GCO availability in Victoria a decisive factor in transfer application battle

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The Arrium class action was commenced in the Supreme Court of Victoria in August 2020 on behalf of class members who acquired an interest in shares in Arrium Ltd in the relevant period. In February 2021, an application was filed by the plaintiffs seeking a group costs order (GCO) and, shortly after, KMPG filed and served a summons seeking the transfer of the proceeding from the Supreme Court of Victoria to the Supreme Court of New South Wales. After receiving submissions from the parties, Nichols J determined that the appropriate sequencing was for the transfer application to be heard after the GCO application and, subsequently, orders providing for a GCO in the amount of 40% were made. No appeal was brought from that order. 

Consequently, in determining the transfer application questions arose as to what weight, if any, ought to be given to the existence of the GCO in the exercise of the transfer power and, if the proceedings were transferred, whether the GCO would apply in apply and be enforceable in New South Wales thereafter (in circumstances where there remains a prohibition on contingency fees). Having regard to the general importance of these questions, her Honour referred the following questions to the Court of Appeal for determination: 

1. In exercising the discretion to transfer proceedings to another court under s 1337H(2) of the Corporations Act 2001 (Cth) (Corporations Act), is the fact that the Supreme Court of Victoria has made a group costs order under s 33ZDA of the Supreme Court Act 1986 (Vic) relevant? (Answer: Yes) 
   
   
2. If the proceedings are transferred to the Supreme Court of New South Wales:
   a. will the GCO made by the Supreme Court of Victoria on 3 May 2022 remain in force and be capable of being enforced by the Supreme Court of New South Wales, subject to any order of that Court; (Answer: No) and
   b. if the GCO will remain in force, does the Supreme Court of New South Wales have power to vary or revoke the GCO? (Answer: Does Not Arise) 
   
   
3. Should the proceeding be transferred to the Supreme Court of New South Wales pursuant to s 1337H of the Corporations Act, as sought in prayer 3 of the summons filed by the fifth defendant on 26 February 2021? (Answer: No) 

Before addressing the above questions, their Honours considered the relevant legislative frameworks and the GCO in this case. Importantly, it was concluded that it is clear, from both the form of the order and the legislative context in which it was made, that the GCO is only expressed to operate in respect of the proceeding in the Supreme Court of Victoria. It follows that, absent some order or legislative provision, the GCO will not continue to bind those to whom it relates if the proceeding is transferred to another court. 

In respect of question 1, this was answered in the affirmative. Their Honours concluded that there is neither a textual nor contextual reason that would require the court to ignore a GCO that it had made when it later came to the decision as to the appropriate forum. Further, it would be a striking construction of s 1337H, which is expressed in very broad terms, to require the court to ignore an order that it had made pursuant to a power conditioned on the interests of justice and in respect of which the plaintiff and the law practice may have ordered their affairs. Further, neither BHP Billiton Ltd v Schultz (2004) 221 CLR 400; [2004] HCA 61 (which determined that where a party enjoys a procedural advantage by reason of having instituted a proceeding in one forum, and the other party suffers a corresponding disadvantage by reason of that choice, that procedural advantage is irrelevant to the assessment of the interests of justice) nor BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45 preclude the court from taking the GCO into account in the transfer application under s 1337H. Accordingly, both the existence of a GCO and the consequences for the GCO in the event of a transfer are relevant to the choice of forum.

Ancillary to the above, their Honours rejected the submission that the GCO is irrelevant on the basis that it should not have been made before the application to transfer had been determined. First, no appeal from the decision to grant the GCO had been made, and secondly the circumstances in which the GCO was made may be relevant to an application to transfer. 

Question 2 was answered in the negative in respect of subpart (a), and therefore subpart (b) did not arise. Central to this question was the operation of s 1337P(2) of the Corporations Act which provides that “[i]f a proceeding is transferred or removed to a court (the transferee court) from another court (the transferor court), the transferee court must deal with the proceeding as if, subject to any order of the transferee court, the steps that had been taken for the purposes of the proceeding in the transferor court (including the making of an order), or similar steps, had been taken in the transferee court”. 

The defendant submitted that the GCO was an order that constituted a “step that had been taken for the purposes of the proceeding” and is therefore taken to have been made in the transferee court. Conversely, the plaintiffs submitted that s 1337P does not apply to a GCO and only operates in respect of orders, or kinds of orders, that are within the power of the transferee court to make. Their Honours concluded that the evident purpose of s 1337P is to preserve steps taken in one court so they do not have to be duplicated in the transferee court (i.e. as a deeming provision, it gives legal force to the steps taken in the first court, but critically is not expressed to be a conferral of power to take that step (and does not endow the transferee court with that power where there are no cognate or similar provisions in the transferee court)). 

Question 3 was answered in the negative. Interestingly, their Honours indicated that “the existence of a GCO does not mean that a transfer should not be made”, however, considered it was a factor relevant for the Court to take into account (and in some circumstances, it may be a powerful factor). 

Ultimately their Honours concluded, taking into account the importance of the GCO to the proceedings, that it was made because it was determined to be necessary or appropriate in the interests of justice in the proceeding and the relatively neutral state of the agreed facts as to the natural forum, their Honours were not persuaded that the Supreme Court of New South Wales was the more appropriate forum and the proceeding should not be transferred to that court

Bogan v The Estate of Peter John Smedley (Deceased) [2023] VSCA 256 (Ferguson CJ, Niall and Macaulay JJA) 

Victorian Court of Appeal, Ferguson CJ, Niall and Macaulay JJA,
26 October 2023

Applicant’s Solicitors: Banton Group 
Respondents’ Solicitors: Baker McKenzie, Ashurst Australia (Fifth Respondent)
Applicant’s Funder: Equite Capital No 1 Pte Ltd

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