Interlocutory Orders in Class Actions – Including as to Security for Costs – Case Sensitive

In Hearsay Issue 89 reference was made to the decision in St Mary’s Hog’s Pty Ltd v HBCA Pty Ltd [2022] FCA 52, concerning the onus of proof pertaining to the consideration of “stultification” of a proceeding in the event of an order for security for costs being made but not serviced (https://www.hearsay.org.au/applications-for-security-for-costs-some-recent-issues/). A security order was made there in a class action.

That decision of Markovic J went on appeal to the Full Court of the Federal Court. The appeal was dismissed, the appeal decision going by the name Goodwin v HBCA Pty Ltd [2022] FCAFC 166. The Full Court – in the context of security for costs – afforded some useful observations as to the case management of class actions.

Middleton and Lee JJ – with whom Derrington J substantially agreed – wrote:

…

[42] The argument that the primary judge placed no or insufficient weight on the fact that the exercise of discretion to award security was happening in the context of a class action suffers from the difficulty of seeking to elevate a discretionary conclusion reached based on the evidence in one case into a principle of broader application. This flaw can be seen in the submission made by the representative applicants that error is said to be revealed by reason of the fact that the primary judge did not adopt the approach taken in Abbott v Zoetis Australia Pty Ltd (No 2) [2019] FCA 462; (2019) 369 ALR 512 (per Lee J at 523 [33]–[41]).

[43] But this submission pays insufficient attention to a point stressed in that case. As Lee J observed (at 513 [2]):

Given the heterogeneity of class actions, to speak in definitive and broad terms about how principles of practice and procedure should generally be applied is to court danger. Of course, there are some rules, largely statutory in nature, which necessarily apply to all proceedings, but there is a real danger of elevating statements concerning practice and procedure made in one context into statements of Talmudic significance which must be invariably or uncritically applied. Case management and the application of the practice and procedure provisions of both Part IVA of the [FCA Act] and the provisions of the Federal Court Rules 2011 (Cth)… is a task to be performed on a bespoke basis depending upon the particular facts and circumstances that present themselves. Put another way, care must be taken to “avoid reading judgments on fact specific interlocutory issues of practice and procedure as if they were determinative of precepts and principles of general application”: see Regent Holdings Pty Ltd v Victoria [2012] VSCA 221; (2012) 36 VR 424 at 429 [19] (Nettle, Redlich and Osborn JJA); Gill v Ethicon Sàrl (No 2) [2019] FCA 177 at [6] (Lee J).

[44] In Abbott (at 523–525 [33]–[41]), the following points were made:

(1) the nature of the claim advanced in the relevant class action is highly relevant;

(2) that the respondent in that case could not realistically expect to obtain an order for security in an individual case brought by such claimants and that this was relevant;

(3) that it was relevant that generally group members are entitled to play a passive role while the claims of the applicant and common issues are determined;

(4) the stage at which the provision of security is proposed is relevant;

(5) an award of security in that case would have caused complications (and not only to group members) and that this was relevant;

(6) it is simplistic to apply indiscriminately to Part IVA proceedings the approach to stultification adopted in ordinary, inter partes proceedings; and

(7) it was at least relevant that the Court ought not to put barriers in the way of self-funding class actions.

[45] The primary judge (at J [134]–[138]) identified factors considered by her Honour to be relevant to the circumstances presented in this commercial class action with identifiable group members. The primary judge made reference to Abbott (at J [123]) which her Honour described, correctly, as a mass tort or product liability open class action. To have an appeal ground that asserts error because the primary judge failed “to conduct an analysis of the position of the first and second appellants in accordance with the approach adopted” in a quite different case is insufficient.

[46] In Abbott, after considering the Full Court decisions in Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153; (2003) 130 FCR 317 and Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1, Lee J observed (at 517 [15]):

Critically, however, context is everything, and nothing in Bray or Madgwick should be seen as delimiting or attenuating the broad discretion the Court has to order, or decline to order, security. It is a discretion to be exercised judicially, having regard to a consideration of the particular facts of the case: Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] HCA 41; (1998) 193 CLR 502. If they are relevant, the factors that may be taken into account are unrestricted, and the weight to be given to them depends upon the fact’s own intrinsic persuasiveness and its impact on other circumstances which have to be weighed: see Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114; Morris v Hanley [2000] NSWSC 957 at [11]–[21]; Acohs Pty Ltd v Ucorp Pty Ltd [2006] FCA 1279; (2006) 155 FCR 181 at 185–186 [12].

[47] As the Full Court explained in Zoetis Australia Pty Ltd v Abbott [2019] FCAFC 153 (at [7]–[9] per Allsop CJ, Perram and Beach JJ), in refusing the application for leave to appeal, this paragraph revealed a balancing had taken place of all matters considered relevant, including those identified above (at [44]).

[48] It may be accepted that just because group members can obtain the benefit of s 33ZB orders from the answers to common questions, it is simplistic to apply indiscriminately to class actions the approach to stultification adopted in ordinary, inter partes proceedings. It may also be accepted that aspects of her Honour’s reasons might be thought to reveal an approach to stultification which apparently placed minor significance on the special role of group members and the structure and policy of Pt IVA. But read fairly, a balancing also took place in the present case. The primary judge was alive to the proceeding being a class action but thought it was appropriate to characterise the representative proceeding as being commercial in nature and, given the ability to identify the group members, considered, in all the circumstances, there should have been some evidence of the ability and willingness of group members to contribute to any order for security.

(emphasis added)