Perera v GetSwift Limited

Counsel for the Applicants in NSD 964 of 2018: Mr J Sheahan QC and Mr A Hochroth

Solicitor for the Applicants in NSD 964 of 2018: Corrs Chambers Westgarth

Counsel for the First Respondent in NSD 950 and 964 of 2018 and the Second Respondent in NSD 951 of 2018: Mr JT Gleeson SC and Mr A Shearer

Solicitor for the First Respondent in NSD 950 and 964 of 2018 and the Second Respondent in NSD 951 of 2018: Quinn Emanuel Urquhart & Sullivan

Counsel for the First Respondent in NSD 951 of 2018: Mr DG Collins QC and Dr O Bigos

Solicitor for the First Respondent in NSD 951 of 2018: Phi Finney McDonald

BETWEEN: DWAYNE CAVAN SHANAHAN PERERA Applicant

AND: GETSWIFT LIMITED (ACN 604 611 556) First Respondent

JUDGES: MIDDLETON, MURPHY AND BEACH JJ DATE OF ORDER: 20 December 2018

1. The Applicant pay the costs of the First and Second Respondents, and 90% of the costs of Mr Raffaele Webb, of the application for leave to appeal and appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BETWEEN: DWAYNE CAVAN SHANAHAN PERERA Applicant

GETSWIFT LIMITED (ACN 604 611 556) Second Respondent

JUDGES: MIDDLETON, MURPHY AND BEACH JJ DATE OF ORDER: 20 December 2018

1. Orders 1 and 2 of the Orders of Justice Lee in NSD 580/2018 (the Proceeding) made on 25 June 2018 be vacated.
2. Pursuant to s 33ZF of the Federal Court of Australia Act 1976 (Cth) (the Act), Squire Patton Boggs (SPB), and its officers, servants and agents be restrained from communicating with group members in the Proceeding, other than Mr Dwayne Perera and persons who have executed a retainer with SPB, solely in relation to the issue of whether group members should exercise their right to opt out of the Proceeding pursuant to s 33J of the Act, with such restraint to continue until the conclusion of the opt out process following the expiry of the date for opt out in the Proceeding.
3. For the avoidance of doubt, Order 2 does not prevent SPB from responding to any unsolicited enquiry concerning opt out made to them by a group member in the Proceeding: (a) Prior to service of the opt out notice - by communicating to that group member that matters relevant to the issue of opt out are currently before the Court and the Court will, in due course, set a date for opt out and make orders for the distribution of an opt out notice to the group members in the Proceeding; or (b) After the service of the opt out notice - by communicating to that group member that they should refer to the opt out notice and take such advice as they think appropriate relating to their right to opt out in such manner as they think fit by taking independent legal advice or contacting the independent barrister referred to in the opt out notice.
4. The costs entitlement of the Applicant arising from his partial success in this application is satisfied by the 10% reduction in the costs he is obliged to pay in proceeding NSD 950/2018. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BETWEEN: SHAUN MCTAGGART First Applicant SAMANTHA MCTAGGART Second Applicant

AND: GETSWIFT LIMITED (ACN 604 611 556) First Respondent

JOEL MACDONALD Second Respondent BANE HUNTER Third Respondent

JUDGES: MIDDLETON, MURPHY AND BEACH JJ DATE OF ORDER: 20 December 2018

1. The Applicants pay the costs of the First, Second and Third Respondents and of Mr Raffaele Webb of the application for leave to appeal and appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 The Court made orders on 20 November 2018: (a) granting leave to appeal to the applicants in two open shareholder class actions (the Perera appellant and the McTaggart appellants) being NSD 950/2018 and NSD 964/2018 against the respondents GetSwift Limited and two company officers (the GetSwift respondents) in relation to orders made by the primary judge on 23 May 2018 to permanently stay the two proceedings, and allowing a third open shareholder class action, NSD 951/2018 (the Webb Proceeding) to continue, but then dismissing the appeals; (b) granting leave to appeal to the Perera appellant in relation to orders of the primary judge on 25 June 2018 to restrain communications by Squire Patton Boggs (SPB) with group members, allowing that appeal in part, and setting aside the restraint orders; and (c) refusing leave to appeal to the Perera appellant in relation to common fund orders made by the primary judge on 20 June 2018. 2 The parties were directed to file short submissions on the questions of substitute restraint orders and costs. These reasons concern those two issues only and will not reprise details contained in the principal judgment on the applications (Perera v GetSwift Limited [2018] FCAFC 202).

THE SOLICITOR RESTRAINT ORDERS 3 Mr Perera submits that by its judgment the Full Court found: (a) there was no evidence that SPB communicated with or was likely to communicate with its clients in a manner which was misleading, unfair, unlawful or involved any ethical constraint (at [323]); (b) the primary judge erroneously assumed that SPB had not been retained generally to advise group members (at [324]); (c) the fact that there was "a possibility of conflict" was not a sufficient basis to restrain communications between SPB and its clients. Even if there were a possibility of conflict, there was no evidence to suggest that SPB would not appropriately manage that conflict or would not give professional and non-misleading information to their clients (at [326]); and (d) the restraint comprised an interference with the lawyer/client relationship between SPB and its clients which constituted a substantial injustice (at [328]). 4 He argues that there is no evidence that SPB would or was likely to act in any way other than properly, lawfully, ethically and professionally, whether towards its clients or towards group members. He contends that there is no basis for any restraint to be imposed upon SPB's communications with anyone. He says that, even accepting that the Court has an obligation to protect the integrity of its processes and to ensure the proper communication of information to group members, an injunction should not be issued on the basis of speculation, and some actual or apprehended wrongful conduct must be identified before any substitute restraint orders are appropriate. Mr Perera says that no restraint should be imposed on SPB. 5 In the alternative, he says that any restraint imposed by the Court should be framed to constitute the minimum interference necessary to protect the interests sought to be protected. He submits that the restraint should not extend to prevent SPB from advising Mr Perera or any client of SPB (including any group member who chooses to retain the firm in the future) and that it should not prevent SPB from making public comment about the proceedings (for example in response to media inquiries). 6 We do not accept Mr Perera's contention that an injunction to restrain SPB's communications with group members that are not its clients is inappropriate. As we said in the principal judgment (at [321]), in the unusual circumstances confronting him we consider the primary judge properly exercised his discretion to make an order restraining SPB's communication of information to group members, except in so far as the restraint extended to group members who were clients of SPB. We saw (and see) no basis to interfere with the restraint order in so far as it relates to group members who are not clients of SPB. 7 In the circumstances it is appropriate to vary the primary judge's orders only so as to make clear that SPB is restrained from communicating with non-client group members. The restraint only concerns the issue of whether group members should exercise their right to opt out and it does not prevent SPB from communicating in relation to any other matter. It is the minimum restraint necessary to preserve the integrity of court-approved communications relating to the right to opt out. We have made restraint orders in accordance with Mr Webb's submissions. 8 As Mr Perera seeks, the restraint does not extend to communications by SPB with group members who become clients of SPB in the future, but that somewhat misses the point. The point of the injunction is to prevent SPB from communicating with group members who are not its clients in an effort to persuade them to opt out, because doing so may allow the firm to present the possibility of a viable, alternative commercial vehicle to vindicate group members' claims against the GetSwift respondents and thereby circumvent or reduce the effectiveness of the orders allowing only the Webb Proceeding to go forward. It may be doubted that, in the future, properly informed group members will choose to retain SPB to act for them in a claim against the GetSwift respondents when: (a) the Perera Proceeding has been permanently stayed; (b) the Court has found that the Webb Proceeding is a better vehicle to vindicate group members' claims against the GetSwift respondents; and (c) SPB has been named as a concurrent wrongdoer by the GetSwift respondents which gives rise to, at least, the appearance of a conflict of interest.

Costs in relation to the permanent stay orders 9 Mr Perera notes that Full Court upheld the orders of the primary judge staying the Perera and McTaggart Proceedings on a different basis to that which the primary judge identified. The Full Court did not accept that the Perera and McTaggart Proceedings were an abuse of process, did not endorse his Honour's reliance on the equitable doctrine of bills of peace, did not accept his Honour's alternative invocation of de-classing under s 33N, and doubted (though did not decide) whether s 33ZF permitted the grant of a permanent stay. The Full Court said that the position was, in truth, one where the GetSwift respondents or Mr Webb should have filed a notice of contention to the effect that the primary judge had power to grant the relief granted on case management grounds even absent establishing abuse of process. 10 Mr Perera therefore argues that it is appropriate to apportion costs on a per issue basis as was done, for example, in New South Wales v Nominal Defendant [2005] NSWCA 213. He says that he had some success on Grounds 3, 4-5 and 6-8, each of which challenged the juridical basis upon which the primary judge had ordered the permanent stay. He argues that the proper costs order would involve some downward adjustment to the costs ordered to be paid to the GetSwift respondents and Mr Webb to reflect the fact that while they obtained the result for which they contended, it was on a different basis. 11 Alternatively, Mr Perera says that if the Court is minded simply to order that costs should follow the event, the order should take into account that the GetSwift respondents and Mr Webb incurred their costs in appeals in both the Perera Proceeding and the McTaggart Proceeding. He says the appropriate order is that Mr Perera pay 50% of the GetSwift respondents' and Mr Webb's costs of the appeals, and that the McTaggart appellants pay the other 50%. 12 For their part the McTaggart appellants argue there should be no order that they pay the costs of the GetSwift respondents and Mr Webb. They also note that although the Full Court dismissed the appeal, it determined (at [123]) that the source of the power to order a permanent stay of the Perera and McTaggart Proceedings was the Court's express and implied power to manage cases before it, not to prevent abuses of process. 13 They submit that the applications concern a case management decision made following a selection process instigated by the primary judge, which was "novel", "complex, elaborate and expensive" and able "to be dealt with less elaborately and more efficiently" in the future. They note the Full Court estimated costs incurred by the unsuccessful funders were "in the order of $300,000-$500,000" each, and its view that "losses of that magnitude are likely to prove unsustainable over the medium to long term". The result would be that some funders may withdraw from the funding market, which will have the undesirable effect of reducing competition between funders (at [282]). They say that Vannin has actually spent well more than $500,000 on their proceeding to date and that Vannin should not be visited with an order to pay costs as that will act as a further disincentive to Vannin (and other funders) considering funding the investigation and prosecution of other class actions. They say that would not be in the interests of group members; nor would it promote access to justice. 14 The McTaggart appellants also contend that the applications raised important matters of principle in relation to how the Court should deal with competing class actions, and note that the Full Court used them as an opportunity to provide general guidance for docket judges on the management of such cases. They say that the Full Court accepted many of the submissions they made on matters of general utility and policy, and it rejected some of the submissions made by the GetSwift respondents and Mr Webb. In reliance on Ruddock v Vardarlis (No 2) (2001) 115 FCR 229 at [17] (Black CJ, Beaumont and French JJ) they argue that the Court should therefore decline to order costs against them. 15 Finally, they argue that the appeal was successful in so far as it related to the personal claims of the McTaggart appellants. 16 We do not accept these contentions. 17 We commence by noting that the discretion as to costs is a broad one which is relevantly unfettered, save for the requirement to act judicially and to ensure that any power to award costs is exercised in the way that best promotes the overarching purpose in s 37M of the Act. There is no absolute rule that costs follow the event and an award of costs is discretionary, but generally that discretion is exercised in favour of the successful party: Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 at 62-63 [25] (Gleeson CJ, Gummow, Hayne and Crennan JJ); Oshlack v Richmond River Council (1998) 193 CLR 72 at 88-89 [40]-[41] (Gaudron and Gummow JJ). In the circumstances of the present case in relation to the appeals against the permanent stay orders we consider costs should follow the event. 18 First, the appeals centrally concerned whether the circumstance of the three competing open shareholder class actions warranted the primary judge's imposition of permanent stays in respect of two of them. The GetSwift respondents and Mr Webb were wholly successful in maintaining the primary judge's orders in that regard. More particularly, the key issues in the appeals were: (a) whether the Court had power to stay the Perera and McTaggart Proceedings respectively; and (b) if so whether the primary judge's exercise of the power miscarried. The GetSwift respondents and Mr Webb were successful on both of those issues, and the Full Court rejected the many grounds of appeal. 19 While the Full Court did not accept that competing class actions such as the Perera and McTaggart Proceedings constitute an abuse of process, and it took a different view as to the source of the power to permanently stay a competing open class action, the fact remains that the permanent stay orders were upheld. It is relevant too that Mr Perera conceded that much the same result as a permanent stay for abuse of process could be achieved by using other tools available to the Court, and that was the result in the appeals. 20 Second, the fact that the Full Court took a different view to the primary judge on some issues does not carry much significance when the GetSwift respondents and Mr Webb were wholly successful on the key issues. The primary judge dealt with the power to stay a competing class action in a novel context and in a wide-ranging judgment that considered a number of issues (such as bills of peace, s 33ZF of the Act and de-classing proceedings under s 33N) on which his Honour did not ultimately rely for the conclusion that it was appropriate to order a permanent stay. While the Full Court took a different view to the primary judge on those issues they were not essential to the primary judge's decision, nor crucial to ours. 21 It is also relevant that the Full Court took the opportunity to provide some general guidance for docket judges dealing with competing class actions and on questions of policy when these matters were not central in the hearing or the decision. 22 Third, we accept that ordering costs against the unsuccessful funders of the Perera and McTaggart Proceedings will increase their losses in circumstances where (as we said at [282]) there is already a risk that the substantial costs of involvement in such a case selection process may force funders out of the market. Such an outcome is undesirable because it will reduce access to justice and may lead to higher funding charges. However, it is also undesirable that the GetSwift respondents and Mr Webb should have to meet their own costs of the appeal. 23 The primary judge was required to decide the best way to deal with the case management difficulties that were thrown up by three competing open class actions and his Honour made a discretionary case selection decision which took into account all the circumstances of the case and involved weighing up a number of incommensurable and conflicting considerations, in relation to which there could be no one right answer. The Webb Proceeding came out on top in that process. Notwithstanding the relatively high bar that is appropriate on appeals from discretionary decisions on practice and procedure, the Perera appellant and McTaggart appellants commenced applications for leave to appeal. These were always going to be difficult and were ultimately unsuccessful. The GetSwift respondents and Mr Webb should not be forced to carry their own costs of the applications. 24 Fourth, there is no force in the contention that the McTaggart appellants should not pay costs because their appeal was successful in so far as it related to their personal claims. It is not clear that the orders of the primary judge operated to stay their personal claims. Further, before us no party sought to argue that they should be stayed and this issue took up little or no time. 25 Finally, we note that the two applications for leave to appeal against the permanent stay orders raised essentially the same issues. The GetSwift respondents provided one set of submissions in respect of the appeals and the issues in those appeals were dealt with indivisibly in the hearing and in the Full Court's reasons. There was also substantial crossover in Mr Webb's submissions in relation to the two cases. It would be unrealistic and artificial for a taxing officer to have to divide up costs as though they were incurred in one of the two applications as opposed to another. We consider that Mr Perera and the McTaggart appellants should each pay 50% of the GetSwift respondents' and Mr Webb's party/party costs. We have not, however, made an order in those terms because the Perera and McTaggart appellants should be jointly and severally liable so as to ensure that the GetSwift respondents and Mr Webb recover their costs even if one of the appellants is unable to pay. It is, of course, impermissible for the GetSwift respondents or Mr Webb to make "double recovery" of their costs.

Costs in relation to the solicitor restraint orders 26 Mr Perera seeks orders that Mr Webb pay the costs of the application for leave to appeal and the appeal in NSD 951/2018, and that there be no order for costs as between him and the relevant GetSwift respondents. He contends that he had substantial success on the application for leave to appeal and the appeal in relation to the restraint order. He argues that the bulk of the written submissions and oral argument in NSD 951/2018 related to the challenge to the injunction to restrain SPB from communicating with group members, including their own clients and that the other issues ventilated in the proceeding did not occupy any significant hearing time before the Full Court. Mr Webb opposes this course. 27 Mr Perera does not seek a costs order against the GetSwift respondents. That is appropriate when the GetSwift respondents did not seek the restraint at first instance, did not seek to be heard on this issue at first instance, did not seek to be heard on the matter in the appeal and took no position in respect of it. 28 In our view the partial success Mr Perera had in proceeding NSD 951/2018 should make little difference to the overall cost outcome. This is so for various reasons. 29 First, NSD 951/2018 was ancillary to Mr Perera's main application for leave to appeal in NSD 950/2018. The application involved two key issues being: (a) the common fund order; and (b) the restraint orders. The Full Court dismissed the application for leave to appeal against the common fund order but granted leave and allowed the appeal in part on the restraint orders. That is, Mr Perera was unsuccessful in relation to half of the issues raised in the application. 30 Second, while the Full Court set aside the restraint orders as made, a more limited restraint remains on foot through the substituted restraint orders. SPB remains restrained from communicating in relation to opt out with the vast bulk of group members, which shows the quite limited success Mr Perera obtained. 31 Third, this part of the applications for leave to appeal was only a minor point in the Full Court proceedings overall and occupied minimal time. Mr Perera's success on this minor aspect of the applications justifies, at best, a very minor reduction in his cost liability to Mr Webb who was otherwise wholly successful: see for example Tayles v Davis (No 2) [2010] VSCA 107 at [16]; Falcetta v Federal Commissioner of Taxation (2004) 56 ATR 194; [2004] FCAFC 194 at [4]. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Middleton, Murphy and Beach.