Introduction
In Southernwood v Brambles, the Federal Court of Australia ordered the consolidation of two class action proceedings brought against Brambles on terms which include the two law firms and the two litigation funders to represent the consolidated class. This is a new and radical development which, if successful, may become the norm or at least more common.
Background
The two open shareholder class actions, named Southernwood and Kidd respectively, were filed against Brambles arising from the same facts within a week of each other in August 2018. The legal representatives of both Applicants attempted unsuccessfully to reach an agreement on consolidating the two proceedings. Brambles applied for an order staying one proceeding. Southernwood applied for an order consolidating the proceedings. The Kidd applicants opposed a consolidated proceeding and sought orders for continuing the co-operation orders between the law firms, which they argued would make orders for a consolidated proceeding unnecessary.
Decision
When there are overlapping class actions against the same party, the Court can:
- Consolidate the class actions into one proceeding;
- De-class one of the proceedings;
- Conduct a joint trial of the two proceedings;
- Close the class in one proceeding and order that the class in the second proceeding be open, along with a joint trial of both proceedings; or
- Stay one of the class action proceedings permanently.
The Court held that a consolidated proceeding was the preferred course .This required an agreement to be signed by the Applicants, governing the rights and responsibilities of class members, legal representatives and litigation funders, a consolidation of legal costs and appointment of an independent costs consultant to assess consolidated costs every 4 months to report to the Court.
Justice Murphy’s reasons for ordering consolidation were that:
- each class action proceedings had a large number of members and had litigation funding agreements in place;
- consolidation would minimise duplicate costs for Brambles, with the protection of the appointment of an independent costs assessor to examine the costs every four months;
- ultimately Brambles did not oppose consolidation;
- Brambles had overstated the risk of duplicate costs orders given the existing co-operation orders;
- The class member had not shown unwillingness or inability to agree to consolidation, despite earlier unsuccessful attempts to reach an agreement on consolidation;
- There have been previous occasions where courts have consolidated proceedings;
- Staying one of the proceedings would not necessarily resolve all claims of members who had opted out decide to file a separate class action proceeding; and
- It would be easier for the parties to settle the proceeding.
His Honour stated that while consolidation “may be inappropriate where there is no agreement between the respective applicants, solicitors and funders”, the Court would place “the applicants’ and class members’ interests…at the forefront” when deciding whether to order consolidation.
Conclusion
This is a new approach by the Court to addressing the problems presented by competing class action proceedings. It remains to be seen whether it succeeds.
Clearly this approach is a departure from the winner takes all outcome which has occurred when one proceeding is stayed and may be more efficient.
If successful, consolidation may become a new norm or at least more common.
Chris Goddard
chris.goddard@chrisgoddardsolicitors.com.au
Paul Goddard