Court of Appeal declines to answer whether Court has power make ‘common fund order’ at settlement, issues remains in need of clarification
In this matter the New South Wales Court of Appeal declined to answer in the hypothetical whether the Court had power to make a ‘common fund order’ (CFO) at settlement, in the latest judgment concerning a set of representative proceedings regarding defective motor vehicle airbags
On 16 September 2020 Sackar J removed the following separate question to the Court of Appeal for determination:
Does the Court have the power pursuant to s 173 of the Civil Procedure Act 2005 (NSW) to make an order requiring group members in this matter who have not signed a litigation funding agreement with Regency Funding Pty Ltd to pay an amount to that funder out of the proceeds of any settlement by way of return on expenditure, commission or other similar remuneration to the funder?
This followed the High Court’s decision in BMW Australia Ltd v Brewster (2019) 374 ALR 627;  HCA 45 (Brewster), which held that neither s 183 of the Civil Procedure Act 2005 (NSW) nor the materially similar s 33ZF of the Federal Court of Australia Act 1976 (Cth) permitted the making of a CFO at an early stage of proceedings. A key aspect of the majority’s reasoning involved construing s 183 as a general ‘gap filling’ power.
President Bell (with Bathurst CJ and Payne JA agreeing) observed that, by contrast, s 173 is specifically concerned with the Court’s approval of settlement of representative proceedings. Further, s 173(2) permits the Court to make “such orders as are just with respect to the distribution of any money”.
The defendant (BMW), which pushed for determination of the separate question, submitted that any CFO at settlement would be relevantly equivalent to the orders found to not be authorised by the High Court, and the answer to the separate question should therefore be “no”.
The plaintiff, on the other hand, submitted that the question should not be answered as there was no ‘matter’ in the constitutional sense. The referred question was said to not represent a present controversy to be determined, as it presupposed a settlement that may not occur. Even if there was the power to answer the question, the plaintiff submitted the Court should exercise its discretion to not answer it. This was because the Court should wait for the emergence of facts relevant to whether such an order would be ‘just’ under s 173(2), such as settlement quantum and the form of any proposed order. The plaintiff contended that, if the Court of Appeal did determine it would answer the question, it should not be answered in the negative; the reasoning of the High Court in Brewster concerned orders at an early stage of proceedings and did not automatically apply to the context of an order following settlement.
The Court of Appeal determined it was not appropriate to answer the question, having regard to the ‘evidentiary vacuum’, the fact there may not be a settlement, and the lack of a proposed form of order to consider. Further, the Court of Appeal noted that the ratio decidendi of Brewster was limited to a CFO prior to settlement or judgment, and it was “far from obvious” that the majority of the High Court was addressing the power of the Court under s 173.
The Court left open the possibility of making a CFO under s 173 when armed with the ‘hard’ information of an actual settlement proposal. In doing so, the Court noted that the majority judgments in Brewster did not expressly preclude such an order, and all but Gordon J’s did not do so by implication either.
Brewster v BMW Australia Ltd  NSWCA 272
New South Wales Court of Appeal, Bathurst CJ, Bell P and Payne JA, 30 October 2020
Plaintiff’s Solicitors: Quinn Emanuel;
Defendant’s Solicitors: Ashurst Australia;
Plaintiff’s Funder: Regency Funding Pty Ltd
Austlii link: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWCA/2020/272.html?context=1;query=%20NSWCA%20272;mask_path=
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