The Changing Face of Practice Part A

Queensland law and practice has failed to keep up with national and international developments. Procedural reform should be introduced to facilitate class actions in Queensland courts, on behalf of Queensland persons and conducted by Queensland practitioners. This is long overdue. Queensland needs to adapt to the new landscape. This may be on the horizon. It is my understanding that the Queensland Attorney General and Minister for Justice has indicated that he is seeking the support of his colleagues for the preparation of the necessary legislative amendments.

This paper examines a number of developments in other Australian jurisdictions where statutory class action regimes have been introduced. The focus is on pleading and procedural problems and pitfalls for new players. Such issues may be of interest to both those involved in the design of a class action regime for Queensland and to practitioners who may become involved in this ‘changing face of practice’.

1. The limited utility of the Queensland representative action rule

The Queensland representative action rule would appear to be of limited utility in many instances, particularly where the claims for relief include damages3. Rule 75 Uniform Civil Procedure Rules 1999 (Qld) provides that:

A proceeding may be started and continued by or against 1 or more persons who have the same interest in the subject matter of the proceeding as representing all of the persons who have the same interest and could have been parties in the proceeding (emphasis added).

Courts which have similar representative action rules have frequently adopted a narrow construction of the ‘same interest’ requirement and often concluded that this precludes bringing representative claims for damages. Moreover, other representative action rules often provide that the proceeding may be brought on behalf of ‘some or all’ of those with the ‘same interest’4 whereas the Queensland rule does not expressly provide for a limited number of class members.

Whilst various courts have adopted differing views over the years as to the ambit of the traditional representative rule, the high water mark of restrictive interpretations would appear to be the decision of the Chancellor and subsequent endorsement by the English Court of Appeal in Emerald Supplies Ltd v British Airways plc [2010] EWCA Civ 1284.

In that case an attempt to use the English representative action rule to bring claims on behalf of persons who allegedly suffered loss as a result of price fixing by an air cargo cartel was thwarted on the basis that such persons did not have the requisite ‘same interest’. It was suggested, inter alia, that the English ‘group action’ procedure was the more appropriate procedural option, even though that would have required the filing of individual claims by all those seeking damages.

Perhaps not surprisingly the decision has attracted some criticism, not least of all by a former Queensland lawyer who is an internationally recognized academic class action expert5, together with proposals by judges for reform6.

Legislative proposals for reform have been introduced in the United Kingdom, at least for the purpose of facilitating class actions in the area of competition law. The UK Government recently published a report indicating that it will send proposals to Parliament for the adoption of an opt‐out class actions regime by which consumers can pursue claims for anti‐competitive conduct. The proposals envisage that the UK Competition Appeals Tribunal (CAT), which currently hears appeals from decisions of the OFT, Competition Commission and sectoral regulators, will be the primary venue for the new class actions. More detailed information is contained in the press release of the Department of Business Innovation and Skills (BIS)7 and in the full report8.

2. Are you able to proceed by way of a class action and if so where?

At present, one obvious difficulty facing Queensland claimants with causes of action arising under the common law, or based on State statutory provisions, is that class actions in the Federal Court require there to be (at least one) ‘federal’ cause of action. Attempts to join common law claims with a (barely) arguable federal cause of action may be a recipe for disaster for both litigants and lawyers. For example, in Cook v Pasminco9 proceedings were brought as a class action in the Federal Court against the owners of smelters in NSW and South Australia claiming damages for injury to health allegedly caused by noxious emissions together with claims for the loss in value of real estate. In addition to the common law causes of action (not otherwise able to be pursued by way of a class action in the Federal Court) it was pleaded that for the purposes of Part VA of the Trade Practices Act 1974 (Cth) the noxious emissions were ‘goods’ manufactured by the respondent and supplied in trade or commerce in circumstances where the ‘defect’ in such goods had caused the injuries in question. Not surprisingly Lindgren J dismissed the proceedings as incompetent and made an order for costs on an indemnity basis against the applicant’s solicitors (but not the counsel on whose advice they had relied!).  

Similarly, difficulties in establishing a basis for federal jurisdiction arose in Johnson Tiles v Esso Australia litigation which arose out of the explosion at the Longford gas plant in Victoria and encompassed claims for misleading and deceptive conduct in contravention of the Trade Practices Act 1974 (Cth). After 3 years of disputation in the Federal Court in Victoria the proceeding was transferred to the Supreme Court of Victoria and a fresh proceeding was commenced.

However, where there is a bona fide and arguable claim that there is federal jurisdiction the Federal Court may have jurisdiction over the (remaining) claims even if the invocation of a federal right is unsuccessful.10

Depending on the facts it may of course be possible to bring a class action on behalf of Queensland group members in other Australian jurisdictions with class action regimes (e.g. Victoria and NSW) if the other state court has jurisdiction.

In the present Hopkins class action proceedings in the NSW Registry of the Federal Court the group members claiming damages include Queensland investors who acquired an interest in stapled units in the RiverCity Motorways Investment Trust and the RiverCity Motorway Holding Trust, both of which were involved in financing the design and construction of the North‐South Bypass Tunnel in Brisbane.

There has also been press and media coverage of a long foreshadowed class action against the State of Queensland itself claiming damages for victims of the 2011 floods. Query whether a NSW resident who has suffered property loss in Queensland could lead a class action in the NSW Supreme Court under Part 10 of the Civil Procedure Act 2005 (NSW). This might be considered as there is no federal cause of action available and no applicable class action procedure in Queensland.

It is my understanding that there have been recent proposals for reform of the representative action rule in Queensland by law firms, the Law Society and the Bar Association. Thus, as noted in the introduction to this paper, it may be that Queensland will introduce a state class action regime modeled on the Federal, NSW and Victorian provisions.

Accordingly, it may be instructive to have regard to some recent and current procedural problems that have arisen in class action proceedings in the Federal Court and the Supreme Courts of NSW and Victoria. The following topics are not intended to be exhaustive. Moreover, only selected cases are referred to.

3. Do you really want to bring a class action?

Class actions clearly facilitate access to justice and enable proceedings to be commenced on behalf of large numbers of persons at relatively little cost per person. Neither the consent nor the knowledge of such persons is required. Moreover, the commencement of the action stops the limitation clock running in respect of those causes of action pleaded in respect of the defined class.

However, in many class actions to date there has been considerable interlocutory warfare. Many cases have been protracted and extremely expensive to conduct.

In some instances considerations of cost and delay may favor the use of one or more ‘test cases’ , with ‘protective’ proceedings issued to protect the interests of some or all class members where such persons have become clients and have authorised the commencement of individual proceedings on their behalf.

In a number of cases in NSW ‘protective’ proceedings have been commenced on behalf of large numbers of persons by the filing of one or more summonses or statements of claim with the names of all of the plaintiffs included in a schedule attached to the initiating process. Whilst this may involve a degree of procedural ‘criminality’ such irregularity is unlikely to result in the proceeding being a nullity. This procedural methodology was used in the Dalkon Shield litigation for thousands of claimants (pending the outcome of proceedings in the United States); in the silicone gel breast implant litigation (also pending the outcome of United States litigation) and in the more recent tobacco license fee recovery litigation. In the Tracknet class action in the Federal Court11 each of the members of the class was identified in a schedule to the initiating process but, other than the applicant, were not parties, per se.

In some cases it may be possible to delay service of any ‘protective’ proceeding pending the commencement and conduct of suitable ‘test cases’. However, procedural rules in relation to time for service have become increasingly attenuated in recent years and these have to be carefully considered. Moreover, it may be advisable to seek orders from the court expressly authorizing a stay of the ‘group cases’ together with directions for the conduct of the ‘test cases’. The defendants will no doubt seek to be heard and cannot be expected to consent to the procedural course proposed. One or more contested interlocutory hearings may be necessary in order to determine how the litigation is to be managed by the court and the parties.

For example, in the Cu7 IUD litigation in the NSW Supreme Court of NSW Smart J devised an elaborate procedure for the selection of 10 test case plaintiffs from amongst the 300 women with pending personal injury claims with a view to ensuring that they were representative of the types of injuries, covered the periods during which different warnings were in place and encompassed the two different size devices used and the claims of women who had, and women who had not, had children before use of the IUD device. Nine lead plaintiffs cases proceeded to trial jointly. Whilst the proceedings in the Cu7 litigation were unduly protracted, were very costly and had an unfortunate outcome12, in many cases the trial of one or more test cases may be a more expeditious and economical procedural path than pursuit of a class action. However, it may be that the (relatively) recent introduction of case management conferences in class actions in the Federal Court may facilitate the more expeditious and economical resolution of the issues in dispute.

The abovementioned and other alternatives to a class action are only appropriate where the ‘class’ is limited to persons who have become clients and have authorized the commencement of proceedings on their behalf. However, many current class actions comprise only identifiable group members who have provided individual instructions (and have agreed to litigation funding arrangements).

One obvious legal limitation of alternatives to a class action is that any judicial resolution of ‘common’ questions in the ‘test cases’ is not binding in the other cases. However, in practical terms this is unlikely to be of much consequence. Success or failure in the ‘test cases’ will usually bring about a resolution of the other proceedings.

Assuming that it has been decided to pursue a class action a number of practical and procedural problems may arise.

4. Threshold considerations in commencing a class action

4.1 Pre action obligations

Depending on the jurisdiction and the applicable substantive law and procedural rules it may be advisable, or in some instances legally necessary, to comply with certain pre‐action requirements.

4.2 The individual claim of the representative plaintiff(s)

One of the key objectives of a class action is to facilitate judicial determination of the ‘common’ legal and/or factual questions that arise in respect of the claims of all of the class members.

This is done through the trial and determination of the claims of the representative plaintiff. This may give rise to some difficult procedural, legal and ‘tactical’ problems. Some of these may be illustrated by reference to relatively recent product liability class actions.

4.2.1  Should you plead and pursue ALL causes of action that are available?

In Courtney v Medtel a class action was brought on behalf of all persons who had suffered injury as a result of having been implanted with a particular defective pacemaker. The pacemakers were alleged to be defective because the batteries were found to have a propensity to stop without prior warning short of the expected life of the batteries. In persons who were totally dependent on the pacemaker this could result in death.

The causes of action available to the lead applicant and the class members encompassed (a) negligence; (b) misleading and deceptive conduct; (c) contravention of implied warranties in respect of the merchantability and fitness for purpose of the pacemakers; and (d) ‘strict’ liability for defective goods under the provisions of the Trade Practices Act 1974 (Cth).

A tactical decision was made to limit the trial to the ‘easiest’ causes for action for which liability was strict (ss 74B and D of the Trade Practices Act 1974). This was procedurally achieved by having these causes of action determined first as separate issues. Notwithstanding the reluctance of the trial judge to agree to this course, given the well known principles against the ‘splitting’ of causes of action, the Respondents agreed and the trial proceeded on this basis.

This not only expedited the trial but considerably curtailed the ambit of discovery and the factual and expert evidence at trial thus substantially reducing the costs. The Applicant succeed at trial on the two ‘strict liability’ causes of action (Courtney v Medtel Pty Ltd [2003] FCA 36) and the judgment was upheld on appeal (Medtel Pty Limited v Courtney [2003] FCAFC 151 (7 July 2003). The application for special leave to the High court was refused. The proceedings were resolved in a relatively short period of time with relatively modest legal costs.

An alternative approach was adopted in the Vioxx product liability class action. All available causes of action were pleaded and were sought to be relied upon at trial. This had the effect of considerably widening the ambit of discovery and the factual and expert evidence at what became a lengthy trial. On one estimate the total costs of the parties exceeded $20 million.

The representative Applicant, Mr Peterson, succeeded at trial and obtained an award of damages in the sum of $330,465.

However, he only succeeded on the two ‘strict liability’ causes of action under the Trade Practices Act 1974 (ss 74B & D). Moreover, those causes of action had only been pleaded against one of the two respondents.

Jessup J held that, because Vioxx involved about a doubling of the risk of heart attack, it was not reasonably fit for the purpose of being used for the relief of arthritic pain, which was the purpose implicitly made known by the applicant as required by s 74B and which was the purpose for which goods of the relevant kind were commonly bought as required by s 74D.

The trial judge held that the first respondent, under its common law duty of care, ought to have warned the Applicant’s doctor of the cardiovascular risk and ought not to have emphasised the safety of Vioxx. However, he was not satisfied that, had a sufficient warning been given, or had the safety of Vioxx not been emphasised, the applicant would not have taken Vioxx exactly as he did. Thus it was held that the first respondent’s failure to discharge its duty of care did not contribute to the applicant’s heart attack. Thus he rejected this aspect of the applicant’s negligence case as against the first respondent. The applicant claim in negligence against the second respondent was also dismissed.

In respect of the applicant’s other cause of action under the Trade Practices Act: Jessup J held that the first respondent’s failure to warn, and its emphasis on safety, amounted to misleading conduct in trade or commerce in contravention of section 52. However, he was not satisfied that the applicant’s heart attack occurred by reason of this misleading conduct.

The applicant alleged also that Vioxx had a defect within the meaning of s 75AD of the Trade Practices Act. Jessup J held that Vioxx did have such a defect, in the sense that the safety of Vioxx was not such as persons generally were entitled to expect. However, he upheld the first respondent’s defence under s 75AK(c) of that Act, namely, its claim that the state of scientific or technical knowledge at the time when Vioxx was supplied to the applicant was not such as would enable the defect to be discovered. Thus he rejected the applicant’s claim under s 75AD of the Trade Practices Act. (Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd [2010] FCA 180)

Thus, although successful at trial the applicant succeeded only on two of the causes of action and only against one of the two respondents.

Moreover, at the trial it was sought to be proved that Vioxx caused a number of physical injuries, including heart attacks and strokes. Mr Peterson succeed in respect of his own claim, arising out of his heart attack, but the trial judge not accept that Vioxx caused strokes.

Thus, although successful in respect of his claim for damages he obtained an order for only some of the costs incurred in connection with the proof of his individual claim; was ordered to pay the costs of the successful respondent; and was ordered to pay some of the costs incurred by the unsuccessful respondent. (Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (No 5) [2010] FCA 605).

However, things got worse for Mr Peterson. The decision of the trial judge was overturned on appeal by the Full Federal Court on the basis that the court was not satisfied that it had been proved at trial that Vioxx caused Mr Peterson’s individual heart attack. (Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2011] FCAFC 128).

Needless to say, this had even more adverse cost consequences for Mr Peterson (Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (No 2) [2011] FCAFC 146) notwithstanding the fact that the ‘generic’ finding that Vioxx causes heart attacks was not overturned on appeal.

A comparison of the above two cases will I hope illustrate the pitfalls of proceeding to trial on all available causes of action and the advantages of seeking a preliminary determination of what, from the plaintiffs perspective, are the ‘easiest’ causes of action to succeed and which may be resolved more economically and expeditiously. Moreover, it is of little comfort to defendants to succeed on some but not all of the causes of action, particularly if a costs order in their favor is not able to be enforced against an impecunious lead plaintiff and where, at least in the federal, Victorian and NSW class action regimes, cost orders cannot be made against class members.13 Furthermore, it is clearly in the interests of the administration of justice if cases can be resolved more quickly and expeditiously and with fewer judicial resources.

In Federal Court class action proceedings the applicable Practice Note14 now provides that to narrow the scope of the dispute, at the earliest practicable date the Court may consider the utility of either (a) determining any common question in the proceeding as a preliminary question15 or (b) give summary judgment16 on any common question in the proceeding.

In the current bank fees litigation in the Federal Court in Victoria the court ordered the determination of separate questions.17 The subsequent interlocutory determination of several of the critical issues concerning the recoverability of certain fees and charges facilitated an expeditious appeal which was determined by the High Court in less than six months from the interlocutory judgment.18  

> Continued Part B

Footnotes

1. I am grateful to Ben Slade of Maurice Blackburn for helpful comments and suggestions following a review of an earlier draft of this paper. I am reluctantly required to accept personal responsibility for any errors.
2. See generally, Grave D, Adams K and Betts J, Class Actions in Australia, second edition, Law Book Company, 2012; Cashman P, Class Action Law and Practice, Federation Press 2007.
3. A quick search on Austlii, using the search term ‘representative action’, of cases decided by the Queensland Supreme Court elicited 6 cases: Virgtel Limited & Anor v. Zabusky & Ors [2006] QSC 66 (6 April 2006) a case involving a derivative action; Martin & Anor v Qld Electricity Transmission Corporation [2003] QSC 309 (8 August 2003) a discrimination case brought by way of representative complaint; Jones v State of Queensland & Anor [1997] QSC 209 (31 October 1997) a native title case brought by way of representative action; I S Schache and K Schache as t’ees for the Schache Superannuation Fund and as representative for investors in the Arafura Pearl Project for the financial year 2005/2006 & Ors v GP No 1 Pty Ltd & Ors [2011] QSC 413 (23 December 2011) a claim by investors brought in a representative capacity seeking equitable relief; Borg & Ors v Northern Rivers Finance Pty Ltd & Ors [2003] QSC 112 (9 May 2003) proceedings arising out of tax minimization schemes; IVI Pty Ltd v. Baycrown Pty Ltd [2005] QSC 330 (9 November 2005) a case concerning, inter alia, whether representative capacity is required to be stated in proceedings brought by an agent on a contract.
4. See e.g. r 21.09.1 High Court Rules 2004 (Cth); r 18.02 Supreme Court Rules (NT), r 18.02 Supreme Court (General Civil Procedure) Rules 2005 (Vic); O 18 r 12(1) Rules of the Supreme Court 1971 (WA)
5. Mulheron R, ‘A Missed Gem of an Opportunity for the Representative Rule’ [2012] Euro Business L Rev 49‐60; ‘Emerald Supplies Ltd v British Airways plc; A Century Later, the Ghost of Markt Lives On’ (2009) 8 Competition LJ 159‐179. See also, Mulheron R, ‘The Case For an Opt out Class Action Regime for European Member States: A Legal and Empirical Analysis’ 15 The Columbia Journal of European Law 3, Summer 2009, 409; ‘Recent Milestones in Class Actions Reform in England: A Critique and a Proposal’ (2011) 127 Law Quarterly Review 288‐315; ‘The Impetus for Class Actions Reform in England Arising from the Competition Law Sector’ in Wrbka S et al (eds) Collective Actions: Enhancing Access to Justice and Reconciling Multilayer Interests?, Cambridge University Press 2012, chapter 15, 385‐412.
6. Sir Gerald Barling, ‘Collective Redress for Breach of Competition Law‐A Case for Reform?’ [2011] Competition LJ 5. See also the decision of Jacobs LJ in Enron Coal Services Ltd (in liq) v English Welsh & Scottish Railway Ltd [2011] EWCA Civ 2, [142]. Previously there had been a number of proposals for in introduction of an ‘opt out’ class action regime in the United Kingdom, including for competition law cases. See e.g. Office of Fair Trading, Private Actions in Competition Law: Effective Redress for Consumers and Business, OFT 916, November 2007; Civil Justice Council, Improving Access to Justice Through Collective Actions: Developing a more Efficient and Effective Procedure for Collective Actions, Final Report to the Lord Chancellor, November 2008.
7. https://www.gov.uk/government/news/new‐help‐for‐consumers‐and‐businesses‐to‐take‐action‐against­price‐fixing.
8. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/69123/13‐501‐private­actions‐in‐competition‐law‐a‐consultation‐on‐options‐for‐reform‐government‐response.pdf.
9. Cook v Pasminco (2000) 99 FCR 548; Cook v Pasminco (No 2) (2000) 107 FCR 44
10. See generally, Allsop J, ‘Federal Jurisdiction and the Federal Court of Australia’ in 2002’ (2002) 23 Australian Bar Review 29
11. See e.g. Lukey v Corporate Investment Australia Funds Management Ltd [2005] FCA 1074 (27 July 2005)
12. The trial judge inappropriately found in favour of the defendants on the issue of general causation and did not proceed to consider the individual cases of the nine plaintiffs: Denzin v Nutrasweet Co [1999] NSWSC 106. The judgment was overturned on appeal and a new trial ordered: Moylan v Nutrasweet Co [2000] NSWCA337.
13. Except in limited circumstances not relevant for present purposes.
14. Practice Note CM 17, Representative Proceedings Commenced under part IVA of the Federal Court of Australia Act 1976 (Cth), 8. See also 9 Trial of common questions.
15. See Rule 30.01 Federal Court Rules 2011
16. See s 31A Federal Court of Australia Act 1976 (Cth)
17. Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 388
18. Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30