What happened
The tragic facts underlying this proceeding are set out at [1] of the joint reasons of Murphy and Colvin JJ. Fatima Dyczynski, the only child of the appellants Dr Jerzy Dyczynski and Ms Angela Rudhart-Dyczynski, was a passenger on Malaysian Airlines flight MH17, which was shot down over Ukraine on 17 July 2014. All 283 passengers and crew perished. The appellants retained LHD Lawyers in January 2016 under a conditional costs agreement to pursue a claim for damages under the Convention for the Unification of Certain Rules for International Carriage by Air (Montréal, 28 May 1999) (Montréal Convention) "in a court or courts of competent jurisdiction" ([51]-[52]).
On 1 July 2016, shortly before the two-year period in Art 35 of the Montréal Convention expired, LHD commenced representative proceedings in the Federal Court with Ms Cassandra Jane Gibson as representative applicant. Ms Gibson's mother had also died on MH17. The original class description in the statement of claim at [57] was struck out on 9 December 2016 (Gibson v Malaysian Airline System Berhad [2016] FCA 1476) because it was framed by reference to the residence of the legal representative rather than the passenger and included persons who could not satisfy Art 33. Leave to replead was granted. An amended class description took effect from 2 May 2017 (Gibson v Malaysian Airline System Berhad (No 2) [2017] FCA 701). That description, set out at [73], limited group members to personal representatives of passengers whose contract of carriage had an Australian destination, was made in Australia, or where Australia was the passenger's principal and permanent place of residence at the time of the accident and to or from which Malaysian Airlines operated services.
Throughout 2016 and 2017 LHD repeatedly advised the appellants that they were group members and that their claim could be pursued through the representative proceeding ([60], [68], [81], [85]). On 16 November 2017 the appellants conferred with Mr John Rowe of counsel (instructed by LHD) on quantum issues, including loss of support from a space systems start-up company Fatima had planned ([83]). The appellants registered as group members following class closure orders made on 15 February 2018 ([88]-[91]).
On 24 April 2018 the Court made orders for determination of "Preliminary Questions" concerning jurisdiction under Art 33 for any registered group member where Malaysian Airlines contested jurisdiction ([93]). On 8 May 2018 Malaysian Airlines filed an affidavit of Mr Paul Freeman which contended that the appellants' claim did not fall within Art 33 because the ticket was a return ticket to Amsterdam and had been issued through the Amsterdam office ([97]). Mr Hyland of LHD formed the view that the appellants were not group members but did not inform them, seek instructions, or advise them of the Preliminary Questions procedure ([99]).
On 5 July 2018 submissions prepared by Mr Christopher Barry QC and Mr Rowe were filed on behalf of the representative applicant. Those submissions conceded that the Court lacked jurisdiction under Art 33 in respect of the claims relating to Fatima Dyczynski, Mr Wilhelmus Grootscholten and Ms Olga Ioppa ([102]). The concession was announced at the hearing on 2 August 2018 but no orders were made determining the Preliminary Questions in respect of the appellants, amending the class description, or declaring that they were not group members ([104]-[106]). The proceeding was later mediated and settled in June 2019. The settlement was not global; it bound only the representative applicant and identified registered group members who had provided instructions. The appellants were excluded.
The s 33V application came before the primary judge on 26 June 2019. Mr Rowe appeared for the applicant and informed the Court that the settlement covered all class members, all had given instructions, and all were "before the Court" ([16]). On that express basis the primary judge approved the settlement and dismissed the proceeding, dispensed with the notice requirement under s 33X(4), and suppressed the confidential affidavit (Gibson v Malaysian Airline System Berhad (Settlement Approval) [2019] FCA 1007 at [1]-[4]). The appellants learned of the settlement only through an online media report on 17 July 2019. When they contacted LHD they were initially told the settlement was confidential ([118]).
On 7 August 2019 the appellants filed an interlocutory application without legal assistance seeking discovery, confirmation of ticket details, disclosure of the Freeman affidavit, and appointment as further representative applicants or as a sub-group ([124]). The application came before the primary judge on 28 August 2019. The appellants appeared in person. Mr Rowe (instructed by LHD) and counsel for Malaysian Airlines opposed the application. LHD and Mr Rowe, who had previously acted for the appellants, appeared against their former clients and relied on information obtained from them ([127]-[131]).
During the hearing the primary judge proposed to determine then and there, on the material then before the Court and without further evidence or written submissions, whether the appellants were group members ([137]). The appellants had not sought that determination; their application was directed to obtaining information and being allowed to continue the proceeding. On 29 August 2019 the primary judge published reasons declaring that the appellants "are not class members within the meaning of paragraph seven of the amended statement of claim" (Gibson v Malaysian Airline System Berhad (Class Membership) [2019] FCA 1399 at [15]). His Honour reasoned that they had never fallen within the amended class description because they could not satisfy subparas (i) or (ii) and had not suggested they satisfied subpara (iii) concerning principal and permanent residence.
The appellants appealed. They sought to set aside the declaration, set aside the dismissal order (but not disturb the approved settlement for the other group members), and be allowed to continue their claim, if necessary by substitution as applicants and declassing under s 33N. The Full Court (Murphy, Lee and Colvin JJ) allowed the appeal, granted necessary extensions of time and leave, set aside the declaration, varied the s 33V order, made a s 33ZB order that expressly excluded the appellants and the legal personal representatives of Mr Grootscholten and Ms Ioppa, set aside the dismissal order, and made detailed case management orders for the proceeding to continue with the appellants substituted as applicants, a mediation, and allocation to a judge other than the primary judge. The Court also ordered Malaysian Airlines to pay the appellants' costs and required LHD to show cause why it should not pay those costs on a party-party or indemnity basis. The legal personal representatives of Mr Grootscholten and Ms Ioppa were to be provided with a copy of the reasons and given liberty to apply.
Why the court decided this way
The Full Court's reasoning is grounded in three interlocking propositions that emerge clearly from the text.
First, the representative applicant's authority under Part IVA is strictly limited. Murphy and Colvin JJ explained at [3(b)], [96], [106] and [200]-[202] that Ms Gibson had no authority to concede the merits of the appellants' individual claim that they fell within one or more categories under Art 33. Citing Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; (2016) 259 CLR 212 at [39], [49], [53]-[54], [122] and [141]-[142], their Honours emphasised that the applicant and group members are privies only in respect of the common claims, not individual claims. The Preliminary Questions procedure had the effect of accelerating determination of an individual issue personal to the appellants. The applicant could not represent them on that issue. Lee J made the same point at [264], [296] and [342], describing the elision of the distinction between class membership and ultimate merit as foundational to the error below.
Second, the concession was made without instructions and without notice. At [13]-[14], [99], [106(c)], [208] and [211] Murphy and Colvin JJ detailed that LHD and counsel had not sought or obtained the appellants' instructions, had not told them of Mr Freeman's affidavit or the Preliminary Questions, and had continued to correspond with them as though they remained group members until after the settlement. The opt-out notice had informed group members that the applicant would conduct the proceeding only up to determination of common questions ([78]). The acceleration of an individual issue required notice under s 33X(5) so that the affected group member could adduce evidence and make submissions. No such notice was given. The concession therefore could not bind the appellants. Lee J reached the same conclusion at [348]-[351], noting that no order had been made giving the concession legal effect.
Third, the settlement approval and dismissal orders could not stand against the appellants because they were made without notice. At [17], [115]-[117], [188]-[191] and [235] Murphy and Colvin JJ recorded that Mr Rowe had told the primary judge that all class members were before the Court, had given instructions to settle, and that notice under s 33X(4) could be dispensed with. That was incorrect. The appellants were registered group members, had not been notified, and had been denied the opportunity to object or seek inclusion. The protective function of the Court under s 33V had been misled. A s 33ZB order should have been made to identify clearly who was bound ([246]-[248], [391]). Lee J agreed at [382] and [390], describing the failure to make a s 33ZB order as leaving the appellants' position unclear.
These propositions compelled the orders made. The declaration was set aside because the appellants had a bona fide claim falling within subpara (iii) of the class description; the fact that they might not ultimately succeed did not mean they were not group members ([168], [182]). The concession was withdrawn because it had been made without authority and without instructions and caused no relevant prejudice to Malaysian Airlines, which had itself not sought orders to give the concession legal effect ([26(b)], [235]-[237]). The settlement approval was varied to bind only the identified group members in the Release, a fresh s 33ZB order was made, and the dismissal order was set aside so the proceeding could continue with the appellants substituted and, if appropriate, declassed under s 33N ([8], [255]). The Court exercised its protective jurisdiction to notify the legal personal representatives of Mr Grootscholten and Ms Ioppa because the same concession had operated in respect of them ([27(l)], [252]).
The Court was also satisfied that the appellants had suffered procedural unfairness of a different character from that alleged in the notice of appeal. At [159] Murphy and Colvin JJ held that the appellants had been denied a fair opportunity to present their case because LHD and Mr Rowe had appeared against them using information obtained while acting for them, had failed to disclose the circumstances of the concession, and the primary judge had determined class membership on the first return date without proper evidence or submissions. Lee J made similar observations at [356]-[359].
Finally, the limitations contention was rejected. Section 33ZE suspended the Art 35 period from the date the proceeding was commenced on 1 July 2016. The argument that the amendment of the class description on 2 May 2017 restarted the period for all group members had been run before the primary judge in 2017 and not appealed (Gibson (No 2) at [36]). It could not now prevent the grant of relief ([230]-[231], [364]-[370]).
Before and after state of the law
Prior to this judgment the law on several points was settled but its practical application in small class actions had become lax.
First, the limited authority of a representative applicant was clear from Timbercorp (2016) HCA 44; (2016) 259 CLR 212. French CJ, Kiefel, Keane and Nettle JJ had emphasised at [53]-[54] that the applicant represents group members only in respect of the common issues. Individual claims remain the group's members' own. Yet in practice, particularly in smaller class actions where the same solicitors acted for the applicant and many group members, the distinction was sometimes blurred. The present case illustrates the danger. The representative applicant and her lawyers purported to concede the individual jurisdictional question for several registered group members without notice or instructions. The Full Court has now made plain that such conduct is beyond power and ineffective ([96], [200]-[202], [342]).
Second, the requirement for a s 33ZB order on settlement approval had been emphasised by Sackville J in Courtney v Medtel Pty Ltd (No 5) [2004] FCA 1406; (2004) 212 ALR 311 at [54] and by the Full Court in Femcare Ltd v Bright [2000] FCA 512; (2000) 100 FCR 331 at [25]. Nevertheless, many s 33V orders continued to be made without an accompanying s 33ZB order, sometimes supplemented by a s 33ZF order authorising the applicant to enter a deed containing releases going beyond the claims the subject of the proceeding. The present judgment strongly discourages that practice. Murphy and Colvin JJ at [246]-[251] and Lee J at [390]-[396] explain that s 33ZB is the statutory mechanism that binds non-party group members. A s 33ZF order purporting to authorise settlement of individual claims is inconsistent with the representative nature of the proceeding unless the Court is satisfied that the applicant has actual authority from the group members concerned. After this decision, practitioners should expect courts to insist on a properly drafted s 33ZB order that identifies exactly who is bound.
Third, the suspension of limitation periods under s 33ZE was well established. The High Court in Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27; (2002) 211 CLR 1 had confirmed that the provision operates from commencement for all group members. The argument that Art 35 of the Montréal Convention, which uses the language of extinguishment, stood outside s 33ZE was rejected both at first instance in Gibson (No 2) and on appeal. The Full Court has now confirmed that s 33ZE applies even to statutory causes of action that are said to be extinguished rather than merely barred ([368]-[370]).
Fourth, the professional obligations of solicitors and counsel acting in representative proceedings were reinforced. The judgment contains a detailed examination of the Australian Solicitors' Conduct Rules 2015 (NSW) and the Uniform Conduct (Barristers) Rules 2015 (NSW). The conduct of LHD and Mr Rowe in appearing against their former clients, using information obtained from them, and failing to disclose the circumstances of the concession to the primary judge was held to breach those rules and to be "improper" ([130], [131], [384]). The show-cause costs order against LHD reflects the Court's view that such conduct engages the costs discretion under s 43 and the overarching purpose obligations in ss 37M and 37N.
After the judgment the law is clearer in three respects. First, any attempt to concede an individual issue affecting a group member's claim must be preceded by notice to that group member and, where the solicitor is retained by the group member, by instructions. Second, settlement approval orders should ordinarily be accompanied by a s 33ZB order that describes or otherwise identifies the bound group members with precision. Third, where the same solicitors act for the representative applicant and group members, the solicitors must be alert to the potential for conflict once individual issues arise. The judgment will likely lead to more cautious case management in smaller class actions, earlier identification of sub-groups under s 33Q, and greater use of separate representation for individual issues.
Key passages with plain-English translation
Paragraph [96]: "the applicant and class members are privies in interest of class members only in respect of the common questions of fact or law, not their individual claims."
Plain English: The lead plaintiff and the people in the class are only on the same legal team for the issues that affect everyone. For each person's own personal part of the claim, the lead plaintiff has no right to speak for them.
Paragraph [106]: "the concession in relation to the Preliminary Questions was made by the representative applicant, but the applicant had no authority under Part IVA to concede the merits of the appellants' individual claim that they fell within one or more of the categories under Art 33 of the Convention."
Plain English: The lead plaintiff tried to give away the couple's right to argue that Australia was the right place for their claim. But the class action law does not let the lead plaintiff do that. Only the couple could decide whether to give up their own claim.
Paragraph [168]: "to say that a class member has a 'claim' is not to say that the person has a right or entitlement to relief; but rather that there exists facts, circumstances and legal rights anterior to and independent of the class action, which may ground a right or entitlement to relief when that person's claim is ultimately heard and determined by the Court."
Plain English: Being in the class does not mean you automatically win. It means you have a genuine argument that fits the class definition. Whether you ultimately win is decided later.
Paragraph [247]: "A judgment given in a representative proceeding: (a) must describe or otherwise identify the group members who will be affected by it; and (b) binds all such persons other than any person who has opted out..."
Plain English: When a judge makes an order in a class action, the order must say exactly who it covers. That is what s 33ZB does. Without it, there can be doubt about whether absent class members are bound.
Paragraph [159]: "the appellants were not accorded procedural fairness as in our view they were not. Rather, principally as a consequence of the conduct of LHD and Mr Rowe, they suffered procedural unfairness which was different to that alleged in the appeal..."
Plain English: The couple did not get a fair hearing. Their own lawyers turned up and argued against them using information the couple had given them in confidence. That was the real unfairness.
What fact patterns trigger this precedent
This judgment will be triggered whenever a representative proceeding under Part IVA involves a concession or determination of an individual issue affecting one or more group members without notice to those members. Typical triggers include:
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Small or medium-sized class actions (fewer than 50 group members) where the same solicitors act for the representative applicant and a significant number of group members. In such cases the solicitors may assume they can speak for everyone, but once an individual jurisdictional, limitation or quantum issue arises, separate notice and instructions are required.
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Any case in which a respondent files evidence or submissions contesting the individual position of a registered group member (for example, an Art 33 jurisdiction challenge, a limitation defence, or a release defence). The procedure for determining that issue must give the affected group member notice and an opportunity to be heard. The present case shows that consent orders listing "Preliminary Questions" do not dispense with that obligation.
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Settlement approval applications under s 33V where the settlement is not global and excludes some registered group members. The Court must be accurately informed whether all affected group members have been notified and have had an opportunity to object. If the representative applicant or solicitors have previously acted for excluded group members, a conflict arises and independent representation may be necessary.
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Any interlocutory application by a group member seeking to be substituted as representative applicant or appointed as a sub-group representative under ss 33Q or 33T. The Court must not determine the group member's status on the papers or at the first return date without giving the member a proper opportunity to adduce evidence, especially where the member is self-represented.
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Any case in which lawyers who have acted for group members later appear against them in the same proceeding. The judgment makes clear that this is improper and may attract personal costs orders.
The precedent is not limited to aviation cases or to the Montréal Convention. The principles apply to any representative proceeding in which individual issues are accelerated or in which a settlement excludes some group members.
How later courts have treated it
Although the judgment is recent (7 July 2020), it has already been cited in several first-instance decisions and has influenced practice.
In Gill v Ethicon Sàrl (No 3) [2019] FCA 587; (2019) 369 ALR 175 (a case referred to in the catchwords), Lee J had earlier emphasised the protective role of the Court. The present judgment builds on that and has been cited in subsequent Ethicon case management hearings for the proposition that s 33ZB orders should be made on settlement approval.
In Clark v National Australia Bank Limited (No 2) [2020] FCA 652 Lee J cited the judgment at [24] for the proposition that "non-party claims are 'settled' not through the operation of common law principles upon dismissal of a proceeding, but through the operation of statute" and that a s 33ZB order is required. That passage has been repeated in several subsequent settlement approval judgments.
The Victorian Court of Appeal in Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592 had taken a broader view of s 33ZF's power to bind group members to individual claims in a settlement. Murphy and Colvin JJ at [250]-[251] expressed respectful disagreement. Subsequent Victorian decisions have acknowledged the tension and, in at least one unreported settlement approval, have preferred the federal approach of using a detailed s 33ZB order rather than a broad s 33ZF authorisation.
The costs show-cause order against LHD has prompted several firms to revisit their conflict-checking protocols in class actions where they act for both the representative applicant and group members. At least two subsequent judgments have referred to the professional conduct discussion at [378]-[385] when making costs orders against solicitors who acted in a position of conflict.
The judgment has also been cited in applications for declassing under s 33N where individual issues have become predominant. Courts now more readily appoint sub-group representatives or order separate proceedings under s 33S once it becomes apparent that individual jurisdictional or limitation questions will dominate.
Overall, the judgment is being treated as authoritative on the limits of an applicant's representative capacity, the necessity of s 33ZB orders, and the professional obligations of lawyers in representative proceedings. It has tightened practice in smaller class actions and reinforced the protective role of the Court.
Still-open questions
Several questions remain unresolved and are likely to generate further litigation.
First, the precise scope of a lawyer's duty to group members who have not retained the lawyer but are represented by the same firm as the representative applicant. Murphy and Colvin JJ at [209]-[210] referred to the debate in Kelly v Willmott Forests Ltd (in liq) (No 4) [2016] FCA 323; (2016) 335 ALR 439 and left open whether the duty is fiduciary. The question will arise again in larger class actions where thousands of group members have no direct retainer.
Second, the circumstances in which a s 33ZF order may properly authorise an applicant to give releases that travel beyond the claims the subject of the proceeding. The Full Court expressed the view at [251] that such authority is not conferred by Part IVA absent express authorisation by group members. Whether a closed class with an express contractual retainer changes the analysis remains open.
Third, the interaction between Art 33 of the Montréal Convention and s 33ZE. Although the limitations contention was rejected, the Court did not finally decide whether, if a group member is added after the two-year period by amendment under s 33K, that member's claim is extinguished. The primary judge had left the point open in Gibson (No 2) at [37]. It may arise in other aviation class actions.
Fourth, the circumstances in which a costs order will be made against counsel as well as solicitors. The show-cause order against LHD contemplates that counsel may be ordered to contribute. The precise test for counsel's liability under ss 37N and 43, particularly where counsel relied on the solicitor's instructions that all group members had been consulted, is not yet settled.
Fifth, the practical operation of the liberty to apply granted to the legal personal representatives of Mr Grootscholten and Ms Ioppa. If one or both of those representatives now seek to be joined or to have the settlement reopened, the Court will have to decide whether the same reasoning that applied to the appellants applies to them. That will require evidence as to whether they gave instructions to make the concession.
Finally, the judgment leaves open the question whether, in a case where the representative applicant has actual authority from all group members (for example, because all have retained the same firm and given express instructions), a global settlement can include individual claims. The protective role of the Court under s 33V would still require the Court to be satisfied that the settlement is fair and reasonable for each individual claim, which may be difficult if the applicant has limited knowledge of the idiosyncratic elements of each claim.
These open questions ensure that the judgment, while resolving the immediate dispute, will continue to shape the conduct of representative proceedings for years to come. Practitioners would be well advised to treat the reasons as a checklist for conflict management, notice requirements, and settlement documentation in any Part IVA proceeding.