INSIGHT

Latest word on competing class actions

Class Actions Litigation

In brief 4 min read

In the latest instalment in the five competing shareholder class actions against AMP Limited, the Supreme Court of New South Wales has selected one case to proceed. In doing so, the court has made a clear statement that multiple class actions raising similar issues should not be permitted without good reason. Partner Jenny Campbell and Senior Associate Alex Tolliday report.

What has happened?

Five separate (competing) shareholder class actions were commenced against AMP Limited – one in the Supreme Court of New South Wales and four in the Federal Court. In August 2018, the Full Federal Court ordered the transfer of the four Federal Court cases to the Supreme Court of New South Wales, so that the ongoing case management of the proceedings could be determined in one jurisdiction.

The Supreme Court of New South Wales has now determined that only the case run by Maurice Blackburn (consolidated with the Slater & Gordon proceeding as part of an arrangement reached between those firms) should proceed. The cases run by Quinn Emanuel, Phi Finney McDonald and Shine will be permanently stayed.

How did the court decide between the cases?

The decision was delivered by Justice Julie Ward (Chief Judge in Equity). Her Honour's starting point was that having only one case continue was consistent with the overriding purpose mandated by section 56 of the Civil Procedure Act 2005 (NSW): namely – the just, quick and cheap resolution of the real issues in dispute. She did, however, make clear that the fact that multiple cases had been commenced was not an abuse of process.

Against that background, her Honour applied the multi-factorial test first articulated by Justice Lee when faced with a similar issue in three competing class actions brought against GetSwift Limited in the Federal Court. This process involved consideration of the following factors:

  • the competing funding proposals, costs estimates and net hypothetical returns to group members;
  • the proposals for security for costs;
  • 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 plaintiff(s) to date.

Having considered these factors, her Honour was firmly of the view that, absent a compelling reason, it was appropriate that all but one proceeding be stayed.

The key reason for selecting the Maurice Blackburn proceeding was that the case would be run on a 'no win, no fee' model – that is, one that did not involve the payment of a commission to a third party funder. Key to this decision was modelling evidence provided to the court that established, on most scenarios, the net return for group members was likely to be the highest, or 'around the highest', under the Maurice Blackburn funding proposal, as compared with the third party funded models proposed in the other proceedings. Also relevant was Maurice Blackburn's willingness to proffer meaningful security for costs.

Most of the other factors did not feature heavily in the decision. In that respect, her Honour noted that:

  • the first mover advantage should be given no weight;
  • there was no sensible basis to differentiate between the abilities of the respective legal teams or the reputations of their funders (her Honour was satisfied that each law firm had the skill and capacity to conduct proceedings of this kind in the interests of class members);
  • the bookbuilding efforts undertaken by some of the firms should be disregarded;
  • the so-called 'informed choice' made by institutional investors who had registered with different law firms and funders was overstated; and
  • there was no real juridical advantage in the pleading put forward by any of the parties over that of the others.

In coming to this decision, Justice Ward rejected suggestions by one of the plaintiffs that it was unedifying, unseemly and brought the administration of justice into disrepute to have law firms engage in a 'beauty parade' process before the court. Her Honour saw the need to choose a case to proceed as part of the 'ordinary case management processes of the Court'. She did, however, indicate that the process of seeking to adjudicate between the abilities of well-qualified and experienced litigation lawyers to conduct proceedings of this kind (and the 'slings and arrows' cast by them against each other) was unedifying and was not a factor in her ultimate decision.    

What does this mean?

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 is the most obvious evidence of that trend. The decision to permit only one case to proceed in this high-profile and hard-fought contest is a promising development.

It remains to be seen whether any of the stayed parties will seek to appeal the decision. Attempts to appeal the GetSwift decision failed, but that may not discourage an appeal in this case, given the resources expended on getting to this point.