Hamilton v Meta Platforms, Inc (Leave to appeal stay and costs orders)
[2024] FCA 1078
•18 September 2024
FEDERAL COURT OF AUSTRALIA
Hamilton v Meta Platforms, Inc (Leave to appeal stay and costs orders) [2024] FCA 1078
File number(s): NSD 1158 of 2023 Judgment of: O'SULLIVAN J Date of judgment: 18 September 2024 Catchwords: PRACTICE AND PROCEDURE — application for leave to appeal from interlocutory decisions — where primary judge ordered that the proceedings be permanently stayed under s 23 of the Federal Court of Australia Act 1976 (Cth) and r 1.23 of the Federal Court Rules 2011 (Cth) — where the applicant sought an order under s 82(4) of the Competition and Consumer Act (Cth) (CCA) — where primary judge dismissed the applicant’s application for a No Adverse Costs Order — whether decision of primary judge is attended with sufficient doubt to warrant being reconsidered on appeal — whether the applicant would suffer substantial injustice if leave was refused — application for leave to appeal refused
COSTS — interlocutory application — where the applicant sought an order under s 82(4) of the CCA — application dismissed
Legislation: Competition and Consumer Act 2010 (Cth), ss 45(1)(b) and (c), 45AC, 45AD, 45AK, 80, 82, 82(1), (3)-(5), 87(1), 163A
Federal Court of Australia Act 1976 (Cth), Part IVA, ss 21, 22, 24(1A), 33ZE, 43(2)
Cases cited: Australian Competition and Consumer Commission v Yellow Page Marketing BV [2010] FCA 1218
Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666; 69 VR 28
Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; (1991) 33 FCR 397, 399
Dyczynski v Gibson (2020) 280 FCR 583; [2020] FCAFC 120
GLJ v The Trustees of the Roman Catholic Church of Dioceses of Lismore [2023] HCA 32; 97 ALRJ 857
Hamilton v Meta Platforms, Inc (Service out of Jurisdiction) [2022] FCA 681
Hamilton v Meta Platforms, Inc. [2023] FCA 1148 (Stay Decision)
Hamilton v Meta Platforms, Inc. [2023] FCA 1496 (Costs Decision)
House v The King (1936) HCA 40, (1936) 55 CLR 449
Jennings v Jaguar Land Rover Australia Pty Ltd [2024] FCAFC 62
NPP Australia Ltd v RippleLabs, Inc [2020] FCA 1237
Parkin v Boral (Class Closure) (2022) 291 FCR 116; [2022] FCAFC 47
R & B Investments Pty Ltd (Trustee) v Blue Sky (Reserved Question) [2024] FCAFC 89
Sekigawa v Minister for Immigration & Border Protection [2016] FCA 127
Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531, 553
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 98 Date of hearing: 14 August 2024 Counsel for the Applicant: The applicant appeared in person Counsel for the First Respondent: Mr M Darke SC with Ms K Lindeman Solicitor for the Respondents: Corrs Chambers Westgarth Counsel for the Second Respondent: Mr R Yezerski SC with Mr J Entwisle Solicitor for the Second Respondent: Herbet Smith Freehills ORDERS
NSD 1158 of 2023 BETWEEN: ANDREW PAUL STUART HAMILTON
Applicant
AND: META PLATFORMS, INC.
First Respondent
GOOGLE LLC
Second Respondent
ORDER MADE BY:
O'SULLIVAN J
DATE OF ORDER:
18 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.The applications for leave to appeal are refused.
2.The applicant’s interlocutory application filed 7 June 2024 for a no adverse costs order is refused.
3.The applicant is to pay the respondents’ costs as agreed or taxed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
O’SULLIVAN J:
The substantive proceedings the subject of this matter are brought as representative proceedings under Part IVA of the Federal Court of Australia Act 1976 (Cth).
On 10 June 2022, the Court granted leave to the applicant to serve Meta Platforms, Inc. (formerly Facebook Inc) and Google LLC, as first and second respondents respectively, in the United States of America: Hamilton v Meta Platforms, Inc (Service out of Jurisdiction) [2022] FCA 681.
Subsequently, Meta and Google, each filed interlocutory applications seeking orders that the substantive proceedings be permanently stayed (Stay Applications) or in the alternative an order that the proceeding not continue as a representative proceeding under Part IVA.
On 29 September 2023, the Court granted a permanent Stay of the proceedings with the proviso that the Stay did not prevent the claims the subject of the proceedings from being brought by the applicant or Group Members in another, differently constituted, proceeding: Hamilton v Meta Platforms, Inc. [2023] FCA 1148 (Stay Decision).
The primary judge was satisfied the proceeding should be permanently stayed for the reason that the applicant was in an intractable position of conflict with Group Members forming part of the representative proceedings and that to permit the proceeding to continue in its current form would bring the administration of justice into disrepute.
The Court also ordered the applicant to pay the respondents’ costs of the Stay Applications with leave to any party to apply to vary the costs order. The applicant applied to vary the costs order and in so doing, sought an order pursuant to s 82(4) of the Competition and Consumer Act2010 (Cth) that the applicant not be liable for the costs of any respondent to the proceedings regardless of the outcome or likely outcome of the proceedings, known as a No Adverse Costs Order.
On 29 November 2023, the Court dismissed the applicant’s application for a NACO: Hamilton v Meta Platforms, Inc. [2023] FCA 1496 (Costs Decision).
There are two matters before the Court:
(a)First, by an amended application for leave to appeal, the applicant seeks leave to appeal from the Stay Decision and the Costs Decision; and
(b)Second, after filing the amended application for leave to appeal, the applicant filed an interlocutory application in which he sought a NACO order pursuant to s 82(4) of the CC Act. The order sought on the interlocutory application is very wide and I deal with its terms later in these reasons.
The issues arising for determination are:
(a)Should the applicant be granted leave to appeal from the Stay Decision and/or the Costs Decision; and
(b)Should the Court grant the NACO order sought by the applicant in his interlocutory application.
It is for the reasons which follow that:
(a)The applications for leave to appeal the Stay Decision and Costs Decision are refused; and
(b)The interlocutory application for a no adverse costs order is refused.
Principles - Leave to appeal
There is no issue that both the Stay Decision and the Costs Decision are interlocutory decisions such that any appeal requires leave: s 24(1A) FCA Act.
In order to obtain a grant of leave to appeal from an interlocutory decision, an applicant must demonstrate that:
(a)The decision at first instance is attended with sufficient doubt to warrant being reconsidered on appeal; and
(b)The applicant would suffer substantial injustice if leave was refused: Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; (1991) 33 FCR 397, 399.
The two criteria are cumulative and both limbs need to be satisfied: Sekigawa v Minister for Immigration & Border Protection [2016] FCA 127, [12] (Flick J); Jennings v Jaguar Land Rover Australia Pty Ltd [2024] FCAFC 62, [6] (Murphy, Thawley, Stewart JJ).
Both the Stay Decision and the Costs Decision entailed the exercise of a discretion, such that the applicant must demonstrate for the purpose of criteria (a) that the exercise of that discretion is attended with sufficient doubt to warrant it being reconsidered on appeal when considered against the principles set out in House v The King (1936) HCA 40, (1936) 55 CLR 449.
The applicant submitted that rather than the discretionary standard, in the case of the Stay Decision, the approach is the correctness standard: Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531, 553.
In Jennings at [7] their Honours said:
In respect of discretionary decisions, an applicant for leave to appeal will generally need to demonstrate that the doubts as to the correctness of the decision involve errors or matters of principle of the kind described in House v The King (1936) 55 CLR 499, 504-505. It will not be sufficient to merely demonstrate that the discretion could or even should have been exercised differently: Construction, Forestry, Mining and Energy Union v Australian Competition and Consumer Commission [2016] FCAFC 97; 242 FCR 153 at [16]-[17] (Dowsett, Tracey and Bromberg JJ). Even if the decision below is not discretionary in the House v The King sense, but instead evaluative, it will still be necessary to show that sufficient doubt is shown to warrant intervention: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424 at [25] (Allsop J (as his Honour then was), with whom Drummond and Mansfield JJ agreed); Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; 261 FCR 301 (Allsop CJ at [4] to [10], Perram J at [45] to [54]).
The respondents submit that whether or not the matters of principle described in House v The King in the passage set out above, or an evaluative approach involving the correctness of the decision (Warren) are applied, nonetheless it is still necessary to show that sufficient doubt is shown to warrant intervention.
Whereas I accept the respondents’ submission, nonetheless it is clear that both the Stay Decision and the Costs Decision involved the exercise of discretion such that errors or matters of principle of the kind identified in House v The King must be established.
The primary judge’s reasons – Stay Decision
The primary judge referred to her reasons in Hamilton (Service out) and assumed familiarity with those reasons for the purposes of the Stay Decision. These reasons proceed on the same basis.
Hamilton (Service out) was an ex parte application. In accordance with authority, the primary judge did not embark upon a substantive assessment of the merits of the claims pleaded: Australian Competition and Consumer Commission v Yellow Page Marketing BV [2010] FCA 1218 at [23]-[26] (Gordon J when a member of this Court); NPP Australia Ltd v RippleLabs, Inc [2020] FCA 1237 at [26], [27] (Burley J).
The nature of the proceedings
Her Honour summarised the nature of the proceedings in Hamilton (Service out) at [3], [11]-[25], [27]:
(a)The applicant’s claims can be traced to the period between 29 January 2018 and about July 2018, during which it is alleged that Meta and Google introduced measures which prohibited or substantially restricted advertising related to cryptocurrency and, more broadly, the cryptocurrency industry. The applicant seeks relief in respect of alleged contraventions of the CC Act (including restrictive trade practices, misleading and deceptive conduct and accessorial liability) and tortious conduct (including deceit, malicious falsehood and conspiracy): at [3];
(b)The applicant alleges that Meta is a substantial supplier and acquirer of online advertising services, in Australia and globally, via its products, Facebook, Instagram, Messenger, and third-party websites and applications. He alleges Facebook’s Annual Reports from 2017 to 2019 demonstrate that Facebook derives substantial revenue from selling advertising placements to marketers which can appear in multiple places: at [11];
(c)The applicant also alleges that Meta is a substantial supplier and acquirer of online communications services, in Australia and globally: at [12];
(d)The applicant alleges that Google is a substantial supplier and acquirer of online advertising services, in Australia and globally: at [13];
(e)The applicant also alleges that Google is a substantial supplier of online communications services, in Australia and globally: at [14];
(f)The applicant alleges that each of the respondents, respectively, have standard contracts with all persons who use their services. He alleges that Meta and Google use a “clickwrap” mechanism as part of their standard contracts with users whereby users are deemed to have accepted the terms and conditions by signing up to use the services and that those terms and conditions are updated or amended: at [15];
(g)Further, the applicant alleges that each of the respondents had standard terms in relation to the supply and/or acquisition of online advertising content and services to, or from, them which apply to all their advertising customers, and because Meta and Google acquire online advertising services from each other they are respectively parties to each other’s standard contracts relating to online advertising services: at [16];
(h)The applicant relies on s 45AC of the CC Act to contend that Meta and Google respectively should be taken to be a party to the standard contracts to which their related companies are party and that Facebook Ireland Limited and Google Australia Pty Ltd are relevantly related to Meta and Google respectively: at [17];
(i)The applicant alleges that Meta and Google supply and acquire online advertising services to and from each other, and to and from persons who are parties to their respective standard contracts. In this way, he contends that there are numerous contracts between Meta and Google respectively and other persons in relation to the supply and/or acquisition of advertising services: at [18];
(j)Central to the Part IV of the CC Act claims is the applicant’s contention that between 29 January 2018 and July 2018, Meta and Google respectively, progressively introduced measures that prohibited or substantially restricted cryptocurrency‑related advertising (Ad Ban Provisions) which he alleges were incorporated into and formed part of the respondents’ respective standard contracts for their users and for suppliers and acquirers of their online advertising services. The applicant alleges the consequence of that was a substantial downturn in many, if not all, parts of the cryptocurrency industry. The applicant alleges that many persons supplying cryptocurrency-related goods and services were negatively impacted by the Ad Ban Provisions: at [19], [20];
(k)The applicant’s overarching contention is that the Ad Ban Provisions caused a substantial reduction in advertising opportunities for cryptocurrency-related goods and services and has resulted in the loss of a “substantial economic benefit” from the cryptocurrency industry, which has in turn caused Group Members to suffer loss or damage, of which his personal claim is an example: at [22];
(l)In the context of the Part IV CC Act claims, the applicant alleges that the Ad Ban Provisions are exclusionary cartel provisions; that they had the effect of substantially lessening competition in markets for cryptocurrencies; that the introduction and implementation of the Ad Ban Provisions were relevantly part of a concerted practice and that in:
(i)Giving effect to Ad Ban Provisions, satisfied each of the elements of s 45AD, in their respective standard contracts with users such that each of the respondents contravened s 45AK of the CC Act;
(ii)Giving effect to provisions in their respective standard contracts with users such that each of the respondents acted in contravention of s 45(1)(b) of the CC Act; and/or
(iii)Engaging in a concerted practice, which had the effect of substantially lessening competition in the market(s) for cryptocurrencies in Australia, thereby contravening s 45(1)(c) of the CC Act: at [24], [25].
(m)The applicant claims relief in the form of damages, including aggravated damages and exemplary damages, under s 82(1) of the CC Act and s 22 of the FCA Act respectively; declaratory relief under s 163A of the CC Act and/or s 21 of the FCA Act; a permanent injunction under s 80 of the CC Act requiring the respondents to cease the alleged contravening conduct; and other relief under s 87(1) of the CC Act, including a public apology and the provision of certain services to Group Members at no cost for a period of time equal to the period of the alleged contravening conduct: at [27].
The funding arrangements
The primary judge addressed the funding arrangements in detail in the Stay Decision. There is no challenge to her Honour’s description of these arrangements.
The applicant is a solicitor who overseas in Israel and is admitted to practice in New South Wales. He holds a practicing certificate as a corporate legal practitioner with his principal place of practice being JPB Liberty Pty Ltd
The primary judge observed that the proceeding is funded by JPB Liberty Pty Ltd, a company of which the applicant is the sole shareholder, one of two Directors and the Chief Executive Officer. The other Director, Maree Carmel Hamilton, is a non-Executive Director and the applicant’s mother.
The primary judge recorded that the applicant brings the substantive proceedings on his own behalf and on behalf of Group Members as defined in the further amended originating application.
The primary judge referred to the formal, written Litigation Funding Agreement which had been entered into between JPB and approximately 650 Group Members which were defined in the LFA as “Funded Class Members”.
Her Honour noted the definition of Group Members was very broad and is such as to cover a large and geographically diverse group of persons. That is because the definition includes persons who “owned, controlled or had legal entitlements whose value was based on the price of” 33 specified crypto currencies during the period 29 January 2018 to the present.
The funding arrangements involve JPB issuing crypto-tokens known as “Sue Facebook Tokens” (SUFB Tokens) in return for financial and non-financial contributions to the litigation. The issue of the SUFB Tokens is entirely in the discretion of JPB, and therefore the applicant.
At least 48% of the SUFB Tokens on issue are held by the applicant or persons associated to him. This does not include the 2 million tokens held by JPB, which the applicant has indicated will be “burnt” upon resolution of the proceeding.
SUFB Tokens give their holders a right to 25% of the proceeds of the proceeding. A further 5% commission is payable to JPB itself. These entitlements presently arise from the LFA with the approximate 650 Group Members, however, the applicant has signalled an intention to seek a common fund order binding all Group Members to this arrangement.
The respondents’ contentions before the primary judge
The primary judge summarised the respondents’ contentions as being that to permit the proceeding to continue would be to bring the administration of justice into disrepute for two reasons:
(a)First, the applicant, although a solicitor, was not acting in that capacity as the representative applicant such that he was self-represented. Under those circumstances he was in an intractable position of conflict with Group Members given that not only is he the representative applicant, he is also the sole shareholder, Chief Executive Officer and Director of the funder - JPB; and
(b)Second, through the issue of SUFB tokens to him by JPB as a reward for his non-financial contributions to the litigation, the applicant’s interest in the proceedings has been structured in a fashion which, in substance, results in him receiving contingency fees, which is prohibited.
The applicant’s various roles
In reaching the conclusion that the proceedings as presently constituted should be permanently stayed, the primary judge enumerated the several roles the applicant fills in connection with the proceedings:
(a)First, albeit residing overseas, as the representative applicant in the proceedings;
(b)Second, as a self-represented litigant. The primary judge noted that the applicant specifically eschewed any suggestion that he was acting as a solicitor or barrister for anyone in the proceedings. Indeed, there is no solicitor on the record;
(c)Third, as a sole shareholder of JPB;
(d)Fourth, as one of two Directors of JPB and JPB’s Chief Executive Officer. As noted above, the remaining Director is a non-Executive Director and is the applicant’s mother;
(e)Fifth, as the controller of two “Hive accounts”, described by the applicant as a “decentralised, block chain based content sharing platform akin to a social media network” and one of the main ways in which the applicant communicates with Group Members about the proceedings;
(f)Sixth, as “Representative” under the LFA entered into between JPB as litigation funder on the one part and the approximately 650 Funded Class Members on the other. In that context, the primary judge noted that in addition to the applicant having control over the conduct of the proceedings as the representative applicant, in his role as the “Representative” under the LFA, the applicant also has the express authority to control the conduct and direction of the proceeding at any stage. That includes the determination of which claims will be pursued; and
(g)Seventh, as the sole arbiter in relation to the issue of SUFB tokens.
The primary judge addressed the JPB Conflict of Interest Policy (CIP). Her Honour noted that although both it and the LFA refer to the role of “lawyer”, there is no solicitor on the record, nor are lawyers presently retained to fulfil the role of “lawyer”. That had the consequence that “Mr Hamilton is controlling and directing the way in which the proceeding is conducted on the applicant’s side of the record”: Reasons [19].
The primary judge summarised the effect of the analysis of the various roles the applicant occupies and the features of the LFA in the following terms: at Reasons [27]:
Based on the above analysis, it is plain that Mr Hamilton has a financial interest in the litigation that significantly exceeds his own claim for relief in the proceeding. It is also plain that Mr Hamilton is able to exert control over the way in which the claims pursued in the proceeding are framed and resourced, and whether individual categories of claims are pursued or continued in the proceeding. Finally, Mr Hamilton also has significant control over the ultimate distribution of a substantial proportion of any litigation proceeds because he has complete control over the issuance of SUFB Tokens and the terms on which the tokens are issued for financial and non-financial contributions.
As part of her consideration, the primary judge emphasised the respondents’ contention that the granting of a permanent stay did not work so as to prevent the respondents from being pursued in other properly constituted proceedings, including different representative proceedings. Her Honour observed that the commencement of a representative proceeding has the effect that any limitation period ceases to run and does not begin to run again unless either a Group Member opts out of the proceedings or the proceedings (including any appeals) are determined without finally disposing of the Group Member’s claim: s 33ZE of the FCA Act.
Grounds in support of the application for leave
The applicant’s grounds in support of the application for leave, whilst expressed differently in the draft notice of appeal, nonetheless are to a significant extent mirrored in those grounds. There are 17 grounds in the draft notice of appeal, one of which (ground 15) refers to the Costs Decision. The remainder may be grouped conveniently into three central grounds:
(a)The primary judge failed to apply the correct principles in determining the circumstances in which a permanent stay may be granted;
(b)The primary judge erred in finding that the applicant owed a duty to Group Members not to act contrary to their interests in conducting the proceeding; and
(c)The primary judge erred in finding that there was a real potential risk for the applicant’s interests to conflict with those of Group Members.
Ground one – the primary judge failed to apply the correct principles in determining the circumstances in which a permanent stay may be granted
First, the applicant contends that the recent decision in GLJ v The Trustees of the Roman Catholic Church of Dioceses of Lismore [2023] HCA 32; 97 ALRJ 857 demonstrates that the primary judge applied the wrong test in determining the circumstances in which a permanent stay may be granted. He submits that GLJ establishes that a party seeking a permanent stay must demonstrate that an actual abuse of process will occur or that the administration of justice will be brought into disrepute, rather than the mere risk of such abuse. The applicant submits that a decision to grant a permanent stay will automatically satisfy the “substantial injustice” limb of Décor because “if the decision is wrong, injustice is wrought and the administration of justice is brought into disrepute”.
In its response to each ground, the second respondent adopts the submissions of the first respondent.
The respondents respond to this submission in two ways. First, the respondents submit that the applicant mischaracterises the basis upon which the primary judge ordered a permanent stay. The respondents submit that the primary judge did not order a permanent stay on the basis that the proceeding below gave rise to a ‘mere risk’ of the administration of justice being brought into disrepute. Rather, the primary judge was satisfied that the proceeding would bring the administration of justice into disrepute and undermine the integrity of the Court’s processes in relation to representative proceedings. That is because there is the very real potential for conflicts of interest to arise and influence the applicant’s conduct in ways that are to the detriment of Group Members.
Second, the respondents submit that nothing in GLJ casts doubt on the authorities that the primary judge relied on in determining whether a permanent stay should be granted. The principles that inform the grant of a permanent stay were set out by the primary judge, none of which were doubted by the High Court in GLJ. In particular, the respondents note that GLJ dealt with whether a permanent stay ought to have been granted on the ground that a trial would necessarily be so unfair or oppressive to the defendant that it would constitute an abuse of process. They submit that this is one particular species of case in which a permanent stay may be granted, but it is not the only one.
The respondents submit that these principles provided an ample basis for the primary judge to conclude that a stay should be granted where the effect of the stay was not to permanently shut out the applicant or Group Members from agitating their claims.
I accept the respondents’ submissions. The primary judge embarked upon a careful analysis of the authorities and applied the principles accordingly. The applicant’s reliance on GLJ is misplaced.
Ground two – the primary judge erred in finding that the applicant owed a duty to Group Members not to act contrary to their interests in conducting the proceeding
The applicant submits that the primary judge erred in concluding that as the applicant in representative proceedings, he owed a duty not to act contrary to the interests of Group Members and that such duty existed whilst the proceedings were on foot. He submits that this duty “simply does not exist” and is contrary to the decision of the Full Court in R & B Investments Pty Ltd (Trustee) v Blue Sky (Reserved Question) [2024] FCAFC 89. The applicant submits that Blue Sky establishes that there is only a duty at the time of any application to the Court for the approval of a settlement relating to Group Members’ claims generally, or at the time of seeking to obtain a judgment for the benefit of a Group Member on an individual claim, rather than a duty throughout the proceedings.
The applicant submits further that the primary judge’s finding of a duty is inconsistent with the decision in Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666; 69 VR 28, cited by the Full Court in Blue Sky. The applicant submits that this decision makes clear that there is no basis for duties owed by a representative applicant to be broader than those of the representative applicant’s lawyers.
Still further, the applicant submits that there is an “inherent tension” between the duty imposed by the primary judge on representative applicants and the public policy objectives of Part IVA of the FCA Act. This submission is premised on the applicant’s assertion that the duty is an “onerous obligation” which would cause “fewer people” to become representative applicants, thereby undermining the class actions regime.
The respondents submit this ground should be rejected on three bases.
First, the respondents submit that in finding that the applicant owes a duty to Group Members, the primary judge considered the authorities carefully and her Honour’s approach was wholly orthodox.
The respondents highlight that the primary judge observed that the Full Court recognised the representative applicant’s duty in Parkin v Boral (Class Closure) (2022) 291 FCR 116; [2022] FCAFC 47 at [126] (Murphy and Lee JJ) without limiting it to particular aspects of, or stages in, the conduct of the litigation, such as settlement approval or class closing. They refer to the primary judge considering Dyczynski v Gibson (2020) 280 FCR 583; [2020] FCAFC 120 at [209], where Murphy and Colvin JJ noted that the representative applicant in the conduct of Part IVA proceedings has the conduct of those proceedings on behalf of the class members and owes fiduciary duties to the group members. It is for this reason that the respondents submit that the primary judge’s approach was conservative, and that the applicant’s contention should be rejected.
I accept the respondents’ submission.
The primary judge gave consideration to Dyczynski. Her Honour concluded that in circumstances where the applicant is acting in person and also exercising rights conferred on him by the LFA such that he is able to bind Group Members, he owes a duty to Group Members which is at least co-extensive with the duties of lawyers to non-client group members. With respect, her Honour was correct in her analysis of the applicant’s position and the consequent duty he owed to Group Members.
Second, the respondents assert that the applicant’s reliance on Blue Sky is misplaced. In that matter, the Court was there concerned with the question of whether a lawyer retained by a representative applicant owes group members fiduciary duties, particularly having regard to the circumstance that the lawyer has a retainer with the representative applicant, but not with group members, and also has obligations under professional conduct rules. The respondents assert that the applicant’s reliance on Bolitho is incorrect for the same reasons.
I accept that submission. The distinction Mr Hamilton seeks to make is without any sensible basis and attempts to create a distinction where in reality none exists.
Third, the respondents maintain that there is no “inherent tension” between imposing the duty on representative applicants and the public policy objectives of Part IVA. They submit that the duty of a representative applicant not to act in a way that is contrary to group members’ interests is not an onerous obligation, because the representative applicant’s interests will be aligned with those of group members in respect of common issues in ordinary class actions.
I accept that submission and in particular I reject the notion of an “inherent tension” between the imposition of a duty on representative applicants and the public policy objectives of Part IVA.
Ground three – the primary judge erred in finding that there was a real potential for the applicant’s interests to conflict with those of Group Members
The applicant contends that the primary judge erred in finding that there was a real potential for his interests to conflict with those of Group Members as their claims were not co-extensive. The applicant submits that the primary judge should, instead, have found that those interests were “identical”.
The applicant submits that the primary judge erred in using “a commonplace thing” – conflict of interest – to justify a measure that is only to be used in the most exceptional circumstances. He again relies on Blue Sky at [67], to submit that conflicts of interest are an inevitable by-product where a self-appointed representative applicant’s individual claim is the vehicle through which common questions are tried.
The respondents submits that this submission is unmeritorious. They submit that the applicant’s claim is not co-extensive with the claims of all other Group Members. In particular, they refer to the allegation that Mr Hamilton’s alleged losses are said to arise from his own activities purchasing and mining cryptocurrency and attempting to establish a successful cryptocurrency consulting practice. The respondents observe that in contrast, the claims of the Group Members are much broader and include losses allegedly suffered by cryptocurrency exchanges and mining hardware manufacturers, neither of which are part of the applicant’s claims.
I accept that submission. Whereas there will be common issues, it is apparent there are also issues specific to the applicant.
The respondents submit further that Mr Hamilton’s submission is both a misrepresentation of the primary judge’s decision and the decision in Blue Sky. They observed the primary judge expressly recognised that it was uncontroversial that conflicts of interest may arise in funded representative proceedings. However, the primary judge’s concern was not with the mere possibility of conflict, but with the highly unusual constitution of this proceeding that meant that the conflicts were not being managed, and not manageable. It is on that basis, that the respondents submit that Blue Sky does not assist the applicant.
I accept that submission. After considering the nature of the relationship between the applicant and Group Members, the primary judge noted: at Reasons [130]:
It bears emphasis at the outset that the potential for the inadequate management of conflict of interests arising between Mr Hamilton and Group Members is particularly acute in circumstances where Mr Hamilton denied in his written submissions that he owed any fiduciary duties to Group Members, denied that was any “single real conflict of interest arising out of the litigation funding arrangement in these proceedings” and submitted during the hearing that to the extent that he owed a statutory duty to Group Members it was limited to decisions affecting substantive decisions only and was secondary to the pursuit of his own primary claim as the representative applicant.
The primary judge continued by identifying five distinct circumstances in which there was the potential for conflict.
First, in relation to which claims are pursued and how those claims are resourced. Her Honour analysed carefully this scenario before finding that to allow the representative proceeding to be conducted as presently constituted created a real risk of bringing the administration of justice into disrepute and undermining the integrity of the Court’s processes.
Second, in relation to settlement of the proceeding. The primary judge found that the CIP highlighted rather than cured the conflict between the applicant’s interests as owner of JPB and those of Group Members in relation to settlement.
Third, arising from Mr Hamilton’s interest as owner and controller of JPB. The primary judge found that for so long as the applicant was the representative applicant, he was necessarily in a position of conflict between his interests as representative applicant, his interests as the owner of JPB, and his duties as a director of JPB. The primary judge found: Reasons [156] that:
For so long as Mr Hamilton is the Representative, the representative’s interests will be aligned with those of JPB Liberty, rather than Group Members with the result that Group Members’ interests are wholly unprotected in circumstances where JPB Liberty is considering ceasing funding the proceeding.
Fourth, arising from Mr Hamilton’s interest as a substantial holder of SUFB Tokens, which resulted in a real potential for the applicant’s interests as a SUFB Token holder to conflict with the interests of Group Members.
Fifth, arising from Mr Hamilton’s discretionary power to issue SUFB Tokens coupled with his direct and indirect SUFB Token Holders. The primary judge identified the potential for the applicant to issue tokens to himself and his associates at an undervalue was real, particularly in circumstances where the interests of Group Members’ right of participation in the proceeds of litigation was of a lesser order of priority than the rights of SUFB Token Holders.
It is important to keep in mind that an essential part of the Full Court’s reasoning in Blue Sky was that any conflicts that may arise from the proposed solicitors’ common fund order could be managed if “those with duties recognise the existence of the conflict and do their job” such that “those conflicts are managed (with the help of an independent bar) and the interests of group members are protected by the supervision of the Court”: Blue Sky at [68].
The respondents’ contention that this is precisely the form of protection that the primary judge found was absent in the present case, should be accepted.
The primary judge considered carefully each of the potential conflicts of interest and in each case was correct to find the potential conflicts.
It is for the above reasons that I do not consider the Stay Decision is attended with sufficient doubt to warrant it being reconsidered on appeal.
Further, because the Stay Decision does not preclude the applicant or any of the Group Members from pursuing the proceedings, differently constituted, there is in any event no substantial injustice suffered if leave is refused.
The Costs Decision
On 29 September 2023, the primary judge had ordered by Order 3 that the applicant pay the respondents’ costs of the Stay Application.
Subsequently, the applicant applied to vary Order 3. The primary judge dismissed that application in the Costs Decision.
In dismissing the application to vary Order 3, the primary judge identified the relevant principles for an award of costs. Those principles are not challenged.
Next, the primary judge dealt with Mr Hamilton’s application for a NACO before setting out the legislative provisions under s 82 of the CC Act.
The primary judge first considered Mr Hamilton’s contention that the general presumption that costs follow the event is displaced by the NACO regime in s 82 of the CC Act.
The primary judge’s consideration of Mr Hamilton’s application was conducted on the assumption, without finding, that he met the criteria in s 82(5) of the CC Act.
Her Honour found that Mr Hamilton’s reliance on his extant application for a NACO as ousting the general presumption that costs follow the event to be misplaced explaining, correctly, that the making of a NACO application, per se, does not limit the Court’s broad discretion under s 43(2) of the FCA Act so as to displace the general presumption.
Having dealt with that submission, the primary judge addressed the Court’s discretion under s 43(2) of the FCA Act, considering each of the six issues identified by the parties as going to the exercise of the discretion in the circumstances.
The primary judge considered each of the issues carefully concluding that the balance weighed heavily in favour of awarding the respondents their costs and that the usual costs order should be made in the circumstances.
The primary judge’s decision to exercise her discretion is not attended by sufficient doubt to warrant the Costs Decision being reconsidered on appeal.
That being the case, there is no need to consider the second limb of the test which is that the applicant would suffer substantial injustice if leave was refused, however in any event, I am not satisfied that would be the case. The costs order is orthodox and is a risk any litigant takes.
Interlocutory application for a NACO
Mr Hamilton applies under s 82(3) of the CC Act for the Court to make an order pursuant to s 82(4) that he not be liable for any of the respondents’ costs regardless of the outcome in respect of this application for leave to appeal or any further appeal.
The application is very broad and seeks an order that:
Under section 82(4) of the Competition and Consumer Act 2010 (Cth) that he is not liable for the costs of any respondent to these proceedings NSD1158/2023, and any further special leave application or appeal to the High Court, regardless of the outcome or likely outcome of these proceedings.
In so far as Mr Hamilton seeks a NACO in relation to, “… any further special leave application or appeal to the High Court, regardless of the outcome or likely outcome of these proceedings”, that is not something this Court can address and I decline to do so.
As to the matters before this Court, the applicant submits that the legislative purpose of s 82 of the CC Act is to encourage potential applicants to bring compensation claims in circumstances which meet the criteria in s 82(5). Mr Hamilton asserts that this purpose is particularly for small businesses and that his businesses, crypto-mining and consulting activities, constitute small businesses.
Mr Hamilton submits that the criteria in s 82(5) are met because his claims raise many reasonable issues for trial at a prima facie level (s 82(5)(a)); his claims raise issues that are not only significant for the applicant but to the general Australian public (s 82(5)(b)); and the disparity between the financial positions of Mr Hamilton and the respondents is such that the possibility of a costs order in favour of the respondents would have the effect of discouraging him from pursuing the claims at all (s 82(5)(c)). On that basis, the applicant submits that the Court should exercise its discretion to grant a NACO.
The respondents accept that the criterion appearing in s 82(5)(c) is made out. However, they submit that the applicant’s NACO application should be refused for three reasons.
First, the respondents contend that Mr Hamilton misconceives the standard for “a reasonable issue for trial”. They submit that the use of the phrase “reasonable issue for trial” requires Mr Hamilton to demonstrate a higher prospect of success than a prima facie case.
I am not sure that is correct, but in any event, for the reasons which follow, I do not need to decide this point.
Second, the respondents contend that the sole beneficiaries of the NACO would be the applicant and his litigation funding vehicle JPB, as Group Members have no exposure to costs. Further, they submit that it is not part of the object of s 82(4) to protect commercial litigation funders against the costs and risks inherent in the business of litigation funding for profit.
I accept that submission. Although, Mr Hamilton describes his funding model as a self-help mechanism, I have no hesitation in rejecting that description. It is apparent from the funding model that it is a commercial vehicle.
Third, the respondents submit that the NACO should be refused on discretionary grounds. The respondents assert that the primary judge’s decision to permanently stay the proceedings is not attended with sufficient doubt to warrant being reconsidered on appeal, and that having regard to the possible outcomes of the application for leave to appeal, a NACO is either inappropriate or has no work to do.
I have found that the primary judge’s decision to permanently stay the proceedings is not attended with sufficient doubt to warrant it being reconsidered on appeal. I accept the respondents’ submission and consider that in all the circumstances, a NACO is neither appropriate nor does it have any work to do going forward. Insofar as such an order might apply to costs that have been incurred to date, I have already found that the Cost Decision is not attended with sufficient doubt to warrant it being reconsidered on appeal.
Conclusion
The application for leave to appeal the Stay Decision is refused.
The application for leave to appeal the Costs Decision is refused.
The interlocutory application for a NACO is refused.
There is no reason why the usual order for costs should not follow.
I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Sullivan. Associate:
Dated: 18 September 2024
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