Stack v AMP Financial Planning Pty Limited

BETWEEN: MELITA WINTERTON First Applicant

AND: AMP FINANCIAL PLANNING PTY LIMITED (ACN 051 208 327) First Respondent

CHARTER FINANCIAL PLANNING LIMITED (ACN 002 976 294) Second Respondent

HILLROSS FINANCIAL SERVICES LIMITED (ACN 003 323 055) (and another named in the Schedule) Third Respondent

order made by: BEACH J DATE OF ORDER: 21 DECEMBER 2020

1. Pursuant to rule 30.11 of the Federal Court Rules 2011 (Cth) (the Rules) and sections 33ZG(c)(iv) and 33ZF of the Federal Court of Australia Act 1976 (Cth) (the Act), this proceeding (Federal Court of Australia proceeding VID 566 of 2020) (the Winterton Proceeding) be consolidated with Federal Court of Australia proceeding VID 489 of 2020 (the Stack Proceeding), and the consolidated proceeding be known as Stack & Ors v AMP Financial Planning Pty Limited (ACN 051 208 327) & Ors and identified as proceeding VID 489 of 2020) (the Consolidated Proceeding).
2. The applicants in the Winterton Proceeding and the applicants in the Stack Proceeding are to be applicants in the Consolidated Proceeding (the Joint Applicants).
3. The respondents in the Winterton Proceeding and the third respondent in the Stack Proceeding are to be respondents in the Consolidated Proceeding (the Respondents).
4. Pursuant to rule 1.32 of the Rules and section 33ZF of the Act, Piper Alderman and Shine Lawyers (collectively, the Solicitors) be granted leave to be jointly named as the solicitors on the record for the Joint Applicants in the Consolidated Proceeding on the following bases: (a) a litigation committee will be established comprised of an equal number of representatives from each of the Solicitors, which will be responsible for: (i) making major decisions; (ii) management of the litigation; (iii) delegation of carriage and decision-making responsibility to one or other of the Solicitors in relation to any issue in the Consolidated Proceeding; and (iv) determining the distribution and coordination of work between Piper Alderman and Shine Lawyers; (b) the Solicitors will work together to reduce duplication in work; (c) the Solicitors will nominate one physical address and one email address for service on the Joint Applicants; (d) one set of counsel will be engaged to represent the Joint Applicants and the group members in the Consolidated Proceeding; (e) the primary determinants of the allocation of work will be facilitating the overarching purpose in section 37M of the Act and advancing the interests of group members having regard to: (i) the skills and experience of the Solicitors and their respective staff; (ii) the objective of ensuring that the total legal costs are reasonable and proportionate; and (iii) the objective of minimising, to the greatest extent possible, the legal costs incurred through overlapping or duplicated work; (f) the Joint Applicants will jointly: (i) send all correspondence and other communications to the solicitors for the Respondents; (ii) make any interlocutory applications that are necessary in the Consolidated Proceeding, save for any application in respect of non-common issues; (iii) respond to any interlocutory applications filed by the Respondents in the Consolidated Proceeding; (iv) retain, brief and instruct expert witnesses in the Consolidated Proceeding; and (v) conduct the discovery process in the Consolidated Proceeding, including the coordination of electronic discovery, requests, processes and technology; and (g) the Respondents need only produce one set of discovery documents to the Joint Applicants.
5. Costs incurred to date in the Winterton Proceeding are to be costs in the Consolidated Proceeding.
6. Costs incurred to date in the Stack Proceeding are to be costs in the Consolidated Proceeding.
7. The costs of any duplicative work performed in the Consolidated Proceeding on and after the date of these orders that is performed by reason of there being two firms jointly representing the Joint Applicants rather than one firm are: (a) not recoverable against group members in the Consolidated Proceeding; and (b) not recoverable against the Respondents in the Consolidated Proceeding.
8. In the event that the Joint Applicants are required to provide security for costs in relation to the Consolidated Proceeding, Woodsford Litigation Funding 2 LLP and/or Woodsford Litigation Funding 5 LLP (jointly and severally, the Funder) shall provide a form of security for costs as ordered by the Court or agreed to by the Respondents.
9. Without affecting the powers of the Court as to costs, in the event that an adverse costs order is made against the Joint Applicants in the Consolidated Proceeding, the Funder will each meet any such order.
10. By 4.00 pm on 8 February 2021, the Joint Applicants in the Consolidated Proceeding are to serve on the Respondents copies of a consolidated originating application and consolidated statement of claim which they propose to seek leave to file.
11. By 4.00 pm on 22 February 2021, the Respondents are to indicate whether they oppose the filing of the consolidated originating application and the consolidated statement of claim.
12. Pursuant to sections 33ZF(1) and 37P(2) of the Act, Valerie Higinbotham (the Costs Referee) be appointed as an independent costs referee for the purpose of: (a) conducting inquiries every four months (commencing from the date of the making of these Orders) as to the question of whether there is unnecessary or excessive work (including any unnecessary or excessive duplication of work) being performed by the Solicitors in the Consolidated Proceeding, having regard to the matters set out in paragraphs (i) to (iii) of Order 4(e) above; and (b) providing confidential written reports (of no more than 10 pages) to the Court and the Solicitors every four months (commencing from after the date of the making of these Orders) stating the Costs Referee's opinion on the question set out at Order 12(a) above, including any recommendations for reducing duplication where identified or otherwise reducing costs.
13. The Solicitors must cooperate and provide such information, access to personnel and access to documents as the Costs Referee may require.
14. Without affecting the powers of the Court as to costs, the Joint Applicants are to be liable for the reasonable fees of the Costs Referee, which fees will become part of the Joint Applicants' costs in the Consolidated Proceeding.
15. Subject to any further order of the Court, for the purpose of any order made pursuant to sections 33V or 33ZJ of the Act approving payment or part-payment of the Joint Applicants' legal costs and disbursements out of any settlement sum or Court award of damages in the Consolidated Proceeding, the total amount so approved will not include an amount that is referable to costs identified by the Costs Referee as being incurred unnecessarily or unreasonably including costs for work that is unnecessarily or excessively duplicative.
16. The interlocutory application filed by the respondents in the Winterton Proceeding on 22 October 2020 (the Interlocutory Application) be dismissed.
17. The parties' costs of the Interlocutory Application be their costs in the cause in the Consolidated Proceeding.
18. Liberty to apply on three days' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BEACH J: 1 By an interlocutory application filed on 22 October 2020, the respondents sought orders that proceeding No. VID 489 of 2020 (the Stack proceeding) be consolidated with proceeding No. VID 566 of 2020 (the Winterton proceeding) in which the interlocutory application had been filed. 2 Subsequently, and after I had indicated my tentative view on the return date, the applicants agreed to consolidation. Further, as part of this consolidation, the solicitors for the applicants in the two proceedings now propose to jointly conduct the consolidated proceeding on behalf of the applicants in accordance with a proposed litigation protocol. Moreover, under that protocol there is to be constituted a litigation committee managing the matter on behalf of group members in the consolidated proceeding. 3 I have no doubt that the protocol will facilitate the efficient and effective joint conduct of the consolidated proceeding. Further, the litigation committee will have responsibility for making major decisions concerning the management of the litigation and the delegation of work. Further, the protocol complements the orders which I propose to make which will set out the requirements for the joint conduct of the consolidated proceeding, appoint a costs referee, and provide that the costs of any duplicative work will not be recoverable from group members or against the respondents. 4 But there are two remaining issues that the parties require me to give a ruling on. 5 First, notwithstanding that the respondents have consented to the consolidation orders, they now ambitiously press for a contradictor to be appointed to deal with the content of any proposed co-operation protocol and to monitor its operation. They assert that this is necessary to avoid actual or potential conflicts of interest. The applicants, predictably, do not see the need for the appointment of a contradictor at this stage. 6 Second, the respondents seek the costs of their interlocutory application. Contrastingly, the applicants say that there should be no order as to costs. They say that the interlocutory application was not determined on its merits, and that they have not acted so unreasonably that they should now be ordered to pay the respondents' costs. 7 Let me deal with the contradictor question first.

Is a contradictor necessary at this stage? 8 The respondents apparently consider that the particular circumstances of the consolidation in this case merit the appointment of a contradictor to assist me in scrutinising the content and implications of the protocol or its operation. The respondents say that they have a real interest in ensuring that the protocol issues are addressed appropriately so as to enable the case against the respondents to be articulated clearly and so as to reduce the risk of pleading and related interlocutory disputes. 9 Now I have the power to appoint a contradictor as an appropriate case management tool. That is not in doubt. The question is whether I should. Usually, the appointment of a contradictor is a recognition that the interests of the group members, who are not otherwise represented, need to be taken into account. Such an appointment provides, in a suitable case, a mechanism to ensure that a real contest is had on important issues that affect the parties or group members. Contradictors may be useful in circumstances where absent group members are vulnerable to decisions made by the parties. And a contradictor, who is given access to necessary information and is required to act in the best interest of group members, may be able to provide valuable input and perspective which may be otherwise unavailable. But is one necessary at the present time? 10 The respondents assert that the circumstances of the present case warrant a contradictor as the protocol, to which only the solicitors for the applicants are parties and which does not provide for review of its terms by any person on behalf of group members, does not expressly deal with the potential conflicts which may arise between or out of the issues raised in the Stack proceeding and the Winterton proceeding, as currently pleaded. 11 The respondents assert that the potential conflicts arise in the following way. The class in the Stack proceeding is in substance a sub-set of the class in the Winterton proceeding. According to the respondents, the solicitors for the applicants in the Stack and Winterton proceedings have put the overlapping claims in competing ways which may have a significant impact on the applicants and group members. They assert that this is brought into focus when one considers the way the two cases have been pleaded. 12 The applicants in the Stack proceeding allege that they had available to them an equivalent or substantially better insurance product to the AMP life products at a lower premium and, accordingly, they may only seek to recover any "excess premium" paid. Contrastingly, the applicants in the Winterton proceeding allege that their loss or damage was suffered in the form of the payment of ongoing service fees and commissions including in relation to AMP life products. Accordingly, so the respondents assert, to the extent that the applicants in the Winterton proceeding advance on behalf of the same group members a different counterfactual hypothesis to the applicants in the Stack proceeding as the basis for claiming damages, there is a potential for there to be a conflict of interest. Now whilst this issue may be resolved in the proposed consolidated pleading, the respondents say that the solicitors for the applicants have failed to articulate clearly how they intend to deal with the potential conflict that may arise in these circumstances. 13 As a consequence, so the respondents assert, the protocol is lacking in a number of respects. The respondents assert that there are at least reasonable grounds for the perception that these matters will not be cured nor group member interests properly represented unless a contradictor is appointed. 14 First, the respondents say that how the above issues regarding overlapping claims and how the damages claims are put is important. But they say that the protocol does not include pleading issues such as whether to add, remove or substantially amend claims as a responsibility of the litigation committee. The respondents say that these matters are absent from the protocol. 15 Second, the respondents say that it needs to be considered whether the distinction in the consolidated proceeding of "Overlap Issues", "Winterton Issues" and "Stack Issues" as an organising principle for the division of work is appropriate, rather than a division by reference to the consolidated pleadings or facts in issue. 16 Third, the respondents say that it needs to be addressed whether disputes arising within the litigation committee that are unable to be resolved by the litigation committee should be referred to the present senior counsel for determination. They say that the present senior counsel for the applicants in both proceedings is not an independent third party and may be in a position of conflict. 17 Generally, the respondents say that a contradictor may assist me in considering what is in the best interests of group members in these particular circumstances. 18 I reject the respondents' assertions. No contradictor should be appointed. 19 There is no actual or potential conflict of interest between the solicitors for the applicants and the group members of such a degree as would warrant the appointment of a contradictor at this stage. 20 Now the respondents propose that a contradictor be appointed to assist me in scrutinising the context and implications of the protocol. They say that they have an interest in ensuring that the pleadings clearly articulate the case against them and to reduce any pleading and related disputes. But why would the involvement of a contradictor in the protocol's terms or operation resolve the respondents' hypothetical concerns about the consolidated pleading failing to articulate clearly the claims against the respondents? A contradictor may in appropriate circumstances ensure that a real contest is had before the Court. But the respondents are quite capable of ensuring such a contest on the problem that they have identified. 21 Now the respondents seek to identify a potential conflict in the fact that the applicants in the Stack proceeding and the applicants in the Winterton proceeding presently seek different heads of damage on behalf of overlapping group members. Specifically, the Stack applicants seek damages for the excess premiums paid on AMP life products, whereas the Winterton applicants allege that they suffered loss or damage by reason of service fees and commissions paid to their financial advisors in relation to those products. But none of these differences presently justify the appointment of a contradictor. 22 First, there may be no conflict between the damages claimed in the Winterton proceeding and the Stack proceeding. The respondents assert but do not necessarily establish that the overlapping group members would not be entitled to damages for both the excess premiums and the fees and commissions. There may be a reasonable argument that the applicants and group members are entitled to both heads of loss. But in any event, if the respondents intend to assert to the contrary, that is a matter that they will be capable of raising for themselves, as their own contradictor, when they plead to the consolidated statement of claim. In one sense the real conflict is not between the solicitors for the applicants and the group members, but the group members and the respondents. The group members have an interest in claiming the maximum allowable damage; and the solicitors for the applicants have an interest in obtaining the best outcome for group members. Contrastingly, the respondents have an interest in minimising their exposure. 23 Second, even if it was permissible to claim only one head of loss, as may be the case in the context of the breach of fiduciary duty claims, the two heads may be pleaded as alternatives. But that does not create any conflict. And if an election needs ultimately to be made, then that would be made at a much later point. Moreover, group members will be advised by the solicitors for the applicants about such an election. But again, the applicants' solicitors' interests will be aligned with the group members' interests, and the respondents' opposing interests no doubt will be competently represented if and when such matters need to be determined. 24 Third, under the orders that I propose to make, Shine Lawyers and Piper Alderman will be jointly named as the solicitors on the record. The solicitors jointly will conduct the consolidated proceeding on behalf of all the applicants and group members, not any particular applicant or cohort or subset of the group members; they will owe duties to them all. Further, it should not be presumed that the solicitors will or are likely to act in breach of their fiduciary or ethical duties or obligations. 25 Further, Hassid v Queensland Bulk Water Supply t/as Seqwater [2017] NSWSC 599 is of little assistance. In the present case, the applicants and group members will be jointly represented by the solicitors in a single proceeding. The solicitors are to act in accordance with their obligations to the group members and follow the procedures set out in the protocol. If a relevant conflict later arises that needs to be addressed, I can consider that at the appropriate time. No contradictor need presently be appointed. 26 Let me dispose of some other perceived problems raised by the respondents. 27 The respondents assert that the responsibilities of the litigation committee do not include decisions about the claims to be included in the consolidated pleading. But these are included within "major decisions" for which the litigation committee has responsibility under the protocol. 28 Further, the respondents criticise the proposed division of work involving the solicitors. But the proposed division of work reflects the likely efficiencies that the applicants see in having the solicitors focusing on matters that they have had experience with. In any event, the litigation committee has the flexibility to decide how work is delegated and will no doubt be guided by the best interests of group members. The orders that I propose to make also provide for any costs to be reviewed by a costs referee. And any costs identified as duplicative or wasteful will not be recoverable. 29 Further, the respondents say that the procedure for resolving disputes within the litigation committee is inadequate. It is asserted that the present senior counsel for the applicants is insufficiently independent and conflicted in respect of the question of damages. In my view there is no substance to this assertion. But in any event, if a conflict arises the protocol provides for the dispute to be referred elsewhere. Clause 10 states: 10 DISPUTE RESOLUTION 10.1 Subject to clause 10.2, any dispute arising within the Litigation Committee that cannot be resolved by the Litigation Committee will be referred to Tony Martin SC (Senior Counsel appointed in both the Winterton and Stack Proceedings and to be appointed in any consolidated proceeding) for a final decision, which the parties agree will bind them. 10.2 If a dispute arises which would be referred to Mr Martin SC pursuant to clause 10.1 and any member of the Litigation Committee or counsel considers that it is not appropriate for Mr Martin SC to determine the dispute, the Litigation Committee may refer the dispute to an independent adjudicator appointed by the Litigation Committee, save that, failing agreement within a reasonable time by the Litigation Committee as to such independent adjudicator, the Litigation Committee must refer the dispute to an independent adjudicator to be appointed by the President of the Law Institute of Victoria for a final decision, in respect of which decision, the parties agree to be bound. 30 In my view, none of the matters raised by the respondents identify a likely conflict of interest such as to merit the appointment of a contradictor at this stage. Moreover, I retain a supervisory jurisdiction in respect of this litigation and the matters set out in the protocol. If I consider that it is necessary to make directions with respect to any of the matters raised by the respondents including appointing a contradictor, I can do so as and when a real need arises, as distinct from the flimsy pretexts currently floated by the respondents.

Costs of the interlocutory application 31 The respondents seek their costs of the interlocutory application. 32 They say that on 21 September 2020 they first stated their position that only one proceeding should continue and invited the applicants to provide a copy of the orders they proposed to seek to address the overlap between the two proceedings. But at that time they say that the applicants in both proceedings disagreed that there was a significant degree of overlap and rather proposed that the proceedings be jointly case managed; I should say now that in my view that was not an unreasonable position for the applicants to have taken. 33 The respondents say that on 7 and 16 October 2020 the solicitors for the respondents wrote to the applicants proposing consolidation. The applicants resisted this course. Subsequently, the solicitors for the respondents advised the solicitors for the applicants that they would file an interlocutory application for consolidation; they subsequently did so. 34 The respondents say that it was only after they had filed the interlocutory application, and after the case management hearing on 27 October 2020 where I expressed a tentative view in favour of consolidation that the applicants agreed to consolidate the proceedings. 35 The respondents say that having caused them to incur unnecessary costs in bringing the application, the applicants should bear the respondents' costs of the interlocutory application. 36 But I do not propose to accede to the respondents' request. 37 In an appropriate case a court may make an order for costs even where there has been no hearing on the merits. But generally I should not try a hypothetical application so as to then burden the hypothetical losing party with a costs order. In some cases, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should have their costs. But in the present case, both parties acted reasonably in the commencement and conduct of this application until its resolution. The appropriate exercise of my discretion in such circumstances would usually either be that no order as to costs should be made or that costs should be in the cause. 38 Now I have previously commented on the difficulty in ordering consolidation of representative proceedings absent agreement by the parties and their lawyers. I said in McKay Super Solutions Pty Ltd (Trustee) v Bellamy's Australia Ltd [2017] FCA 947 at [11] to [14]: [I]n relation to consolidation, there is no doubt that I have the power to so order. Section 33ZG(c)(iv) expressly reserves the operation of any law relating to the consolidation of "proceedings" and accordingly my inherent power or the power under r 30.11 of the Federal Court Rules 2011 (Cth) to so consolidate, including to facilitate the objective enshrined in s 22 of the Act. In the context of s 33ZG(c)(iv), "proceedings" must encompass a representative proceeding. If otherwise, it has little place in Part IVA. It must embrace consolidation of a representative proceeding with another proceeding, which could either be an individual proceeding or another representative proceeding; see generally Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR 41-679; [1999] FCA 56, Ryan v Great Lakes Council (1997) 78 FCR 309 at 312 per Wilcox J, Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 at [200] and Grave D, Adams K and Betts J, Class Actions in Australia (2nd ed, 2012) at [9.240] et seq. The difficulty in the present case is not so much the existence of the power but rather its exercise. Here, I have no agreement between all parties in both proceedings as to consolidation. Further, there are different lawyers for the applicants and different litigation funders in each of the proceedings. Absent agreement by both sets of lawyers and funders, there are a number of difficulties in relation to consolidation. For example, what uniform funding model would operate for the consolidated proceedings given the different sets of signed up group members in each of the proceedings, when considered from the perspective of signed up group members, the unsigned group members or the funders? And, what uniform legal representation for the applicants would be used, absent leave being given for separate representation for each of the applicants? Now true it is that in Johnson Tiles separate applicant solicitors were allowed, but there was an agreement to engage the one set of counsel. But in the context with which I am presented, there is no such agreement. In any event, none of this deals with the problem of separate funders and how consolidation would operate in that scenario, particularly given that significant numbers of group members in each case have signed up to different funding arrangements. How would they be affected by consolidation? And what would be the position for those who had not signed up? What funding model would apply? And what type of common fund order would be sought? And to reflect what proposed funding mechanism? A mechanism would need to be determined for resolving such issues including achieving equity as between the McKay group members and the Basil group members. Further, what would be the liability of the McKay interests for the costs of the proposed after-the-event adverse costs insurance intended to be put in place in respect of the Basil proceedings? Moreover, each litigation funder may require sufficient information to form a view as to the co-funder's financial position and in particular its capacity to meet any order for adverse costs. In the circumstance where the litigation funders may be jointly and severally liable (at least indirectly) for such costs, it may not be possible for consolidation to occur without assurances that each funder has adequate finances or insurance arrangements to meet any order which might be made in respect of the consolidated proceedings. It will be appreciated that these difficulties are not insignificant. Generally, consolidation orders are unusual, if only because of the complexity involved in implementing such a mechanism. But in the present context, compounding the usual difficulties are the dimensions of different solicitors, different funders, different funding models and ultimately the circumstance that there is no agreement to this option. I have considered whether if I nevertheless made a consolidation order without first solving these difficulties, the parties would have the incentive if not the necessity to work through these difficult logistics. But I cannot rightly so assume. In the circumstances, the option of consolidation can be put to one side. 39 In my view, in the present case all parties reached a commendable compromise. 40 The applicants have not acted so unreasonably that they should be ordered to pay the respondents' costs of this application. Moreover, it is worth pointing out that the orders sought by the respondents' interlocutory application were that the Stack proceeding and the Winterton proceeding be consolidated, but that there be only one solicitor on the record for the applicants in the consolidated proceeding. Now, the parties have agreed on a compromise where the proceedings are to be consolidated on the basis of the joint carriage by the solicitors for the applicants, which is an appropriate outcome. This involved give and take, and such an agreement only occurred after the solicitors for the applicants wrote to the solicitors for the respondents proposing this course, having agreed between themselves the protocol. 41 In my view, all parties' costs should be their costs in the cause in the consolidated proceeding. 42 I will make orders to reflect these reasons and to formalise the consolidation. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach.

SCHEDULE OF PARTIES VID 566 of 2020 Fourth Respondent AMP Limited (ACN 079 354 519)