Allens

Disputes & Investigations

Increase text sizeDecrease text sizeDefault text size

Focus: Full Federal Court blocks US depositions for Australian class action

18 April 2016

In brief: The Full Federal Court has ordered an anti-suit injunction against the applicant and a group member in the Treasury Wine Estates shareholder class action, preventing the taking of oral depositions from US-based employees under US court procedures. Partner Duncan Travis (view CV) and Associate Michela Agnoletti report on a decision that emphasises the importance of the Federal Court's case management of class action litigation. 

 
 

How does it affect you?

  • The Federal Court will not permit evidence or information to be gathered under compulsory foreign court procedures without its endorsement, particularly in class actions.
  • The Court's exclusive right to manage its own cases would be undermined if parties were able to take such steps without notifying the other party, and gaining endorsement from the Court. 

The background

The applicant, Mr Jones, represented by Maurice Blackburn, commenced shareholder class action proceedings against Treasury Wine Estates Limited (TWE) in July 2014. In the proceedings, Mr Jones alleges that TWE breached its continuous disclosure obligations, and engaged in misleading and deceptive conduct, in relation to the disclosure of allegedly excessive inventory levels held by its US distributors.

In late 2015, Mr Jones and one of the group members in the class action, Utah Retirement Systems (URS), applied in the US District Courts in California and New York for depositions – or compulsory oral discovery – from TWE's US employees, related to matters in dispute in the Australian class action.1 Neither the docket judge in the Australian class action or TWE were notified of the US deposition applications.

The judgment of the Full Federal Court records that the US deposition applications stated that the information obtained by the depositions:2

…would be used for the purposes of the [Australian] class action including providing a greater understanding of the documents produced by TWE on discovery, providing a basis for identifying the witnesses who could give evidence in this proceeding, potentially avoiding the need for an application being made for leave for the administration of interrogatories or for further discovery and, importantly, permitting an assessment to be made of the strengths and weaknesses of the case, including for the purposes of mediation, and the forming of a view as to a proper resolution of group member claims which is fair, reasonable and in the interests of group members.

 

The US deposition applications were supported by a declaration filed by the Maurice Blackburn lawyer responsible for the Australian class action. Among other things, that declaration stated that it was not possible for the applicants to obtain compulsory oral discovery from the proposed deponents under Australian law.3 

The US deposition applications were also supported by legal submissions which included a submission that the requirements of § 1782 had been met, including that 'there was no evidence to suggest that Australian courts had not historically been receptive to § 1782 assistance from US federal courts'.4

TWE sought anti-suit injunctions to restrain Mr Jones and URS from pursuing the US deposition applications. The Chief Justice directed that the original jurisdiction of the matter be exercised by a Full Court.

The judgment

In a joint judgment, the Full Court (Justices Gilmour, Foster and Beach) granted the anti-suit injunctions sought by TWE. The Full Court reasoned that:

  • The importance of judicial case management has increased significantly in recent years. The Court has exclusive control over proceedings before it, and even more so in class actions given the Court's supervisory role set out in Part IVA of the Federal Court of Australia Act 1976 (Cth).5
  • Further, reforms to discovery procedures have meant that discovery – documentary or oral – is no longer a matter of right and will only be ordered if it facilitates the efficient, cost-effective and just resolution of the proceedings.6
  • Mr Jones and URS applied to a foreign court to exercise its power to order compulsory 'oral discovery' outside the docket judge's case management of the proceedings, without his knowledge or approval, and without notice to TWE.7
  • By making the US deposition applications without notice to the other party, and without giving notice to and receiving endorsement from the Court, Mr Jones and URS had undermined the Court's exclusive case management of the proceedings.8
  • There were cases, including the NAB shareholder class action,9 in which the Federal Court and other courts in Australia had granted anti-suit injunctions to protect their processes, and they should be ordered in this case for the same reasons. The Court noted that these cases had not been referred to in the US deposition applications.10  

The Court observed that, theoretically, it has power to order 'oral discovery of the US kind', although that power would only be exercised in a most exceptional case.11 It also commented that orders for § 1782 depositions, while also within the Court's power, would be endorsed only in exceptional circumstances and where notice was given to the other party and the Court.12 In this case, the US deposition applications were 'patently made in order to obtain the benefit of processes not usually available in this Court'.13 

Comment

The Full Court's judgment highlights the increasing judicial emphasis being given to the case management and control of civil proceedings. That emphasis demands that parties be transparent with the Court and other parties when taking actions that may impact upon the Court's management and supervision of the proceedings. The Court will not permit steps to be taken that may have an impact on the efficient and just conduct of the proceedings without its consideration and endorsement. That includes attempting to use overseas court procedures to gather evidence or relevant information.

This was not the first time this process had been attempted in a shareholder class action. Similar steps had been pursued by the plaintiff in the NAB shareholder class action, without the Court's knowledge or endorsement, and had been made subject to an anti-suit injunction. The same result was ordered here.

Footnotes
  1. 28 USC § 1782 of the Federal Rules of Civil Procedure (US) provides that, on application by an 'interested person', a US District Court may make orders requiring a person who resides or is found in the district covered by that District Court, to give testimony, or a statement, or to produce a document or thing for use in a proceeding in a foreign or international tribunal.
  2. Jones v Treasury Wine Estates Limited [2016] FCAFC 59 (Jones v TWE), at [17].
  3. Jones v TWE, at [41].
  4. Jones v TWE, at [45].
  5. Jones v TWE, at [30].
  6. Jones v TWE, at [49].
  7. Jones v TWE, at [29].
  8. Jones v TWE, at [47].
  9. Pathway Investments Pty Ltd v National Australia Bank Limited (No. 2) [2012] VSC 495. Depositions had also been sought, and were made subject to anti-suit injunctions, in that case.
  10. Jones v TWE, at [31]-[40], [46].
  11. Jones v TWE, at [29].
  12. Jones v TWE, at [48].
  13. Jones v TWE, at [44].

For further information, please contact:

Share or Save for later

What are these?

 

To save this publication on your smartphone or
tablet for off-line reading (eg on a plane flight),
we recommend Pocket.

 

 

You can leave a comment on this publication below. Please note, we are not able to provide specific legal advice in this forum. If you would like advice relating to this topic, contact one of the authors directly. Please do not include links to websites or your comment may not be published.

Comment Box is loading comments...