Webb v GetSwift Limited

Federal Court of Australia|2019-09-16|Before: Lee J

The interlocutory application filed 2 September 2019 be dismissed.
The time for bringing any application for leave to appeal from Order 1 be extended to a period expiring 14 days after the publication of revised reasons. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A INTRODUCTION 1 In a previous judgment in this matter (Perera v GetSwift Limited [2018] FCA 732; (2018) 263 FCR 1 at 9-18 [10]-[37]), I traced the genesis, the development and the current state of securities class actions in this country. One of the more recent developments, which is evident from a review of cases currently before the Court, is the prevalence of matters in which a regulator has commenced a civil penalty proceeding and an applicant has sought relief in a class action proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (Act), arising out of the same underlying factual substratum. 2 This case is an example of this phenomenon, although in the present case, unlike other examples, the filing of the class action preceded the litigation commenced by the regulator (ASIC proceeding). The present application is unusual and raises issues of case management generally, which have a significance transcending the circumstances of the current parties. 3 Pursuant to orders made in the class action and in the ASIC proceeding, the two proceedings are listed for hearing sequentially in 2020; with the class action commencing a few months after the ASIC proceeding. It is important to note that there is not a complete commonality of parties between the class action and the ASIC proceeding. The respondents to the class action are GetSwift Limited (GetSwift) and Mr Joel MacDonald (at material times, GetSwift's managing director). The respondents to the ASIC proceeding are also GetSwift and Mr MacDonald, but are supplemented by Mr Bane Hunter (at material times, GetSwift's executive chairman) and Mr Brett Eagle (at material times, the legal counsel and a director of GetSwift). 4 The effects of the case management orders that I made in both proceedings were as follows: commencing on 9 June 2020, the ASIC proceeding on liability will be heard with an estimated duration of six weeks, at the conclusion of which, I propose to reserve my judgment; commencing on 17 August 2020, the initial trial in the class action will be heard, being a hearing which will involve determining the claim of the representative applicant, Mr Webb, together with identified common issues, with an estimated duration of four weeks, at which point judgment in the class action will also be reserved; evidence in one proceeding will not be evidence in the other; and as soon as practicable after reserving judgment (and at the same time), judgment will be delivered separately in both the ASIC proceeding and the class action based upon (and only based upon) the evidence adduced in, and argument advanced in, that individual proceeding (that is, without regard to the evidence adduced in, and argument advanced in, the other proceeding). 5 The orders that I made in both proceedings took into account the right of the individual respondents to maintain a claim of "penalty" privilege. As is now widely accepted, following decisions such as Australian Securities and Investments Commission v Mining Projects Group Ltd [2007] FCA 1620; (2007) 164 FCR 32 and Fair Work Ombudsman v Hu [2017] FCA 1081, the usual application of civil procedure rules must yield to the protection of such a privilege. It follows that Mr MacDonald has, in the class action, been excused from filing and serving any affidavits, substantive defence, or answers to interrogatories, until the close of the case of ASIC in chief in the ASIC proceeding. 6 Additionally, it may be that GetSwift itself will seek to rely upon the evidence of Mr MacDonald, Mr Hunter or Mr Eagle in the class action. This causes a complication as GetSwift (although under an obligation to serve its affidavit evidence in chief in the class action) is not presently in a position to procure the co-operation of those witnesses, including by having them swear affidavits.

B THE CURRENT APPLICATION 7 Both GetSwift and Mr MacDonald (the class action respondents) now seek the vacation of the order I made fixing the class action to commence on 17 August 2020. One reason why this application is unusual is that it calls in aid principles of apprehended bias, but neither GetSwift nor Mr MacDonald contend that there is a reasonable apprehension of bias which presently arises in relation to the hearing of the class action in the manner provided for by the extant Court orders. Rather, they say that there is a likelihood (described variously as "high" or "substantial") that a reasonable apprehension of bias will arise in the future if I was to hear the initial trial of the class action after hearing the ASIC proceeding. 8 Hence, as GetSwift and Mr MacDonald submit, the current application is based on case management principles rather than being an application going to the constitution of the Court (as would be the case in a conventional apprehended bias application). As such, the application as presently framed requires a discretionary decision relating to practice and procedure. The orders as to consecutive hearings were made pursuant to the powers of the Court, including s 37P(2) of the Act, to give directions about the practice and procedure to be followed in relation to the class action proceeding. In considering whether to now exercise a practice and procedure power to vacate my previous order, I am required to exercise such a power in the way that best promotes the overarching purpose: see s 37M(3) of the Act.

C THE CONTENTIONS OF GETSWIFT AND MR MACDONALD 9 In broad summary, GetSwift and Mr MacDonald contend the application should be granted by reason of the following matters:

There is significant overlap in the legal and factual issues raised for determination in both proceedings and, as such, there are a number of matters in real contest, which will be considered at both hearings prior to any judgment being delivered.
There is likely to be "significant overlap in the evidence adduced and the submissions made" in each proceeding, although it is conceded "there will inevitably be differences". In this regard, there will not necessarily be a commonality of witnesses and cross-examination of common witnesses will not be the same in each proceeding, nor will the submissions be replicated. It follows the Court will "inevitably be required to determine the same matters of substantial contest" in relation to the parties at the same time, but on different and potentially inconsistent evidence and submissions.
There is said to be a strong likelihood that the Court will be required to form views as to the credibility of witnesses who are common to both proceedings.
By reason of the above, there is a "serious and substantial risk" that following the hearing of the ASIC proceeding, circumstances will have arisen to ground a disqualification application. That is, by reason of circumstances arising at that time, a fair-minded lay observer may reasonably conceive that the trial judge's "neutrality will be affected by previous views reached on factual matters in the ASIC hearing which are also agitated" in the class action, and as to the credibility of witnesses who have provided evidence in the ASIC proceeding and are to provide evidence in the class action.
Consistent with the overarching purpose, the court should take steps now to guard against the risk that the trial judge may not be able to preside over the hearing of the class action as there is a prospect of costs (said to be in the order of around $300,000) being wasted if there was a need to vacate the class action hearing at short notice.
The determination of the two proceedings as currently proposed is not likely to result in a real saving of expense and inconvenience to the Court and the parties. 10 From the above, Senior Counsel for GetSwift and Mr MacDonald identified two related reasons why he considered that an issue of apprehended bias is likely to arise. First, given that the trial judge will be deciding, at least to a significant extent, the same issues against the same respondents in both proceedings, a fair-minded lay observer would consider that a judge might not be able to entirely disregard the evidence and submissions in one proceeding in deciding those same issues in the other proceeding. Secondly, having necessarily formed views in the ASIC proceeding before the hearing of the class action begins, there will be a reasonable apprehension by a fair-minded lay observer that the trial judge might not be able to put aside these views. I will come back to the consideration of the strength of these submissions below, but before doing that, I should say something about the issues in the proceedings and the likely overlap between them.

D GENERAL OBSERVATIONS CONCERNING THE PROCEEDINGS 11 GetSwift operates a software platform that enables businesses to automate dispatching and tracking of deliveries of goods to customers. GetSwift listed on the Australian Securities Exchange in December 2016, and from that time, had continuous disclosure obligations pursuant to s 674 of the Corporations Act 2001 (Cth) (Corporations Act). It is claimed by ASIC that GetSwift made a series of announcements concerning agreements that GetSwift had entered into with customers. ASIC claims GetSwift omitted material information from the announcements relating to these agreements, and that the announcements contained representations that were misleading and deceptive. 12 ASIC claims that by making the announcements, GetSwift contravened ss 674 and 1041H of the Corporations Act, and s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). ASIC claims that the individual defendants were involved in contraventions of the Corporations Act and the ASIC Act, and further, that those defendants failed to comply with their obligations under s 180 of the Corporations Act. ASIC seeks declarations and pecuniary penalties. 13 Following the filing of a further amended statement of claim in the class action in April 2019, the allegations raised by ASIC and by Mr Webb are largely the same, save that in the class action the allegations relate to GetSwift's contractual obligations and dealings with a total of 16 customers, comprising 13 customers referred to in the ASIC proceeding plus an additional three customers. As a reflection of this, orders have been made in both proceedings allowing for largely identical categories of documents to be produced by way of discovery by GetSwift. It follows it is reasonably likely that the documentary cases tendered by the parties in the two proceedings will substantially overlap. 14 Leaving aside the documentary case, it is appropriate to assume that there is likely to be a substantial overlap in the witnesses. ASIC has foreshadowed that it expects to rely on 30 lay witnesses and that those witnesses will include representatives of the clients and customers who had entered into the relevant customer agreements with GetSwift. Although the lay evidence of the applicant in the class action has been filed, Mr Webb has not confirmed the scope of any further evidence he may wish to adduce at the hearing and it does not seem to me unlikely that Mr Webb may seek to rely on some evidence of witnesses called in the ASIC case, by subpoenaing them to give evidence in the initial trial. 15 When it comes to expert evidence, ASIC has foreshadowed that on the important issue of materiality, it proposes to adduce opinion evidence only from a professional investment expert. As I presently understand the position, although the time for the filing of expert evidence in the class action has not yet been reached, I assume that Mr Webb will adduce evidence of a type commonly seen in these sorts of proceedings, including from a forensic economist who undertakes a regression analysis by way of an event study. 16 Consistent with the case management directions I have already made, there is no need for Mr Hunter, Mr MacDonald or Mr Eagle to communicate what evidence they propose to rely upon until ASIC has closed its case in the ASIC proceeding. But upon closure, they will be required to file and serve any defences and affidavits. At the same moment, procedural directions in the class action will also "kick in", requiring Mr MacDonald to file a substantive defence, answer any interrogatories and file and serve any affidavit evidence in that proceeding. That being said, of course, it will only be necessary for GetSwift or Mr MacDonald to make a final decision about what evidence they actually adduce in their case in the class action, after Mr Webb has closed his case in the class action. 17 Having said that, it is appropriate to proceed on the basis that Mr Hunter and Mr MacDonald (and perhaps Mr Eagle) are potential witnesses, and in the event that they do give evidence, Mr Hunter and Mr MacDonald are likely to be significant witnesses. It is possible, however, to overstate the importance of their testimony. As those experienced in commercial litigation in general, and in securities class actions in particular, would readily appreciate, what matters most in the determination of the issues in cases such as this is the analysis of such contemporaneous notes and documents as may exist and the probabilities that can be derived from these documents and any other objective facts. Take the example of the dealings between GetSwift and the customers: there is likely to be a documentary record both within the business records of GetSwift and their contractual counterparty which records dealings between them which go beyond the agreement itself. Additionally, experience suggests that it is also likely that there will be informal email exchanges, both between GetSwift and the customers, and within the relevant organisations. 18 As Leggatt J said in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) at [15]-[23], there are a number of difficulties with oral evidence based on recollection of events given the unreliability of human memory. Moreover, considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. As his Lordship noted, a witness is asked to make a statement, often when considerable time has already elapsed since the relevant events. The statement is usually drafted by a solicitor who is inevitably conscious of the significance for the case of what the witness does or does not say. The statement is often made after the memory of the witness has been "refreshed" by reading documents. The documents considered can often include argumentative material as well as documents that the witness did not see at the time and which came into existence after the events which the witness is being asked to recall. It may go through several iterations before it is finished. As Lord Buckmaster famously said, the truth "may sometimes leak out from an affidavit, like water from the bottom of a well". This may be overly cynical, but the surest guide for deciding the case will be as identified by Leggatt J at [22]: … the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on the witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. 19 This is not to say that I discount the fact that Mr Hunter and Mr MacDonald (at least) may be significant witnesses; indeed, their subjective understanding of facts may be of real importance in determining matters in the ASIC proceeding. The point is, however, that any evaluation of the difficulties that may arise with oral testimony must take account of the likelihood that the best assistance the Court is likely to receive is to be found in the contemporaneous documentary record.

E THE RELEVANT LEGAL PRINCIPLES 20 At the outset, it is important to again stress that it is accepted that there is presently no reasonable apprehension of bias that can be established; it is contended that such an apprehension may well arise in the future, and indeed is likely to arise. Recently, in McKenzie v Cash Converters International Ltd (No 3) [2019] FCA 10 at [17]-[20], I set out the relevant principles informing disqualification for apprehended bias in the following terms: The usual starting point for considering the principled approach to disqualification applications is Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 at 344 [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ), where it was held that a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide. There is often arid debate in applications of this kind as to whether the Ebner test is undemanding or creates a "low hurdle". The shorthand of the "two might" test is frequently invoked. This case was no exception. Irrespective as to whether one characterises the test as undemanding, balanced against it, of course, is the well-established proposition that a judge should not disqualify himself or herself on the ground of bias or reasonable apprehension of bias unless "substantial grounds" are established: Bienstein v Bienstein [2003] HCA 7; (2003) 195 ALR 225 at 233 [36] (McHugh, Kirby and Callinan JJ), see also R v Watson; ex parte Armstrong (1976) 136 CLR 248 at 262 and British American Tobacco Australia Services Limited v Laurie [2011] HCA 2; (2011) 242 CLR 283 at 305 [45] (French CJ) and 313-314 [71] (Gummow J). Gleeson CJ, McHugh, Gummow and Hayne JJ in Ebner at 345 [8] noted that the principled approach involves both the identification of what might lead a judge to decide a case other than on its legal and factual merits and then the articulation of the logical connexion between that factor and the feared deviation from the course of deciding a case on its merits. In applying this, Gageler J in Isbester at 155-156 [59] noted that there were, in effect, three steps involved: Step one is identification of the factor which it is hypothesised might cause a question to be resolved otherwise than as the result of a neutral evaluation of the merits. Step two is articulation of how the identified factor might cause that deviation from a neutral evaluation of the merits. Step three is consideration of the reasonableness of the apprehension of that deviation being caused by that factor in that way. 21 To these principles, I would add the following: the rule against actual or apprehended bias is directed to pre-judgment incapable of being altered by evidence or argument. It is not directed to predisposition capable of being swayed by argument or by evidence. 22 As Gleeson CJ and Gummow J said in Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; (2001) 205 CLR 507 at 531-2 [71]-[72]: Decision-makers, including judicial decision-makers, sometimes approach their task with a tendency of mind, or predisposition, sometimes one that has been publicly expressed, without being accused or suspected of bias. The question is not whether a decision-maker's mind is blank; it is whether it is open to persuasion … … Natural justice does not require the absence of any predisposition or inclination for or against an argument or conclusion. (Footnotes omitted) 23 Further, in the same case, Hayne J observed at 564 [185] the following: Saying that a decision maker has prejudged or will prejudge an issue, or even saying that there is a real likelihood that a reasonable observer might reach that conclusion, is to make a statement which has several distinct elements at its roots. First, there is the contention that the decision-maker has an opinion on a relevant aspect of the matter in issue in the particular case. Secondly, there is the contention that the decision-maker will apply that opinion to that matter in issue. Thirdly, there is the contention that the decision maker will do so without giving the matter fresh consideration in the light of whatever may be the facts and arguments relevant to the particular case. Most importantly, there is the assumption that the question which is said to have been prejudged is one which should be considered afresh in relation to the particular case. 24 The second and third contentions identified by Hayne J seem to me to be of especial importance in the present circumstances. Saying that a judge has prejudged or will prejudge an issue, or even saying there is a real likelihood that a reasonable observer might reach that conclusion, carries with it the contention that the judge might apply that opinion formed during the course of the ASIC proceeding to the matters in issue in the initial trial of the class action, and further, the judge might do so without giving the matter fresh consideration in the light of whatever may be the facts and arguments advanced in the class action.

F CONSIDERATION 25 The argument advanced by GetSwift and Mr MacDonald is necessarily based on a degree of supposition and prognostication. There are a number of things that may happen in these proceedings prior to any issue of apprehended bias becoming crystallised. The first, obviously enough, is that like almost all securities class actions that have been conducted in this Court, the initial trial will not take place because the matter resolves by way of some paction agreed between the parties approved by the Court prior to the initial trial. The second is that the ASIC proceeding may be non-suited, or the defendants may decline to go into evidence. The third is that there will not be significant differences in the evidence between the ASIC proceeding and the class action as to the common issues, or significant issues of credit will not arise, hence avoiding some of the potential difficulties fastened upon by GetSwift and Mr MacDonald. The opposite may be the case. We do not know with certainty. 26 It seems to me that it is appropriate to proceed on the basis that it will create some challenge for a trial judge to sit sphinx-like through the ASIC proceeding and form no preliminary views as to the likely factual findings that will be made. It is a tad unrealistic to expect that a judge would approach the class action entirely tabula rasa. Hence, the first of the contentions identified by Hayne J (that the decision-maker will likely have a preliminary opinion on the relevant aspect of the matter in issue) would seem to have some force. Despite this, I do not consider that there is a high likelihood, let alone an inevitability, that a fair-minded lay observer would reasonably apprehend that as the trial judge, I might not be able to bring an impartial mind to the resolution of the questions that I will be required to decide in the class action. 27 In Cash Converters at [28]-[29], I explained that the test for apprehended bias requires the attribution of knowledge of matters to a hypothetical fair-minded lay observer, despite some criticism that this amounts to a fiction used to connote a degree of detachment or objectivity to a process which inevitably involves the application of normative standards of behaviour determined by the Court itself: see Martin CJ's comments in Commonwealth Bank of Australia v Jackson McDonald (a firm) [2014] WASC 301 at [24]. As I then noted, the hypothetical fair-minded lay observer can be summarised as being a hypothetical construct of a person who: (1) is taken to be reasonable: Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 at 492-493 (12); (2) does not make snap judgments: Johnson at 494 [14]; (3) is neither complacent nor unduly sensitive or suspicious: Johnson at 508-509 [53]; (4) knows of all the circumstances of the case: Re JRL; ex parte CJL (1986) 161 CLR 342 at 355, 359, 368 and 371-2; Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 87-8 and 95; and (5) will have regard to the fact that a judicial officer's training, tradition and judicial oath equip the judge with the ability to discard the irrelevant, the immaterial and the prejudicial: Johnson at 492-493 [12]. 28 This seems to me to be a situation where the ability of a judge to discard the irrelevant, the immaterial and the prejudicial is of signal importance. As can be seen from the sensitivities that arise in dealing with legal argument and evidence on the voir dire in the absence of a jury, as compared to the conduct of a trial where the judge is the tribunal of fact, there is an entrenched recognition that judges are able to compartmentalise material. By their oath, Judges are required (and are expected) to decide facts in issue by reason of an assessment of the evidence admitted and the arguments advanced in the case and not in another case. 29 As touched on above, often a judge will hear extensive cross-examination on a voir dire which may not be admitted as evidence in a trial. Some evidence adduced on a voir dire may involve attacks on the qualifications, experience or creditworthiness of a witness. The duty of the judge is to determine the facts and issues in the trial on the basis of the material adduced in relation to them. It is realistic to recognise that the judge may have received, through exposure to extraneous material, some predisposition or tentative views, but the key is whether or not those views are open to persuasion on the basis of different evidence or different submissions. 30 Having said this, there is a non-fanciful risk that an issue may well arise in the future which does cause difficulty in me hearing both the ASIC proceeding and the class action. Presently, I do not think the prospect of a difficulty arising is anything like as high as GetSwift and Mr MacDonald suggest, but it cannot be entirely dismissed. However, the lodestar is the overarching purpose. Although there was evidence significant costs would be thrown away in the event that the class action hearing had to be vacated at short notice, this evidence is based on a number of premises, some of which may not be well-founded. For example, it seems to assume cancellation fees would be charged (an unusual eventuality in my experience) and, more importantly, it may be that an additional judge could be made available at short notice to hear the class action during the time already allocated. 31 For my part, I think having two judges involved (unless it was required) would be a highly undesirable state of affairs. By the time the class action is called on for hearing, I would have obtained an appreciation of a large number of adjectival facts which are either not in contest or are agreed, but which will be important in understanding the background to the dispute. I also would have acquired a familiarity with large parts of the documentary case. For another judge to pick up the class action, very significant duplication of effort would be involved. The efficient use of the judicial and administrative resources available for the purposes of the court and the efficient disposal of the court's overall caseload are important factors to take into account. 32 This problem will arise again. There are great economies likely to be achieved by the one docket judge case managing both regulatory proceedings and a class action if they involve consideration of the same underlying facts. If an issue arose which went to the proper constitution of the court then, naturally enough, the necessity for the proceedings to be determined according to law by a properly constituted court would trump any cost considerations, but this is not the present case. 33 Even if I was to assume that there would be some costs thrown away because a judge would not be ready to take up the case at short notice, this causes additional problems. This class action has already been on foot for a very considerable period of time. It is appropriate to move to an initial trial as quickly as possible. Although some evidence has been adduced by Mr Webb as to the financial position of GetSwift (in support of the contention that the initial trial needs to be determined sooner rather than later), it does not seem to me appropriate on this application that I make any findings in this regard. 34 It suffices for present purposes for me to note that it is plainly in the interests of group members, in respect of whom I have a protective role, to ensure that their claims are the subject of s 33ZB orders following an initial trial as soon as practicable. 35 In all the circumstances, I am not persuaded that I should make orders vacating the listing of the class action to commence on 17 August 2020 and I dismiss the relief sought in prayer 1 of the interlocutory application. In relation to costs, both parties agreed that the issue raised a matter of some general importance and, in any event, it was appropriate that I receive full argument in relation to whether or not the course I proposed was appropriate in the circumstances. Accordingly, I do not propose to make any order for costs in relation to the interlocutory application. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.

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