Parkin v Boral Limited

Federal Court of Australia|2021-07-21|Before: O'Hara J, Lee J

Counsel for the Applicant in NSD 602 of 2020: Mr W A D Edwards with Mr R J May

Solicitor for the Applicant in NSD 602 of 2020: Maurice Blackburn

Counsel for the Applicant in NSD 935 of 2020: Mr M J Darke SC with Ms A Poukchanski

Counsel for the Respondents in NSD 602 of 2020 and NSD 935 of 2020: Mr C A Moore SC with Ms G Keesing

Solicitor for the Respondents in NSD 602 of 2020 and NSD 935 of 2020: Herbert Smith Freehills

AND: BORAL LIMITED (ACN 008 421 762) Respondent

BETWEEN: MARTINI FAMILY INVESTMENTS PTY LTD ACN 606 000 944 ATF MARTINI FAMILY INVESTMENTS SUPER FUND Applicant

AND: BORAL LIMITED (ACN 008 421 762) Respondent

The proceedings be stood over for a case management and interlocutory hearing at 2.15pm on 4 August 2021. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A Introduction 1 In CJMcG Pty Ltd as Trustee for the CJMcG Superannuation Fund v Boral Limited (No 2) [2021] FCA 350; (2021) 389 ALR 699, I dealt with the issue of three competing securities class actions of a substantially similar nature brought against Boral Limited (Boral): (1) the CJMcG proceeding; (2) the Parkin proceeding; and (3) the Martini proceeding. 2 The issue for determination in CJMcG (No 2) was selecting the proceeding by which group members' claims should be advanced. I concluded that the CJMcG proceeding ought to be permanently stayed. I also ordered (at 727 [105]) that the Parkin and Martini proceedings be listed for case management to make directions in relation to the approval of opt out notices to be sent to the group members in both proceedings. I noted (at 726 [104]): On balance, and not without some hesitation, I have formed the view that, at least at this time, I should not order a permanent stay of the Martini proceeding, but rather, let it proceed as a closed class proceeding. Having said that, I intend to relist the matter at the earliest convenient date in order to hear argument about a form of notices that should be sent to group members who are not currently clients of Phi Finny McDonald and those that are clients of Phi Finny McDonald. 3 For reasons explained in Parkin v Boral Limited (Opt Out Notices) [2021] FCA 478, I determined that it was appropriate to order that a notice be sent to those persons (Notice) who were currently group members in the Parkin and Martini proceedings (overlapping group members). The Notice informed the overlapping group members of the judgment in CJMcG (No 2) and apprised them of the fact that the Court had selected the Parkin proceeding as the most appropriate vehicle to advance group member claims because, in the Court's view, among other things, it was likely to provide the best financial return to group members and was therefore the vehicle which was in the best interests of group members as a whole. The Notice also informed the overlapping group members that the Martini proceeding was to be limited to those who had signed a litigation funding agreement by 31 March 2021. 4 At Section D of the Notice, the following appeared: D. What is going to happen to the Martini Class Action? 12. The Martini Class Action has not been stayed. However, the future status of the Martini Class Action is uncertain. 13. Depending on the responses received to this notice, the Martini Class Action may not be viable, could be stayed for the near future, adjourned, or could proceed. 14. If it proceeds, the Martini Class Action will only be permitted to proceed on behalf of group members who have opted out of the Parkin Class Action. 5 The overlapping group members were then informed as to their options. They were told they could remain a group member in the Parkin proceeding by doing nothing, in which case they would not be able to pursue their claim in the Martini proceeding. Alternatively, they were advised that they could remain a group member in the Martini proceeding by opting out of the Parkin proceeding, in which case they would not be able to pursue their claim in the Parkin proceeding. 6 To help group members decide between the two options, the Court appointed an independent barrister to allow the group members to obtain independent advice from someone not affiliated with either of the class actions.

B The Process contemplated by the Notice 7 The result of the choices made by the relevant group members is that, of those persons who have taken an active step, up until this stage, of seeking to become involved in the class action by a process of registration or otherwise, the group members in the Martini proceeding currently represent approximately 26 per cent of the affected or damaged shares if calculated on a first-in-first-out (FIFO) basis, or 27 per cent of the affected or damaged shares if calculated on a last-in-last-out (LIFO) basis. Obviously enough, this is a subset of the entire class. Although there may be some doubt about the precise number, calculated by reference to the entire class, this equates to approximately 6.7 per cent of persons who have affected or damaged shares. 8 The question which now arises is whether the Parkin proceeding and the Martini proceeding should continue to proceed in the ordinary course, or alternatively, whether steps should be taken to either adjourn or stay, temporarily, the Martini proceeding. 9 Initially, the joint position of the applicant in the Parkin proceeding and Boral was that the Martini proceeding should be the subject of a temporary stay. However, that position changed at the commencement of the hearing this morning. In evidence, as Exhibit A, were communications between the solicitors for Boral, Herbert Smith Freehills (Freehills), and the solicitors for the applicant in the Martini proceeding, Phi Finney McDonald (PFM). 10 The letter from Freehills (dated 19 July 2021) referred to submissions filed on behalf of the applicant in the Martini proceeding on these applications. It requested that PFM specify whether co-operation arrangements and case management orders, to the effect that had been referred to in Boral's submissions, were being proposed. The response given to that letter (dated 20 July 2021) confirmed that if the Court was not minded to stay the Martini proceeding temporarily, then consent would be given to orders being made which would provide for a number of matters outlined in Boral's submissions. Those matters were as follows: (a) there be only one set of counsel; (b) there be a single address for service; (c) only a single set of applicants' experts, and only one expert for any relevant field of expertise; (d) joint interlocutory applications, save for any application in respect of non-common issues; (e) primary review of documents by one firm not two, with one to report results to the other; (f) joint management of trial related matters, such as a joint tender bundle; joint submissions; joint objections to evidence and only one lot of cross-examination; (g) [deleted] (h) appointing an independent costs referee to provide periodic updates to the Court to minimise duplication in work and ensure costs are reasonably incurred; and (i) an order that costs for duplicated work cannot be recovered against group members or the respondent. 11 Mr Moore SC, who appeared on behalf of Boral, confirmed that the position of Boral was that it was agnostic as to whether the Court facilitated the regime which had been referred to in Exhibit A, or alternatively, stayed the Martini proceeding: T4.35-41. The position of the applicant in the Parkin proceeding remained unchanged.

C The Difficulties with each approach 12 Before considering the course I propose to take, it is well to commence by outlining the difficulties that exist in adopting the alternatives that have been presented to me.

C.1 Allowing both proceedings to continue 13 In unchallenged evidence on this application, one of the leading class action practitioners in the country, Mr Jason Betts, deposed to his experience acting for respondents in numerous competing or concurrent claims prosecuted by more than one firm of solicitors. He gave evidence that in his experience, cases involving more than one firm of solicitors acting on behalf of representative parties, or more than one representative party with separate legal representation asserting substantially the same claims, are cases which lead to increased complexities in the management of the litigation. This likely means increased legal costs incurred by both the representative parties and also the respondent. I accept this evidence which, in my view, is consistent with the experience of the Court. 14 There are ways, of course, of ameliorating the increased complexity and costs associated with multiple representation on behalf of applicants. No doubt Boral's shifting position today is informed by their view that the acceptance by PFM of a regime contemplated by Exhibit A would serve to reduce the burden from the perspective of Boral. The reality is that one proceeding advancing one pleading, with one set of solicitors and counsel is, from the perspective of the Court, most likely to facilitate the overarching purpose. Consistently with what has happened in this case, steps can be taken to manage cases closely to avoid unnecessary costs but this, in my view, is a process of amelioration of, and not eradication of, the problem.

C.2 Adjournment or temporary stay 15 At first glance, it might be thought that the adjournment or temporary stay of the Martini proceeding creates no downside comparable to the increased costs of the counterfactual. Certainly, the consideration of the downside of adjourning the Martini proceeding requires close thought. 16 This is a case where no undertaking has been given on behalf of Boral to not relitigate common issues in the Martini proceeding, in circumstances where issues were determined adversely to it in the Parkin proceeding. The absence of this undertaking is perhaps unsurprising in the circumstances. Mr Darke SC, counsel for the applicant in the Martini proceeding, frankly conceded during the course of his submissions that, were there an adjournment or temporary stay ordered, the applicant in the Martini proceeding wishes to "keep up his sleeve" the prospect that he could seek to relitigate the common questions in the event that they were determined adversely in the Parkin proceeding: T31.33-42. 17 It is worth pausing for a moment to consider this issue from the perspective of both the group members and also a respondent, since this issue has not really been the subject of any extended examination in the authorities. 18 I have previously made reference in a number of judgments to what I have described as the pivotal provision in Pt IVA of the Federal Court of Australia Act 1976 (Cth) (Act), being s 33ZB. This provision creates a statutory estoppel binding group members to any judgment that has been made; including a determination of common issues. 19 Pt IVA more generally provides for an opt out regime. An applicant can commence a representative proceeding without the consent of a group member. The safeguard, however, is that a group member is entitled to be given adequate notice to make an informed decision about whether they wish for their claim to be determined in the representative proceeding, or rather wish to opt out. At least as a matter of legislative theory, the structure of Pt IVA provides that a group member is not placed in the position of having their rights determined in a case, in which they have had no involvement, and conducted by legal representatives they have had no involvement in selecting. It follows that Pt IVA, by its very nature, involves the prospect, at least in theory, that individuals who do not wish their claim to be determined in the class action may be able to relitigate issues in a different proceeding. 20 I raised with the parties during the course of oral argument whether a judgment made on the common issues could somehow operate in rem so as to bind group members, including by an order made under s 33ZF of the Act. However, having considered this prospect, I do not think that it is a possible option, particularly because of the structural aspects of Pt IVA to which I have already made reference. This would flow from the caution expressed in BMW Australia Ltd v Brewster [2019] HCA 45; (2019) 374 ALR 627 (at 643 [70] per Kiefel CJ, Bell and Keane JJ) that a provision such as s 33ZF cannot be used as a mechanism to rewrite the scheme of the legislation. 21 It might be thought to be a risk so minimal as to be fanciful that an individual group member would seek to relitigate common issues adversely determined after a long and complex initial trial, but as a matter of statutory construction, and subject to considerations I will deal with below, it is legally possible. 22 The position in relation to a respondent may not be entirely dissimilar but it is different. Stepping back for a moment, it is worth recalling that a fundamental tenet of the Australian legal system is that individuals claiming or denying the existence of a legal right should have an opportunity to be heard, but that access to justice cannot confer an unfettered licence to litigate. There must be limits. Public confidence in the courts, the proportionate use of public resources, finality in litigation, the scandal of inconsistent judgments, certainty of rights and the predictability of future outcomes all require there be an end to litigation. Duplicative relitigation is manifestly unfair and brings the administration of justice into disrepute: see O'Hara J, "Litigation preclusion: to what extent could (or should) a litigant be barred by prior litigation to which it was not a party?" (2018) 46(3) Australian Bar Review 286 (at 286). 23 In Kirby v Centro Properties Ltd [2008] FCA 1505; (2008) 253 ALR 65, Finkelstein J, in dismissing an application for a stay of proceedings and granting leave to file written submissions on the appointment of a litigation committee (which in the events that happened did not occur), dealt with a submission, coincidentally made by Freehills, that suggested their clients would be free to relitigate issues in another proceeding which went to trial. His Honour said the following (at 69-70 [16]-[18]): 16. Possibly Freehills was under the impression that if that action went against their clients they would be free to re-litigate the issues in the other action. If so, they may have been mistaken. For example, in England in Hunter v Chief Constable of the West Midlands Police [1982] AC 529; [1981] 3 All ER 727 (Hunter), the case involving the so-called "Birmingham 6", the House of Lords held that it was contrary to public policy and an abuse of process for a person to challenge in civil proceedings a decision which had gone against that person in a criminal case against which he had not appealed. Hunter and his co-accused had been convicted, wrongly as it turned out, of murder. They alleged at the trial that the confessions upon which their convictions were based were made as a result of threats and violence. The judge (wrongly as history shows) found that did not happen. The jury in any event convicted them. Subsequently Hunter sued the police officers for assault. His claim was struck out as an impermissible collateral attack on the findings made at the criminal trial. In Arthur JS Hall & Co v Simons [2002] 1 AC 615; [2000] 3 All ER 673, the House of Lords said that ordinarily the principles of res judicata and issue estoppel would be adequate to cover collateral challenges to civil decisions. But they said the Hunter abuse of process principle could be relied upon if necessary. It is not clear whether the Hunter principle will be applied in full in Australia: compare Rogers v R (1994) 181 CLR 251; 123 ALR 417; [1994] HCA 42 with D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; 214 ALR 92; [2005] HCA 12. But it is unlikely that any court would permit a party to relitigate a question or issue which has already been decided against him even though the other side cannot strictly satisfy the requirements of res judicata or issue estoppel. 17. In the United States in Parklane Hosiery Co Inc v Shore 439 US 322 (1979) (Parklane), which was itself a class action case, the US Supreme Court held that the court has broad discretion to allow offensive, "non-mutual collateral estoppel" - that is, a plaintiff in a later action may, where it would promote judicial economy, consistency of result and would not otherwise be unfair, invoke issue estoppel against a defendant such as Centro to bar relitigation of an issue even if the plaintiff was not joined in the earlier action or in privity with a party to that action: Parklane at 329-31; see also V Morabito, "Defendant Class Actions and the Right to Opt Out: Lessons for Canada from the United States" (2004) 14 Duke J of Comp & Intl L 197, p 228 (collecting the US and Canadian authorities on "non-mutual collateral estoppel" or inherent jurisdiction to bar re-litigation of issues especially as applied in class actions). 18. Moreover, even if the principle identified in Parklane is not a part of the general doctrine of issue estoppel in Australia, I would certainly consider adopting it at least in the limited context of class actions, either pursuant to the court's authority under s 33ZF(1) of the Federal Court Act or possibly under the court's inherent jurisdiction to prevent an abuse of process. With respect to the latter, see Saffron v FCT (No 2) (1991) 30 FCR 578 at 583; 102 ALR 19 at 23 (Davies J), at FCR 588; ALR 28 (Lockhart J) and at FCR 599; ALR 37 (Beaumont J), where the Full Court suggested that while the Parklane principle was not a part of issue estoppel jurisprudence under Anglo-Australian law, it appeared to perform the same function and yield the same result as would obtain under the Australian abuse of process doctrine. 24 It seems to me that his Honour's comments need to be modified in the light of the High Court's comments in Brewster, but it is to be recalled that notions of justice and public confidence in the administration of justice must reflect contemporary values and must take into account the circumstances of a case, including the nature of representative proceedings. 25 In Rogers v The Queen (1994) 181 CLR 251, McHugh J stated (at 286): Although the categories of abuse of procedure remain open, abuses of procedure usually fall into one of three categories: (1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court's procedures would bring the administration of justice into disrepute. 26 As Lord Sumption JSC observed in Virgin Atlantic Airways Limited v Zodiac Seats UK Limited (formerly known as Contour Aerospace Limited) [2013] UKSC 46; [2014] AC 160 (at 180 [18]), it is only in relatively recent times that courts have endeavoured to impose some coherent scheme on this area of the law. This includes what his Lordship described as the "portmanteau term" of res judicata, which is used to describe a number of different legal principles with different juridical origins; although his Lordship noted (at 180 [17]) that "[a]s with other expressions, the label tends to distract attention from the contents of the bottle". 27 The question of in what circumstances can courts preclude the ability for relitigation runs through a variety of areas of the law. As class actions develop, and continue to increase as a mechanism by which courts quell controversies through the use of judicial power, it is necessary to give close thought to the circumstances in which a party to one representative proceeding, who has had a determination of common issues, is entitled to relitigate those issues. In my mind, it is difficult to understand why the principles of abuse of process are not sufficiently flexible to have regard to the bespoke circumstances in which a respondent in a representative proceeding, with all the ability to participate in that representative proceeding, is able to relitigate an adverse decision on issues which transcend that proceeding; that is, the common issues. The maxim interest rei publicae ut sit finis litium (it is for the common good that there should be an end to litigation) has a particular resonance when it comes to the determination of common issues in group proceedings. 28 Returning to the difficulty with adjourning temporarily the Martini proceeding, there is a risk that in the absence of an undertaking, both the applicant and group members in the Martini proceeding, and Boral, may consider themselves in a position to reagitate common issues. However, to adopt the expression of Mr Edwards, counsel for the applicant in the Parkin proceeding, such risk should be considered "vanishingly low", not only because of the potential legal impediments I have identified above, but also because it does not seem to be practicable that such an eventuality would result. From the perspective of the applicant in the Martini proceeding, this is a case involving funded litigation. It would be quite remarkable if, following an adverse determination of the common issues in the Parkin proceeding, it could be seriously said to be commercially viable for a funder to advance funds for the relitigation of those issues in another representative proceeding. 29 In relation to individual group members, the relitigation of common issues in a case such as the present would be very unlikely. Similarly, for Boral, even if, contrary to my preliminary view, there is an ability to relitigate common issues, there does not seem to me to be a realistic prospect this would occur, particularly in circumstances where any determination of the common issues could be the subject of an appeal. 30 In these circumstances, it follows that the risks of adjourning or ordering a temporary stay are relatively remote.

D Determination 31 My preliminary view when commencing the hearing of this application was to make orders along the following lines: 1. Pursuant to s 53A of the Federal Court of Australia Act 1976 (Cth) (Act), the whole of proceeding NSD935/2020 (Martini proceeding) be referred to mediation, being a mediation to be conducted concurrently with a s 53A mediation of the whole of proceeding NSD602/2020 (Parkin proceeding) at a time and by a mediator to be confirmed by further order in the Parkin proceeding. 2. Prior to the making of an order pursuant to s 53A of the Act in the Parkin proceeding, the solicitors for the respondent in the Parkin proceeding are to confer with the solicitors for the applicants in the Martini proceeding (PFM) to ascertain their availability and the availability of counsel PFM proposes to brief to attend the concurrent mediation and to ascertain their views about a suitable mediator. 3. Within one business day of the making of an order pursuant to s 53A of the Act in the Parkin proceeding, the respondent serve a copy of the order on PFM. 4. Pursuant to s 33ZF and/or s 37P(2) of the Act and/or FCR 1.32 and/or FCR 5.04, the Martini proceeding be adjourned until the earlier of the following: a. the making of any application pursuant to s 33V of the Act; or b. a case management hearing to be conducted seven days after the publication of reasons for judgment at any initial trial in the Parkin proceeding. 5. Liberty for the applicant in the Martini proceeding to make an application to vary order 4 on notice by approaching the Associate to Justice Lee to seek a re-listing of the Martini proceeding. 32 On balance, however, I have determined after hearing argument that it would not be appropriate to proceed down this course. 33 The first and most important reason why this is the case is that the party most affected by duplication of proceedings and any vexation occasioned by it no longer actively supports the application for a temporary stay. If Boral had actively supported the application for a temporary stay, then I would likely have granted it. But in circumstances where it is satisfied that steps can be put in place to ameliorate the primary risk of increased costs, then it seems to me the force of this risk is greatly diminished. 34 Secondly, the orders that Boral has proposed in its reply submissions (at [12]), as agreed to by PFM, appear to provide a sensible way of addressing the prospect of increased costs. There was one point in the Freehills proposal which was not accepted by PFM and that related to a cost-capping order. In Bellamy's Australia Ltd v Basil [2019] FCAFC 147; (2019) 372 ALR 638, the Full Court (Murphy, Gleeson and Lee JJ) noted (at 641 [10]-[13]) that there are at least three ways that duplicative costs occasioned by two class action proceedings can be addressed and the protections are evident when one considers the likely circumstances in which the applicant's costs will become payable. The Full Court said: 11. Such costs are most likely to be payable in three circumstances: first, pursuant to orders made in favour of the applicants at an initial trial or at some interlocutory stage prior to an initial trial; secondly, and rarely, pursuant to an order in favour of a group member or in favour of a former group member following an initial trial including after any declassing, that is, being an order made during the course of the determination of a group member or former group member's claim; or thirdly, an amount representing costs to be paid as part of a settlement of the whole or part of the matter, with such settlement being subject to Court approval pursuant to s 33V of the Act. 12. In the first and second circumstances, subject to any order made to the contrary, the taxation of any costs will be subject to the application of Pt 40 of the Federal Court Rules 2011 (Cth) (FCR) including: (a) FCR 40.06 (which would relevantly allow [the respondent] to seek an order that any unreasonably incurred costs be disallowed or directing an inquiry as to whether any costs have been so incurred and providing for the costs of such inquiry); and (b) FCR 40.30 (which relevantly provides that a taxing officer is not to allow on taxation costs that in the opinion of the taxing officer have been incurred or increased through unreasonableness or any other unnecessary expense). 13. In the third circumstance, in approving a class action settlement, the Court will, as part of its protective and supervisory role in relation to group members, only allow the deduction of costs from the settlement sum in an amount that the Court is satisfied is fair and reasonable (viewed from the perspective of the group members, being those likely bearing the ultimate burden of the costs from an inclusive settlement sum). An assessment of whether costs are fair and reasonable would perforce include consideration as to whether they are duplicative or excessive. 35 I intend to closely manage these proceedings and I am confident that I can ensure that the protections identified above work to ensure that unnecessary costs are not incurred. 36 Thirdly, both sets of solicitors acting for the applicants are very highly experienced in the conduct of Pt IVA proceedings. Indeed, it is not the first time that these firms of solicitors have worked together. Mr Jeremy Alexander Zimett gave evidence that Mr Julian Klaus Schimmel, the solicitor for the applicant in the Parkin proceeding, recently went into evidence about a cooperation agreement in proceedings in the Supreme Court of Victoria. That cooperation agreement was approved by Nichols J in Stallard & Napier v Treasury Wine Estates [2020] VSC 679. In his affidavit, Mr Zimett stated the following (at [17]): In this regard, based on my experience, I would reasonably expect that the legal teams for the Parkin and Martini Proceedings, if both proceed cooperatively, would each individually be much smaller than the team for the Parkin Proceeding if it proceeds by itself. Mr Julian Schimmel, lawyer for the Parkin applicant, recently went into evidence about this type of structure in the context of a cooperation agreement approved by her Honour Justice Nichols in the matters of Stallard v Treasury Wine Estates Ltd (SECI 2020/01590) and Napier v Treasury Wine Estates Ltd (SECI 2020/01983), by stating (as summarised by Justice Nichols): "in substance… complex, multi-party litigation, when conducted by a single firm, commonly involves a number of lawyers at varying levels of seniority meeting regularly to collectively make decisions, and that the joint conduct of a consolidated proceeding by two firms involves making decisions and performing legal work in very much the same way as a single team of solicitors from one firm would operate, save that the manner of working is formalised in a protocol. Mr Schimmel described the measures that would be adopted to enhance and manage co-operation between the firms, including by the assignment of work by senior lawyers and the use of project-management software applications which enhance synchronising work flow" (Stallard & Napier v Treasury Wine Estates [2020] VSC 679 at [51]). 37 Fourthly, even though I do have some residual concerns relating to costs, if this case is to be resolved by settlement following a mediation, as so many securities class actions are, then it is highly unlikely that the case will be resolved without the persons who, following a conscious decision, have decided to remain in the Martini proceeding. Indeed, it is unlikely that a settlement in the Parkin proceeding will occur without a settlement also occurring in the Martini proceeding. Although I think I could have allowed for the effective participation of the legal representatives in the Martini proceeding in any mediation, no doubt those legal representatives will be better apprised of the relevant issues if they have a prior participation in the preparation of the case. 38 Fifthly, this is a case where the Court can be confident that, although they are relatively small in number when assessed against the whole of the class, those who wish to remain as Martini group members have made an informed choice based on accurate information to continue to have their claims resolved in that proceeding. Although relatively small, the closed class is not insignificant, by any means, in size. It is also certainly not so insignificant as to require that it be stayed or adjourned. 39 As has been stressed on a number of occasions, this is a very fact-dependent analysis. While I was initially attracted to the idea of adjourning the Martini proceeding, I have ultimately determined not to proceed down this course; a determinative factor in this decision being that the respondent is content with the course that is reflected in Exhibit A. 40 For these reasons, orders for a temporary stay or adjournment of the Martini proceeding should not be made. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (15)

Cited By (1)