RELEVANT PRINCIPLES
41 Pursuant to s 33V of the FCA Act, reproduced below, discontinuance of a representative proceeding requires the approval of the Court:
33V Settlement and discontinuance - representative proceeding
(1) A representative proceeding may not be settled or discontinued without the approval of the Court.
(2) If the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court.
42 This requirement is also reflected in r 26.12 of the Federal Court Rules 2011 (Cth); in particular, subr 4:
26.12 Discontinuance
(1) A party claiming relief may discontinue a proceeding in whole or in part by filing a notice of discontinuance, in accordance with Form 48.
(2) The party may file the notice of discontinuance:
(a) without the leave of the Court or the other party's consent:
(i) at any time before the return date fixed in the originating application; or
(ii) if the proceeding is continuing on pleadings - at any time before the pleadings have closed; or
(b) with the opposing party's consent - before judgment has been entered in the proceeding; or
(c) with the leave of the Court - at any time.
Note 1: For when pleadings close, see rule 16.12.
Note 2: The Court may give leave subject to conditions including costs - see rule 1.33.
(3) The notice of discontinuance must:
(a) state the extent of the discontinuance; and
(b) if the discontinuance is by consent - be signed by each consenting party.
(4) However, a litigation representative or a representative party must not discontinue a party's claim without first obtaining the leave of the Court.
(5) An application for a winding up order under section 459P or 461(1)(a) of the Corporations Act 2001 may be discontinued only with the leave of the Court.
(6) A notice of discontinuance filed by one party does not affect any other party to the proceeding.
(7) Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.
43 The majority of the decided cases on s 33V(1) have been concerned with settlements, rather than discontinuances: see Wotton v State of Queensland [2009] FCA 758; 109 ALD 534 at [37]. Importantly, however, the considerations relevant to the former are not always identical to the latter. As Anastassiou J has recently observed, the "Court's task in considering whether to approve the discontinuance of a representative proceeding has a different emphasis compared with the approval of a settlement": Babscay Pty Ltd v Pitcher Partners [2020] FCA 1610 at [19]. Three differences are relevant in this context.
44 First, the nature of the act requiring approval by the Court is "quite different": see Babscay [19]. Discontinuance of a proceeding "in the strict sense is the unilateral act of the applicant", whereas settlement of a proceeding is a multilateral act agreed to by all parties: see Babscay at [19]-[20].
45 Second, the two approval decisions produce vastly different legal consequences. These differences were helpfully summarised by Anastassiou J as follows (Babscay at [20]-[24]):
… Leaving to one side the cost consequences, the discontinuance of the proceeding puts the applicant in the same position as if the proceeding had not been commenced, save for the effluxion of time in relation to any limitation period within which an action must be brought.
In relation to representative proceedings, the qualification just mentioned does not apply to group members. In such circumstances, time for the purposes of a limitation period is suspended upon the commencement of a representative proceeding and does not run again for a group member unless the group member opts out under s 33J or the proceeding is determined without finally disposing of the group member's claim: s 33ZE(1) of the Act. I shall refer to the significance of this protection further below.
The legal effect of a unilateral discontinuance compared with a settlement agreement may be readily summarised as follows. In the case of a discontinuance, the applicant is free to commence a new proceeding against the same respondents if so advised. As there is no agreement by which the proceeding is compromised, there can be no merger of the applicant's rights in the proceeding. Similarly, in the absence of any judicial determination, there can be no res judicata or issue estoppel: see, eg, Caason Investments Pty Ltd v Cao (No 3) [2020] FCA 91 at [132] (Murphy J); Thirteenth Corp Pty Ltd v State [2006] FCA 979; 232 ALR 491 at [33] (Jessup J); Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 450 NSWLR 543, 556-557 (Clarke JA).
In contrast, where a settlement agreement has been reached it will be binding upon all group members who have not opted out of the representative proceeding pursuant to s 33J of the Act. Subject to Court approval under s 33V of the Act, the rights of the group members merge in the settlement agreement, or in the case of an accord executory, merge upon performance of the terms of the agreement. The legal consequences for group members of a settlement agreement are therefore more significant, as the agreement will operate to extinguish their rights in the proceeding and bar them from bringing later proceedings in relation to the same causes of action.
… It is important not to conflate a settlement agreement, which, by its terms, mandates the discontinuance of the representative proceeding, with a unilateral discontinuance with which this application is concerned. A settlement agreement which requires performance on the part of the applicant by discontinuing the proceeding is no different in principle to an agreement which requires the applicant consent to orders dismissing the proceeding.
46 Third, the tests to be applied, and considerations to be taken into account, are also not uniform: Tate v Westpac Banking Corporation (No 2) [2020] FCA 1374 at [31]. It is well accepted that the test for deciding whether to approve a settlement is to determine whether the settlement represents "a fair and reasonable compromise of the claims made on behalf of the group members": Lopez v Star World Enterprises Pty Ltd [1999] FCA 104; ATPR 41-678 at [15]. This is, however, plainly not apt to describe the test to be applied by the Court in a case of discontinuance: Babscay at [24].
47 The difficulty, in this regard, is that competing approaches have emerged for deciding whether to approve a discontinuance. One approach is to consider whether the proposed discontinuance would be fair and reasonable not only in the interests of the immediate parties but of all group members, as per Perram J in Mercedes Holdings Pty Limited v Waters (No 1) [2010] FCA 124; 77 ACSR 265 at [10], [24]. The other approach is, conversely, to consider whether the proposed discontinuance would be unfair or unreasonable or adverse to the interests of group members, as per Dixon J in Laine v Theiss Pty Ltd; Beetson v SunWater Limited [2016] VSC 689 at [34]. These differing approaches were briefly considered by Yates J in Simonetta v Spotless Group Holdings Limited [2017] FCA 1071, although his Honour did not express a concluded view as to which was the preferable approach (at [12]):
In Mercedes Holdings Pty Limited v Waters (No 1) [2010] FCA 124 (Mercedes Holdings) at [10] and [24], Perram J said that the question arising on an application for discontinuance is whether the proposed discontinuance would be fair and reasonable not only in the interests of the immediate parties but of the group members as a whole. In Laine v Thiess Pty Ltd; Beetson v SunWater Limited [2016] VSC 689 (Laine), Dixon J analysed the matter somewhat differently by considering whether the discontinuance would be unfair or unreasonable or adverse to the interests of group members: see at [34]. The applicants suggested that the approach in Laine might be more apt where, as here, the practical effect of the discontinuance, if approved, will be to do no more than return group members to the position they were in before the commencement of the proceeding. I think there is some merit in that submission but, as the question was not addressed in any detail, and as my consideration of the present application does not turn on any difference between the approach in Mercedes Holdings and the approach in Laine, I will refrain from expressing any concluded view on it.
(Emphasis in original.)
48 In Babscay, however, Anastassiou J did express a concluded view, his Honour preferring the approach of Dixon J in Laine (at [28]):
I respectfully agree with the articulation of the principle by Dixon J in Laine. In my view, his Honour's statement of the principle to be applied in the case of a unilateral discontinuance, which does no more than return group members to the position they were in before the commencement of the proceeding, aptly describes the focus of the Court's consideration in the present context.
49 As was the case in Simonetta, it is unnecessary for the purposes of this application to decide whether the principle or test as expressed in Laine is preferable to the principle or test as expressed in Mercedes Holdings. For the reasons given later, the discontinuance of the proceeding was appropriate on either test. That is likely to be the position in many, if not most, cases such as this, where the discontinuance occurs at an early stage and in circumstances where the effect of the discontinuance is to return the group members to the position they were in before the commencement of the proceeding. Nevertheless, and to avoid any continuing uncertainty in relation to the matter, it should be noted that the approach taken by Anastassiou J in Babscay, endorsing the articulation of the principle in Laine, should be endorsed as the preferable approach in such cases. It is also particularly appropriate in a case such as this where it would appear (as was conceded by Mr O'Brien) that the group members were entirely unaware of the proceeding and there was no information as to how many group members there were, who they were or what their circumstances were, or would be, if the proceeding was discontinued. It is difficult to see how, in such a case, a positive view could be formed about whether the discontinuance would be unfair, unreasonable or adverse to the group members.