Gill v Ethicon Sàrl

1. The interlocutory application by the respondents dated 12 December 2018 be dismissed.
2. The respondents pay 75% of the applicants' costs of the application, those costs not to include costs of the preparation of the confidential affidavit of Rebecca Lee Jancauskas dated 30 January 2019 (which was not read).
3. The applicants' solicitors are to file and serve an affidavit setting out the lump sum costs of the applicants calculated on the basis referred to at Order 2, above.
4. There be a further case management hearing which is to be conducted on a date to be fixed and the parties are to communicate to the Associate to Justice Lee mutually convenient dates when they believe the case management hearing could be most usefully conducted. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A Introduction 1 The respondents in this class action seek a "hard closure" of the class. In the lingua franca of Part IVA practitioners, a "hard closure" is a closure of the class which extinguishes a group member's rights to share in the fruits of a subsequent judgment unless the class member takes steps to register in the proceeding. By way of contrast, a so-called "soft closure", refers to orders that are made to facilitate settlement, which provide for group members to come forward and register by a particular date (registration date) in order to participate in a settlement, provided such settlement takes place by a specified date in the future (usually a date chosen to allow enough time for a scheduled mediation to take place and for any prospective s 33V application to be determined) (specified date). All group members become bound by the settlement, but any group member who does not register by the registration date is barred from participating in the settlement. If there is no settlement, the closure is temporary (or "soft"), in that the class closure order is then spent and the class, as it were, "springs" open upon the passing of the specified date. This allows group members who fail to register by the registration date to continue to participate in the class action because their rights have not been extinguished by reason of a want of registration. 2 Class closure orders have been controversial. Aspects of the practice have been referred to by a leading expert in class actions, Professor Morabito, as "grossly unsatisfactory". Professor Morabito contends that it fails to pay sufficient regard to the opt-out model adopted by Part IVA which has, at its heart, the notion that persons who fall within the description of the group will be included in the class action and be entitled to receive whatever relief is obtained by the group, without being required to indicate their desire to participate in the proceeding: see Morabito, V, "Judicial Responses to Class Action Settlements that Provide no Benefits to some Class Members" (2006) 32 Monash University Law Review 75 at 103-104. 3 Despite this controversy, "soft" class closure orders have become common. Their rationale, as the Full Court explained in Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98; (2017) 252 FCR 1 at 22 [75], is that: … a requirement for class members to register their claims will facilitate settlement, because it allows both sides to have a better understanding of the total quantum of class members' claims, permits the settlement amount to be capped by reference to the number of class members, and assists in achieving finality (to the extent the Pt IVA regime permits): see Grave D, Adams K and Betts J, Class Actions in Australia (2nd ed, Lawbook Co, 2012) at [14.410]. A class closure order that precludes class members, who neither opt out nor register, from sharing in a subsequent settlement may facilitate settlement, and therefore be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding. 4 In the decision the subject of appeal in Melbourne City Investments, the primary judge, Foster J, in Jones v Treasury Wine Estates Limited (No 2) [2017] FCA 296, expressed doubt that the Court had power to make an order before the initial trial of a Part IVA proceeding, that would extinguish a group member's rights to share in the fruits of a subsequent judgment unless the class member took steps to register (that is, a "hard" closure order). Despite expressing those doubts as to power, his Honour refused the application made on discretionary grounds: see [61]-[62] and Melbourne City Investments at 20-21 [71]. 5 The Full Court agreed with the exercise of his Honour's discretion and, when it came to "hard" closure orders, said the following at 22 [76]: ... we share the views expressed by the primary judge in relation to a class closure order that also precludes class members from sharing in a subsequent judgment. In our view, the Court should be cautious before making a class closure order that, in the event settlement is not achieved, operates to lock class members out of their entitlement to make a claim and share in a judgment. That is, the facilitation of settlement is a good reason for a class closure order but, if settlement is not achieved, an order to shut out class members who do not respond to an arbitrary deadline is not. 6 Like in many aspects of practice and procedure relating to representative proceedings, there is a danger in generalising and care must be taken to "avoid reading judgments on fact specific interlocutory issues of practice and procedure as if they were determinative of precepts and principles of general application": see Regent Holdings Pty Ltd v State of Victoria [2012] VSCA 221; (2012) 36 VR 424 at 429 [19] per Nettle, Redlich and Osborn JJA. Having sounded that note of caution, for my part, it is very difficult to see how it is appropriate for a court, exercising a protective and supervisory role in respect of group members, to take the step of extinguishing the property rights of persons on a final basis, unless it is in the context of approving a settlement prior to an initial trial. When this is appreciated, and it is understood that "soft" closure orders can be adapted to serve the admittedly desirable end of facilitating such a settlement, it is not evident to me why a "hard" closure order would ever be appropriate (at least in an open class proceeding or a closed class proceeding with a large number of group members). 7 The legislative foundation upon which class closure orders rest is s 33ZF of the Federal Court of Australia Act 1976 (Cth) (Act). As it has often been said, the purpose of s 33ZF is to equip the court with the "widest possible power" (McMullin v ICA Operations Pty Ltd (1998) 84 FCR 1 at 4 (Wilcox J)) and, like any other provision granting broad powers to a court, its operation should not be limited absent clear indication in its terms or by reason of context. In enacting Part IVA, Parliament was introducing an "entirely novel procedure" and "in order to avoid the necessity for frequent resort to Parliament for amendments to the legislation, it was obviously desirable to empower the Court to make the orders necessary to resolve unforeseen difficulties" (see McMullin at 4; Courtney v Medtel Pty Limited [2002] FCA 957; (2002) 122 FCR 168 at 182 [48]). There is no doubt that the power exists to make class closure orders to facilitate settlement. Having said that, the power to make "any order" is only enlivened where the court "thinks" the order is "necessary or appropriate" to ensure justice is done in the proceeding. Once the court reaches this level of satisfaction, it follows (subject to constitutional limitations) that the court has power to make an order under s 33ZF. The word "necessary" does not impose a requirement that the court must be satisfied that unless the order is made, the administration of justice will be undermined. Rather, it requires that the proposed order "be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding": see Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited [2016] FCAFC 148; (2016) 245 FCR 191 at 224 [165]. 8 It follows that in order for me to be able to make the order sought by the respondents, at the very least, I would need to "think", in the present context of the Part IVA opt-out regime, that it is appropriate that the relevant group members' claims be extinguished for all time in the event that they do not respond timeously to a court notice requiring them to take active steps to, in effect, "opt-in" to the proceeding. The whole point of class closure orders is to provide some certainty (or at least some guidance) to a respondent as to the nature and quantum of the case advanced against the respondent by non-parties in appropriate cases. As noted above, in circumstances where this information can be provided without extinguishing group member claims for all purposes, it is not self-evident to me how such a "hard" closure order could ever be either necessary or appropriate in the relevant sense (absent, perhaps, an outlier case of a very small sophisticated group conducting litigation as a common enterprise). 9 Before leaving these general observations I should make a final point: I have already referred to the undesirability of "fixed" rules when dealing with issues of practice and procedure. It should not be assumed that "soft" closure orders will always be appropriate as a pre-condition to settlement discussions or prior to a Court approved mediation. It is case dependent. It is possible to imagine, for example, that such an order may not be utile when the claim made by an applicant is for an award of damages in an aggregate amount without specifying amounts awarded in respect of individual group members (see s 33Z(1)(f) of the Act).