"First in, not necessarily best dressed"

By a majority of 3-2, the High Court has determined that, where two or more law firms commence overlapping and competing class actions, there is no rule or presumption that the class action issued “first in time” will proceed with all latter class actions stayed.  Rather, it is necessary to consider a range of factors in determining which class action is best placed to represent the interests of group members.

Background

Within a period of 5 weeks in 2018, 5 shareholder class actions were commenced against AMP (an Australian financial services company) alleging that it had misled the Australian Securities & Investments Commission and improperly inflated its share price.  Each competing law firm filed a motion in the New South Wales Supreme Court seeking orders that the other competing actions be permanently stayed.  AMP took no position aside from asserting that only one class action should proceed.

The primary judge awarded carriage of the class action to Komlotex Pty Ltd (which commenced its class action last in time) (Wigmans v AMP Ltd [2019] NSWSC 603) after considering a range of factors including:

• the competing funding proposals, costs estimates and net hypothetical return to members;
• the proposals for security;
• the nature and scope of the causes of action advanced (and relevant case theories);
• the size of the respective classes;
• the extent of any bookbuild;
• the experience of the legal practitioners (and funders, where applicable) and availability of resources;
• the state of progress of the proceedings; and
• the conduct of the representative plaintiffs to date.

The primary judge concluded that there was not much separating the parties and their lawyers and that the most important determining factor was which funding proposal was likely to provide the best return for group members.  The primary judge favoured Komlotex Pty Ltd’s model (which offered a "no win, no fee" funding model).

The lead plaintiff who commenced her class action first in time (Ms Wigmans) appealed the primary judge’s decision.  The New South Wales Court of Appeal dismissed the appeal (Wigmans v AMP Ltd (2019) 373 ALR 323; [2019] NSWCA 243).  Ms Wigmans appealed to the High Court on a number of grounds including that the approach adopted by the primary judge departed from a supposed first in time rule or presumption and improperly adopted the "carriage" or "certification" procedure from the United States and Canada.

The High Court’s decision

Having regard to relevant legislation and common law principles, the High Court determined that:

• The New South Wales Supreme Court has the power to grant a Stay;
• There is no rule or presumption that the class action commenced first in time should prevail, although the order of filing remains a relevant consideration (but less relevant where competing proceedings have been filed within a short time of each other);
• The factors that might be relevant in granting a Stay cannot be exhaustively listed and may vary from case to case;
• Litigation funding arrangements are not a mandatory consideration but they are not irrelevant; and
• The primary judge was entitled to consider the competing funding proposals as the most important determining factor.  

With respect to whether the primary judge improperly adopted procedures from the United States and Canada, the High Court said:

Unlike the United States and some Canadian provinces, which have adopted certification and carriage motion procedures to resolve multiplicity in class actions, Australian legislatures deliberately chose not to adopt such procedures…

But the decision not to adopt the United States or Canadian procedures in Australia does not end, or dictate the outcome of, the process of identifying the relevant considerations for the Supreme Court in deciding which of the competing representative proceedings is to proceed.

Commentary

The High Court’s comment that the adoption of a “first in time” rule or presumption would lead to an “ugly rush” to the courtroom door is not an unwelcome observation in an increasingly competitive class actions environment that is attracting new entrants to this market and poses a threat to defendants confronted with mass tort litigation that may be rushed for cynical reasons or issued without a proper consideration of the merits.

Further, the High Court’s affirmation that the funding proposal that was likely to provide the best return for group members, whilst an encouragement for funders to become more competitive, is a commonsense observation that reinforces the policy reasons for the implementation of a class action regime in Australia in the first place.