Discontinuance application
21 Section 33V(1) of the Act stipulates that a representative proceeding may not be settled or discontinued without the approval of the Court. The Court adopts a protective role with respect to the interests of group members who are not directly represented in the proceedings. As stated by Murphy J in Turner v TESA Mining (NSW) Pty Ltd (No 2) [2022] FCA 435 (Turner) (at [6]), an applicant must demonstrate an entitlement to an order for approval even when the order is not opposed, and the Court should be alive to the possibility that the outcome, whether it be settlement or discontinuance, may reflect conflicts of interest or conflicts of duty and interest between the applicant and group members, or between group members.
22 A discontinuance differs in its nature to a settlement, each having different legal consequences. The Court's task in considering whether to approve a discontinuance is therefore different to its task in approving a settlement under s 33V of the Act: Babscay Ptd Ltd v Pitcher Partners [2020] FCA 1610 (Babscay) at [19]. A discontinuance is a unilateral act of the applicant, which (subject to any cost consequences) puts the applicant in the same position as if the proceeding had not been commenced. As there is no agreement by which the proceeding is compromised, there can be no merger of the applicant's rights in the proceeding. As there is no judicial determination, there can be no res judicata or issue estoppel: Babscay at [20]-[22]; Caason Investments Pty Ltd v Cao (No 3) [2020] FCA 91 at [132]; Thirteenth Corp Pty Ltd v State [2006] FCA 979; 232 ALR 491 at [33].
23 While it is clear that the test for settlement approval requires the Court to be satisfied that the proposed settlement is fair and reasonable and in the interests of affected group members, including as between group members, there has been some uncertainty as to the test to be applied when approval is sought for discontinuance, with two distinct approaches having emerged.
24 In Mercedes Holdings Pty Ltd v Waters (No 1) [2010] FCA 124; 77 ACSR 265 (at [9]-[10]), Perram J concluded that the test is whether the proposed discontinuance would be fair and reasonable not only in the interests of the immediate parties but of the group members as a whole. That test was subsequently adopted in number of decisions: see for example Hodge v Waters (No 4) [2014] FCA 472 at [15]; Adams v Navra Group Pty Ltd [2019] FCA 1157 at [19] and Sister Marie Brigid Arthur (Litigation Representative) v Northern Territory of Australia (No 2) [2020] FCA 215 at [69]-[70]. A second approach was stated by Dixon J in Laine v Thiess Pty Ltd [2016] VSC 689 (Laine) (at [34]) and requires determination of whether the discontinuance would be unfair or unreasonable or adverse to the interests of group members. In Simonetta v Spotless Group Holdings Limited [2017] FCA 1071 (at [12]), Yates J considered it unnecessary to express a concluded view but stated that there was merit in the submission that the test in Laine might be more apt where the practical effect of the proposed discontinuance will be to return group members to the position they were in before the commencement of the proceeding. Support for the test in Laine has been expressed in a number of subsequent decisions in this Court: see Babscay (at [28]) (Anastassiou J); Watson v Maximus Holdings (NSW) Pty Ltd [2021] FCA 87 (Maximus) (at [49]) (Wigney J); Francis (Trustee) v Oculus Accounting Pty Ltd (No 2) [2021] FCA 1275 (Oculus) (at [33]) (Derrington J); and Alford v AMP Superannuation Limited [2024] FCA 332 (Alford) (at [13]) (Anderson J). In Turner, Murphy J expressed the view (at [10]) that, at least in the context of a proposed discontinuance where the practical effect will be to return group members to the position they were in before the commencement of the class action, the test in Laine was appropriate. Lee J expressed his agreement with that view in Lloyd v Belconnen Lakeview Pty Ltd (No 3) [2022] FCA 761 at [6]. It is apparent that, in a case such as the present, the weight of the authorities supports the view that the task of the Court is to assess whether the discontinuance would be unfair or unreasonable or adverse to the interests of group members.
25 For the reasons that follow, I consider that the proposed discontinuance would not be unfair or unreasonable or adverse to the interests of group members.
26 First, the applicants have adduced evidence to the effect that the proceeding was commenced on the foundation of publicly available material obtained from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, where significant information was not available to the applicants and their representatives at the time of commencement. The applicants have now had the benefit of reviewing and considering documents produced by the respondents by way of initial discovery. Further advice on prospects has been obtained. Most relevantly, the litigation funder, Woodsford, has withdrawn its funding for the proceeding. The evidence also indicates that it is unlikely that another commercial third-party funder would agree to fund the proceeding. Shine Lawyers has also confirmed that they are unwilling to self-fund the proceeding.
27 Second, an agreement to discontinue the proceeding has been reached with the respondents on terms which do not prejudice the rights of group members. All group members will be returned to the position they were in prior to the commencement of the proceeding, and their rights against the respondents will not be affected by the discontinuance. There has been no hearing or judicial determination in relation to the merits of their claims and no question of res judicata or issue estoppel arises. Thus, any group member who wishes to commence their own proceeding against one or other of the respondents will be free to do so.
28 Third, group members have been given notice of the proposed discontinuance and of their right to object to the discontinuance and/or to seek substitution as the representative applicant, and no group member has done so.
29 As part of the discontinuance, the parties have reached an agreement (recorded in the Discontinuance Deed) whereby the respondents consent to an order of the Court requiring them to pay an aggregate amount of $1.5 million in respect of the applicants' costs of the proceeding. By the Discontinuance Deed, the parties have agreed that the costs payment is not an admission of liability or wrongdoing by the respondents. It is somewhat unusual for respondents to pay an amount towards the costs of an applicant who has agreed to discontinue a proceeding. The more common position is that a discontinuing applicant will be required to pay the costs of the respondent (see the default position in r 26.12(7) of the Federal Court Rules 2011 (Cth)), but frequently parties reach an agreement to discontinue a proceeding on a "walk away basis" (ie, subject to an order that each party bears their own costs). While it is uncommon for a respondent to agree to pay an amount towards the costs of a discontinuing applicant, I do not consider that the agreement renders the discontinuance unfair or unreasonable or adverse to the interests of group members. The evidence before the Court is that the applicants, and the litigation funders, now assess the prospects of success in the proceeding as insufficient to justify its continuation. Whilst the respondents have agreed to pay an amount towards the applicants' costs as part of the agreement to discontinue the proceeding, they have done so without admission of liability. There is no suggestion that the respondents would be willing to make a payment to the applicants or group members in the context of a discontinuance of the proceeding where the claims of the applicants and group members are not extinguished.
30 In the circumstances, I am satisfied that it is appropriate to approve the discontinuance pursuant to s 33V of the Act and grant leave for the applicants to discontinue the proceeding by filing a notice of discontinuance pursuant to r 26.12.