BACKGROUND AND PROCEDURAL HISTORY
16 We have drawn the following description from the primary judge's reasons.
17 GetSwift is a technology company founded in 2015, listed in 2016, and which relevantly provides software for businesses to manage what are described as 'last-mile' delivery functions. After listing, GetSwift, at various times, made announcements to the ASX about agreements and 'partnerships' signed with clients. On 11 December 2017, the company announced a $75 million capital raising, at $4.00 per share. On 19 January 2018, the Australian Financial Review reported that GetSwift had allegedly failed to inform the market that its agreements with some customers had been terminated, and further alleged that it had announced the revenue forecasts tied to an agreement with the Commonwealth Bank of Australia prematurely. Shortly thereafter, on 22 January 2018, GetSwift shares were placed in a trading halt, and two days later were suspended from official quotation, pending the company's response to questions from the ASX. A number of announcements relevant to the company's suspension from official quotation (including questions raised by the ASX) were then apparently released up to reinstatement to official quotation on 19 February 2018.
18 Before entering the trading halt on 22 January 2018, GetSwift's share price was $2.92, however, following reinstatement, it declined to $0.51 as at the close of trade on 21 February 2018.
19 Ms Banton, a partner of the law firm Squire Patton Boggs (SPB) gave evidence that SPB began investigating possible claims against GetSwift on 19 January 2018 and published a 'Notice of Investigation' into a potential class action on 2 February 2018 on the SPB website. Its purpose was to seek to bring the potential class action to the attention of shareholders who acquired shares in GetSwift in the period 24 February 2017 to 19 January 2018. A dedicated 'GetSwift Class Action' webpage and email address were established so that interested investors could register their interest online and obtain more information. Eventually, 103 shareholders chose to retain SPB (Perera Funded GMs) and also to enter into a litigation funding agreement with a litigation funder, International Litigation Partners No 18 Pte Ltd (ILP18).
20 SPB filed the Perera Proceeding (Dwayne Perera v GetSwift and Anor NSD 226 of 2018) on 20 February 2018 against GetSwift and Mr Joel Macdonald, the CEO of GetSwift. The proceeding was listed before the primary judge for a first case management hearing on 23 March 2018, which was then adjourned to 29 March 2018.
21 Mr Pagent, a partner of the law firm Corrs Chambers Westgarth (Corrs) gave evidence that on 20 February 2018, a litigation funder, Vannin Capital Operations Limited (Vannin) announced it was investigating a potential class action against GetSwift and its executive directors and invited shareholders who purchased shares in GetSwift between 24 February 2017 and 19 January 2018 to register their interest in the proposed class action. 441 investors registered their interest in participating in the class action via the website www.getswiftclassaction.com.au, and 208 investors signed litigation funding agreements with Vannin (McTaggart Funded GMs).
22 Corrs filed the McTaggart Proceeding (Shaun and Samantha McTaggart v GetSwift and Others NSD 440 of 2018) on 26 March 2018 against GetSwift, Mr Macdonald and Mr Bane Hunter, the Executive Chairman of GetSwift. This proceeding was also listed for a first case management hearing on 29 March 2018.
23 On 19 February 2018 two further potential class actions were publicly announced by two other law firms, Gadens and MC Lawyers & Advisers. Nothing further has been heard by any party as to those two proposed class actions.
24 At the case management hearing on 29 March 2018, the primary judge indicated that he was disposed to make orders facilitating each of the applicants putting before the Court their proposals for how the issue of the two competing class actions should be dealt with. There was no opposition to this course by either of the applicants or GetSwift, and orders were made in both proceedings for the parties, by 4 pm on 9 April 2018, to exchange and file affidavits and submissions directed to:
(a) the manner and form by which security for costs was to be provided in the respective proceedings;
(b) the details, including any proposed percentage subject to further order, of the terms of any common fund order to be sought in the proceedings;
(c) whether, subject to the filing of a defence, any issues in the proceedings were suitable for reference to a special referee or whether a court appointed expert or joint expert be appointed or retained in relation to any issue;
(d) an estimate by the applicants' solicitors, on affidavit, of the costs that were likely to be incurred on the assumption that issues of contravening conduct and causally related loss were in dispute;
(e) the number of funded group members and the aggregate number of shares held by all funded group members;
(f) what, if anything, was proposed to deal with potential overlap between the Perera Proceeding and the McTaggart Proceeding, such as a consolidation of the two proceedings, a permanent stay of one of the proceedings, an order declassing one of the proceedings under either s 33N(1) or s 33ZF of the Act, an order closing the class in one (but not the other) proceeding, or orders allowing a joint trial of both proceedings with each left constituted as open class proceedings; and
(g) in the event a temporary or permanent stay or declassing of a proceeding was proposed, the matters relied upon in support of that contention.
25 The primary judge then listed the two proceedings for a further case management hearing on 13 April 2018, with a view to hearing and deciding any applications relating to the matters the subject of submissions filed pursuant to the earlier orders. The primary judge said that the purpose of the process was for each of the applicants to put their 'best foot forward' to come up with a detailed proposal to deal with the competing class actions and, if only one proceeding was to go forward, to explain why it was that their proceeding should be preferred. To preserve the integrity of the process as to the competing proposals, the primary judge further noted in the orders that:
there should be no discussion between the applicants, the applicants' lawyers or the funder in this proceeding and the applicant, the applicant's lawyers or the funder in the Related Proceeding as to the content of the material to be filed and served pursuant to [the orders] until after the exchange provided for by that order.
26 Shortly after the exchange of affidavit evidence and submissions between Mr Perera and the McTaggart applicants, another law firm Phi Finney McDonald (PFM) filed an interlocutory application on behalf of Mr Raffaele Webb seeking orders that he be granted leave to intervene in both proceedings, a regime for a notice to group members, and for the case management hearing to be adjourned until late May or June 2018. The application was premised on the basis that Mr Webb intended shortly to file a class action by Mr Webb against GetSwift.
27 To explain any suggested delay in making the application, Mr Ben Phi, a partner of PFM, deposed that prior to 20 February 2018 the firm took preliminary steps to assess the merits of a potential claim against GetSwift, and Mr Phi had preliminary discussions with representatives of a litigation funder, Therium Capital Management Limited (Therium). Mr Phi said that he decided against announcing a potential class action until after GetSwift resumed trading as, in his experience, announcing a class action prior to the resumption of trading (or even shortly after an alleged corrective disclosure) may allow a respondent to argue that any share price fall was caused, at least in part, by the threat of a class action. He also so deferred because his view was that it was appropriate to review analyst reports and media commentary to form a view as to the precise cause of a particular share price reaction, and, further, his preference was not to announce a class action until after he was satisfied that appropriate funding could be secured on terms that he considered were favourable to group members. Despite this initial preference, following the filing of the Perera Proceeding on 20 February 2018, he caused an announcement of PFM's investigation to be published on PFM's website and the potential PFM class action was reported by the media the following day.
28 His Honour immediately listed a case management hearing on 11 April 2018. Following exchanges between his Honour and the parties, Mr Webb did not press for adjournment of the case management hearing. His Honour made orders that Mr Webb have leave nunc pro tunc to intervene in the Perera Proceeding and the McTaggart Proceeding for the limited purpose of appearing at the case management hearing on 11 April 2018, and for the purpose of making any application he wished to make on 13 April 2018.
29 His Honour ordered Mr Webb to exchange with the other applicants any affidavit evidence, submissions, and any other material related to the same issues which were the subject of the earlier exchange between Mr Perera and the McTaggart applicants. His Honour did not allow Mr Webb or his legal advisers to have access to any material already filed, and again noted in the orders that there should be no discussions between the applicants, the applicants' lawyers or the funders. His Honour said that, on 13 April 2018, he would grant leave to Mr Webb to file and have returnable instanter, an originating application commencing a class action with Mr Webb as the representative applicant.
30 We note at this point that the Perera and McTaggart applicants submitted to the primary judge that Mr Webb had obtained some advantage by reason of what occurred. Before us they argue that when his Honour came to weigh up the respective advantages and disadvantages of the competing proposals, he should have taken into account "the fact that the Webb applicant enjoyed a process advantage compared with the McTaggart (and Perera) applicants". They say that arises because, after setting up what the parties said was a "competitive tender" process, Mr Webb's late entry put him at a "clear advantage" apparently because at the time they submitted their respective proposals, the McTaggart applicants (and Corrs and Vannin) and Mr Perera (and SPB and ILP18) "thought they were in a two-horse race, not a three-horse race, and they bid accordingly. But Webb knew it was a three-horse race, and he was able to bid accordingly". They also say that some unfairness was occasioned because, whereas the Perera and the McTaggart applicants were required to submit their evidence and proposals by 4.30 pm on 9 April 2018, Mr Webb was given until 4.30 pm on 12 April 2018 which meant that he was able to incorporate into his proposal developments that occurred between 9 and 12 April 2018.
31 Mr Perera submits that allowing persons such as Mr Webb (and PFM and Therium) to come along "at the heel of the hunt" would "encourage a phenomenon of entrepreneurial lawyers and funders parasitically lying in wait to steal the work product of those who have conscientiously been investigating claims on behalf of real people who have retained them".
32 The primary judge, in our view correctly, rejected these submissions for seven reasons:
(a) first, Mr Webb did not have access to any of the material filed by the other applicants. He (and PFM and Therium) like Mr Perera (and SPB and ILP18) and the McTaggart applicants (and Corrs and Vannin), all knew that their responses were to be prepared without contacting or having access to the materials of the other applicants;
(b) second, the McTaggart applicants' submissions were silent as to the details of the 'developments' which were asserted to have presented Mr Webb with a competitive advantage between the first exchange (between Mr Perera and the McTaggart applicants on 9 April) and the second exchange (between Mr Perera and the McTaggart applicants on the one hand, and Mr Webb on the other, on 12 April). His Honour said that given Mr Webb did not have access to any of the details of the earlier proposals put forward, no relevant distortion occurred. We agree;
(c) third, no complaint was made by the legal representatives of Mr Perera and the McTaggart applicants at the case management hearing on 11 April 2018 as to the orders made on that date in regard to Mr Webb;
(d) fourth, his Honour said that what was put in place was not some process of bargaining between the Court (in its protective role as to group members) and scheme promoters and that the analogy to an auction was inapposite. We would also interpolate at this point that US-style auctions are not appropriately adapted to the Australian conditions of Part IVA as Beach J explained in Bellamy's at [23]. His Honour said that each applicant was to put its best foot forward and they did so, and the evidence that ILP18 would have approached the process differently in the event a third funder was to be involved (and not just a competition with Vannin) was not to the point. What the orders sought to elicit, inter alia, was a considered proposal which best served the twin ends of furthering the overarching purpose and protecting the interests of group members, not the optimal commercial 'deal' for the funder pitched at the level to beat (but only just) the commercial 'deal' likely proposed by another funder;
(e) fifth, his Honour rejected the notion that Mr Webb had acted in a way which could be accurately described as "parasitically lying in wait to steal the work product" of others. Mr Webb had not filed a class action by the time of the first case management hearing but Mr Phi provided an explanation of why his attention was directed to attempting to negotiate funding terms, which only occurred on 4 April 2018, and as to why he deferred the commencement of proceedings. Mr Phi also said that he did not anticipate orders such as those made at the first case management hearing;
(f) sixth, his Honour accepted Mr Webb's submission that the proposal he put forward reflected, at least as to funding rates and budgeted legal costs, those funding terms agreed with Therium and the budget proposed by PFM on 4 April 2018, which was before the orders made on 11 April 2018; and
(g) seventh, each of the Perera and McTaggart applicants submitted that their respective proposals were superior and they provided no detail as to how the supposedly superior and well thought through proposals and submissions would have changed.
33 Let us return to the chronology. When all three proceedings came before his Honour on 13 April 2018, detailed evidence was adduced and submissions were made as to the approach to be taken to resolve the issue of the competing class actions, the powers of the Court in this regard and the comparative merits of the competing proposals. Further argument spanned three further hearings, with additional submissions and materials being filed. We would not condone such a complex, elaborate and expensive exercise in other cases when the issue of competing class actions needs to be dealt with. But we mean no criticism of his Honour in the present context given the novelty of some of the legal and forensic issues raised. But, in future cases these questions require to be dealt with less elaborately and more efficiently.
34 The parties put forward various proposals. Their respective proceedings and proposals may be summarised as follows.
35 The Perera Proceeding had the following components:
(a) Mr Perera was the representative party having acquired seven parcels of shares in November and December 2017 (each of which were sold at a profit) and he bought his first loss-making shares on 5 January 2018;
(b) the proceeding was commenced as an 'open' class action and the class included 103 Perera Funded GMs who acquired 2,575,804 shares in the relevant period;
(c) the proceeding was funded by ILP18, a special purpose funding entity. Corporations related to ILP18 had moneys on trust with SPB;
(d) the Perera Funded GMs had entered into funding agreements with ILP18 and retainer agreements with SPB;
(e) the funding agreement provided for a commission ranging between 25% and 40% (discriminating between group members on the basis of the amount of shares held) but Mr Perera proposed a common fund order which involved payment of the lesser of 25% of net proceeds or 22.5% of gross proceeds, which sum would be capped to ensure that it was an amount not greater than 25% of net proceeds;
(f) ILP18 was prepared to abide by any order as to security for costs be it by way of cash deposit, bond or insurance cover; and
(g) no suggestion was made that any substantive question could be referred to a special referee or be the subject of evidence from a court appointed expert.
36 Mr Perera submitted that the Perera Proceeding should proceed as an open class action, and the Court should temporarily stay, or adjourn, the other proceedings until shortly after the date for opt out had passed in the Perera Proceeding. Subject to consideration of the number of persons who opted out Mr Perera proposed that the other proceedings then be either closed or declassed. At least when the McTaggart Proceeding was the only competitor, Mr Perera contended that the discriminating feature for deciding whether to close or declass that proceeding (under s 33N of the Act) was whether the McTaggart Proceeding had "insufficient registered group members to justify it continuing as a representative proceeding". Mr Perera also submitted that the Webb Proceeding should be declassed.
37 The McTaggart Proceeding had the following components:
(a) the McTaggart applicants were the representative parties having bought 151,208 shares starting in September 2017 and, after selling some at a profit, selling all the remaining shares they then held on 19 February 2018, the day trading resumed, which was alleged to have crystallised a loss of $182,223;
(b) the proceeding was commenced as an 'open' class action, and the class included 208 McTaggart Funded GMs who acquired 1,545,374 shares in the relevant period;
(c) the proceeding was funded by Vannin which was wholly owned by a substantial corporation known as Vannin Capital PCC, which would meet Vannin's request for funds to finance its litigation funding operation;
(d) the McTaggart Funded GMs had entered into funding agreements with Vannin but had not entered into retainer agreements with Corrs;
(e) the funding agreement provided that the funding commission would be 10% if proceeds were received before the end of 2018, 20% if received before 26 September 2019 and 30% if received thereafter. At the time they filed their initial submissions the McTaggart applicants did not indicate that they were prepared to make an application for a common fund, preferring to abide further developments. But during the course of oral submissions before the primary judge, they said they would be content with a common fund order which provided for essentially the same terms as in the funding agreement, being 10% of gross proceeds before 31 December 2018, 20% of gross proceeds until a date 42 days prior to the initial trial, and 30% of gross proceeds thereafter;
(f) a sum of $250,000 was held in Corrs' trust account and the funding agreement required Vannin to obtain "after the event" (ATE) insurance of an amount in excess of that amount that was likely to be awarded for security for costs. Alternatively Vannin was prepared to provide security for costs by way of a cash deposit; and
(g) no suggestion was made that any substantive question could be referred to a special referee or be the subject of evidence from a court appointed expert.
38 The McTaggart applicants submitted that their proceeding should remain an open class proceeding and the Perera Proceeding should be closed under s 33ZF(1) of the Act. They submitted that Mr Webb should be notified that the McTaggart Proceeding would be an open class proceeding, and the Perera Proceeding would be a closed class proceeding. Following this notification, if Mr Webb and Therium wished to continue with the Webb Proceeding, that proceeding should proceed as a single claim heard together with the other proceedings.
39 The Webb Proceeding had the following components:
(a) Mr Webb was the representative party having purchased shares in GetSwift during the relevant period (there was no further evidence as to his purchases);
(b) the proceeding was commenced as an 'open' class action. No group members had signed a funding agreement and accordingly there were no funded group members;
(c) Mr Webb produced a letter from Therium dated 12 April 2018, in which the 'Investment Committee' of another Therium entity represented that it had committed a sum for the purposes of Therium funding the costs incurred by PFM and indemnifying Mr Webb in relation to adverse costs;
(d) the only retainer agreement entered into was between Mr Webb and PFM. No funding agreement which provided a 'deadlock' provision to resolve issues which might arise in the settlement context between Mr Webb and Therium existed;
(e) Mr Webb proposed a common fund order which would entitle Therium to a funding commission that was the lesser of:
(i) 2.2 times the expenses that Therium had paid in the proceedings if the parties entered into a settlement agreement on or before 12 April 2019, or 2.8 times if there was a successful resolution after 12 April 2019; or
(ii) 20% of the net litigation proceeds (that is, the settlement sum less approved professional fees and disbursements);
(f) initially it was proposed that security for costs be provided by way of an ATE policy together with a deed of indemnity, but during the hearing it was submitted that Therium was prepared to put up cash security should the Court so order; and
(g) Mr Webb asked the Court to appoint a special referee to conduct periodic reviews of the reasonableness of Mr Webb's legal costs, with only those costs assessed as reasonable being costs included for part-payment of Mr Webb's legal costs. Additionally, Mr Webb accepted that there was scope for the Court to appoint, or for the parties to jointly engage, a forensic economist to assist the Court in respect of matters of loss causation and the quantification of loss and damage.
40 Mr Webb agreed with the other applicants that only one proceeding should proceed as an open class. He contended that orders should be made allowing the Webb Proceeding to proceed on behalf of an open class and variously submitted that directions should be made to either stay, declass or adjourn the other proceedings.
41 GetSwift sought a stay of all proceedings but one, but was agnostic as to which proceeding should go forward. It submitted that the Court had an inherent jurisdiction to stay its proceedings as an abuse of process or if the proceedings were unjustifiably oppressive or otherwise brought the administration of justice into disrepute. It argued that the categories of abuse of process and vexation or oppression were not closed and were insusceptible of precise formulation, and in the context of Part IVA proceedings that meant that the Court had power to stay a proceeding if it was likely that one party would be subject to vexation and oppression.
42 GetSwift also submitted that there was no issue as to power in relation to declassing any of the class actions. As to the issue of discretion, apart from the fact that GetSwift submitted that the appropriate form of security for costs ought to be cash paid into Court, and that GetSwift wished to be heard as to the timing and quantification of security, it recognised that it was a matter for the Court as to which of the three proceedings should go forward.