5. [33] Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 49-50; citing FW Maitland ed, Select Pleas in Manorial and Other Seignorial Courts (1889) 2 Selden Society 90. Regarding the role of juries in this time, see generally, James Bradley Thayer, A preliminary treatise on evidence at the common law (Little, Brown and Co, 1898) ch II. [34] Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 54-5; citing Manor of Hatfield, Yorks (Leeds Archives Department, DB 204/5, sd Monday after Feast of St Martin, 2 Edw III). [35] FW Maitland, Select pleas in manorial and other seignorial courts - volume I, reigns of Henry III and Edward I (1889) 2 Selden Society 150 (Fair of St Ives, 1275). [36] Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 40, 49, 89-90, 94-9. [37] Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 54-5, 77-8, 82-3, 104-25. [38] Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 137-8; John A. Kazanjian, "Class Actions in Canada" (1973) 11(3) Osgoode Hall Law Journal 397, 401. [39] See, eg, Griffith v Bateman (1677-8) Fin H 333; 23 ER 183; Hole v Harrison (1673) Fin H 15; 23 ER 9; Anonymous (1660-1706) 2 Freem Chy 128; 22 ER 1104 (A). See generally, Geoffrey C Hazard Jr, “Indispensable Party: The Historical Origin of a Procedural Phantom” (1961) 61(7) Columbia Law Review 1254 1256-62. [40] See, Perera v GetSwift Limited [2018] FCA 732; 127 ACSR 1, [147]-[159] (Lee J). [41]Lord Nottingham's M̀anual of chancery practice' and P̀rolegomena of chancery and equity, D E C Yale ed (Cambridge University Press, 1965) 95; see also, ibid at 300 (case of Allanson v Daniel & Witcherley (1672)). [42] See, eg, Raymond B. Marcin, "Searching for the Origin of the Class Action" (1974) 23(3) Catholic University Law Review 515; John A Kazanjian, "Class Actions in Canada" (1973) 11(3) Osgoode Hall Law Journal 397, 402-3; Hansberry v Lee 311 US 32, 42 (1940). [43]Brown v Vermuden (1676) 1 Chan Cas 272; 22 ER 796; also reported at (1676) 1 Chan Cas 282; 22 ER 802. [44] (1676) 1 Chan Cas 272; 22 ER 796; see further, Baker v Rogers (1729) Sel Cas T King 74; 25 ER 230. [45] See further, How v Tenants of Bromsgrove (1681) 1 Vern 22; 23 ER 277; Ewelme Hospital v Andover (1684) 1 Vern 266; 23 ER 460. [46] (1701) 1 Eq Ca Abr 164; 21 ER 960. [47]Walley v Walley (1687) 1 Vern 484; 23 ER 609; Cowslad v Cely (1698) Prec Ch 83; 24 ER 40; Quintine v Yard (1702) 1 Eq Ca Abr 74; 21 ER 886. [48]Bowyer v Covert (1682) 1 Vern 95; 23 ER 337. [49](1701) 23 ER 870. [50] See, eg, Brown v Howard (1701) 1 Eq Ca Abr 164; 21 ER 960: “all are bound, though only a few Tenants Parties; else, where there are such Numbers, no Right could be done, if all must be Parties; for there would be perpetual Abatements”. [51] See, eg, Neve v Weston (1747) 3 Atk 557; 26 ER 1121; see generally, Geoffrey C Hazard Jr, John L Gedid and Stephen Sowle, “An Historical Analysis of the Binding Effect of Class Suits” (1998) 146 University of Pennsylvania Law Review 1849, 1866-1874. [52]Leigh v Thomas (1751) 2 Ves Sen 312; 28 ER 201. [53] Money from the sale of enemy ships taken at time of war pursuant to a letter of marque, the prize agent being the person responsible for selling the taken ships and then distributing the proceeds. [54] See the discussion in Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 182-183. [55] See, Lloyd v Loaring (1802) 6 Ves Jun 773; 31 ER 1302; Adair v The New River Company (1805) 11 Ves Jun 429; 32 ER 1153; Cockburn v Thomson (1809) 16 Ves Jun 321; 33 ER 1005; and see also, Good v Blewitt (1806-1807) 13 Ves Jun 397; 33 ER 343. [56]Cockburn v Thomson (1809) 16 Ves Jun 321; 33 ER 1005, 1007. [57]Adair v The New River Company (1805) 11 Ves Jun 429; 32 ER 1153, 1159. [58] See, Duke of Bedford v Ellis [1901] AC 1, 10-11 (Lord Macnaughten); Carnie v Esanda Finance Corp Ltd [1995] HCA 9; 182 CLR 398, 429 (McHugh J). [59] Geoffrey C Hazard Jr, John L Gedid and Stephen Sowle, “An Historical Analysis of the Binding Effect of Class Suits” (1998) 146 University of Pennsylvania Law Review 1849, 1869. [60]Cf, Joshua Getzler, “Fiduciary Principles in English Common Law”, in Evan J Criddle, Paul B Miller, and Robert H Sitkoff (eds), The Oxford Handbook of Fiduciary Law (Oxford University Press, 2019). [61]Adair v The New River Company (1805) 11 Ves Jun 429; 32 ER 1153, 1159; see also, Templeton (Registrar of Titles (Vic)) v Leviathan Pty Ltd (1921) 30 CLR 34, 76 (Starke J). [62] See generally, Stephen C Yeazell, From Medieval Group Litigation to the Modern Class Action (Yale University Press, 1987) 100-211. [63]Attorney-General v Wilson (1840) Cr & Ph 1; 41 ER 389. [64]Foss v Harbottle (1843) 2 Hare 461; 67 ER 189. [65] Eromanga Hydrocarbons NL v Australis Mining NL (1988) 14 ACLR 486, 488-9 (Malcolm CJ). [66] Pt 2F.1A of the Corporations Act 2001 (Cth). See generally, R P Austin and Professor I M Ramsay, Ford, Austin & Ramsay's Principles of Corporations Law (LexisNexis, 17th ed, 2018) [10.239]-[10.300]. [67]Corporations Act 2001 (Cth) s 237(2). [68]Corporations Act 2001 (Cth) s 240. [69]Rafferty v National Australia Bank Ltd [2011] FCA 169, [10] (Mansfield J); see also, In the matter of 22 Park Street Pty Ltd (Rec & Mgr Apptd) [2021] VSC 247, [21]-[28] (Connock J). [70]Cohen v Beneficial Industrial Loan Corp, 337 US 541 (1949). [71]Cohen v Beneficial Industrial Loan Corp, 337 US 541, 550 (1949). [72]Heckmann v Ahmanson 168 Cal App 3d 119 (1985). [73] At 129. [74] At 129-133. [75] See, former ss 447D, 479(3) and 511 of the Corporations Act 2001 (Cth) (now s 90-15 of the Insolvency Practice Schedule (Corporations) 2016 (Cth)); former s 134(4) of the Bankruptcy Act 1966 (Cth) (now s 90-15 of the Insolvency Practice Rules (Bankruptcy) 2016 (Cth)). [76] For convenience this article uses the word “administrator” to refer to the person responsible for an insolvency administration, including a trustee in bankruptcy or a liquidator, and not just a person appointed pursuant to Part 5.3A of the Corporations Act 2001 (Cth). [77]Re GB Nathan & Co Pty Ltd (In Liq) [1991] 24 NSWLR 674, 677-9 (McLelland J). [78]Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities [2007] FCA 1443; 25 ACLC 1,443, [51] (French J). [79]Re ICS Real Estate Pty Ltd (in liq) [2014] NSWSC 479; 14 ASTLR 382. [80]Re ICS Real Estate Pty Ltd (in liq) [2014] NSWSC 479; 14 ASTLR 382, [3] (holding that the contradictor’s interests were identical to the other beneficiaries of one trust and closely analogous to those of the other trust), [4] (holding that it was expedient for the purpose of saving expense for the contradictor to be joined as a defendant and appointed to represent the class), [27] (holding that, considering the limited claims of the individual beneficiaries meaning individual claims would not be cost effective, it was preferable that the issue be resolved “in a proceeding of which all have notice, are afforded an opportunity to participate if they wish, and there is a representative of their interests” (Brereton J). [81]Re Willmott Forests Ltd (No 2) [2012] VSC 125; 88 ACSR 18. [82]Re Willmott Forests Ltd (No 2) [2012] VSC 125; 88 ACSR 18, [54]-[58] (Davies J). [83]Young v Higbee Co 324 US 204 (1945). [84] See, Corporations Act 2001 (Cth) Pt 5.1; R P Austin and Professor I M Ramsay, Ford, Austin & Ramsay's Principles of Corporations Law (LexisNexis, 17th ed, 2018) [24.020]-[24.180]. [85]Young v Higbee Co 324 US 204, 209-14 (1945). [86]Re Opes Prime Stockbroking Ltd (No 2) [2009] FCA 813; 179 FCR 20, [63]-[66] (Finkelstein J); affirmed in Fowler v Lindholm; Re Opes Prime [2009] FCAFC 125; 178 FCR 563. [87]Cf, Kelly v Willmott Forests Ltd (in liquidation) (No 6) [2019] FCA 745, [18], [28] (Murphy J) (holding that an objector to a class action settlement was acting only in its own interests and not in the interests of the other group members, in circumstances where a contradictor had been appointed to represent the absent group members). [88]Australian Law Reform Commission, Report No. 46, Grouped Proceedings in the Federal Court (1988). [89]Federal Court of Australia Act 1976 (Cth) Pt IVA. [90] See, Civil Procedure Act 2005 (NSW) Pt 10; Supreme Court Act 1986 (Vic) Pt 4A; Civil Proceedings Act 2011 (Qld) Pt 13A; Civil Procedure (Representative Proceedings) Bill 2019 (WA). [91]Federal Rules of Civil Procedure (US) r 23. [92] For a detailed comparison, see Michael J Legg, “Judge’s role in settlement of representative proceedings: Lessons from United States class actions” (2004) 78 ALJ 58. [93]Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2009] FCAFC 26; 355 ALR 20, [6]-[7] (Moore, Sundberg, and Tracey JJ); Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; 259 CLR 212, [52]-[53] (French CJ, Kiefel, Keane and Nettle JJ); Federal Court of Australia Act 1976 (Cth) s 33ZB; Federal Rules of Civil Procedure (US) r 23(c)(3). [94]Cf, Finance Sector Union of Australia v Commonwealth Bank of Australia [1999] FCA 59; 89 FCR 417; Sreika v Cardinal Financial Securities Limited [2000] FCA 1647; Wingecarribee Shire Council v Lehman Brothers Australia Limited (No 3) [2010] FCA 747. [95]Dillon v RBS Group (Australia) Pty Limited [2017] FCA 896; 252 FCR 150 at [46] (Lee J); Wong v Silkfield Pty Ltd (1999) 199 CLR 255 at [28], [30] (Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ). [96]Federal Rules of Civil Procedure (US) r 23(a)-(b). In summary, class actions require not only common questions, but also that joinder of all group members to one claim would be impracticable, and that the representative parties are typical of the class and will fairly and adequately represent the class members’ interests. They also must fall into one of three categories: (1) separate actions by individual class members would risk inconsistent findings; or dispose of the claims of non-parties (“(b)(1) classes”); (1) the defendant’s conduct renders it appropriate for injunctions or declarations to be made with respect to the class as a whole (“(b)(2) classes”); or (3) the common questions predominate over any individual questions, and a class action is superior to other available dispute resolution methods (“(b)(3) classes”). [97]Federal Court of Australia Act 1976 (Cth) ss 33L, 33M, 33N, 33P; and see, eg, AS v Minister for Immigration & Ors (Ruling No.7) [2017] VSC 137; Meaden v Bell Potter Securities Ltd (ACN 006 390 772) (No 2) [2012] FCA 418; 291 ALR 482. [98]Australian Law Reform Commission, Report No. 46, Grouped Proceedings in the Federal Court (1988), [145]-[147]. [99] See, Federal Rules of Civil Procedure (US) r 23(a)-(b); Michael J Legg, “Judge’s role in settlement of representative proceedings: Lessons from United States class actions” (2004) 78 ALJ 58. [100]Federal Court of Australia Act 1976 (Cth) s 33E. [101]Federal Court of Australia Act 1976 (Cth) s 33J; but cf, Multiplex Funds Management Ltd v P Dawson Nominees Pty Ltd (2007) 164 FCR 275; Vince Morabito, An Evidence-Based Approach to Class Action Reform in Australia- Closed Class Actions, Open Class Actions and Access to Justice (October 2018), available at <https://ssrn.com/abstract=3272089>. [102]Federal Court of Australia Act 1976 (Cth), ss 33X(1)(a), 33Y. [103]Federal Rules of Civil Procedure (US) r 23(c(2))—opt out rights are given to (b)(3) classes, but not (b)(1) or (b)(2) classes. [104]Federal Court of Australia Act 1976 (Cth) s 33V; Federal Rules of Civil Procedure (US) r 23(e). [105]Federal Court of Australia Act 1976 (Cth) s 33X(4), 33Y; Federal Rules of Civil Procedure (US) r 23(e)(1). [106] See, eg, Tongue v Council of the City of Tamworth [2002] FCA 1163, [9]-[10] (Allsop J); Kelly v Wilmott Forests (in liq) (No 4) [2016] FCA 323; 335 ALR 439, [58]-[60] (Murphy J). [107]Federal Rules of Civil Procedure (US) r 23(e)(5). [108] See, eg, Re US Bioscience Securities Litigation, 155 FRD 116, 120 (ED Penn, 1994); Re Fine Paper Litigation, 632 F 2d 1081, 1086 (3rd Cir, 1980). [109]Wigmans v AMP Limited [2021] HCA 7. [110]Timbercorp Finance Pty Ltd (in liq)v Colins [2016] VSCA 128. [111]Wigmans v AMP Limited [2021] HCA 7, [105]-[109] (Gageler, Gordon and Edelman JJ). [112] See, Wigmans v AMP Limited [2021] HCA 7, [115]-[123] (Gageler, Gordon and Edelman JJ). [113]Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507. [114]Dyczynski v Gibson [2020] FCAFC 120; 381 ALR 1. [115]Dyczynski v Gibson [2020] FCAFC 120; 381 ALR 1, [209]-[210] (Murphy and Colvin JJ). [116]Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, [38] (French CJ, Bell, Gageler and Keane JJ). [117]Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, [40] (French CJ, Bell, Gageler and Keane JJ). [118]Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, [40] (French CJ, Bell, Gageler and Keane JJ) (emphasis added). [119]Cf, Nettle J at [2015] HCA 28; 256 CLR 507, [98]. [120]Timbercorp Finance Pty Ltd (in liq) v Collins [2015] VSC 461; Timbercorp Finance Pty Ltd (in liq)v Colins [2016] VSCA 128; Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; 259 CLR 212. [121] See, Woodcroft-Brown v Timbercorp Securities Ltd & Ors [2011] VSC 427; 253 FLR 240; Woodcroft-Brown v Timbercorp Securities Ltd [2013] VSCA 284; 96 ACSR 307. [122]Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507, [98] (Nettle J). [123]Timbercorp Finance Pty Ltd (in liq) v Collins [2015] VSC 461, [551]-[552] (Robson J). [124] See,Timbercorp Finance Pty Ltd (in liq)v Colins [2016] VSCA 128, [113], [155]-[174], [213]. [125]Timbercorp Finance Pty Ltd (in liq)v Colins [2016] VSCA 128, [213]. [126] Note that this was raised in argument— see, 259 CLR 212, 217. [127]Wong v Silkfield Pty Ltd [1999] HCA 48; 199 CLR 255, [20]; David Rosenberg, "Class Actions for Mass Torts: Doing Individual Justice by Collective Means," (1987) 62(3) Indiana Law Journal 561, 573; Phillips Petroleum Co v Shutts 472 U.S. 797, 813-4 (1985). [128]Cf, Matter of Rhone-Poulenc Rorer, Inc. 51 F.3d 1293, 1299-300 (Posner J) (7th Cir, 1995). [129]Carnie v Esanda Finance Corp Ltd (1995) 38 NSWLR 465, 472 (Young J); [130]Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd [2010] FCA 180; 184 FCR 1. [131]Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2011] FCAFC 128; 196 FCR 145. [132]Peterson v Merck Sharp & Dohme (Aust) Pty Ltd (No 6) [2013] FCA 447, [10]-[12] (Jessup J). [133]Peterson v Merck Sharp & Dohme (Aust) Pty Ltd (No 6) [2013] FCA 447, [16]-[21] (Jessup J). [134]Peterson v Merck Sharp and Dohme (Aust) Pty Ltd (No 7) [2015] FCA 123, [6]-[7], [9] (Jessup J). [135]Peterson v Merck Sharp and Dohme (Aust) Pty Ltd (No 7) [2015] FCA 123, [10]-[13] (Jessup J). [136] Carnie v Esanda Finance Corp Ltd (1995) 38 NSWLR 465. [137]Carnie v Esanda Finance Corp Ltd (1995) 38 NSWLR 465, 472 (Young J). [138] See, eg, Consolidated Credit Network v Illawarra Retirement Trust [2005] NSWSC 1004; Cummins Generator Technologies Germany GmbH v Johnson Controls Australia Pty Limited [2015] NSWCA 264; 326 ALR 556, [156]-[168]. [139] See, eg, Oztech Pty Ltd v Public Trustee of Queensland [2019] FCAFC 102. [140]Hansberry v Lee 311 US 32 (1940). [141]Burke v Kleiman 277 Ill. App. 519 (1934). [142]Broussard v Meineke Discount Muffler Shops, Inc 155 F.3d 331 (4th Cir, 1998). [143] For instance, where a claim is brought on behalf of past and current shareholders, the present shareholders may benefit significantly more from the business continuing than the claim proceeding: see, eg, TW McConnell Pty Ltd v SurfStitch Group Ltd (administrators appointed) [2017] NSWSC 1755, [26]-[27]; TW McConnell Pty Ltd v SurfStitch Group Ltd (subject to DOCA) (No 3) [2018] NSWSC 1749; 133 ACSR 98, [9]-[10];TW McConnell Pty Ltd as trustee for the McConnell Superannuation Fund v SurfStitch Group Ltd (administrators appointed) (No 4) [2021] NSWSC 121. [144] Vince Morabito, An Empirical Study of Australia’s Class Action Regimes: Second Report: Litigation Funders, Competing Class Actions, Opt Out Rates, Victorian Class Actions and Class Representatives (Monash University, September 2010), 33; Vince Morabito, “Empirical Perspectives on 25 Years of Class Actions” in Damian Grave and Helen Mould, 25 Years of Class Actions in Australia (University of Sydney, 2017) 43, 65; Phillips Petroleum Co v Shutts 472 U.S. 797 (1985), 813-4; Debra Lyn Bassett, “Class Action Silence”, (2014) 94 Boston University Law Review 1781, 1783; and cf, O’Dea & Anor v Westpac Banking Corporation [2019] NSWSC 1078, [94], [103] (Sackar J); Alex A Parkinson, "Behavioral Class Action Law" (2018) 65(5) UCLA Law Review 1090, 1116-25. [145]Cf, Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107, [85] (Lee J) (“Leaving aside manifest deficiencies in a way a case is pleaded or conducted, often it will be difficult to tell whether a particular decision was sound until the end of the litigation”). [146] See, Attwells v Jackson Lalic Lawyers Pty Limited [2016] HCA 16; 259 CLR 1, [32]-[36] (French CJ, Kiefel, Bell, Gageler and Keane JJ). [147] See, Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; 101 ACSR 233, [351]-[360] (Black J); cf, Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; 48 WAR 1, [263]-[275] (Edelman J). [148]Amchem Products, Inc, v Windsor 521 US 591 (1997). [149]Ortiz v Fibreboard Corp 527 US 815 (1999). [150]Amchem Products, Inc, v Windsor 521 US 591, 626-7 (1997); Ortiz v Fibreboard Corp 527 US 815, 856-7 (1999). [151]Ortiz v Fibreboard Corp 527 US 815, 857 (1999) [152] See also, Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 2) [2020] FCA 1355, [24(2)] (Glesson J) (holding that the representative applicant’s fiduciary duties to group members was a reason why group members did not need to be separately represented). [153] See generally, Morris A Ratner, “Class Conflicts” (2017) 92 Washington Law Review 785. [154] Deborah R Hensler, “Asbestos Litigation in the United States/ Triumph and Failure of the Civil Justice System” (2005) 12(2) Connecticut Insurance Law Journal 255, 272. [155] Deborah R Hensler, “As time goes by: Asbestos litigation after Amchem and Ortiz” (2002) 80 Texas Law Review 1899, 1918-20. [156]McKenzie v Cash Converters International Ltd (No 4) [2019] FCA 166. [157]McKenzie v Cash Converters International Ltd (No 4) [2019] FCA 166, [14] (Lee J). [158]Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107. [159]Federal Court of Australia Act 1976 (Cth) s 33K. [160]Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107, [85]-[86] (Lee J). [161] See, Breen v Williams (1995) 186 CLR 71, 113 (Gaudron and McHugh JJ), 137-8 (Gummow J); Pilmer v The Duke Group Ltd [2001] HCA 31; 207 CLR 165, [73]-[74] (McHugh, Gummow, Hayne and Callinan JJ); Howard v Federal Commissioner of Taxation (2014) 253 CLR 83, [56] (Hayne and Crennan JJ). [162] See, eg, J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2015) [5-385]-[5-435]; Lionel Smith, “Prescriptive Fiduciary Duties” (2018) 37(2) University of Queensland Law Journal 261; Justice Fabian Gleeson, “Proscriptive and prescriptive duties: is the distinction helpful and sustainable, and if so, what are the practical consequences?” (Conference Paper, Supreme Court Corporate and Commercial Law Conference, 15 November 2017, available at <https://www.supremecourt.justice.nsw.gov.au/Documents/Publications/Corporate%20and%20Commercial%20Law%20Conference/2017/2017_Gleeson_JA.pdf>; and cf, Byrnes v Kendle [2011] HCA 26; 243 CLR 253, [122] (Heydon and Crennan JJ). [163]Cf, Daniels v Anderson (1995) 37 NSWLR 438, 489-505 (Clarke and Sheller JJA).