Were parts of the March 2020 orders beyond power?
67 Let me then turn more directly to the question of class closure and registration orders.
68 Section 33ZF(1) has been the source of power by which the Federal Court has regularly made class closure and registration orders. For example, it was the basis of the Full Court's decision endorsing such orders in Melbourne City Investments Pty Ltd v Treasury Wine Estates (2017) 252 FCR 1 at [74] and [75] per Jagot, Yates and Murphy JJ, being an order of the kind made in the present proceeding by the March 2020 orders.
69 But in the wake of BMW, a challenge was made to the making of such orders under the cognate s 183 of the Civil Procedure Act 2005 (NSW). That question was referred to the NSW Court of Appeal in Haselhurst v Toyota Motor Corporation Australia Ltd (2020) 101 NSWLR 890, where the Court answered the question in the negative on 22 April 2020, on the basis that the order in that case effected a contingent extinguishment of group members' choses in action and so could not be said to be necessary or appropriate to ensure that justice was done in the proceeding.
70 Subsequently, there was a further decision of the NSW Court of Appeal in Wigmans v AMP Ltd (2020) 102 NSWLR 199, where Haselhurst was fortified. In Wigmans there was lukewarm acceptance of what I had said in Newstart 123 Pty Ltd v Billabong International (2016) 343 ALR 662. Macfarlan, Leeming and White JJA said at [128]:
We agree that the extinguishment of the rights of unregistered group members in that and other cases have underpinned the settlement, and it is contemplated by the orders impugned in this appeal. We can also envisage cases where there has been an in principle settlement, after which group members are notified, and given the opportunity to participate (it might be expected that such notification would advise the quantum offered to group members and the mechanism by which their claims would be assessed), and if what Beach J has written about unregistered group members being given adequate opportunity to participate is understood in that sense, then to that extent there is no difficulty with the reasoning. However, that is not what is proposed by Komlotex and AMP. It is not proposed that all group members be given any opportunity at all to participate in any settlement, but rather only those which register. We respectfully disagree with the reasoning insofar as it is relied on to justify what Komlotex and AMP propose.
71 Now it is to be noted that the mediation of the present proceeding was conducted in circumstances where the March 2020 orders had been made very shortly before Haselhurst, but where it was known that their validity was under a potential cloud by reason of Haselhurst and Wigmans.
72 Are the March 2020 orders concerning registration valid? Do they remain in force in respect of the recipients of the March 2020 notice who failed to register? An affirmative answer must be given to each question. What then should be said of Haselhurst and Wigmans?
73 By reason of BMW, Haselhurst determined that the barring order made as part of the class closure orders in that case was beyond power under s 183. The Court found that the purpose and effect of the order at issue (order 16) was to effect a contingent extinguishment of unregistered group members' rights of action against the respondents. The Court said that an order which destroyed a person's cause of action within the limitation period, without a hearing and with no guarantee that the person would necessarily know of the outcome or consequence of their failure to register, was not an order that was "necessary to ensure that justice is done in the proceedings" or "appropriate ... to ensure that justice is done in the proceedings". It was found that s 183 was not a source of power to extinguish group members' rights before settlement of the proceedings or a judgment in the proceedings. But these observations were all in the context of the Court analysing the particular order before it.
74 I should set out the order in question (order 16):
Pursuant to s 183 of the Act, any Group Member who neither opts out in accordance with Order 12 nor registers in accordance with Order 15 on or before the Class Deadline shall remain a Group Member for the purposes of any judgment or settlement but, in the event that an in-principle settlement is reached before the commencement of the trial on the common issues and that settlement is ultimately approved by the Court, shall be bound by the terms of the settlement agreement and barred from making any claim against the Defendant in respect of or relating to the subject matter of this proceeding, including participating in any form of compensation or otherwise benefiting from any relief that might be ordered or agreed.
75 Now the order impugned in Haselhurst, which was said to effect an impermissible extinguishment of the claims of group members, is quite different to the March 2020 orders made by the docket judge in the present case. The relevant orders, which in my view provide a suitable precedent for use in other cases, were in the following terms:
8. Pursuant to section 33ZF of the Act, and subject to any further order of the Court, any Group Member who by the Class Deadline does not: (i) register in accordance with the manner provided for in Order 6 above; or (ii) opt out of this proceeding in accordance with the manner provided for in Order 4 above (Unregistered Group Member), will remain a group member for all purposes of this proceeding and shall not, without leave of the Court, be permitted to seek any benefit pursuant to any settlement (subject to Court approval) of this proceeding that occurs before final judgment.
9. Any Group Member wishing to seek a variation of Order 8 must deliver to the Applicants' solicitors, by no later than the Class Deadline, written notice of the variation sought and a statement of the reasons for seeking the variation, and the solicitors shall forthwith notify the Respondent and the Court of the notice and the reasons.
76 There are two significant differences between the March 2020 orders in this case, and the orders in Haselhurst.
77 First, the March 2020 orders do not use the language of extinguishment or "barring", but rather are expressed in terms of a group member not being "permitted to seek any benefit pursuant to any settlement (subject to Court approval)". So, the orders are expressly in anticipation of the exercise of power that must occur at the s 33V stage, where the Court must consider whether it is just to distribute the settlement only to those who have manifested an interest by registering.
78 Second, the March 2020 orders are expressly conditioned by the words "without leave of the Court", to indicate that the question as to whether unregistered group members ought receive a distribution is a question that the Court will need to consider in future. Of course, that would be at the time of the later s 33V application.
79 So, the March 2020 orders are not orders which effect an extinguishment of group member claims, contingently or otherwise. The true position is that the claims of group members would not be extinguished until such time as the settlement was approved under s 33V and those claims merged in the settlement as approved by judgment of the Court, with the otherwise consequent dismissal of the claims. This would then be made binding on them under s 33ZB. It may be noted that at that point, which follows group members being afforded an opportunity to be heard, what is occurring is that the Court is making an order under s 33V. The fact that unregistered group members' rights merge in the settlement and consequent dismissal without them receiving anything is no more than the consequence of the exercise of power under s 33V with respect to a just distribution of the settlement.
80 In my view, the construction adopted by the Court of the particular orders before it in Haselhurst does not apply in the present case. The decision is readily distinguishable for that important reason alone.
81 But I would venture to also observe, with respect, the following.
82 First, an order of the kind under consideration, as was made by the docket judge, does not effect a contingent extinguishment of group member choses in action at all. Indeed, the notion of a contingent extinguishment is to my mind problematic in any event. If there is a contingency, nothing has been extinguished. But there is more. If that contingency is expressed in an interlocutory order, which is susceptible to variation, it is unclear how anything could be said to be extinguished if the contingency itself may be redefined or removed by a later and final order.
83 Second, BMW was directed to a different problem, where the purpose of the early common fund order was said to be to ensure the economic viability of a proceeding and to put it on a stable foundation so that it could go ahead. It was said that such a purpose was extraneous to dealing with the substantive rights of group members in the proceeding. Now I might say that in many cases where early common fund orders have been made, that was not the purpose. But in any event, a class closure order is not in the same category. Its purpose is not extraneous to dealing with the substantive rights of group members in the proceeding. Indeed, the opposite. Its very focus is on how those substantive rights are to be adjusted inter se in the event that the proceeding settles.
84 Third, I should note for completeness that The Owners - Strata Plan No 87231 v 3A Composites GmbH (No 3) [2020] FCA 748 occurred in a different context and not for the purpose identified in Melbourne City Investments of facilitating the desirable end of settlement. It can be put to one side.
85 Let me now say something about Wigmans. In Wigmans, the Court considered the form of a proposed notice to group members which referred to an intention on the part of the applicant and respondent that in the event a settlement were reached, they would apply for an order excluding any group member who had neither registered nor opted out by the relevant deadline from receiving any benefit pursuant to the settlement. In other words, they did not propose a barring order of the kind which failed in Haselhurst. The notice was to flag an intention that group members who did not register in a timely way may receive nothing from the settlement. The Court held that the orders made issuing the notice were beyond power.
86 It was said that what was proposed was contrary to a fundamental precept of Part 10 of the Civil Procedure Act (the cognate of Pt IVA), confirmed by the High Court in Mobil Oil v State of Victoria (2002) 211 CLR 1, because (at [79]):
… If what is contemplated by Komlotex and AMP comes to pass, group members who take no positive step will gain no benefit from any settlement and will have their rights extinguished. Indeed, it is reasonable to expect that the extinction of passive or unregistered group members' rights would be one of the drivers of any settlement between registered group members and AMP. This prima facie gives rise to a conflict between group members who are registered and those who are not.
87 It was said that a fundamental precept was that the representative applicant acts for all group members, and that group members may do nothing prior to a settlement and still reap its benefit. It was said that a settlement whereby registered group members receive payment but unregistered group members receive nothing but have their rights extinguished "is contrary to the essence of the opt-out regime. This prima facie falls squarely within what was held in Haselhurst" (at [95]). It was said that the fact that the proposed notice only communicated a present intention to seek a future order extinguishing rights was not the end of the analysis, as the question was "whether the practical effect of the orders conforms with the statute" (at [104]) which it did not do; it was said that the present intention was proposed to be deployed to prevail upon group members to make binding decisions as to whether to opt out. Further, it was said that what was proposed gave rise to a conflict between group members who were registered and those who were not, and that a conflict was real, immediate and direct because the representative would be propounding a settlement where registered group members receive nothing and have their rights extinguished, notwithstanding that the representative applicant is meant to be representing them.
88 More generally, in Wigmans the parties also accepted that Haselhurst was correct and Wigmans was premised upon its correctness. But if Haselhurst is problematic, then the Wigmans foundation is problematic. But Wigmans has problematic aspects even if Haselhurst was not problematic.
89 First, Part IVA is not inconsistent with group members being required to take a positive step before settlement or judgment at an initial trial. Now Part IVA generally permits group members to adopt a passive stance, but they can be required to give, for example, discovery in some circumstances; see Regent Holdings Ltd v State of Victoria (2012) 36 VR 424. As was said in Regent Holdings (at [12]), concerning the statement of the High Court in Mobil Oil (being the same passage cited in Wigmans):
… that statement does not mean that it is of the essence of a Pt 4A proceeding that group members not be required to take any positive step before common questions of liability have been resolved. Read in context, and understood against the background of the case with which the High Court was concerned, it means no more than that there are some Pt 4A actions in which that is likely to be so. This case illustrates that there will be circumstances in which group members may be asked to take some step before common questions of liability are resolved.
90 So, it is not a fundamental precept of representative proceedings that group members can never be required to take any positive step at an early stage in the proceeding. I said in Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469 at [47] to [52]:
I accept that group members other than the lead applicant can be and have been compelled by court order to actively participate in representative proceedings at a time prior to the first stage trial and without any s 33Q or s 33R consideration coming into play. Examples of such compulsion include the following contexts:
(a) Provision of discovery has been compelled in at least four cases (P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176; Thomas v Powercor Australia Ltd (No 1) [2010] VSC 489 (Thomas); Regent Holdings Pty Ltd v Victoria (2012) 36 VR 424 (Regent Holdings) and Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2011] ATPR 42-361).
(b) Provision of particulars of group members' claims has been compelled in at least seven cases (Kirby v Centro Properties Ltd (2011) 84 ACSR 87 (No VID 326 of 2008), pursuant to an order made on 14 February 2011; Thomas; Meaden v Bell Potter Securities Ltd [2011] FCA 136; Regent Holdings; Weimann v Allphones Retail Pty Ltd (No 3) [2009] FCA 1292; Murphy v Overton Investments Pty Ltd [1999] FCA 1123 and Williams v FAI Home Security Pty Ltd [1999] FCA 1771).
(c) Provision of a contribution towards security for costs has been contemplated in at least one case, namely Madgwick v Kelly (2013) 212 FCR 1 where it was held that an order for security for costs was appropriate, and that it was fair that the group members who stood to benefit from the proceeding make a real but not oppressive contribution to a pool of funds for security.
(d) Provision of particulars of group members' identities has been compelled in order to facilitate the service of subpoenas (Kirby v Centro Properties Ltd, unreported, Federal Court of Australia, 8 February 2011, transcript of hearing at T22 and T45).
But the context of these examples is all important.
Discovery and particulars of group members' claims may be accelerated in order to facilitate a mediation so that there can be an adequate appraisal of potential quantum ranges for the total class and the avoidance of a disproportionate level of information asymmetry.
Discovery and particulars from group members may be accelerated because they are relevant to the trial on common issues. For example, in a cartel proceeding where a common issue at the liability stage is whether an arrangement to price collude was put into effect involving a large number of customers over a long time frame over an entire industry, inputs into a multiple regression linear analysis (to establish a positive value for the relevant dummy variable) may require data from all group members, so that a statistical analysis can be performed for the first stage trial in order to determine whether the arrangement was put into effect.
More generally, discovery from particular group members may be accelerated because they might have documents relevant to one of the common issues.
But to admit of these possibilities and justifications does not support the proposition that whenever the Court perceives it to be convenient, such an acceleration can be or should be ordered. Section 33ZF still needs to be satisfied. Moreover, in the present case the application that I am addressing is not covered by the foregoing scenarios.
91 Second, it is interesting, but not determinative, that when the Victorian Parliament enacted Part 4A of the Supreme Court Act 1986 (Vic), they included s 33ZG, which gave specific power to require group members to take a step to be entitled to benefit, but prefaced s 33ZG with the words "[w]ithout limiting the operation of section 33ZF, an order under that section may -". So, s 33ZG was declarative or elaborative of the general grant of power conferred by s 33ZF, which is common to both Pt IVA and the Victorian legislative analogue (see Muswellbrook Shire Council v Royal Bank of Scotland NV [2016] FCA 819 at [21] per Rares J).
92 Third, there is nothing in BMW that requires the conclusion that s 33ZF cannot be called in aid to require group members to take a positive step in the proceeding. BMW did not so hold. Further, there is nothing in BMW evincing any intention that any just resolution (at [21]) be limited only to a judgment, so as to render beyond power an order which is directed to facilitating a mediation or the ultimate exercise of power under s 33V. Section 33ZF enables an order which is directed to ensuring that a mediation can proceed effectively, particularly if the ultimate goal is to facilitate an exercise of power under s 33V.
93 Fourth, nothing in BMW requires the conclusion that a notice cannot be issued stating that it is the intention of a party to move the Court for a particular order in the future, even if there is doubt as to whether the Court can or will make that order. Section 33X(5) permits a notice to be issued informing group members of "any matter". That includes any matter relevant to their decision to opt out. I see no reason to read down s 33X(5) so as to prevent group members of being informed of such a thing. Section 33X(5) is facultative, not restrictive. Nothing in Pt IVA precludes the Court from directing that a notice be given to group members under s 33X(5) informing them, prior to determining whether they should exercise their right to opt out, of any relevant matter affecting such a choice that they need to consider including that:
(a) application may be made for a common fund order under s 33V(2) on settlement; or
(b) if they do not take a positive step of registering their interest before a mediation, this may have consequences for them when the Court comes to exercise any power under s 33V in considering what is fair and reasonable between group members inter-se.
94 Fifth, I have difficulty with Wigmans' analysis of conflict of interest and its view as to the consequences of such a conflict existing. Even if the sending out of a notice did manifest that a conflict of interest may arise because of the intention held by the representative, that is not a reason to deprive group members of that information. In the event that a settlement was procured by a representative in a position of conflict, the question that would then arise is whether it should be approved under s 33V. The Court is there. Settlements require approval to guard against such conflicts causing unfair prejudice to group members in the settlement context. Indeed, the presence of an actual or potential conflict is a reason to send out a relevant notice to group members. It would enable group members to consider whether they wished to make an application under s 33T. More generally, the scheme of Part IVA confers authority on the representative who like any fiduciary must manage conflicts in accordance with established principle, subject to oversight of the Court and the right of other group members to seek to replace the representative.
95 For the foregoing reasons, with respect and with reluctance, I consider Wigmans to be problematic. But again, I can distinguish it. In the present case I am not dealing with a prospective notice. I am dealing with the actuality of a notice which has been sent and which has already conveyed information to group members. My function is to consider, in the light of what has happened and what was communicated to recipients of the March 2020 notice who failed to register, whether it is just to admit or exclude them from the settlement. So, Wigmans does not stand in my way in considering that it may be just not to admit these group members to the settlement.
96 In my view, the March 2020 orders made in the present case were within power. So, the O'Sullivan claimants should have acted in accordance with their terms.