Introduction
In Perera v GetSwift, the Full court of the Federal Court considered the problem of three multiple corporate disclosure class actions brought against GetSwift Ltd on substantially the same issues. At first instance, Lee J ordered that the Perera and the McTaggart proceedings be permanently stayed as abuses of process and allowed the Webb proceeding to continue. Each applicant was contending that their class action should continue and the others should be stayed or declassed. The appeals to the Full Court were rejected.
Background
Getswift Ltd was founded in 2015 and was listed on the ASX in 2016. It provided software to businesses for “last-mile” delivery functions. On 19 January 2018, the Australian Financial Review published an article in which it was alleged that Getswift Ltd had failed to inform shareholders that its agreements with some customers had been terminated and had announced a revenue forecast from an agreement with Commonwealth Bank of Australia prematurely. On 22 January 2018, Getswift shares, which were trading $2.92 at the time, were placed on a trading halt for a month to address questions by the ASX. When trading resumed on 21 February 2018, the value of the shares collapsed to $0.51.
The Perera proceeding was filed in the Federal Court on 20 February 2018 by Squire Patton Boggs (SPB), consisting of 103 investors. The McTaggart proceeding was filed on 26 March 2018 by Corrs Chambers Westgarth (Corrs), consisting of 443 investors. In around April 2018, the Webb proceeding was filed by interlocutory application seeking leave to intervene in both proceedings by Phi Fenny McDonald (PFM). The reason for the delay was that FPM took preliminary steps to assess the merits of the claim and also to avoid announcing a class action until after the trading halt was lifted and also to negotiate better funding terms with its litigation funder.
The First Instance Decision
Perera and McTaggart applied to strike out the Webb proceeding on the basis that it would “encourage a phenomenon of entrepreneurial lawyers and funders parasitically lying in wait to steal the work product of those who have conscientiously been investigating claims on behalf of real people who have retained them”. Justice Lee gave seven reasons for rejecting Perera’s submission:
- Webb lacked access to material filed by other applicants and Perera knew this;
- The Perera and McTaggart submissions ignored the history of the dispute while Webb’s submissions did not, giving it a competitive advantage;
- Perera and McTaggart did not object to interlocutory orders made regarding Webb on 11 April 2018;
- The orders sought to preserve the best interests of the class, not the best deal offered by litigation funders;
- He accepted Webb’s explanation for the delay in filing their proceeding;
- Webb’s submission clearly accounted for the funding terms set with its litigation funder; and
- The Perera and McTaggart submissions failed to explain what made their litigation funding proposals superior.
GetSwift sought orders that two of the proceedings be permanently stayed but did not specify which one should continue. The primary judge ordered that the Perera and McTaggart proceedings be permanently stayed. The primary judge considered that the Webb proceeding was more preferable because it was an open class and claimants from the other proceedings would be a part of the Webb proceeding. Cost was also a serious issue in favour of staying two of the proceedings.
The Appeal Decision
Perera and McTaggart appealed to the Full Court. Their argument was that Lee J erred in deciding that the court had to resolve the multiplicity of class actions and failed to explain how this would affect the administration of justice. The Appellants also argued that the primary judge failed to consider the choices made by the claimants in joining their respective class actions and failed to examine adequately the respective merits of their class action.
The Full Court considered the exercise of power under s33ZG(c)(iv) of the Federal Court Act to consolidate duplicated proceedings. The Court acknowledged the difficulty with exercising this power because there were different law firms engaged as well as different litigation funders involved, especially if they disagreed on how to consolidate the proceedings. The Full Court therefore concluded that consolidating the proceedings was not appropriate due to the lack of agreement between the applicants’ representatives and their respective litigation funders.
The Full Court examined the principles of abuse of process. There are no distinctive categories in a court’s assessment of what constitutes abuse of process, with reference to the Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256. Permanent stays are only granted to remedy an injustice and if the affected party is not shut out from seeking vindication. With class actions, it is easier for the court to permanently stay a duplicated class action because the members of the class can join the existing class action and this would not shut out the claims of stayed applicants. Each claimant can also opt out of the class and bring their own proceeding.
Another issue was cost. Having three class actions against a party based on the same issues would result in considerable duplication of costs and lengthy delays. The Full Court affirmed the primary judge’s view regarding cost as a reason to permanently stay two of the class actions. It would also be unjust for the Respondent to be required to defend three proceedings.
The Full Court referred to the recent High Court case of UBS Ag v Tyne [2018] HCA 45 that an abuse of process requires one of two conditions to enliven the power. These are unjustifiable oppression on the other party or where the proceeding brings the court’s administration of justice into disrepute. Disrepute arises from causing the administration of justice to be seen as unfair, inefficient, expensive and/or contrary to the rule of law. This can occur regardless of the merits of the plaintiff’s case or whether they were at fault or not.
The Full Court considered the difficulty in applying these principles to this case, because competing class actions do not fall within any of the above categories. The Full Court rejected the argument that continuing the Perera and McTaggart proceedings would be unjustifiable, oppressive or would bring the administration of justice into disrepute. The Court’s reasons were:
- A multiplicity of proceedings is inevitable in class actions if a single member of class decides to opt out and continue their own individual proceeding against the same Defendant;
- Part IVA of the Federal Court Act is designed to facilitate the merging of common issues, but does not require them to be put together;
- In its own words: “It is not oppressive nor would it bring the administration of justice into disrepute to permit multiple class actions which are not all brought on an ‘open class’ basis to proceed”;
- The mere fact that there are multiple overlapping proceedings does not mean an abuse of process has occurred. Overlapping group members are not considered parties to the proceeding;
- The claimants affected by the stayed proceedings can opt out and bring their own proceedings individually;
- Risk of duplicated costs can be ameliorated through case management orders;
- Multiplicity of proceedings based on same issues is not by itself an abuse of process, if there are different parties involved and/or they seek different remedies; and
- The Webb proceeding was filed after the Perera and McTaggart proceedings were filed and thus it could not have been considered an abuse of process at that time.
The Full Court nonetheless agreed with the primary judge’s decision to stay two of the proceedings as an appropriate exercise of the court’s case management power.
Conclusion
The Full Court has rejected abuse of process as a solution to the problem presented by multiple class actions and affirmed as appropriate the exercise of the court’s broad case management power to stay multiple class actions. In doing so, the Court has given preference to the use of an open class proceeding as the proper vehicle for determining the claims made against GetSwift. This preference will influence the shape of future proceedings and their timing.
Chris Goddard
chris.goddard@chrisgoddardsolicitors.com.au
Paul Goddard