Soft class closure orders queried in NSW

_{< Go back to Class Actions Landscape Australia}

This judgment concerned the permissibility of ‘soft’ class closure orders, and the current divergence between the decision of the New South Wales Court of Appeal in Wigmans v AMP Ltd (2020) 102 NSWLR 199; [2020] NSWCA 104, and the decision of the Full Court of the Federal Court in Parkin v Boral Ltd (2022) 291 FCR 116; [2022] FCAFC 47, in which Wigmans was held by Murphy, Beach and Lee JJ to be ‘plainly wrong’.

Pursuant to rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW), the primary judge stated a separate question, at the request of both parties, for the Court of Appeal to determine:

… does the Supreme Court of NSW have power pursuant to sections 175(1), 175(5) and 176(1) of the Civil Procedure Act 2005 (NSW) (CPA) or otherwise to approve a notice to Group Members of the right to register to participate in any settlement of the proceedings or opt out of the proceedings for the purposes of CPA section 162 containing the following notation:

‘Upon any settlement of this proceeding the parties, alternatively, the defendant, will seek an order, which, if made, has the effect of providing that any Group Member who by a registration date: (i) has not registered; or (ii) has not opted out in accordance with the orders made by the Court, will remain a Group Member for all purposes of this proceeding but shall not, without leave of the Court, be permitted to seek any benefit pursuant to any settlement (subject to Court approval) of this proceeding that occurs before final judgment.’

The defendants in the underlying proceeding contended that the answer to the separate question should be ‘yes’ (and that Wigmans should be overruled). The plaintiffs did not take a different position on the question of power, however, expressly reserved their position on the question of discretion, that is to say whether the Court should exercise its discretion to issue a notice of the kind contemplated in the separate question if there was power to do so. Both parties accepted that the decision in Wigmans, if upheld, would compel a negative answer to the separate question. The Court appointed Kate Morgan SC to act as contradictor.

Of note, a difficulty that emerged during the course of the hearing, and over which serious concern was raised by the Court, was the artificiality and undesirability of answering a question in the abstract, divorced from the context of an agreed form of proposed notice to class members, therefore rendering any answer to the question vulnerable to the criticism of hypotheticality: c.f. Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9. Following the hearing and with a view to curing the objection that any answer to the separate question may be hypothetical, the parties agreed a form of notice which it was proposed would be sent to class members prior to any mediation, and supplemented the notation to the separate question “in important respects” (see [10]).

Departing from Previous Authority

As a preliminary matter, the Chief Justice considered the approach to be followed when intermediate appellate courts are asked to depart from the authority of courts of co-ordinate jurisdiction as well as their own previous decision: see Totaan v R (2022) 108 NSWLR 17; [2022] NSWCCA 75 at [72]-[76].

That principle is to the effect that, whilst intermediate appellate courts are not legally bound by their own earlier decisions, they should only depart from such authority or the authority of courts of co-ordinate jurisdiction within the national system if they are of the view that the decision in question is ‘plainly wrong’ and, such an error having been identified, there are ‘compelling reasons’ to depart from the earlier decision or decisions. The fact that reasonable minds might differ on the interpretation of a statutory provision will generally be insufficient to warrant a conclusion that an earlier or existing interpretation of the provision or provisions in question was ‘plainly wrong’.

An important clarification was that, consistent with the judgment of the High Court in Hill v Zuda Pty Ltd (2022) 275 CLR 24; [2022] HCA 21 at [25], the test does not comprise two limbs, being whether an earlier decision is ‘plainly wrong’ AND where there are ‘compelling reasons’ to depart from it. Their Honours proceeded on this basis, Confidential and for internal use only 9 and indicated that Totann should be qualified insofar as it suggests that two independent limbs would need to be satisfied before any such departure could occur.

Finally, one matter left unresolved on the authorities concerns what a court is to do in circumstances where neither of two competing interpretations can be said to meet the onerous threshold of being ‘plainly wrong’. Where one of those decisions is that of the same court which has previously expressed a view on the matter, that court should adhere to its previously expressed view.

Consideration

The analysis is lengthy and detailed and is summarised here at a necessarily high level.

Ultimately, the Chief Justice (with whom Gleeson and Stern JJA agreed in full) was not satisfied that the Court’s recent decision in Wigmans was ‘plainly wrong’, or that there are compelling reasons to depart from it. His Honour therefore refused leave, to the extent that leave is necessary, to overrule Wigmans, thereby answering the separate question in the negative.

Critical to his Honour’s conclusion was a passage from Mobil Oil Australia Pty Ltd v State of Victoria (2002) 211 CLR 1; [2002] HCA 27, cited with approval in BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45, that “[g]roup members, however, need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring” (at [40]). This, in his Honour’s view, rendered the conclusion that Wigmans was plainly wrong a “surprisingly ambitious one”.

Further, and consistent with the submissions of the contradictor, his Honour considered that the proposed notification places non-registered class members in a position that would be contrary to the opt out legislative scheme enshrined in Pt 10 of the Civil Procedure Act 2005 (NSW) and its analogue in the Federal Court of Australia Act 1976 (Cth) (the ‘fundamental precept’) – in effect, authorising the issuing of a notice which turned the statutory scheme on its head by, in practical terms at least, requiring class members to opt in to the group prior to any settlement or judgment based on any such settlement.

President Ward agreed with the orders proposed by the Chief Justice, and was not persuaded that either Wigmans nor Parkin was ‘plainly wrong’. The balance of her Honour’s judgment (where her Honour respectfully differs from Wigmans) concerned the proposition that notification to class members of an intention (or possible intention) at a later point in time to seek an order from the Court excluding unregistered class members from participation in a settlement reached at mediation gives rise to an insoluble conflict of interest at the time that the notice is issued. Her Honour did not accept that the existence of a possibility for a conflict of interest will necessarily result in the existence of an insoluble conflict of interest in reality.

Justice Leeming also agreed with the orders proposed by the Chief Justice and his reasons. Three additional points were included in his Honour’s separate reasons:

• First, that it is preferable to express the test applicable when one intermediate appellate court departs from a decision of another intermediate appellate court on federal or uniform legislation or common law which is materially unaffected by statute by asking whether there is a ‘compelling reason’ to do so. In many or most such cases, it will be better to speak to the quality and cogency of the case made out for departure from the earlier decision, rather than the egregiousness of the Court's error.

• Secondly, in respect of soft class closure being prima facie contrary to a ‘fundamental precept’ of Pt 10 and inherent in the legislative choice of an opt out regime, his Honour did not think that the reasoning in Parkin accurately reflected what was said in Wigmans – it was not (in his Honour’s view) deployed to connote an ‘an absolute rule’ and rather was deployed to address a basic principle underlying the regime established by the statute.

• Third, his Honour agreed with the Chief Justice concerning differences between s 175(5) and s 183 of the CPA in Wigmans at [100], and that “it is tolerably plain from reading the passage in context that the only point being made was a textual one about those two provisions, rather than a statement that the power was unqualified by any other consideration extraneous to the provision” (at [159]).

[Postscript: On 14 May 2024 the defendants in the underlying proceeding filed an application for special leave to appeal to the High Court.]

Pallas v Lendlease Corporation Ltd [2024] NSWCA 83

New South Wales Court of Appeal, Bell CJ, Ward P, Gleeson, Leeming and Stern JJA, 17 April 2024
Applicants’ Solicitors: Herbert Smith Freehills
Respondents’ Solicitors: Maurice Blackburn Lawyers
Applicants’ Funder: Harbour

AustLII link

_{< Go back to Class Actions Landscape Australia}