A LEAVE TO APPEAL & COMPETING CLASS ACTIONS GENERALLY
36 Although this year marks 70 years since Sir Frederick Jordan died, his work remains of enduring contemporary significance. Most importantly, his Chapters on Equity in New South Wales, reprinted most recently in Sir Frederick Jordan, Select Legal Papers (Legal Books, Sydney, 1983), have had a profound influence on generations of lawyers, textbook writers and judges. A further legacy is his purple passage (oft-cited by intermediate courts of appeal) from In re the Will of F. B. Gilbert (Deceased) (1946) 46 SR (NSW) 318 at 323 guarding against the ready grant of leave to appeal in matters involving matters of practice and procedure. Save for some matters of principle, the bulk of the arguments advanced on these two applications for leave to appeal against orders granting stays of two class actions (and proposed cross-appeals) illustrate the good sense of Full Courts being chary in granting leave to appeal in matters which concern procedure.
37 It is worth starting by quoting from Jordan CJ's judgment commencing at a point earlier than the usual citation (which is emphasised in the extract) and finishing a little later. The following extract (at 322-323) explains how the constraints in appellate interference change depending upon the nature of the discretion exercised:
…it was said for the applicant, that, since by s. 3 [of the Testator's Family Maintenance and Guardianship of Infants Act 1916 (NSW)] the question whether any and if so how much provision should be made for an applicant is in terms left to the discretion of the Court, it is only in the most exceptional circumstances that a Court of Appeal could regard itself as justified in interfering with the exercise of a discretion by a judge of first instance - only where he has misapplied the law, or his order is likely to lead to a miscarriage of justice. In this connection, however, I am of opinion that… 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. But an appeal from an exercise of a so-called discretion which is determinative of legal rights stands in a some-what different position. In this class of case, too, a Court of Appeal submits itself to self-imposed restraints, but restraints which, though strict, are some-what less stringent than those adopted in matters of practice or procedure. A Judge dealing with the question of the statutory rights of an applicant under the Testator's Family Maintenance, etc., Act - whether he is entitled to anything, and if so how much, in respect of those rights - is in a position analogous to that of a Judge trying without a jury issues as to whether the plaintiff is entitled to a common law right to damages and if so to how much. In the latter type of case, it has been laid down… that "the presumption is that the decision of the trial Judge on the facts was right, and that presumption must be displaced, by the appellant." With the trial Judge's findings of fact, a Court of Appeal will not interfere unless it comes to a clear conclusion that he was clearly wrong, e.g., where he has adopted a wrong principle, or has clearly overlooked something or accepted evidence inconsistent with itself or with indisputable facts. This is applicable, too, to the inferences drawn by the trial Judge from the facts found by him, and, in particular, to the exercise by him of a judicial discretion in assessing damages. Where these are at large, it is improbable that any two men would arrive at precisely the same figure. Hence, it has been laid down that, although the members of a Court of Appeal might themselves have been disposed to award somewhat more or somewhat less, it is not proper for them to embark upon a re-assessment of the damages in order to arrive for themselves at a compromise upon which they can all agree, unless they are satisfied that the trial Judge has acted upon a wrong principle, or has neglected to take into account something relevant, or has taken into account something irrelevant, or that the amount awarded is so much out of all reasonable proportion to the facts proved in evidence that the award should not be allowed to stand.
(Citations omitted, emphasis added)
38 The reasoning captured in this passage finds reflection not only in later authorities explaining how applications for leave should be determined, but is echoed in cases such as Robinson Helicopter Company Incorporated v McDermott [2016] HCA 22; (2016) 90 ALJR 679 at 686-687 [43], where the High Court (French CJ, Bell, Keane, Nettle and Gordon JJ) observed, by reference to a series of well-known cases, that how an appeal is to be conducted depends upon the nature of the impugned finding: for a recent discussion of these principles, see also Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; (2018) 261 FCR 301 at 306-307 [3] (Allsop CJ) and at 316-317 [45]-[47] (Perram J).
39 The dichotomy between practice or procedure discretions and discretions that determine substantive rights is also embedded in the second limb of the test stated in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399 (Sheppard, Burchett and Heerey JJ), which provides that an applicant for leave must usually show that: first, in all the circumstances, the decision to be appealed is attended with sufficient doubt to warrant its reconsideration on appeal; and secondly, supposing the decision to be wrong, "substantial injustice" would result if leave was refused.
40 Although the distinction between matters of procedure and matters of substance is sometimes elusive in the context of usual, inter partes litigation, it can be even more problematical in Pt IVA proceedings. When a judge stays one class action on the basis that group member claims can be pursued in another class action, it is difficult to see how the substantive rights of the applicant or a group member are affected in a significant way. The applicant may already be within the group definition in the non-stayed proceeding, or will likely be able to become a group member. Moreover, the applicant cannot be shut out from maintaining an individual proceeding. Similarly, a group member in a stayed proceeding will usually be able to pursue their claim in the class action going forward; or can opt-out and then decide to pursue their claim individually. Although many of the submissions assumed group member prejudice if the decision below was wrong, the prejudice was limited to a suggestion that the pursuit of the claims in one proceeding may not be as cost effective as in another (with the exception of a specific subset of group members, to which attention will be directed below). In this respect, without diminishing the protective role of the Court in relation to group members, it must be borne in mind that the potential injustice to be identified on a leave application must be substantial.
41 What complicates matters is that the various substantive rights involved in class actions are complex and go beyond the ability of a person to vindicate or resist a claim. Funded class actions usually constitute a common enterprise with a shared purpose of pursuing group members' claims successfully but with the allied aim of benefitting others in addition to the group members, being solicitors and (usually) funders.
42 One of the two class actions stayed involves the now familiar arrangement of one funding agreement being signed with the lead applicant with a common fund order being sought (and hence involves contractual relationships somewhat different to those described as a managed investment scheme by a majority of the Full Court in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11); the other stayed action, involves no agreements with a litigation funder, but a retainer and costs agreement operating on a no-win no-fee basis (with an "uplift") signed by a number of group members, but which would operate differently in the event that a common fund order was made in terms proposed by the applicant.
43 Despite their differences in form, each stayed proceeding represents a common enterprise of a commercial character which hopes to use the Court's processes to obtain mutual benefits for each of the applicant, group members and third parties.
44 It follows that staying a class action, although superficially a matter of practice and procedure, does have substantive consequences which transcend the interests of the parties themselves. Consequently, depending upon the nature of the discretion exercised, there is often no bright line in funded class actions between a procedural setback and something which might seriously affect substantive rights of co-venturers in the commercial enterprise. But recognising that prejudice might be visited upon a non-party by a procedural decision, is the start and not the end of the analysis.
45 It is necessary to understand the nature of the suggested prejudice. Although the orders of the primary judge did have substantive consequences for those seeking a reward out of the stayed enterprises; this type of prejudice, representing sunk costs, might arguably be thought to be part of the rough and tumble of conducting a business in commercialising litigation which, in the long run and assuming efficiencies of markets, is likely to be factored into price. This is not to say the prejudice is not real, but it is of a particular character. It seems to me this type of prejudice to commercial venturers in litigation is qualitatively different to the type of prejudice experienced by a party to litigation suffering an adverse determination relating to their substantive rights which might arguably be wrong.
46 There is a further prejudice occasioned by competing class actions, that is, the potential increased costs and vexation caused to a respondent. But in the present proceeding, this prejudice is less relevant at the initial stage of consideration of leave, in the absence of a standalone application for leave to appeal by the respondent (BHP). As will be explained below, BHP has served prophylactic draft notices of cross-appeal, in the event leave to appeal is granted to either of the applicants for leave to appeal. Potential prejudice to BHP is said to form the foundation of those contingent cross-appeals.
47 Leaving aside the question of prejudice, a further potential barrier to leave is the nature of the decision itself and the procedural context in which it was made; it is not only a discretionary decision, but an unusual discretionary judgment which involved the judge having to focus on considerations which included giving effect to the protective role of the Court. What the primary judge did was to fasten upon a practical solution to a practical case management problem. The case management decision which is the result of ensuring the processes of the Court and the interests of group members are protected might, properly analysed, defy characterisation as a matter of pure practice and procedure, but is a discretionary decision of a particular kind.
48 As the Full Court (Middleton, Murphy and Beach JJ) explained in Perera v GetSwift Limited [2018] FCAFC 202; (2018) 363 ALR 394 at 429-430 [162], 445 [241], 451-452 [274], such a decision is a matter of case management involving an evaluation, and not a calculus; it involves weighing up incommensurable and sometimes conflicting considerations and it is inevitable that different judges may weigh the relevant considerations differently. It is also a decision made in the context of there being a range of potential solutions and there being no uniquely "correct" answer.
49 As a docket judge's decision involves an appraisal informed by diverse factors, the ultimate judgment is one upon which reasonable minds might, and often will, differ. In these circumstances, to paraphrase Sir Frederick Jordan, applications for leave must be assessed against the backdrop that it would not be proper for a Full Court to embark upon a re-assessment of diverse factors considered by the primary judge in order to arrive for ourselves at a compromise upon which we can all agree, unless satisfied that the primary judge has acted upon a wrong principle, or has neglected to take into account something relevant, or has taken into account something irrelevant, or that the result is so out of all kilter to the facts proved in evidence that the solution fastened upon should not be allowed to stand. Put in more familiar terms, given that it is necessary to demonstrate sufficiency of doubt in respect of the decision to be appealed, this first limb of the Décor test will not be satisfied, unless there is some real basis for considering that some House v The King (1936) 55 CLR 499 error is able to be established should leave to appeal be granted: at 504-5.
50 It is worth emphasising these points not only because they inform the principled determination of these applications, but because it is likely that competing class actions are not going to go away. Those involved in the commercial enterprise of funded litigation (with long purses and litigious dispositions) should be aware that in accordance with the statutory charge in s 37M(3) of the Federal Court of Australia Act 1976 (Cth) (Act), the power to grant leave will be exercised or carried out in the way that best promotes the overarching purpose, being the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Attempts to transfer exercises of discretion in these case management applications from a docket judge to a Full Court with the result that the "disposal of cases could be delayed interminably, and costs heaped up indefinitely", must be resisted as being inimical to the overarching purpose: Re Will of Gilbert at 323. Of course, it will be just to grant leave when the cumulative requirements of the Décor test are satisfied (Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; (2017) 252 FCR 1 at 4 [3] (Jagot, Yates and Murphy JJ)), but this should be able to be demonstrated clearly.
51 As will be seen, these applications for leave, like many others where a discretionary decision is impugned, have sought to dress up quibbles and disagreements with parts of the primary judge's reasoning, as constituting error. Only three points of substance are made and leave should be granted with regard to two. It follows that in the wake of this judgment, there will now have been two Full Court decisions relating to the case management of competing class actions. The considerable latitude given to docket judges in fashioning a solution is evident. Occasions of competing class actions which have led to different procedural outcomes in the past, will continue to do so in the future - as one would expect given it is a case management decision rooted in the particular circumstances of a given case. In my view, in the light of this guidance, and the flexibility given to docket judges, absent recognisable legal error, considerable hurdles confront those seeking leave to appeal in similar circumstances in the future.