FEDERAL COURT OF AUSTRALIA
Gill v Ethicon Sàrl (No 2) [2019] FCA 177
File number: NSD 1590 of 2012 Judge: LEE J Date of judgment: 4 February 2019 Catchwords: REPRESENTATIVE PROCEEDINGS – application for “hard closure” of the class – appropriateness of “hard closure” orders – possibility of “soft closure” – likelihood of settlement offer being made to resolve whole of proceedings prior to judgment being delivered – interlocutory application dismissed – filing of large amounts of irrelevant material relevant to costs order Legislation: Evidence Act 1995 (Cth) s 131
Federal Court of Australia Act 1976 (Cth) Pt VB, s 33V, s 33Z(1)(f), s 33ZF
Cases cited: Courtney v Medtel Pty Limited [2002] FCA 957; (2002) 122 FCR 168
Dillon v RBS Group (Australia) Pty Limited [2017] FCA 896; (2017) 252 FCR 150
Ethicon Sàrl v Gill [2018] FCAFC 137
Jones v Treasury Wine Estates Limited (No 2) [2017] FCA 296
McMullin v ICA Operations Pty Ltd (1998) 84 FCR 1
Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98; (2017) 252 FCR 1
Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited [2016] FCAFC 148; (2016) 245 FCR 191
Regent Holdings Pty Ltd v State of Victoria [2012] VSCA 221; (2012) 36 VR 424
Morabito, V, “Judicial Responses to Class Action Settlements that Provide no Benefits to some Class Members” (2006) 32 Monash University Law Review 75
Date of hearing: 4 February 2019 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 37 Counsel for the Applicants: Dr D E Graham SC with Mr A Naylor Solicitor for the Applicants: Shine Lawyers Counsel for the Respondents: Mr S Finch SC with Mr D T W Wong Solicitor for the Respondents: Clayton Utz ORDERS
NSD 1590 of 2012 BETWEEN: KATHRYN GILL
First Applicant
DIANE DAWSON
Second Applicant
ANN SANDERS
Third Applicant
AND: ETHICON SÁRL
First Respondent
ETHICON INC
Second Respondent
JOHNSON & JOHNSON MEDICAL PTY LIMITED ACN 000 160 403
Third Respondent
JUDGE:
LEE J
DATE OF ORDER:
4 FEBRUARY 2019
THE COURT ORDERS THAT:
1.The interlocutory application by the respondents dated 12 December 2018 be dismissed.
2.The respondents pay 75% of the applicants’ costs of the application, those costs not to include costs of the preparation of the confidential affidavit of Rebecca Lee Jancauskas dated 30 January 2019 (which was not read).
3.The applicants’ solicitors are to file and serve an affidavit setting out the lump sum costs of the applicants calculated on the basis referred to at Order 2, above.
4.There be a further case management hearing which is to be conducted on a date to be fixed and the parties are to communicate to the Associate to Justice Lee mutually convenient dates when they believe the case management hearing could be most usefully conducted.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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- Case
- [2019] FCA 177
- Decision Date
CaseChat Overview and Summary
The legal issue before the court was whether it was appropriate to grant the respondents' application for a "hard closure" of the class action, or whether a "soft closure" would be more suitable. The court needed to consider the possibility of a settlement offer being made to resolve the entire proceeding before judgment was delivered, and whether a "hard closure" would facilitate such a settlement. The court also had to consider the implications of a "hard closure" on the rights of the group members and the principles underlying the class action regime.
The court ultimately dismissed the respondents' application for "hard closure" and found that a "soft closure" was more appropriate. The court reasoned that the possibility of a settlement offer being made to resolve the entire proceeding before judgment was a significant factor in favour of a "soft closure". The court noted that the respondents had not made any decision to make a further offer to the "RP Group Members", and that any such offer would only be in relation to a subset of group members and part of their claims. The court also considered the principles underlying the class action regime, which emphasise the opt-out model and the entitlement of group members to share in the fruits of a subsequent judgment without being required to indicate their desire to participate in the proceeding.
The court made several orders in relation to the case. The interlocutory application by the respondents was dismissed, and the respondents were ordered to pay 75% of the applicants' costs of the application. The applicants' solicitors were required to file and serve an affidavit setting out the lump sum costs of the applicants. A further case management hearing was scheduled to be conducted on a date to be fixed, and the parties were required to communicate to the Associate to Justice Lee mutually convenient dates for the hearing.
Orders
Orders of the court
1. The interlocutory application by the respondents dated 12 December 2018 be dismissed.
2. The respondents pay 75% of the applicants’ costs of the application, those costs not to include costs of the preparation of the confidential affidavit of Rebecca Lee Jancauskas dated 30 January 2019 (which was not read).
3. The applicants’ solicitors are to file and serve an affidavit setting out the lump sum costs of the applicants calculated on the basis referred to at Order 2, above.
4. There be a further case management hearing which is to be conducted on a date to be fixed and the parties are to communicate to the Associate to Justice Lee mutually convenient dates when they believe the case management hearing could be most usefully conducted.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
The respondents in this class action seek a “hard closure” of the class. In the lingua franca of Part IVA practitioners, a “hard closure” is a closure of the class which extinguishes a group member’s rights to share in the fruits of a subsequent judgment unless the class member takes steps to register in the proceeding. By way of contrast, a so-called “soft closure”, refers to orders that are made to facilitate settlement, which provide for group members to come forward and register by a particular date (registration date) in order to participate in a settlement, provided such settlement takes place by a specified date in the future (usually a date chosen to allow enough time for a scheduled mediation to take place and for any prospective s 33V application to be determined) (specified date). All group members become bound by the settlement, but any group member who does not register by the registration date is barred from participating in the settlement. If there is no settlement, the closure is temporary (or “soft”), in that the class closure order is then spent and the class, as it were, “springs” open upon the passing of the specified date. This allows group members who fail to register by the registration date to continue to participate in the class action because their rights have not been extinguished by reason of a want of registration. Class closure orders have been controversial. Aspects of the practice have been referred to by a leading expert in class actions, Professor Morabito, as “grossly unsatisfactory”. Professor Morabito contends that it fails to pay sufficient regard to the opt-out model adopted by Part IVA which has, at its heart, the notion that persons who fall within the description of the group will be included in the class action and be entitled to receive whatever relief is obtained by the group, without being required to indicate their desire to participate in the proceeding: see Morabito, V, “Judicial Responses to Class Action Settlements that Provide no Benefits to some Class Members” (2006) 32 Monash University Law Review 75 at 103-104. Despite this controversy, “soft” class closure orders have become common. Their rationale, as the Full Court explained in Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98; (2017) 252 FCR 1 at 22 [75], is that:… a requirement for class members to register their claims will facilitate settlement, because it allows both sides to have a better understanding of the total quantum of class members’ claims, permits the settlement amount to be capped by reference to the number of class members, and assists in achieving finality (to the extent the Pt IVA regime permits): see Grave D, Adams K and Betts J, Class Actions in Australia (2nd ed, Lawbook Co, 2012) at [14.410]. A class closure order that precludes class members, who neither opt out nor register, from sharing in a subsequent settlement may facilitate settlement, and therefore be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding.