Nature of relationship between representative applicant and Group Members
77 At the heart of this application is the issue of conflict of interests between Mr Hamilton and Group Members. The respondents' principal argument is that Mr Hamilton's multiple roles - as a litigant in person; representative applicant; Chief Executive Officer, director and sole shareholder of the Funder; the largest holder of SUFB Tokens; and the person who controls the issue of SUFB Tokens - create, at the least, a real potential for Mr Hamilton's personal interests and his duties to the Funder to conflict with his duties to, and the interests of, Group Members.
78 Mr Hamilton's submissions oscillated on the seminal issue of the representative applicant's duty to group members, at times denying any such duty was owed, but ultimately contending that the duty was of limited scope and secondary to the representative applicant's own interests in successfully prosecuting their own claim. As the argument developed, a central point of contention between the parties was the ambit of the duties Mr Hamilton owes to Group Members in conducting the proceeding and whether such duties are secondary to his own interests in the proceeding.
79 A substantial portion of Mr Hamilton's written and oral submissions were devoted to demonstrating that a representative applicant was not a fiduciary of Group Members, in the sense of being legally bound to put the interests of Group Members ahead of his own. The contrary position was expressly recognised by the CMP prior to the CMP being amended during the hearing to delete the adjective "fiduciary" from the statement about the duty owed by Mr Hamilton to the Group Members. In his supplementary submissions, Mr Hamilton submits that a representative applicant in a representative proceeding does not owe fiduciary duties to group members. Mr Hamilton submits that for this reason the starting point for the respondents' "entire conflict of interest argument" is flawed. Mr Hamilton submits that his primary obligation as representative applicant is to pursue his own claim. He says that Group Members gain the benefit of the litigation without taking on the risks. Mr Hamilton contends that as representative applicant he owes no fiduciary obligation to Group Members because Group Members could have no reasonable expectation that he would act in the interests of Group Members to the exclusion of his own interests. He submits that it is the primary obligation of the Court to protect group members and that any legal representatives acting as such in the proceeding, including the respondent's legal representatives, have an obligation to protect group members which in his submission is derivative of the legal representatives' duty to the court.
80 As the argument developed, the point about nomenclature faded in significance. Both Mr Hamilton and the respondents accepted that the structure and content of Part IVA of the Act imposes statutory duties on a representative applicant. The respondents' position was that it mattered not how the duty was described, whether as fiduciary or as an implied statutory duty, what is important is the content of the duty owed by a representative applicant to group members in the conduct of common claims. The difference between the parties thus reduced as the argument developed to a contest as to the content and scope of the statutory duty.
81 The respondents submit that there is a duty on the representative applicant not to act contrary to the interests of group members in conducting the representative proceeding: Parkin v Boral [2022] FCAFC 47; 291 FCR 116 at [126] (Murphy, Beach and Lee JJ). The respondents submit that the duty is not limited to particular aspects of the conduct of the litigation, such as settlement approval or class closure, but extends to the conduct of the proceeding generally. They rely by way of analogy on the duties of a representative applicant's lawyers to non-client class members which extend to the preparation and prosecution of the proceeding generally, and submit that the duty of a representative applicant to group members must be co-extensive, particularly, where, as here, the representative applicant is acting in person: Kelly v Willmott Forests (No. 4) [2016] FCA 323; 335 ALR 439 at [308] to [309] (Murphy J).
82 Mr Hamilton submits that the duty is not so wide and is rather a duty not to deprive group members of their substantive rights. Mr Hamilton submits that the duty does not extend to the day-to-day management of the case including the making of forensic decisions, decisions about how and where to spend money and decisions where it cannot be ascertained prospectively whether those decisions will make any difference in the end result of the case. Mr Hamilton submits that where it is not possible prospectively to determine how a forensic decision might affect the outcome of a case then it is not appropriate to suggest that a conflict of interest can arise in respect of such decisions. Mr Hamilton contends that there is a meaningful distinction between decisions that affect substantive rights and mere forensic decisions. Further and crucially, Mr Hamilton submits that a representative applicant is justified in pursuing their interests "primarily" and in treating the group members' interests as "secondary". Mr Hamilton reasons as follows:
(1) Part IVA of the Act is procedural and not substantive, citing BHP Group Limited v Impiombatao [2022] HCA 33 at [54] (Gordon, Edelman and Stewart JJ) in that it extends the representative applicant's claim as the vehicle for determining the claims of other group members;
(2) The representative applicant's claim remains the basis of the claim and "always has to come first" and the group members' claim "tails on from that, as a procedural matter, not as a substantive" matter; and
(3) It follows that the scheme of Part IVA tends against the imposition of typical fiduciary relationships where the fiduciary undertakes to prefer the interests of the beneficiary over their own interests because the scheme requires the representative applicant to pursue their own claim "primarily" and to "then secondarily protect the interests of group members" in a limited way by not depriving group members of their substantive rights.
83 I am not persuaded by Mr Hamilton's submissions. They are contrary to authority and mischaracterise the scheme of Part IVA. For the reasons that follow, I am satisfied that as the representative applicant in the present proceeding, Mr Hamilton owes a duty to Group Members not to act in a way that is contrary to their interests in conducting the proceeding.
84 In Parkin v Boral the Full Court recognised that a representative applicant owed a duty to group members not to act contrary to the interests of group members: at [126]. The Full Court did not limit the ambit of that duty to particular aspects of, or stages in, the conduct of the litigation, such as settlement approval or class closing. In the circumstances of this case, where Mr Hamilton is acting in person and by his conduct of the proceeding and also by exercising rights conferred on him under the LFA, he can bind Group Members, the duty he owes to Group Members must be at least co-extensive with the duties of lawyers to non-client group members.
85 I do not accept that a limitation on the ambit of the duty can be drawn by reference to the distinction that Mr Hamilton seeks to draw between decisions which affect substantive rights of Group Members and those which are merely forensic or procedural in nature. That distinction is not sensibly maintainable when considered in context. For example, a forensic decision not to call evidence on a particular issue or a procedural decision not to pursue one or more of the common claims may readily be seen as potentially impacting the substantive rights of Group Members. Both decisions, even though not in relation to settlement per se or class closure, have the real potential to impact Group Members' interests. Mr Hamilton's submission that it is difficult to determine prospectively whether Group Members' interests will be adversely affected by a particular decision may be accepted, but it serves to demonstrate why it is all the more important to the operation of Part IVA for the representative applicant's interests to be substantially aligned with those of Group Members, as opposed to the interests of the Funder, and to recognise that the representative applicant owes a duty not to act in a way that is contrary to the interests of Group Members. Conflicts may manifest in ways that are subtle and the interests of group members may be negatively impacted in a way that is unintentional. Recognising that a representative applicant owes a duty to group members not to act contrary to the interests of group members requires the representative applicant to be vigilant in keeping group members' interests front of mind.
86 Mr Hamilton submits that the authorities cited by the respondents do not support the contention that a representative applicant owes a fiduciary duty to group members in a representative proceeding. Further, that statements to that effect in the authorities relied upon by the respondents are obiter dicta which is not seriously considered. He says that the line of obiter dicta can be traced to Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507 at [40] (French CJ, Bell, Gageler and Keane JJ) which Mr Hamilton submits does not actually state that representative applicants owe fiduciary duties to group members. Mr Hamilton submits that I am bound by a line of authority which he describes as being to contrary effect, namely, that representative applicants do not owe fiduciary duties to group members. The line of authority relied on by Mr Hamilton in this respect comprises the decision in Timbercorp Finance Ltd (in liq) v Collins and Tomes [2015] VSC 461 (Timbercorp PJ), the intermediate appeal in Timbercorp Finance Ltd (In Liq) v Collins and Tomes [2016] VSCA 128 (Timbercorp VCA) and the ultimate appeal in Timbercorp Finance Ltd (In Liq) v Collins and Tomes [2016] HCA 44; 259 CLR 212 (Timbercorp HCA).
87 Mr Hamilton submits that to recognise a duty that is fiduciary in character as owing by a representative applicant to group members would disturb "a finely balanced statutory scheme" and would be inconsistent with the analysis of Part IVA in the High Court's decision in Timbercorp HCA and Impiombato.
88 Meta accepts, correctly, that the plurality's statement in Tomlinson at [40] that representative parties in class actions typically owe fiduciary duties to group members was obiter dicta. However, Meta contends that it was seriously considered obiter dicta and that since Tomlinson there has been a line of binding authorities which affirm this proposition.
89 It is convenient to extract the relevant passage from Tomlinson at [40] in full:
40 Traditional forms of representation which bind those represented to estoppels include representation by an agent, representation by a trustee, representation by a tutor or a guardian, and representation by another person under rules of court which permit representation of numerous persons who have the same interest in a proceeding. To those traditional forms of representation can be added representation by a representative party in a modern class action. 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, including the risk to a represented person of the detriment of an estoppel operating in a subsequent proceeding outweighing the benefit to that person of participating in the current proceeding.
(emphasis added)
90 That passage is directed to forms of representation which bind those represented to estoppels by the representative. An additional example to the traditional forms of that type of relationship is identified as "representation by a representative party in a modern class action". A point being that in a representative proceeding, the representative has the capacity to take action that is binding on the represented parties.
91 In that context, the plurality observed that each of the forms of representation identified, including class actions, are "typically" the subject of various safeguards, namely, "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". Such safeguards protect against the risk inherent in the potential collision between binding representation and errant representation. The plurality, in obiter, recognised the complimentary roles that the twin safeguards of fiduciary obligation (or an analogue arising from statute) and court oversight play in protecting the interests of represented parties in representative actions. In some contexts, one or other of the safeguards will apply, but in others, the circumstances may dictate that both safeguards are required to protect the interests of the represented parties.
92 In the setting of a representative class action, it may readily be seen that the ambit of the two types of safeguards overlap, but not entirely. Recognising that the representative applicant owes a duty not to act contrary to the interests of group members serves the purpose of protecting group members from the representative proceeding being conducted in a way that is motivated by preferring the self-interest of the representative applicant to the interests of group members when there is not complete alignment between the relevant interests. The protection afforded by the court's supervisory role in relation to settlement approval, for example, may overlap to some extent with the protection given by imposing a duty on the representative applicant but only to the extent that the conduct of the proceeding has culminated in a settlement which is before the court for approval. Where the representative applicant conducts the proceeding in such a way as to act to the detriment of group members in a way that falls short of putting forward a settlement for approval, the safeguard of imposing a duty to not act in a manner contrary to the interests of group members serves an important purpose. Contrary to Mr Hamilton's submission that to recognise a duty of this type would disturb the statutory scheme and be inconsistent with the analysis of Part IVA in Timbercorp HCA and Impiombato, imposing a duty of this type facilitates the operation of the statutory scheme.
93 In Dyczynski v Gibson [2020] FCAFC 120; 280 FCR 583, the Full Court was concerned with concessions made by the representative applicant in the representative proceeding which had the effect of excluding the appellants from the class definition. The appellants were not informed of those concessions and upon discovering that the class proceeding had been settled sought to be substituted as the applicants. Murphy and Colvin JJ held that the appellants were not bound by those concessions primarily because neither the representative applicant nor the respondent to the class proceeding had sought to give legal effect to the concession by means of an order or declaration: at [198]. Murphy and Colvin JJ also concluded that a range of other matters demonstrated that the concession could not provide a proper foundation for a conclusion that the appellants had ceased to be class members: at [199]. One reason for reaching this conclusion was that the appellants had not been given notice of the procedure for the determination of a preliminary question in which the concession had been made: at [204]. Murphy and Colvin JJ held that the solicitors acting for the representative applicant and the appellants were obliged to inform the appellants about the procedure and had failed to obtain the appellants' instructions in respect of the concession and had not informed them of the concession until after the appeal commenced: at [208]. In this context, their Honours observed (at [209]):
209. Even if [the solicitors] had not entered into a retainer with the appellants [the solicitors] would have had an obligation to give them notice of the procedure for determination of the Preliminary Questions. The scheme of Part IVA is that the applicant has the conduct of proceedings on behalf of the class members and has fiduciary obligations to them: [Tomlinson] at [40] (French CJ, Bell, Gageler and Keane JJ). The applicant's lawyers also owe obligations to class members but how far those obligations extend is not settled…
210. In acting for the representative applicant [the firm] was obliged to act consistently with the representative applicant's fiduciary obligations to class members. Thus it was necessary for [the solicitors] to notify affected class members of the procedure for determination of the Preliminary Questions so that affected class members could decide whether and if so how to best protect their interests, including by deciding to instruct [the solicitors] to represent their individual interests if they considered that appropriate.
(emphasis added)
94 Meta submits that the better view is that the paragraphs extracted above form part of the ratio of Dyczynski. I agree. In addition, paragraph [40] of Tomlinson and paragraph [209] of Dyczynski have been cited by the High Court as support for the proposition that in exercising the power to stay a representative proceeding the court recognises that the representative applicant typically undertakes the fiduciary obligations of a representative party to members of the group: Wigmans v AMP Limited [2021] HCA 7; 270 CLR 623 at [117] (Gageler, Gordon and Edelman JJ). Similarly, the minority in Wigmans did not see difficulty in ascribing to a representative applicant obligations of a fiduciary character: [44] (Kiefel CJ and Keane J). That critical proposition was reiterated in the same terms as in Dyczynski more recently in Paschke v Secretary, Department of Social Services [2023] FCAFC 143 at [20] (Anderson, McEvoy and Hespe JJ).
95 For completeness I note that the statements in Dyczynski have been approved or applied in multiple single judge decisions in this Court including: Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 2) [2020] FCA 1355 at [24] (Gleeson J); Kayler-Thomson v Colonial First State Investments Limited (No 2) [2021] FCA 854 at [82] (Colvin J); and Brady v NULIS Nominees (Australia) Limited atf the MLC Super Fund [2021] FCA 999 at [28] (Markovic J).
96 For present purposes, it is sufficient to recognise that a representative applicant typically undertakes obligations akin to the fiduciary obligations owed by a representative party to represented parties. Mr Hamilton's unusually extensive interests in this proceeding and the total alignment of his interests with those of the Funder provide a compelling basis to conclude that, even more so than in a typical representative action, he is subject to a duty not to act contrary to the interests of Group Members.
97 Dyczynski is a stark example of how even experienced legal practitioners, including senior counsel, junior counsel and solicitors, who owe duties to the court and the appellants by reason of their retainer can through mere inadvertence, or otherwise, breach those strict duties. Unlike the independent legal representatives retained by the representative applicants in Dyczynski, Mr Hamilton is appearing as a litigant in person. In Wilkinson v Wilson Security Pty Ltd [2022] FCA 756, Colvin J made the following observation in respect of a litigant in person who was not legally qualified and who had commenced representative proceeding as the representative applicant:
12. … The Court is unable to look to the lawyers for the representative applicant as independent officers with duties to the court to perform their obligation to act in the interests of the group members when dealing with the determination of the common questions by proceedings or settlement: as to which obligation, see Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323 at [220], [308] (Murphy J)
98 Notwithstanding that Mr Hamilton is legally qualified, he has been at pains to make clear that he does not act as a solicitor for the Group Members and is not the solicitor on record. He eschews owing any professional obligations to Group Members. The Court is not able to rely on him as it would on an independent solicitor on the record with duties to the court and to Group Members. The risk that manifested in Dyczynski is more pronounced in this proceeding - there is no independent solicitor who owes obligations to the court, whether as solicitor on the record or as legal advisor to the representative applicant. Any reliance which the Court may otherwise place on Mr Hamilton, either in his capacity as an admitted solicitor or by reason of the duty that he owes as the representative applicant to Group Members, is undermined by the numerous conflicts of interests arising from his extensive additional interests in the proceeding and his alignment with the Funder. For these reasons, notwithstanding that Mr Hamilton sought to distinguish Wilkinson on the basis that unlike Mr Wilkinson, he is legally qualified, I consider Colvin J's analysis of the importance of independent legal representation in representative proceedings to be compelling, and apt to the circumstances of this proceeding.
99 For completeness I note that the respondents submit that Mr Hamilton's conduct of past case management hearings demonstrates his inexperience in conducting representative proceedings. It is not necessary for me to decide that issue. Even if one assumes, without deciding, that Mr Hamilton is competent by reason of his qualifications and experience to act as a solicitor in proceedings of this type, that is not what he is purporting to do in this proceeding. The fact that he is legally qualified does not ameliorate the risk attendant on enabling him to conduct a representative proceeding without engaging an independent legal practitioner who owes, and acknowledges, a duty to the Court and to Group Members. It is not just that Mr Hamilton is not independent - it is that he is adamant that he is not acting as a lawyer for anyone. Were the proceedings not representative proceedings, then Mr Hamilton would be free to take that course, even though in doing so, he may suffer the oft recognised risks attendant on a lawyer acting for themselves. In a representative proceeding, that risk is not confined to the individual applicant, but is amplified across the whole of the group members.
100 This proceeding has been shorn of an important measure of protective oversight of the manner in which Mr Hamilton conducts the representative proceeding in circumstances where he has power to affect the rights of all Group Members. The scheme of Part IVA is that the applicant has the conduct of proceedings on behalf of the class members and as a result typically owes fiduciary obligations to them. The Court relies on lawyers' adherence to their duties as officers of the Court when acting for a representative applicant, without which the Court would itself have to supervise the representative applicant's performance of their fiduciary obligations: Wilkinson at [12]. To recognise that Mr Hamilton owes a duty to Group Members not to act contrary to their interests is consistent with the statutory scheme and facilitates the operation of the scheme in a way that balances the advantages inherent in prosecuting common claims as representative proceedings and the potential disadvantage visited upon group members as a consequence of being bound by the representative applicant's conduct of the proceeding.
101 Mr Hamilton's submissions to the effect that characterising the representative applicant's relationship with group members as fiduciary is a step too far because that would be to require the representative applicant to act in the interest of the beneficiaries to the exclusion of all others, particularly the representative applicant's own, interests, proved to be a straw man argument. The duty for which the respondents contend, and which I accept, is more limited. It is a duty not to act contrary to the interests of the Group Members.
102 Mr Hamilton's reliance on what may be called in shorthand the Timbercorp line of authority can be addressed in short order:
(1) in the primary judgment Timbercorp PJ, Robson J states at paragraphs [573] to [574] 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. No authority is cited for either proposition. I respectfully decline to follow these statements in light of the authorities that I have traversed above;
(2) in Timbercorp VCA the Court stated as follows:
213. The analysis of pt 4A set out above shows also that the group members in the group proceeding were not privies of the plaintiff in respect of unpleaded claims and defences, and that Tomlinson does not hold otherwise. The plaintiff was not the agent of the group members; nor was he their fiduciary. The group members had no control over the conduct by the plaintiff of the group proceeding. They have no enforceable rights against him in the event that they consider that he has not advanced, or not properly advanced, their unpleaded claims. In advancing their amended defences, the group members are not claiming 'under or through' the plaintiff in the group proceeding. It is true that, by reason of the provisions of pt 4A, the plaintiff represented group members in that proceeding. And, to the extent of that representation, group members, in so far as they take its benefit, must also share in its burden. Nevertheless, the plaintiff did not represent group members in respect of their unpleaded defences and claims.
(footnotes omitted, emphasis added)
103 Read in context, the Victorian Court of Appeal's statement that the representative plaintiff was not the fiduciary of the group members is confined to the unpleaded claims of the group members because the representative plaintiff did not represent the group members in respect of those defences and claims. The Court of Appeal's statements in respect of unpleaded claim and defences does not assist Mr Hamilton in respect of his obligations to Group Members in relation to pleaded claims and defences which are the subject of this stay application. There was no explicit consideration by the High Court of the lower courts' statements with respect to the fiduciary nature of the representative plaintiff's role. Further, the majority referred to Tomlinson at [40] with apparent approval: at [45] to [46]. Accordingly, the Timbercorp line of authority does not stand for the proposition that Mr Hamilton urges, namely, that representative plaintiffs do not owe fiduciary duties to group members. It is also contrary to the express statements of the High Court in Wigmans, which I have referred to above.
104 Accordingly, in determining the present applications, I will proceed on the basis that Mr Hamilton owes a duty to Group Members not to act contrary to the interests of Group Members in conducting the representative proceeding and that duty is not limited to conduct that relates directly to settlement or class closure in the way in which Mr Hamilton contended.