Southernwood v Brambles Ltd

Case [2019] FCA 1021

FEDERAL COURT OF AUSTRALIA

Southernwood v Brambles Limited [2019] FCA 1021

File number: VID 972 of 2018
Judge: MURPHY J
Date of judgment: 28 June 2019
Catchwords: REPRESENTATIVE PROCEEDINGS – two overlapping open securities class actions against the same respondent making the same claims on behalf of the same class members – parties seeking different orders to deal with the multiplicity of proceedings – respondent seeks permanent stay of one proceeding, one applicant seeks consolidation of the proceedings, the other applicant seeks orders for cooperation between the applicants - available case management options for competing class actions – consolidation of proceedings ordered notwithstanding absence of agreement between the applicants – common fund order made
Legislation: Federal Court of Australia Act 1976 (Cth) ss 33ZF, 37AF, 37AG, 37M
Cases cited:

Blairgowrie Trading Limited & Another v Allco Finance Group Ltd (recs and mgrs appointed) (in liquidation) (No 3) [2017] FCA 330; (2017) 118 ACSR 614

Brewster v BMW Australia Ltd [2019] NSWCA 35; (2019) 366 ALR 171

Buses and 4WD Hire Pty Ltd v Oz Snow Adventures Pty Ltd [2016] NSWSC 1017

Cantor vAudi Australia Pty Ltd (No 2) [2017] FCA 1042

Carnie v Esanda Finance Corp Ltd (1996) 38 NSWLR 465

Impiombato v BHP Billiton Ltd (No 2) [2018] FCA 2045

Johnson Tiles Pty Ltd v Esso Australia Limited (1999) FCA 56; (1999) 56 ATPR 41-679

Kirby v Centro Properties [2008] FCA 1505; (2018) 253 ALR 65

Lewis v Daily Telegraph (No 2) [1964] 2 QB 601

McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd [2017] FCA 947

Money Max Int Pty Ltd v QBE Insurance Group Ltd [2016] FCAFC 148; (2016) 245 FCR 191

Pearson v State of Queensland [2017] FCA 1096

Perera v GetSwift Limited [2018] FCA 732; (2018) 357 ALR 586

Perera v GetSwift Limited [2018] FCAFC 202; (2018) 363 ALR 394

Petersen v Bank of Queensland (No 3) [2018] FCA 1842; (2018) 132 ACSR 258

Westpac Banking Corp v Lenthall [2019] FCAFC 34; (2019) 366 ALR 136

Zantran Pty Ltd v Crown Resorts Limited [2019] FCA 641
Date of hearing: 2 April 2019
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Category: Catchwords
Number of paragraphs: 77
Counsel for the Applicant in VID 972 of 2018: Mr B Quinn QC and Mr T Chalk
Solicitor for the Applicant in VID 972 of 2018: Slater & Gordon Lawyers
Counsel for the Applicant in VID 1006 of 2018: Mr W A D Edwards
Solicitor for the Applicant in VID 1006 of 2018: Maurice Blackburn Lawyers
Counsel for the Respondent: Dr C Button and Dr O Bigos
Solicitor for the Respondent: Allens

ORDERS

VID 972 of 2018
BETWEEN:

HOLLY SOUTHERNWOOD

Applicant
AND:

BRAMBLES LIMITED

Respondent

JUDGE:

MURPHY J

DATE OF ORDER:

8 MAY 2019

THE COURT ORDERS THAT:

Consolidation

1.Pursuant to Rule 30.11 of the Federal Court Rules 2011 (the Rules) and section 33ZF of the Federal Court…

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Southernwood v Brambles Limited [2019] FCA 1021
Case
[2019] FCA 1021
Decision Date

CaseChat Overview and Summary

In Southernwood v Brambles Ltd, the Court was faced with two overlapping securities class actions brought against the same respondent by different applicants. The Southernwood proceeding was filed on 8 August 2018, while the Kidd proceeding was filed on 14 August 2018. Both actions involved allegations of misleading or deceptive conduct and breaches of continuous disclosure obligations by Brambles in relation to certain guidance issued in 2017. Despite some differences in claim periods, there was substantial overlap in the class membership of both actions. Brambles sought a permanent stay of one of the proceedings, while Southernwood sought consolidation of the proceedings, and the Kidd applicants sought cooperation orders between the parties to manage the proceedings efficiently.

The Court was required to decide between various options for managing the competing class actions, including consolidation, de-classing, joint trial, closing the class in one proceeding, and a permanent stay of one of the proceedings. Given the significant number of class members in both proceedings and their retention of different solicitors and funders, the Court considered the implications of each option. A permanent stay of one of the proceedings would have left a large group of class members outside the ongoing proceeding, potentially leading to further litigation and complicating settlement efforts.

The Court ordered the consolidation of the proceedings, despite the absence of agreement between the applicants. This decision was made considering the significant number of class members and their chosen legal and funding arrangements. The consolidated proceeding would be known as Holly Southernwood and William Vincent Kidd & Mary Agnes Collum as Trustees for the Magness-Bennett Superannuation Fund v Brambles Limited, with VID 972/2018 as the identifier. The Court also made a common fund order to manage the financial aspects of the consolidated proceeding.

Orders

Orders of the court

1. Pursuant to Rule 30.11 of the Federal Court Rules 2011 (the Rules) and section 33ZF of the Federal Court of Australia Act 2011 (the Act), the proceeding William Vincent Kidd and Mary Agnes Collum as Trustees for the Magness-Bennett Superannuation Fund v Brambles Limited (VID 1006/2018 (Kidd Proceeding)) be consolidated with this proceeding (VID 972/2018) (Southernwood Proceeding)) and the consolidated proceeding be known as Holly Southernwood, and William Vincent Kidd & Mary Agnes Collum as Trustees for the Magness-Bennett Superannuation Fund v Brambles Limited to be identified as VID 972/2018 (Consolidated Proceeding).

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

I thank the parties for the quality of their written and oral submissions, upon which I have directly drawn at some points of these reasons.THE EVIDENCE The parties relied upon the following material: (a)Brambles filed an interlocutory application dated 15 October 2018 seeking a permanent stay of one of the proceedings, and relied on affidavits of Mr Paul Nichols, a partner of Allens, the solicitors for Brambles in the proceeding, made 12 October 2018 and 28 March 2019, and affidavits of Mr James Campbell and Mr Alex Tolliday, both senior associates with Allens, made 21 February 2019 and 21 March 2019 respectively, and submissions;(b)Southernwood filed an interlocutory application dated 20 March 2019 seeking consolidation of the proceedings, and relied on affidavits by Mr Andrew Paull, a lawyer in the employ of S&G, made 20 February, 20 March, 22 March and 1 April 2019, and submissions; and(c)the Kidd applicants relied on affidavits by Ms Brooke Dellavedova, a principal with MB, made 19 February, 22 February, 21 March, 25 March and 1 April 2019, two of which were partly confidential, and an affidavit of Mr Ronald Koo, a senior associate with MB, made 13 March 2019, and submissions seeking what I have called ‘cooperation orders’.THE PROCEDURAL HISTORY On 8 August 2018 Southernwood filed the Southernwood proceeding and on 14 August 2018 the Kidd applicants filed the Kidd proceeding. As noted above, by the time the competing interlocutory applications were before the Court for decision more than 4,900 class members had entered into funding agreements with IMF and retainer agreements with S&G, and more than 2,400 class members had done so with Harbour and MB. Both proceedings were ‘open’ class actions and made claims arising from the same factual substratum. They both concerned the guidance that Brambles issued for FY2017 and for its FY2019 medium-term targets, the revised FY2017 guidance issued on 23 January 2017 and Brambles’ withdrawal of its medium-term targets on 20 February 2017, and they alleged that Brambles breached its continuous disclosure obligations and engaged in conduct that was misleading or deceptive. The claim period in the Southernwood proceeding commenced on 18 August 2016 and ended on 17 February 2017. The claim period in the Kidd proceeding at the time it was filed was 20 October 2016 until 19 February 2017. Although there were differing claim periods there was a substantial overlap in class membership. On 15 October 2018, shortly before the first case management hearing on 26 October, Brambles filed a stay application in each proceeding, seeking an order that only one of the proceedings be allowed to proceed. In effect, the stay application required the Court to decide between the various available options for dealing with overlapping class actions, which include:(a)consolidation of the proceedings;(b)de-classing of one of the proceedings;(c)a joint trial of all proceedings with each left as they are presently constituted as ‘open’ class proceedings which is the ‘wait and see’ approach adopted in Cantor vAudi Australia Pty Ltd (No 2) [2017] FCA 1042;(d)‘closing’ the class in one of the proceedings and leaving the other proceeding as an ‘open’ class action, with a joint trial of the two proceedings, as adopted in Bellamy’s; and(e)a permanent stay of one of the proceedings, as adopted in GetSwift.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The Kidd applicants opposed both of the stay application and the consolidation application. Instead they sought detailed case management orders setting a regime for cooperation between the respective solicitors in advancing the two proceedings efficiently and without duplicated costs (the cooperation orders). They contended that consolidation orders were unnecessary in light of the cooperation that would be achieved through the proposed cooperation orders. Brambles ultimately accepted that it was appropriate to consolidate the two proceedings, but with the proviso that only one firm of solicitors be permitted to represent the applicants in the consolidated proceeding. If the Court was to make consolidation orders which allowed two firms of solicitors on the record for the applicants, Brambles argued for various orders to protect its position in relation to costs. In some circumstances it will be appropriate to address the case management difficulties and other problems associated with competing class actions through orders to stay one or more of the proceedings and allow only one proceeding to go ahead: see Perera v GetSwift Limited [2018] FCA 732; (2018) 357 ALR 586 (Lee J) approved in Perera v GetSwift Limited [2018] FCAFC 202; (2018) 363 ALR 394 (GetSwift) (Middleton, Murphy and Beach JJ). But there are a range of potential solutions to the difficulties that may arise from overlapping class actions and no one right answer. In the circumstances of this case I would have made orders to permanently stay one of the competing class actions except for the fact that the applicants and many class members, both in number and claim value, have retained different solicitors and entered into litigation funding agreements with different funders. In the Southernwood proceeding more than 4,900 persons have entered into funding agreements with IMF Bentham Limited (IMF) and retainer agreements with Slater & Gordon (S&G). In the Kidd proceeding more than 2,400 persons have entered into funding agreements with Harbour Fund III LP (Harbour) and retainer agreements with Maurice Blackburn (MB). The applicants in the respective proceedings estimated the aggregate claim value of the ‘signed up’ class members as approximately $100 million in the Southernwood proceeding and approximately $107 million in the Kidd proceeding, on a FIFO basis. Such circumstances distinguish the present case from those in GetSwift: at [197]. Allowing Brambles’ application would mean that one of the proceedings, brought on behalf of more than either 4,900 or 2,400 persons with claims estimated at approximately $100 million, would be permanently stayed. Class members in the stayed proceeding who prefer their existing arrangements with a law firm and/or funder may opt out of the ongoing proceeding and bring a claim on an individual or test case basis, or join with other ‘opt outs’ in bringing another class action, in respect of the same claims: see McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd [2017] FCA 947 (Bellamy’s) at [34], [39] and [96]-[97] (Beach J); GetSwift at [197]. There are thus various permutations in which a multiplicity of proceedings may persist if I were to stay one of the proceedings, which is undesirable. Even if any class members in the stayed proceeding that opt out of the ongoing class action do not immediately commence another proceeding of some kind, the existence of a group of class members with sizeable aggregate claims sitting outside the ongoing class action is likely to make it more difficult to settle that proceeding. These possible outcomes tend against ordering a permanent stay of one or other of the overlapping proceedings.