Smith v Australian Executor Trustees Limited; Creighton v Australian Executor Trustees Limited  NSWSC 17
Faced with two class actions with very similar claimants and subject matter, and a defendant wanting one case stayed, the Court determined that both cases could proceed and be heard together.
- The NSW Supreme Court considered how to proceed where two class actions had “substantial overlap and substantial differences”. The defendant wanted one proceeding stayed on the grounds that it would be oppressive to be compelled to fight two class actions simultaneously, alternatively that there should be a joint committee to manage the two cases. Other courses mooted by the parties included consolidating the two actions, having them heard together and/or having evidence from each admitted in the other.
- The actions arose from the collapse of Provident Capital, which the defendant Australian Executors Trustee was the trustee of. Broadly, it was alleged that Australian Executors Trustee breached duties under 283DA of the Corporations Act, causing loss to debenture holders.
- The claimant groups in both actions comprised debenture holders. One action had an open class, and was conducted by Slater & Gordon on a no win no fee basis and with an indemnity from Slater & Gordon to the plaintiff (alone) for adverse costs. The other action had litigation funding, which protected all the group members from any adverse costs. The groups weren’t exactly the same, but there was an overlap because some group members in the closed class, who had signed a funding agreement and therefore actively selected the case they wanted to participate it, also met the criterion for the open class. At the same time, the Court noted of the two cases, “it is at least theoretically possible that one could succeed and the other could fail”.
- The Court also emphasised that the Group Members in the closed class/funded case might ultimately receive a smaller recovery because of the commission payable to a funder. “Even if both cases succeeded, it is possible because of the way in which the cases are put that some debenture holders could recover more as a member of the class on behalf of whom the Smith Proceeding is brought than as a member of the class on behalf of whom the Creighton Proceeding is brought”. The Court acknowledged however that if the proceedings lasted a long time then that worse outcome may not be the case.
- Slater & Gordon submitted that, given the absence of determinative authority in Australia on this issue, reference should be made to the Canadian approach previously referred to in a 2008 decision of Finkelstein J in the Centro Class Action, in particular that one action should proceed and it should be selected having regard to eight specified factors.
- The Court stated there was no fixed rule that only one class action could proceed. It distinguished the Canadian landscape on the grounds that Canada had a certification process at the early phase of a class action. The Court compared the extant situation with that where a defendant faces a class action as well as proceedings by parties who have opted out of class actions, and the Court observed that a defendant having to find a multiplicity of battles is not of itself oppressive (“in the normal case, it is not oppressive for different plaintiffs to bring proceedings against the same defendant arising out of the same or substantially the same facts”). On the other hand, the Court noted that interests of justice strongly point to cases with common issues and common defendant being heard together with shared evidence to reduce costs and avoid inconsistent judgments.
- Interestingly, the Court also indicated that lawyers should not be imposed on group members without their agreement, stating:
“Looked at from the point of view of debenture holders it is not obvious that one proceeding is better than the other” “The two proceedings offer true alternatives in the sense that they have different funding models and frame their cases in significantly different ways. The choice is not simply which legal advisors should be permitted to advance what is effectively the same proceeding. The Creighton Proceeding has one substantial advantage over the Smith Proceeding in terms of costs in the event that there is a settlement. But otherwise the choice between them is not an easy one to make…where the choice is not obvious, in my opinion, it is inherently undesirable for the court to make it on behalf of debenture holders”
- Ultimately, the Court regarded the large, albeit not absolute, overlap in the classes to be against the interests of justice, principally because of the difficult position the defendant would be in, including as regards settlement dynamics. The Court then considered how to avoid any overlap in group members, which it effectively treated as a question of how to remove from the open class the group members who had actively taken a step to participate in the closed class. With that in mind, the Court determined the issue with orders that: “the two proceedings be heard together and that evidence in one be evidence in the other” and anticipated future orders excluding from the open class those participating in the closed class.
This summary is only an indication of the court’s decision, and is not advice. More considered and customised analysis and advice should be sought from Sladen Legal or another lawfirm before the summary is relied on for any decision or conduct.
If you have any further questions, or for further information, please contact: