Furniss v Blue Sky Alternative Investments Limited

Principles for granting of leave to appeal 6 The relevant principles relating to the grant of leave to appeal are not in dispute. These were conveniently and very helpfully set out by Wigney J in Roberts-Smith v Roberts [2022] FCA 524 at [13] to [17]: [13] An applicant for leave to appeal must generally demonstrate: first, that the decision in question is "attended with sufficient doubt to warrant its being reconsidered by the Full Court"; and second, that "substantial injustice would result if leave were refused, supposing the decision to be wrong": Re Décor Corporation Pty Ltd and Rian Tooling Industries Pty Ltd v Dart Industries Inc (1991) 33 FCR 397; [1991] FCA 844 at 398 (Sheppard, Burchett and Heerey JJ); Advanced Holdings Pty Ltd v Commissioner of Taxation (2020) 281 FCR 149; [2020] FCAFC 157 at [35] (Steward J, with Allsop CJ and Bromwich J agreeing); Davidson v Official Receiver [2021] FCAFC 73 at [15] (Allsop CJ, Markovic and Anastassiou JJ). The two criteria are cumulative and both must ordinarily be made out: Rawson Finances Pty Ltd v Deputy Commissioner of Taxation [2010] FCAFC 139 at [4]-[5] (Ryan, Stone and Jagot JJ); Ah-Chee v Stuart [2019] FCAFC 165 at [12] (Reeves, Griffiths and Charlesworth JJ). They are also related and should not be divided into "separate compartments": Ah-Chee at [12]; Cabcharge Australia Ltd v Australian Competition and Consumer Commission [2010] FCAFC 111 at [20] (Kenny, Tracey and Middleton JJ). [14] While the two Décor criteria may not represent a "hard and fast rule" (Samsung Electronics Co. Ltd v Apple Inc. (2011) 217 FCR 238; [2011] FCAFC 156 at [29] (Dowsett, Foster and Yates JJ)), they nevertheless provide "general guidance which the Court should normally accept": Rawson Finances Pty Ltd v Commissioner of Taxation [2016] FCAFC 95 at [39] (Robertson, Moshinsky and Bromwich JJ). [15] In relation to the first of the two Décor criteria, an applicant for leave to appeal does not have to demonstrate that the proposed grounds of appeal are strongly arguable, or that the proposed appeal will or is likely to succeed. An applicant need only demonstrate that there is sufficient doubt about the correctness of the decision to warrant appellate reconsideration. Where, however, the decision of the primary judge is a discretionary decision, the applicant will generally need to demonstrate that the doubts as to the correctness of the decision involve errors or matters of principle of the kind described in House v The King (1936) 55 CLR 499; [1936] HCA 40 at 504-505 (Dixon, Evatt and McTiernan JJ). It will generally not be sufficient to merely demonstrate that the discretion could or even should have been exercised differently because, for example, the relevant considerations could or should have been weighed differently to the way they were weighed by the primary judge: Ah-Chee at [13]; Construction, Forestry, Mining and Energy Union v Australian Competition and Consumer Commission (2016) 242 FCR 153; [2016] FCAFC 97 at [16]-[17] (Dowsett, Tracey and Bromberg JJ). [16] As for the second of the Décor criteria, an applicant seeking leave to appeal an interlocutory decision is likely to suffer substantial injustice, supposing the decision to be wrong, if the decision has the practical effect of finally determining the rights of the parties, or determines "a substantive right": Décor at 400. The existence of those circumstances will generally provide a prima facie case, or at least a strong ground, for the grant of leave to appeal: Ex parte Bucknell (1936) 56 CLR 221 at 225-226 (Latham CJ, Rich, Dixon, Evatt and McTiernan JJ); Construction, Forestry, Maritime, Mining and Energy Union v One Key Workforce Pty Ltd [2020] FCAFC 27 at [44] (McKerracher, Farrell and Markovic JJ); Hastwell v Kott Gunning [2021] FCAFC 70 at [26], citing Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564; [2000] FCA 1572 at [43] (French J, with whom Beaumont and Finkelstein JJ agreed); Aardwolf Industries LLC v Tayeh [2020] NSWCA 301 at [1] (Bell P), [54] (Macfarlan JA) and [87] (Leeming JA). [17] Different considerations generally apply, however, where the decision in question is a discretionary decision relating to a matter of practice and procedure and no questions of general principle are at stake. In such cases, appellate intervention requires the "exercise of particular caution": Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 at [34] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ). In Adam P Brown Male Fashions Pty Ltd v Phillip Morris Incorporated (1981) 148 CLR 170 at 177, Gibbs CJ, Aikin, Wilson and Brennan JJ approved the following "oft-cited" statement of Sir Frederick Jordan in In re the Will of F. B. Gilbert (dec.) (1946) 46 SR (NSW) 318 at 323: … there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. 7 At the outset I make three observations. First, the issue relating to the 'carriage application' as described by the primary judge is one of practice and procedure and no questions of general principle are at stake. This is just another case concerning the weighing up of the various factors relevant to a carriage application. I am not disposed to consider that an exercise of discretion in the sense considered in House v The King (1936) 55 CLR 499 ('House v The King') is involved in determining the 'carriage application', nor is it merely a matter of case management. Case management is a relevant consideration because of the dictates of s 37M of the Federal Court of Australia Act 1976 (Cth), to the extent that the Court is concerned with the application of provisions made under that Act with respect to the practice and procedure of the Court. The carriage application involves the careful consideration and evaluation of many factors, as recognised by the High Court in Wigmans v AMP Limited (2021) 270 CLR 623 ('Wigmans'). As stated at [116] of the High Court decision in Wigmans: The task undertaken by the primary judge was not a judgment regarding a matter of "mere" case management but a larger task of ensuring that justice is done in the competing representative proceedings which have been commenced under Pt 10 of the CPA where all courts must be astute to protect the best interests of group members. (citations omitted) 8 I interpolate that prior to the handing down of the Wigmans decision, earlier Federal Court judgments concerning competing class actions did refer to the exercise by a Judge of discretionary powers and the application of case management principles: see, eg, Klemweb Nominees v BHP (2019) 369 ALR 583 ('Klemweb') at [13]. Putting this characterisation of the judicial exercise of power aside, which needs to be more precisely formulated in view of the approach of the majority in Wigmans, the principles concerning resolving the choice between competing class actions are now well established. The real difficulties that may arise are in the exercise of the power of the Court to reach the appropriate decision in the best interests of the group members. 9 Secondly, I do appreciate that the applicant, as a first matter, need only demonstrate that there is sufficient doubt about the correctness of the decision of the primary judge to warrant appellant reconsideration. In my view, no such sufficient doubt has been demonstrated. I make this assessment whether one adopts the House v King approach to "discretionary decisions", or my own preference to view the primary judge's decision as one of a broad and evaluative kind: see, eg, Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [26] and Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 261 FCR 301 per Allsop CJ at [4] to [10] and Perram J at [45] to [54]. 10 Thirdly, if the primary judge had finally ordered that the Furniss Proceeding and R&B Proceeding be consolidated (to which I will return), then I accept that the die would have been cast for the further conduct of the litigation, and the consolidation of the proceedings, whilst a decision involving practice and procedure, would impact on the parties in a somewhat more substantive way than, say, an interlocutory ruling on discovery.

DISCUSSION 11 The primary judge set out the relevant factors to consider in making the relevant evaluation on the carriage application as follows in his reasons ('J'): [35] As Gageler, Gordon and Edelman JJ emphasised in Wigmans v AMP Limited [2021] HCA 7; (2021) 270 CLR 623 (at 666 [106]), multiplicity of proceedings is not to be encouraged. The continuation of competing representative proceedings run by different firms of solicitors with different funders may be inimical to the administration of justice. [36] There is no "one size fits all" approach to issues of multiplicity: Wigmans (at 666 [106] per Gageler, Gordon and Edelman JJ); Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107; (2019) 369 ALR 583. A wide variety of factors may be relevant to the exercise of the Court's discretion depending upon the particular circumstances of the case. [37] In any event, following the decision of the High Court in Wigmans, my summary of the relevant principles in CJMcG Pty Ltd as Trustee for the CJMcG Superannuation Fund v Boral Limited (No 2) [2021] FCA 350; (2021) 389 ALR 699 (at 703-704 [9]-[13]) remains an appropriate touchstone: 9. First, in determining the appropriate remedial response, the focus of the Court is on what "would be in the best interests of group members": at [52]. This is a task directed to ensuring that justice is done in the competing proceedings: at [116]. In this way, the approach mandated by Wigmans is entirely consonant with the Court's statutory requirement contained in Pt VB of the Federal Court Act 1976 (Cth) (Act) to facilitate the overarching purpose. 10. Secondly, there is no race to the courthouse. The High Court has decisively rejected that there be a presumption that the "first in time" rule applies: at [52] and [94]. In and of itself, it is not vexatious, oppressive or an abuse of process to commence a subsequent bona fide class action prior to the Court giving substantial directions in existing but overlapping proceedings: at [107], citing Getswift (at [150]). Although the time of filing may remain a relevant consideration, as I will explain below, it is a less relevant consideration in cases such as the present where the competing proceedings have been commenced within a relatively short time of each other: at [107], citing Wigmans v AMP Ltd (2019) 103 NSWLR 543; 373 ALR 323; [2019] NSWCA 243 (at [83] per Bell P, with whom [Macfarlan], Meagher, Payne and White JJA agreed). 11. Thirdly, as is to be expected in a multifactorial inquiry, the factors relevant to the determination of applications such as the present will vary from case to case: at [109], citing Getswift First Instance (at [169]) and Getswift (at [195]). The point made by the High Court is that it is necessary for a court to determine, by reference to all relevant considerations, which proceeding going ahead would be in the best interests of group members: at [109]. 12. Fourthly, the litigation funding arrangements adopted by the competing applicants are not irrelevant, and there is nothing foreign to the judicial process for a court to take into account likely success in proceedings or quantum of recovery, both of which may be affected by the litigation funding arrangements in place: at [111]-[112]. 13. It follows from the above that the factors that will be relevant in conducting a multifactorial analysis for the purposes of staying one or more of the duplicative proceedings cannot be exhaustively stated. Having said that, previous cases, for example, Wigmans v AMP Ltd [2019] NSWSC 603 (at [121]-[126] per Ward CJ in Eq) (Wigmans First Instance), McKay Super Solutions Pty Ltd (as trustee for the McKay Super Solutions Fund) v Bellamy's Australia Ltd [2017] FCA 947 (at [71] per Beach J) and GetSwift First Instance (at [169] per Lee J), have identified at least the following factors, which all participants have suggested are relevant considerations to a greater or lesser extent (summarised in Wigmans (at [6])): (1) the competing funding proposals, cost estimates and net hypothetical return to group members; (2) proposals for security; (3) the nature and scope of the causes of action advanced (and relevant case theories); (4) the size of the respective classes; (5) the extent of any book build; (6) the experience of the legal practitioners (and funders) and availability of resources; (7) the state of progress of the proceedings; and (8) the conduct of the representative applicants to date. 12 It is significant to note that no "one size fits all", and a wide variety of factors may be relevant to any evaluation with no one factor being mandatory. The ultimate focus is what would be in the best interests of group members. 13 I turn first to look at the primary judge's approach. There were a number of "possible ways forward" identified as what would be in the best interests of group members at [74]: The transcript will record that during the course of oral submissions, a number of options were canvassed. Without seeking to be exhaustive, most attention was given to the following options: (1) one or other of the proceedings be stayed, allowing the unstayed proceeding to continue in its current form; (2) both proceedings continue for a period in order to allow group members to be notified and elect between the two proceedings; one or other of the proceedings would the proceed as an open or closed class, and the proceedings would be heard together; (3) the Furniss Proceeding proceed on an open basis; and (4) the R&B Proceeding proceed on a closed basis, restricted to the 76 persons who have signed funding agreements. 14 His Honour appreciated the weighing up of the various factors relevant to the carriage application, and accepted at [82]: While the factors relied upon by the respondents are weighty, I think it is a considerable overstatement to say that there is no good reason to order consolidation. And in the end, it is an unusual aspect of these applications that I consider to be decisive in favouring this solution. 15 His Honour said the following at [79] and [83] to [85]: [79] I reiterate here that the proper approach requires me to fasten upon what I think is in the best interests of group members: Wigmans (at 667-668 [109] per Gageler, Gordon and Edelman JJ). If I form the view that consolidation is the best approach in all the circumstances, then the mere fact that a funder might not find that result to its commercial advantage should not, in my view, impact upon what I consider to be best for group members. … [83] Shine has had the opportunity over a quite lengthy period to apprise itself of detailed information concerning the underlying dispute. It would be inimical to the overarching purpose of civil litigation in this Court for that detailed analytical work to be lost. It follows that I do not think a resolution which involves the Furniss Proceeding being stayed could ever be in the interests of group members. [84] Similarly, recent, intensive, and obviously careful work has been undertaken by those acting in the R&B Proceeding in order to develop a case theory, particularly as to how alleged loss is to be calculated. The pleading, with respect, shows some real sophistication as to how the liability and damages case is to run in relation to BLA. Additionally, I am told by senior counsel for R&B Investments that extensive work has been undertaken with a consulting expert concerning the case to be advanced against the auditor. If I elect to stay the R&B Proceeding, there is a prospect that this accumulated knowledge and analysis being lost to group members. I reach this conclusion notwithstanding those acting for Mr Furniss are highly competent practitioners who, in due course, would advance the case they perceive to be optimal. [85] This seems to me a case where group members would be best assisted by the fruits of the work that has been done by both sets of solicitors and counsel. At the end of the day, if I am focusing on the interests of group members, this is determinative. 16 Then significantly to the determination of this application for leave to appeal, his Honour said at [90] and [93]: [90] Subject to the question of costs, I propose to stand this matter over for a period of approximately three weeks in order to see what, if anything, can be agreed between R&B Investments, Mr Furniss and the funders. … [93] It should be evident from these orders that I intend to be in a position to assess the respective positions taken by R&B Investments and Mr Furniss. At the end of the day, if I take the view that one or other party has been intransigent in coming to a sensible resolution and consolidation has not been achieved, this will inform the different remedial solution that will then be put in place. 17 In my view, before going any further, it is abundantly apparent that the primary judge has in his final reasons and disposition of the 'carriage application' left the appropriateness of consolidation for further consideration (irrespective of comments made in the transcript along the way and the reasons being ex-tempore) . I do not accept the following submission of the applicant at [18] of the written submissions (repeated in oral submissions): The net effect is that the primary judge effectively ordered consolidation. Mr Furniss must either reach agreement on consolidation or run the high risk that carriage would go, effectively by default, to the R&B Proceeding even though his Honour recognised (J[82]-[83]) that a stay of the Furniss Proceeding could not ever be in the interests of group members. 18 The primary judge was anticipating in light of his reasons that consolidation would be properly considered by the parties and other interested persons, but if agreement was not achieved then this would inform "the different remedial solution that will be put in place". 19 This approach is completely in accord with the comments of the Full Court in Perera v Getswift Ltd (2018) 263 FCR 92 ('Perera') at [48] to [51], particularly at [50] to [51]: [50] For a consolidation order to be made in competing funded class proceedings, a mechanism would need to be determined for resolving such issues [referred to in [48] and [49]], including so as to achieve equity between the group members in each of the proceedings. In circumstances where the litigation funders may be jointly and severally liable (at least indirectly) for adverse costs, it may not be possible for consolidation to occur without assurances that each funder has adequate finances or insurance arrangements to meet any order which might be made in respect of the consolidated proceedings. Amongst other things, each litigation funder is likely to require sufficient information to form a view as to the co-funder's financial position and in particular its capacity to meet any order for adverse costs. [51] The result is that consolidation orders are unlikely to be made in the absence of agreement between the different applicants, funders and solicitors. There was no agreement in the present case and the primary judge did not consider consolidation to be a viable option. In circumstances where no party contended for consolidation, this option may be put to one side. 20 The primary judge was looking for the "mechanism" to go forward, giving all those involved the chance to consider (or re-consider) their position. The primary judge would have been well aware that consolidation orders are unlikely to be made in the absence of agreement between the different applicants, funders and solicitors. 21 It may well be that when the matter returns to him on 21 December 2022 and if the parties do not agree on consolidation of the proceedings after conferring, the primary judge will view the factors relevant to the carriage application differently. 22 In this context, I cannot see any error in the approach of the primary judge that impacts at all on the Court's orders that are sought to be set aside on the application for leave to appeal, namely paragraphs 9 to 11 of the Orders made on 23 November 2022. It certainly could not be said the approach of the primary judge was unreasonable, unjust or irrational, where he decided that the factor of obtaining the assistance of the fruits of the work done by both sets of solicitors and counsel was decisive. 23 Submissions were made that the primary judge overstated the work done by the legal representatives of the applicant in the R&B Proceeding (the Fifth Respondent in this proceeding) and that the primary judge further relied upon statements of Senior Counsel without supporting evidence, referring to J63] and J[84]. Whatever else may be said, and accepting that the lawyers in the Furniss Proceeding will do everything necessary to look after the interests of the group members, there is at least some basis to conclude that useful work undertaken in the R&B Proceeding would be lost. At the level of inquiry required by the primary judge in the circumstances, the primary judge's views on this topic cannot be discounted. 24 The main attack made by the applicant was upon the primary judge concluding that the competing funding arrangements were not particularly significant and treating the question of who bears the legal costs as a neutral factor. The basis of the attack is that the primary judge ignored the overall effect that group members would likely obtain a greater return from the Furniss Proceeding. 25 There is no doubt that the funding arrangements may be a factor to consider. They were clearly put in issue in the carriage application. Without the overriding factor considered by the primary judge in favour of possible consolidation, the primary judge may have needed to consider in more detail the possible or likely recovery advantages to group members in the event of a common fund order. The assessment will be the hypothetical exercise of anticipating what would be in the common fund order that may be made by the Court, taking into account a number of factors relevant to any such order: see eg Money Max v QBE (2016) 245 FCR 191. At the moment the exercise involves predicting the ambit of the common fund order on settlement. The significantly greater risk borne by the R&B funder may be an important element in considering a common fund order. It may be that the R&B funder obtains a higher percentage of the litigation return compared to the Furniss funder. 26 However, as matters now stand, the primary judge did consider the difference in funding arrangements and did not treat them as "irrelevant" (although he considered it to be "not particularly significant": J[47]) and specifically alluded to the possible larger percentage that may be regarded as reasonable for a common fund order in the case of the R&B funder than in the case of the Furniss funder: see J[48]. 27 In view of the final weighing of factors, particularly the "unusual aspect of the applications that [the primary judge considered] to be decisive in favouring [consolidation]" (J[82]), I do not consider the primary judge needed to go any further. In other circumstances, it may well have been incumbent on the Court to assess in more detail the funding arrangements: see, eg, Klemweb at [28] to [30]. 28 Other attacks were made by the applicant. These were mainly submitting that the primary judge placed insufficient weight or placed too much weight on various factors. I do not consider any of these attacks have any substance to show sufficient doubt in the decision of the primary judge. 29 In particular, the applicant submitted that the primary judge at J[43] and J[86] erred in attaching any weight to the fact that 76 people have signed funding agreements with the R&B funder. There was a suggestion the primary judge was preoccupied with this aspect. I do not consider that the primary judge was preoccupied with this issue, but I would characterise his comments at J[43] and J[86] as passing observations without any material impact on his reasoning for determining the way forward he favoured. In the end, the primary judge merely recorded this aspect as a "further factor not pointing away from consolidation": J[86]. 30 Overall, where the primary judge has made an assessment of each factor calling for some consideration and considered possible dispositions of the carriage application in circumstances where in his view no one factor overrides the ultimate position that both proceedings should continue in the best interests of the group members, there is no basis to review the various factors along the lines submitted by the applicant. No one factor is mandatory. Some have more significance than others. Not all need be considered in the depth contended for by the applicant in the circumstances of this case. 31 It was suggested that in light of the number of errors made by the primary judge, particularly as to the funding arrangements, and the fact that in effect the primary judge has ordered consolidation or will proceed to do so in any event, I should intervene now to grant leave to appeal to avoid wasting the Court's time and that of the parties, as a future application for leave to appeal would be inevitable. 32 I have indicated I do not consider that the primary judge has ordered consolidation, or will inevitably proceed to consolidation. In these circumstances, I proceed to hear and determine the application for leave to appeal upon the current position before me without anticipating the scenario the applicant apparently fears will occur on 21 December 2022 before the primary judge, namely that consolidation will be forced upon the parties. 33 Further, because of the matters I referred to earlier in these reasons, there can be no substantial injustice in refusing leave to appeal even assuming the primary judge erred. So far, neither proceeding has been stayed. The primary judge will be considering the carriage application on 21 December 2022, and will consider the position in light of his comments at J[93]. I do not assume that the primary judge is not or will not be aware of the comments made by the Full Court in Perera at [48] to [51] dealing with the difficulties in relation to consolidation. In fact, the very approach of the primary judge and his orders demonstrate an acute awareness of the issues involved in ordering consolidation in competing funded class proceedings. If the primary judge does not proceed to order consolidation, he will need to consider the different remedial solution he envisaged. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Middleton.

SCHEDULE OF PARTIES NSD1062 of 2022 Respondents Fourth Respondent: EY (ALSO KNOWN AS ERNST & YOUNG) (A FIRM) (ABN 75 288 172 742) Fifth Respondent: R&B INVESTMENTS PTY LTD AS TRUSTEE FOR THE R&B PENSION FUND