Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd

Fostif Pty Ltd (Fostif) brought representative proceedings in the Supreme Court of New South Wales against Campbells Cash & Carry Pty Ltd (Campbells) and others, seeking recovery of tobacco licence fees paid by retailers. Fostif alleged that the fees were paid under a mistake of law, constituting a total failure of consideration, and were therefore recoverable in restitution. The primary judge dismissed Fostif's application for leave to proceed with the representative proceedings, finding that the proceedings constituted an abuse of process, specifically champerty and trafficking in litigation. Fostif appealed this decision to the Court of Appeal.

The Court of Appeal was required to determine whether the primary judge erred in finding that the representative proceedings were an abuse of process. This involved considering whether Fostif's funding arrangements with its litigation funder, which involved a substantial return on investment, amounted to champerty or trafficking in litigation. The court also had to consider whether the proceedings met the jurisdictional requirements for representative proceedings under the Supreme Court Rules, particularly concerning whether the represented parties had the "same interest" as Fostif and whether there was a beneficial common relief. Furthermore, the court had to assess the relevance of the expiry of the limitation period to the application of the rules governing representative proceedings and the primary judge's discretion to make orders "otherwise" than as provided by the rules.

The Court of Appeal allowed the appeal, overturning the primary judge's decision. The court held that the primary judge had erred in concluding that the funding arrangements constituted champerty or trafficking in litigation. It was held that the funding of litigation by a third party, even for a commercial return, is not inherently an abuse of process. The court found that the representative proceedings were properly constituted and that the common issues of fact and law, the potential for beneficial common relief, and the fact that the represented parties had the "same interest" in the subject matter of the proceedings were sufficient to satisfy the requirements for representative proceedings. The court also considered that the expiry of the limitation period was a relevant factor in favour of allowing the representative proceedings to continue, as it would otherwise prevent many potential claimants from pursuing their claims.

The Court of Appeal ordered that the appeal be allowed, the orders of the primary judge be set aside, and that Fostif be granted leave to proceed with the representative proceedings.