In the latest instalment in the attempts to deal with competing shareholder class actions, the Full Federal Court has ordered the transfer of four shareholder class actions against AMP to the Supreme Court of New South Wales, where a fifth class action is already pending. In doing so, the court gave the clearest indication yet that multiple class actions raising similar issues should not be permitted to proceed. It also acknowledged in more express terms than ever before that competing class actions are really all about the competing interests of class action promoters and not group members. Partner Jenny Campbell and Linklaters Associate Gert-Jan Hendrix report.
The Full Federal Court has ordered that the four competing shareholder class actions commenced against AMP Limited in the Federal Court be transferred to the Supreme Court of NSW. This means that it will now be up to the Supreme Court to decide which one (or more) of the five competing cases should proceed, and on what terms.
The transfer order will not, however, take effect for 28 days, to allow for the affected parties to make an application for special leave to appeal to the High Court if they wish to do so.
As a result of matters raised in the Banking Royal Commission, five separate lawyer/litigation funder teams were quick to file five separate shareholder class actions against AMP Limited – four in the Federal Court and one in the Supreme Court of New South Wales.
Faced with this ridiculous situation, AMP made applications to transfer the four Federal Court claims to the Supreme Court of New South Wales – presumably, with a view to having the Supreme Court then decide which one should proceed. In turn, the plaintiffs in the four Federal Court cases applied to have the Supreme Court proceedings transferred to the Federal Court.
In early July, the Supreme Court declined to transfer the case before it to the Federal Court, and foreshadowed an anti-suit injunction against the continuance of the Federal Court proceedings if the plaintiffs did not agree to a voluntary transfer of those proceedings to the Supreme Court. What followed was a back-and-forth on whether or not the transfer applications before the Federal Court could be heard, which only ended when the Chief Judge in Equity of the Supreme Court refused to grant an 'anti-anti-anti-suit injunction' on the basis that the Federal Court should be allowed to hear the transfer applications before it.
Chief Justice Allsop (who delivered the main judgment, and with whom Justices Middleton and Beach agreed on the issues outlined below) provided a short but important analysis, which started with the following statement:
… the running of multiple actions by different lawyers, with different funders was, in principle, potentially inimical to the administration of justice and, in particular, potentially inimical to the interests of group members, and potentially oppressive to AMP.
His Honour then labelled the 'competing' aspect of competing class actions as being 'really, competing self-interests of those promoting and hoping to manage these proceedings'. He also noted the 'risk of the possible placement of that self-interest above the interest of those who the Court is bound to protect: the group members'.
After going on to note that similar proceedings, for similar groups, raising similar issues in more than one open class action 'would likely be unsatisfactory', he indicated that the issues to be taken into account in managing that scenario included the definition of the classes, whether they are open or closed, the issues raised in the causes of action pleaded, the apparent quality of the pleading, the terms of any funding agreement, and any other surrounding and relevant circumstances.
Importantly, the Chief Justice warned that little weight should be given to which case was filed first, because the court should be 'astute to protect the best interests of all group members and not the desires of the promoters and managers of the litigation (in particular, the commercial funders and the lawyers) to be the first to the filing gate'.
Against that background, his Honour concluded that a 'careful and balanced case management analysis' as to which one or more of the five competing class actions should go ahead is required, and on what terms as to funding terms and fee, legal costs and management of the litigation. In this particular case, the Full Court decided that involved transferring the four cases to the Supreme Court so that it can consider all five cases together having regard to 'all relevant matters and the best interests of group members'.
The only countervailing argument raised by the Federal Court plaintiffs against the transfer was that it would deprive the group members of the suspension of the limitation period that would otherwise ensue while Federal Court proceedings remained on foot. All three judges, for different reasons, dismissed this argument on the basis that the transfers would not affect the suspension of the limitation period (but allowed a period for a special leave application to be made on this point before the transfers are affected).
For some time, we have been expressing concern about the increasing levels of entrepreneurialism in the class action environment – the growing number of competing class actions are the most obvious evidence of that trend. We welcome the Full Court's preparedness to call 'a spade a spade' when it comes both to the need to address the competing class actions problem and the fact that the problem arises from the competing self-interests of class action promoters.
It is also a positive development that the Full Court recognises the importance of taking into account AMP's interests in resolving the competing case scenario. That said, AMP is still facing five competing class actions and it will now be up to the Supreme Court of NSW to decide which case (or possibly cases) should proceed.
The Federal Court has already been faced with that decision in the context of the three competing shareholder class actions against GetSwift Limited, which was different from the AMP scenario because all three cases were commenced in the same court. In GetSwift, Justice Lee decided to pick one case to go ahead and stayed the others (see our Client Update: Competing class actions – the court takes control). However, the court's power to make that decision is now subject to an appeal to the Full Federal Court, which was heard in early August with judgment pending.
It is perhaps not a coincidence that all of this is coming to a head at the same time as the Australian Law Reform Commission is considering whether the federal approach to class actions requires recalibration, including as a result of increased commercialisation. In our submission to the ALRC, we supported its proposal to address the competing class action problem by having the court select a single class action to proceed to the exclusion of all others. As we see it, this is in the interests of both class members and defendants.