Litigation funding regulations tested as applicants bring cross-claim in underpayment case

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This proceeding has been brought on behalf of persons who claim to have been underpaid by the respondent as a result of its failure to pay them above their ordinary rates of pay when working overtime. The proceeding is being funded by the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union and the Construction, Forestry, Maritime, Mining and Energy Union (Unions) pursuant to a funding agreement dated 21 December 2020. The respondent was provided with a copy of funding agreement in accordance with the requirements of the Federal Court’s class actions Practice Note (GPN-CA). 

In this judgment Colvin J dealt with an application by the respondent to be released from its implied undertaking that the funding agreement only be used for the purposes of the proceeding in the course of which it was produced. The respondent sought this release to allow it to use the funding agreement to commence a separate proceeding against the Unions for allegedly contravening the new litigation funding / financial services regulations which came into force last year. His Honour granted the application. 

Applicable Legal Principles 

The ‘implied undertaking’ is a substantive one which arises irrespective of whether an undertaking was given and regardless of the intentions of the parties (Frigger v Trenfield (No 5) [2020] FCA 827 at [19]). Although good reason must be shown in order for a party to be released from the implied undertaking, the Court has a broad discretion as to whether to do so that is to be exercised in all of the circumstances of the case (Liberty Funding Pty Ltd v Phoenix Capital Pty Ltd (2005) 218 ALR 283; [2005] FCAFC 3 at [31]). 

The Court’s Analysis 

In granting the application, his Honour emphasised that the mere fact that it would be open to the respondent to bring its complaint by way of a cross-claim in the current proceeding was not a reason to refuse to release it from the implied undertaking. 

His Honour then outlined the reasons why bringing the claim as a separate proceeding did not meet the higher bar of an abuse of process. The first of these was the discrete nature of the complaint to be made against the Unions, in that its merit did not depend upon the merits of the claims raised in the class action. The second was the fact that it had not been demonstrated that there would be additional expense or delay or complexity if the issue regarding the funding agreement was the subject of a separate proceeding. The third was his Honour’s rejection of the submission that there was an overlap in the issues raised by the complaint about the funding agreement and the representative claim because the relief sought by the respondent would have consequences for the representative claim.  The fourth reason why his Honour found that bringing the claim about the funding agreement would not be an abuse of process was that the complaints raised about the funding arrangements in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; [2009] FCAFC 147 proceeded as a separate proceeding and there was no suggestion that they be advanced by way of cross-claim. The fifth reason was the logical consideration that the complaints about the funding agreement would need to be dealt with before the claims in the class action are substantially advanced. The sixth reason was his Honour’s rejection of the contention that any complaint about the funding agreement should be raised in the class action so that it too is considered within the ‘no costs’ framework established by s 570 of the Fair Work Act 2009 (Cth). 

White v UGL Operations and Maintenance Pty Ltd [2021] FCA 587

Federal Court of Australia, Colvin J,  
2 June 2021

Applicant’s Solicitors: Eureka Lawyers;
Respondent’s Solicitors: Corrs Chambers Westgarth;
Applicant’s Funder: Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union & Construction, Forestry, Maritime, Mining and Energy Union 

Austlii Link: Accessible here

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