Common Fund Orders get the all clear
In an historic joint sitting of the Federal Court and the New South Wales Supreme Court, critical class action issues including whether court has power to make common fund orders and whether such orders are beyond judicial power or unconstitutional were determined – with both courts independently reaching the same conclusion.
The test cases for the issues were Westpac Banking v Lenthall in the Federal Court, and Brewster v BMW Australia Ltd in the NSW Supreme Court, with the respondents in each matter testing the common fund issues.
In the Lenthall matter, at first instance, Lee J had made a common fund order (Lenthall v Westpac Life Insurance Services Ltd (2018) 130 ACSR 456;  FCA 1422), from which the respondents now sought leave to appeal. In the Brewster matter, the question of the Court's power to make a common fund order was referred directly to the Court of Appeal (Brewster v BMW Australia Ltd  NSWSC 1602).
In the Lenthall matter the respondents (appellants) argued that:
- on their proper construction, neither s 23 nor s 33ZE of the Federal Court of Australia Act 1976 (Cth) permitted the court to make a common fund order, either at all, or at least prior to the conclusion of the proceeding ('construction argument')
- a common fund order did not constitute an exercise of, and was therefore beyond, judicial power ('judicial power argument')
- if s 23 and/or s 33ZF did permit the making of a common fund order, to that extent they were unconstitutional as permitting an acquisition of property on other than just terms contrary to s 51(xxxi) of the Constitution ('constitutional argument')
- if there was power to make the common fund order, the judge’s exercise of discretion to do so miscarried ('discretion argument').
The Court unanimously rejected each of those arguments.
In disposing of the construction argument the Court emphasised the width of the power under s 33ZF (especially at -), and rejected the idea that it should be read down by reference to the 'legality principle', or the 'Anthony Hordern principle'.
In disposing of the constitutional argument, one of the factors which the Court relied upon was that the order was interlocutory in nature, and was always subject to revision at the conclusion of the proceeding (and, in that sense, could be considered as 'provisional').
In relation to the discretion argument the Court, inter alia, rejected the argument that the primary judge erred by not imposing a 'floor' condition of the kind that was imposed in Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191;  FCAFC 148, and indicated that such a condition was based on the facts of that case, and was not required in every case.
In the Brewster matter, substantially the same arguments were put (save for the discretion argument, as no common fund order has yet been made in that matter), and the Court likewise unanimously rejected those arguments for similar reasons.
Westpac Banking Corporation v Lenthall  FCAFC 34
Federal Court of Australia, Allsop CJ, Middleton and Robertson JJ, 1 March 2019
Appellants' Solicitors: Allens;
Respondent's Solicitors: Shine Lawyers;
Respondent's Funder: JustKapital Litigation Pty Ltd
Brewster v BMW Australia Ltd  NSWCA 35
New South Wales Court of Appeal, Meagher, Ward and Leeming JJA, 1 March 2019
Plaintiff's Solicitors: Quinn Emanuel Urquhart & Sullivan;
Defendant’s Solicitors: Ashurst;
Plaintiff's Funder: Regency Funding Pty Ltd
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