mass tort class actions under the federal court of australiaact: justice for … · 2018. 1....

MASS TORT CLASS ACTIONS UNDERTHE FEDERAL COURT OF AUSTRALIA ACT:

JUSTICE FOR ALL OR JUSTICE DENIED?

BARRY LIPP*

When the Commonwealth Government enacted its class action legislationin 1992 under Part IVA of the Federal Court ofAustralia Act 1976 (Cth),the Minister announced that a prime purpose of the legislation was toprovide access to justice for those who would otherwise be denied itbecause their claims were not individually recoverable. However, for 'mass'tort claimants these same procedures, intended to facilitate access tojustice, may in practice create restrictive barriers to commencement ofclass actions, and fail to provide for adequate judicial supervision ofsettlements to ensure that the interests of all class members are protected.This article recommends that the commencement procedures in Part IVA beinterpreted less restrictively so that mass tort claimants are not deniedaccess to the courts, and that there be greater judicial scrutiny and controlof settlements to ensure that Part IVA provides a fair and efficientmechanism for the resolution ofmass tort claims.

I INTRODUCTION

Representative proceedings (or class actions) allow a person to take legal actionon behalf of a group of people who have claims against the same person orpersons, arising in related circumstances, and dealing with common issues of lawor fact. They will be efficient if they save the court and parties time and expenseby aggregating litigation. They will be effective if they provide claimants withaccess to the courts where they otherwise may not have had access, for examplewhere their claims are small. Representative proceedings must also be just. Thelegislative procedures for representative proceedings should enable, and nothinder claimants from bringing their actions to court, and should produce fairoutcomes. Whether the federal representative procedure, contained in Part IVA ofthe Federal Court of Australia Act 1976 (Cth)l achieves these objectives is thesubject of this article.

Even though representative procedures have been available under Englishcommon law for at least two hundred years, they remain novel in Australiancourts. Amendments to the Federal Court of Australia Act 1976 (Cth) in 1992provided detailed procedures for representative actions for the first time inAustralia. After a relatively slow start,2 use of the Federal class action procedure

* Solicitor, Gadens Lawyers, Melbourne. This article is based on an Honours thesis which wassubmitted as part of the Bachelor of Laws course at Monash University.

1 Federal Court of Australia Act 1976 (Cth), pt IVA (hereafter referred to as Part IVA). Whereprovisions of s 33 are cited without naming an Act, they are provisions of s 33 of the Federal CourtofAustralia Act 1976 (Cth).

362 Monash University Law Review (Vol 28, No 2 '02)

has increased markedly over the last four years. As the reviews of recent cases inthis article demonstrate, the limits of the Part IVA procedures are now beingtested by applicants and respondents. How these limits are interpreted by thecourts will have a direct bearing on claimants' access to the courts and the fairnessof outcomes.

A History of Representative Proceedings

Although the principles of representative proceedings can be traced back inEnglish case law to 1805,3 the first definitive interpretation of the modern Englishrule was given by the House of Lords in Duke ofBedford v Ellis in 1901.4 Here,a group of stall holders who sold produce at the Covent Garden Market,represented by Ellis, sought injunction and declaration relating to certainpreferential rights, and an account of sums charged in excess by the Duke, whowas owner and manager of the market.

In Lord Macnaghten's leading judgment, he confirmed the old rule of Chancerythat required all those with an interest in the case to be parties, in order to avoidmultiplicity of litigation. In regard to the representative nature of the action hestated:

Given a common interest and a common grievance, a representative suit wasin order if the relief sought was in its nature beneficial to all whom the plaintiffproposed to represent.5

Nine years later in Markt & Co Ltd v Knight Steamship Co Ltd6 Fletcher MoultonLJ interpreted the requirement for 'same interest', found in 0 16 of the EnglishSupreme Court Rules, more restrictively. He held that where the relief sought bya claimant was damages, then that was an interest peculiar to himlherself, and notcommon or beneficial to all. Thus, '[t]hese words shew that where the claim ofthe plaintiff is for damages the machinery of a representative suit is absolutelyinapplicable'.7

The restrictive English interpretation was followed by Australian courtsinterpreting the Australian equivalents of 0 16, r 9 of the English Rules of theSupreme Court 1965 (UK)8 (now 015 rI2).

This meant that Australian courts were unable to deal with representativeproceedings unless group members had exactly the same interest, and were notseeking damages. This led to calls for the adoption of a class action model similarto that found in r 23 of the United States Federal Rules of Civil Procedure. In

2 Around 30 cases were commenced under Part IVA between 1992 and 1997 - see Public InterestAdvocacy Centre, Representative Proceedings: Supplement, August 1997, Appendix 1.

3 Adair v New River Co (1805) 11 Ves 429 per Lord Eldon.4 [1901] AC 1.5 Ibid 8.6 [1910] 2 KB 1021.7 Ibid 1035.8 High Court Rules 1952 (Cth) r 12; Federal Court Rules (Cth) 0 6 r 13; Supreme Court (General

Civil Procedure) Rules 1996 (Vic) 0 18; Supreme Court Rules 1970 (NSW) pt 8 r 13; SupremeCourt Rules 1937 (ACT) 0 19 riO; Supreme Court Rules 1987 (NT) 0 18; Uniform CivilProcedure Rules 1999 (Qld) r 75; Rules of the Supreme Court 1971 (WA) 0 18 r 12; SupremeCourt Rules 1987 (SA) r 24; Supreme Court Rules 2000 (Tas) pt 10 div 5 r 335.

Mass Tort Class Actions Under The Federal Court ofAustralia Act:Justice for All or Justice Denied? 363

1988, the Australian Law Reform Commission (ALRC) released its Report onGroup Proceedings, and its recommended legislation formed the basis of theFederal Government's class action legislation, enacted in 1992 as Part IVA of theFederal Court ofAustralia Act 1976 (Cth).

B The Position in Victoria

In 1999, 0 18A was introduced into the Supreme Court (General CivilProcedure) Rules 1996 (Vic). Order 18A is substantially the same as Part IVA ofthe Federal Court ofAustralia Act 1976 (Cth).9 The validity of the 0 18A ruleswas challenged by the respondent in Schutt Flying Academy v Mobil OilAustraliaLtd. lO The Victorian Court of Appeal upheld the validity of the rules, but inanticipation of a further challenge to the High Court the Victorian Governmentlegislated to incorporate a procedure almost identical to the Federal Part IVA intothe Supreme Court Act 1986 (Vic).11 Victorian applicants, subject to jurisdictionalrequirements, now have a choice whether to commence a representativeproceeding under the similar Federal or State legislation. 12 This paper discussescases and issues under the Federal Part IVA legislation, based on its ten years ofoperation.

C Objectives of the Federal Representative Procedure Legislation

When the Commonwealth Government enacted its class action legislation in1992 under Part IVA, the then Commonwealth Attorney-General, Mr MichaelDuffy, stated in Parliament that the class action procedure was needed for twopurposes:

The first is to provide a real remedy where, although many people are affectedand the total amount at issue is significant, each person's loss is small and noteconomically viable to recover in individual actions. It will thus give access tothe courts to those in the community who have been effectively denied justicebecause of the high cost of taking action.

The second purpose of the Bill is to deal efficiently with the situation wherethe damages sought by each claimant are large enough to justify individualactions and a large number of persons wish to sue the respondent. The new

9 For a discussion of the differences see Schutt Flying Academy (Aust) Pty v Mobil Oil Australia Ltd[2000] VSCA 103, [9] (Brooking JA).

10 Ibid.11 As amended by the Courts and Tribunals Legislation (Miscellaneous Amendments) Act 2000 (Vic).12 Note however that while the Federal Part IVA permits only applications in respect of causes of

action arising after 5 March 1992, the Victorian Part IVA equivalent has retrospective operation,applying to causes of action arising before, on or after 1 January 2000. An action cannot becommenced under the Federal Part IVA solely by virtue of cross-vesting legislation: s 33G. Seealso Re Wakim; Ex Parte McNally (1999) 163 ALR 270. However, this does not prevent claimsbeing brought in the Federal Court in respect of non-federal matters where some of the claims ina representative proceeding are within the Court's jurisdiction independently of cross-vestinglegislation: McMullin v leI Australia Operations Pty Ltd (1996) 69 FCR 473. Where an applicantpleads both a federal claim (say a trade practices claim) and a common law claim, the applicantmust demonstrate that the common law claim is within the accrued jurisdiction of the FederalCourt, that is, part of the same matter as that which embraces the federal claim. See JonathanBeach QC, 'Representative Proceedings - Some Current Issues' (Paper presented at Gordon &Jackson barristers' clerks seminar, Melbourne, 12 October 2000) 5-6.


procedure will mean that groups of persons, whether they be shareholders orinvestors, or people pursuing consumer claims, will be able to obtain redressand do so more cheaply and efficiently than would be the case with individualactions. 13

Plaintiff lawyers Peter Gordon and Lisa Nichols argue that it is clear from theabove, and from the Government's explanations of the Bill at the time, that thelegislation was intended to be pro-plaintiff, in that it was intended to shift thebalance of rights between individual claimants and more powerful corporateadversaries back in favour of the individual. They argue that the 'price' of suchremedial legislation, designed to provide a mechanism for the vindication ofrights held in common, is a departure from litigation procedures (in favour ofapplicants) that respondents might ordinarily expect. 14 It is clear from thediscussion of cases in this paper that the courts have not always agreed.

Anecdotal evidence suggests that the importance of the class action mechanismextends beyond providing an aggregative vehicle for access to justice. It has beenobserved in the United States that class actions have played a deterrent role bycausing businesses to review their financial and employment practices, and byinfluencing product design. 15 As a result, class actions are sometimes called'private attorneys-general' lawsuits, taking the place of government regulatorswho might be subject to political constraints or limited budgets.

D Mass Tort Class Actions

In the United States, class action litigation has been both prominent andcontroversial since 1966, when r 23 of the Federal Rules of Civil Procedure wasamended so that class members no longer needed to 'opt in' to the litigation, butwere deemed part of the represented group unless they explicitly 'opted out' .16

Overnight the financial exposure of respondents in 'damages' class actions rosedramatically. However, in its notes on r 23,17 the Rules Advisory Committeestated that 'mass accident' cases presented significant individual issues and werethus 'ordinarily not appropriate' for class treatment.

In the 1970s and 1980s, large numbers of individual tort claims, such as thosebrought by victims of asbestos exposure, threatened to overwhelm the US courts.Lawyers and parties sought to reduce litigation costs and courts tried to clear theiroverwhelmed dockets by agreeing to aggregate the cases as class actions. 18 It isclear that when the Advisory Committee spoke of the inappropriateness of massaccidents for class litigation it had not foreseen the scale of this new kind of

13 Commonwealth, Parliamentary Debates, House of Representatives, Second Reading Speech forFederal Court of Australia Amendment Bill 1991, 14 November 1991, 3174 ('Second ReadingSpeech for Federal Court of Australia Amendment Bill 1991 ').

14 Peter Gordon and Lisa Nichols, 'The Class Struggle' (2001) 48 Plaintiff6, 8, 10.15 Rand Institute for Civil Justice, Class Action Dilemmas: Pursuing Public Goals for Private Gain,

Executive Summary (1999), 9 ('Class Action Dilemmas').16 Ibid 1.17 USA, Federal Rules of Civil Procedure, Rules Advisory Committee Notes to Amended Rule 23,

(1966) 39 FRD 69, 98.18 See Linda Silberman, 'The Vicissitudes of the American Class Action - With a Comparative Eye'

(1999) 7 Tulane Journal of International and Comparative Law 201,206-7.


product liability mass tort. Nor had it understood the capacity to resolve them byclass settlement, avoiding repetitive and inefficient litigation of the individualissues. As a result, mass torts have come to be accepted as part of the class actionlandscape in the United States.

In Australia, courts have accepted mass tort class actions under Part IVA. 19However, there is still debate over whether Part IVA lends itself to 'dispersed'mass torts. In a single event or 'disaster' mass tort, the claims of all groupmembers are likely to share the common characteristics of time, place and causeof injury, making resolution of the common claims arising in relatedcircumstances suitable for class treatment. Where the exposure to a defectiveproduct or contaminant and its effects are 'dispersed', the courts have shown areluctance to deal with such actions under Part IVA.20

E Justice Denied?

The result of judicial reluctance to deal with dispersed mass torts in a class actionforum may be that tort claimants will be denied access to justice. In some casesthe small size of individual group members' claims means that class actions arethe only viable form of litigation. In others, the inherent risks in tort litigation forplaintiff lawyers who commonly act on a no winlno fee basis mean that legalrepresentation will only be available where claims are aggregated.

Courts are interpreting the commencement rules of Part IVA restrictively todiscontinue complex mass tort class actions on the grounds that they are not'efficient', or are not 'appropriate' for class action treatment. The results are, in theauthor's opinion, a denial of access to justice to tort claimants who are unable tobring their claim in another forum, and militate against efficiency.

Even where mass tort class actions do pass the commencement barrier, publicinterest lawyers are questioning the fairness of the outcomes they produce underthe Part IVA procedure.21 Critics allege that settlements in class actions create theopportunity for lawyers' conflict of interest, and the potential for collusionbetween class lawyers and respondents.22 This is even more pronounced in masstort class actions where the interests of class members may differ (eg presentlyinjured versus future claimants). On the other hand, respondents argue that thethreat of significant legal costs and the exposure to massive damages forces themto settle class actions,23 regardless of the merits of the action.

The purpose of this article is to review whether Part IVA meets its objectives ofproviding access to justice and fair outcomes, particularly for mass tort claimants.The standards by which this will be judged are:24

19 See for instance Silkfield v Wong (1998) 159 ALR 329, 347 (O'Loughlin and Drummond JJ).20 See Part V of this article.21 See for instance Moira Rayner, 'Public Interest Litigation: Representative Claims and Class

Actions' (2000) 19-20 Just Policy 47.22 See for instance Class Action Dilemmas, above n 15.23 Note that in United States class actions each party usually bears its own costs.24 Adopted from Vince Morabito and Judd Epstein, Victorian Attomey-General's Law Reform

Advisory Council, Class Actions in Victoria: Time for a New Approach, Expert Report 2 (1997), 10.


1. Whether Part IVA provides sufficient opportunity to applicants for thecommencement ofmass tort class actions, such that it provides for accessto justice

In Part II of this article, the rules for certification and commencement of classactions are reviewed, and Part III discusses how those rules are complicated inmass tort claims where there are multiple respondents, creating additionalbarriers to commencement for applicants. Part IV looks at how judges areexercising their broad discretion to discontinue class actions under Part IVA ofthe Act, having the consequence of 'locking out' mass tort claimants from thecourts. Part V describes how in Philip Morris v Nixon,25 restrictive interpretationsof the commencement and discontinuance rules resulted in a denial of justice tomass tort claimants.

2. Whether there are adequate safeguards for participants, specifically interms of control of settlement and costs, to ensure that the procedureprovides for fair outcomes

Part VI discusses how Part IVA of the Act fails to ensure adequate representationfor different interest groups within a mass tort class, and Part VII explores howthis can lead to conflicts of interest in settlements. In Part VIII, the case ofWilliams v FAI Home Security Pty Ltdl6 is reviewed, and questions are raised overthe Court's interpretation of Part IVA which permitted the narrowing and closingof the tort class for the purposes of a settlement in which, it is submitted, both theclass lawyers and the Court failed to act in the best interests of the majority ofclass members. In Part IX, changes to Part IVA of the Act are recommended fortighter judicial control to ensure fairer outcomes in settlements.

Where it is found that the procedures fail to provide access to justice,recommendations are made for changes to Part IVA. Where it is argued that theCourt's interpretation of Part IVA is incorrect or unnecessarily restrictive andleads to unfairness, an alternative interpretation is proffered.

In considering the fairness of class action procedures, it is important to rememberthat they do not create rights or establish new liabilities.27 Class actions do notmake a corporation negligent where it is otherwise blameless.28 It is the author'sconcern that where a class has suffered loss in tort at the hands of a negligentrespondent, class action procedures provide access to, and a mechanism for a justresult.

25 Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487.26 Williams v FA! Home Security Pty Ltd (No 4) (2000) 180 ALR 459.27 New South Wales, 'Class Actions in New South Wales', New South Wales Parliamentary Library

Briefing Paper No 22/96 (1996), 6.28 Ken Fowlie, 'Identifying Class Actions' (Paper presented at Class Actions 1998 Legal Seminar,

Legal and Accounting Management Seminars, June - July 1998), 4.


II COMMENCEMENT OF PROCEEDINGS

Section 33C(1) prescribes the requirements for commonality of claim andcircumstances between class members necessary for the commencement ofrepresentative proceedings. Because of the 'dispersed' nature of many mass tortclaims, the way in which the commonality requirements of s 33C(1) areinterpreted will determine whether mass tort class actions can proceed.

Under Part IVA, once an action has been commenced, it will continue as arepresentative proceeding unless the respondent moves the Court for an orderterminating the proceeding as a class action, on the grounds that the requirementsof s 33C(1) have not been met.29 In reality, s 33C(1) still performs a 'gatekeeper'role, because it has become standard practice for respondent lawyers to move tohave actions struck out on the basis that they do not comply with the followings 33(C)(1) requirements. 3o

A Seven or More Persons Having a ClaimAgainst the Same Respondent

Pursuant to s 33C(1)(a), there must be at least seven persons who have a claimagainst the same respondent. There is no need to identify the members of the classindividually or specify the number of members.31 Subject to ss 33C(1)(b) and33C(1)(c), anyone of those persons can commence a representative proceedingunder Part IVA. Section 33D further .requires that for an applicant to havestanding to represent the group, he or she must have a personal claim against therespondent that is shared by the group members.

After the commencement of the proceeding, even if it appears likely to the Courtthat there are less than seven group members, the Court has discretion to allowthe proceeding to continue.32

B Same, Similar or Related Circumstances

In Carnie v Esanda, Young J stated that representative actions will be available ifthey are the 'most efficient method of conducting the trial', such that they involveless 'delay and expense and prejudice over and above other ways of handling theproblem'.33 Put another way, 'an absence of "relatedness" undermines the[efficiency] rationale of the proceeding'. 34

29 Note also that the Court may, on application by the respondent or of its own motion, discontinuethe representative proceeding, despite having satisfied the requirements under s 33C(1). SeeChapter 4 of this paper.

30 Bernard Murphy, 'Multiple Respondents in Representative Proceedings in the Federal Court ofAustralia' (Paper presented at Advanced Civil Litigation Seminar: Representative Proceedings inthe Federal and State Courts, Law Institute of Victoria, Melbourne, 17 July 2000) 1-2.

31 Section 33H(2).32 Section 33L.33 Carnie v Esanda Finance Corporation Ltd, Supreme Court of New South Wales, Equity Division,

No 3677 of 1988,30 November 1995, unreported, BC9501803, [4].34 The Honourable Justice Murray Wilcox, 'Representative Proceedings in the Federal Court of

Australia: A Progress Report' (1996-97) 15 Australian Bar Review 91, 93.


According to Wilcox J, the words of the s 33C(I)(b), 'same, similar or relatedcircumstances' successively relax the required standard. Relatedness thereforebecomes the minimum threshold for applicants. In Zhang v Minister forImmigration, Local Government and Ethnic Affairs, French J observed that thedecision 'whether the similarities or relationships between circumstances givingrise to each claim are sufficient to merit their grouping as a representativeproceeding ... [will, at the margins, be] practical judgments informed by thepolicy and purpose of the legislation'.35 He remarked that it was clear from thepermissive language of s 33C(2) that group claims would not fail

simply because they involve separate contracts or transactions betweenindividual group members and the respondent or involve separate acts oromissions of the respondent done or omitted to be done in relation toindividual group members.36

This implies that mass torts are not inappropriate for class actions and may besufficiently related to satisfy s 33C(1)(b) notwithstanding that they may be'dispersed' in nature.

C Substantial Common Issue of Law or Fact

Section 33C(1)(c) requires that the claims of the applicant and group membersshare a substantial common issue of law or fact, and that it must arise betweeneach of the applicants and group members on the one hand and all therespondents on the other.

An issue may still be common for the purposes of s 33C(1)(c) even where theevidence to be adduced by the respondent may differ as between respectiveindividual claims. As Lindgren J noted in Bright v Femcare Limited, :37'[A]n issueitself can be common even if the respondents establish that they will adducedifferent evidence from claim to claim in dealing with it'.

The meaning of the term 'substantial' in s 33C(I)(c) has been the subject ofjudicial disagreement.38 In Connell & Ors v Nevada Financial Group Pty Ltd,39Drummond J, noting that the 'substantiality' requirement was not part of theALRC's recommendations in its Grouped Proceedings report and was inserted inthe drafting phase, concluded that 'the imposition of this third criteriondemonstrates a clear intention on the part of the parliament to restrict theavailability of the Pt IVA procedure'.4o

Drummond J interpreted the 'substantiality' requirement narrowly:

[T]he object of Pt IVA would not be served if it was enough for there to be anissue common to each group members' claims that could not be dismissed astrivial or insubstantial, even though the common issue was, when compared

35 (1993) 45 FCR 384, 404-5.36 Ibid 404 .37 Bright v Femcare Limited [2002] FCAFC 243, [28].38 Wilcox, above n 34, 93.39 (1996) 139 ALR 723.40 Ibid 731.


with the other non-common issues raised in the various claims as to liabilityand damages, merely one of a number of issues which had to be resolvedbefore each claim could be determined.41

For Drummond J, a common issue was neither substantial nor sufficient for thepurposes of s 33C(I)(c) if, when compared to the non-common issues, it wasmerely one of a number of issues for resolution.

In Wong & Ors v Silkfield Pty Ltd42, one of the few Part IVA proceedings to come

before the High Court, that Court rejected Drummond J's view when it stated thatthere is no additional requirement that the common issue be an issue central to theresolution of the dispute. It is enough if the common issue is not trivial but ofsome substance, and that claims of group members arise out of similar or relatedcircumstances.

In arriving at this interpretation, the High Court considered its earlier decision inCarnie v Esanda43 where it took a liberal view on the question of what constitutesa 'common claim' under pt 8, r 13(1) of the Supreme Court Rules 1970 (NSW).The Court held that in enacting the Part IVA legislation, the legislature clearly didnot intend to narrow access to justice over existing representative proceduressuch as the regime it considered in Carnie v Esanda.44 The purpose of Part IVAwas to facilitate group proceedings, and a broader interpretation was to bepreferred. In fact, Part IVA was enacted with the intention of increasing theincidence of consumer and product liability litigation.45

In the following chapters, it is argued that the Federal Court has not alwaysfollowed the High Court's permissive approach to commencement, to thedetriment of applicants.

D Specificity of Pleadings

Additionally, pursuant to the general rules of procedure of the Federal Court, thepleadings must set out the material facts that the applicant alleges give rise to thecauses of action on which the applicant and the group members rely, togetherwith particulars of injury or loss.46 However, as Sackville J noted in Philip Morrisv Nixon:

In the context of representative proceedings, it may be sufficient for theapplicant to plead the case of each member of the represented class at areasonably high level of generality ...

The facts material to the claims of each member of the represented groupmight not be necessary to ensure that the respondent adequately understands

41 Ibid 731-732.42 (1999) 165 ALR 373.43 Carnie v Esanda Finance Corporation Limited (1995) 182 CLR 398~

44 (1999) 165 ALR 373, 381.45 S Stuart Clark and Christina Harris, 'Multi-Plaintiff Litigation in Australia: A Comparative

Perspective' (2001) 11(2) Duke Journal of Comparative and International Law 289,317.46 Ibid 313.


the case made on behalf of the represented class and has a fair opportunity tomeet that case.47

Further, the Court is likely to accept initial pleadings on behalf of group membersat a high level of generality, on the understanding that the pleadings may beamended during the course of the proceeding to introduce greater particularity asthe issues in dispute are refined.48

III MULTIPLE RESPONDENTS

Section 33C does not prescribe specific rules where there are multiplerespondents. However, the way in which the courts have interpreted s 33C whenthere are multiple respondents has created additional barriers for commencementof mass tort class actions. For instance, in Symington v Hoechst Schering AgrevoPty Ltd discussed below, tort claimants were unable to bring a class action againstmultiple manufacturers of the same chemical, which had affected them all in thesame way. This Chapter discusses the way in which the commencement ruleshave been interpreted where there are multiple respondents.

A The Applicant Must Have a Personal ClaimAgainst Each Respondent

It is not sufficient for the applicant(s) to have a personal claim against some butnot all of the respondents.49

B There Must Be Seven Or More Persons, Including The Applicant,Who Have Claims Against Each Respondent

In Symington v Hoechst Schering Agrevo Pty Ltd50, the applicant brought a class

action on behalf of nineteen cattle farmers against all the registeredmanufacturers of an agricultural pesticide called 'endosulfan'. The Symingtonsclaimed damages because their cattle were rendered unsaleable after they hadingested food contaminated by the chemical sprayed on nearby cotton crops.Wilcox J struck out the claim against all but one of the respondents because theSymingtons' cattle had been affected by endosulfan manufactured by onlyHoechst, (ie the applicant had a claim against only one of the respondents), andbecause there were not seven group members, including the applicant, who hadclaims against the other respondents. The applicant was then granted leave toamend its pleadings so that it could demonstrate that seven group members,including itself, had a claim against the respondent.

In Ryan v Great Lakes Council51, Mr Ryan sued on behalf of himself and all other

persons who suffered injury as a result of eating oysters contaminated with the

47 (2000) 170 ALR 487, 515-516.48 See for instance Bright v Femcare Ltd (2000) 175 ALR 50, [68]-[79] (Lehane J).49 Symington v Hoechst Schering Agrevo Pty Ltd (1997) 149 ALR 261, 263-264 ; Ryan v Great

Lakes Council (1997) 149 ALR 45,48.50 (1997) 149 ALR 261.51 (1997) 149 ALR 45.


Hepatitis A virus from the Wallis Lakes region in New South Wales. There werethirteen respondents to the proceeding initially - Great Lakes Council, nine oystergrowers, and three distributors. Mr Ryan conceded that he had a personal claimagainst only two respondents, and applying the same reasoning as in SymingtonWilcox J struck out the representative proceedings against the other respondents,and noted that claims against respondents with fewer than seven group membersmust also fail. 52

C Each Class Member Must Have A ClaimAgainst Each Respondent

In Philip Morris (Australia) Ltd v Nixon53, six named applicants brought an action

for themselves and representing a defined class against the respondents,manufacturers and distributors of cigarettes in Australia. The applicants claimedthat they and each group member had contracted a smoking related diseasebecause they were influenced by the respondents to begin or continue smoking.They argued that the respondents had acted both individually and collectively,being sufficient to sustain a claim by each group member against eachrespondent. At first instance Wilcox J accepted the claim, stating that whether therespondents had acted collectively could not be determined until later in theproceeding.54 In the subsequent appeal to the Full Federal Court Sackville J, withwhom Spender and Hill JJ agreed, held that the pleadings did not properlydisclose collective conduct, and group members who had been induced by onemanufacturer to smoke its brand of cigarettes did not have a claim against otherrespondents. He stated that:

[T]he pleading must make claims on behalf of the applicant and each memberof the represented class against the same respondent or, if more than one,against all respondents. It is not permissible in a representative proceeding toplead a claim on behalf of some group members against one respondent and aseparate claim on behalf of other group members against another respondent.55

It will be argued in Part V that this rigid interpretation of the s 33C(I)(a)requirement in Philip Morris v Nixon56 is unwarranted, unnecessary where the ss33C(I)(b) and (c) requirements for related circumstances and common issues oflaw or fact are met, and tells against the 'access to justice' objective of Part IVA.

D The Claims OfAll Group Members Need Not Be The Same Claim

In King v GIO Australia Holdings Ltd57, the respondents argued that Sackville J'sremarks in Philip Morris v Nixon are authority for the proposition that not onlymust each group member have a claim against each respondent, but the sameclaim must be made by each group member against each respondent. This was

52 Ibid 48.53 (2000) 170 ALR 487.54 Nixon v Philip Morris (Australia) Ltd (1999) 165 ALR 515.55 Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487,515.56 Ibid.57 (2000) 174 ALR 715.


rejected by Moore J, stating that the word 'claim' used in s 33C(1)(a) should beinterpreted broadly, and 'is not to be treated as a reference to one common causeof action'.58 Providing each group member has a claim against each respondent,and the claims have sufficient in common to satisfy ss 33C(b) and (c) the claimsneed not be identical.59

This interpretation was clearly demonstrated in the single respondent proceeding,Tropical Shine Holdings v Lake Gesture Pty Ltd.60 Here, the applicant, acompetitor of the respondent furniture retailer brought a claim on behalf ofcustomers of the respondent. The customers claimed they had been misled intobuying furniture by the respondent's deceptive advertising. The applicant claimedit had lost sales as a result. Wilcox J held that despite the different nature of theclaims, they were not incompatible because they arose in the same circumstances,and gave rise to a substantial common issue of law or fact. 61

IV DISCRETION TO DISCONTINUE PROCEEDINGS

A Applications To Discontinue - Non-Common Issues

Under s 33N the Court may, on application of the respondent or of its ownmotion, order that a representative proceeding not continue where it is satisfiedthat it is in the interests of justice to do so. The Court has wide discretion to makesuch orders, including:

Section 33N(1)(c): the representative proceeding will not provide an efficient andeffective means of dealing with the claims of group members; or

Section 33N(1)(d): it is otherwise inappropriate that the claims be pursued bymeans of a representative proceeding (emphasis added).

In Wong v Silkfield, the High Court supported its liberal interpretation ofs 33C(1)(c) (that there needs to be a substantial but not central common issue oflaw or fact between group members) because the Court retains the discretion toterminate representative proceedings under s 33N(1). The Court quoted withapproval from Spender J at first instance, who said:

There will always be a large degree of evaluation concerning commonality andnon-commonality of issues and ultimately, if because of the extent of noncommon issues, representative proceedings in the assessment of the court arenot the preferable means of dealing efficiently and effectively with the claims,the court will no doubt terminate the representative nature of the proceedingsin the exercise of the discretion conferred by s33N(1)(d) of the FCA Act.62

58 Ibid 727.59 Moore J supported his argument by reference to s 33(C)2: the claim need not be based on the same

conduct of the respondent; it may arise out of different transactions with the respondent; and neednot result in the same relief. See (2000) 174 ALR 715,727.

60 Tropical Shine Holdings Pty Ltd (tlas KC Country) v Lake Gesture Pty Ltd (1993) 118 ALR 510.61 Ibid 517.62 Wong v Silkfield Pty Ltd (1998) ATPR ~41-613, 40726.


For this reason most applications by respondents to terminate proceedings forlack of a substantial common issue of law or fact are combined with applicationsunder s 33N(1), appealing to the Court's discretion to discontinue representativeproceedings because of the prevalence of non-common issues.63

In a single event mass tort, such as an airline crash, common issues betweengroup members are likely to predominate. However, in product liability classactions courts may also be faced with diverse non-common issues such as weredescribed in In Re Northern District of California Dalkon Shield IUD ProductsLiability Litigation:64

No one set of operative facts establishes liability. No single proximate causeapplies equally to each potential class member and each defendant.Furthermore, the alleged tortfeasor's affirmative defences (such as failure tofollow directions, assumption of the risk, contributory negligence, and thestatute of limitations) may depend on facts peculiar to each plaintiffs case.

Respondent lawyers argue that where there is so much diversity between theclaims of group members, and the non-common issues will dominate theproceeding, a representative proceeding under Part IVA will not be the mostefficient or appropriate means of dealing with the claims of group members, andthe Court should exercise its discretion to terminate under ss 33N(1)(c) or (d).65

However, as Judge Parker noted in the landmark US asbestos class action Ciminov Raymark Industries:

Unless this plan or some other procedure that permits damages to beadjudicated in the aggregate is approved ... plaintiffs are facing a 100%confidence level of being denied access to the courts.66

B Sections 33C(1)(C) And 33N(1) - Part Of The Same Question?

In Bright v Femcare Ltd67, the primary judge ordered that pursuant to s 33N(1),the representative proceeding not continue. In that case the applicant had broughtproceedings against the makers of allegedly faulty devices used in femalesterilisation procedures. The discretion to discontinue was exercised on thefollowing grounds:

(a) that in resolving the common questions of fact or law, some would provenot to be common to all group members, or would not advance theapplicant's case; and

63 Practice and Procedure - High Court and Federal Court ofAustralia [34,870.25]. See for exampleWong v Sillifield Pty Ltd (1999) 165 ALR 373; Schanka v Employment National (Administration)Pty Ltd Federal Court of Australia, NG461/98, 9 September 1998, unreported, BC9804642;ACCC v Internic Technology Pty Ltd Federal Court of Australia, NG395/98, 14 July 1998,unreported, BC9803245; Community & Public Sector Union v State of Victoria (1999) 90 IR 4.

64 693 F.2d 847, 853 (9th Cir. 1982) (Goodwin J).65 Maryjane Crabtree, 'Class Actions: Product Liability - the Defendant's Perspective' (Paper

presented at Class Actions 1998 Legal Seminar, Legal and Accounting Management Seminars,June - July 1998), 14.

66 Cimino v Raymark Industries Inc, 751 F. Supp. 649, 666 (E.D. Tex. 1990).67 (2001) 188 ALR 633.


(b) the costs of dealing with the remaining common issues under arepresentative proceeding would exceed the costs of dealing with thegroup members' claims individually.

In the subsequent appeal,68 the Full Court held unanimously that it is no part ofthe question posed by s 33N whether the evidence would ultimately reveal thatquestions of fact or law were not common to all group members, or whether theywere likely to advance the applicant's case. The relevant question in relation tos 33N(1) was whether the costs of the representative proceeding would exceedthe cost of individual proceedings.69 The primary judge had erroneously 'mergedthe two enquiries under s33C(1)(c) and s33N(1)(c)'.7o It is therefore clear thats 33N(1) is not part of the same question as s 33C(1), and not to be decided byspeculating on the success or otherwise of claims, or the evidence that underliesthem.

Further, the Full Court held that at such an early stage of the proceedings, whenthe respondent had yet to file its defence, it was simply too early to decide on theefficiency or otherwise of resolving the applicant's claims in a representativeproceeding.

C Exercising The Discretion To Discontinue -Efficiency Versus Access To Justice

Even where the s 33C(1) commencement requirements have been satisfied,courts have still discontinued proceedings under s 33N. Therefore, how the courtsinterpret what is efficient or otherwise inappropriate may determine whethermass tort claimants in multi-issue proceedings are denied access to justice. PartV examines the consequences for claimants of a restrictive interpretation inPhilip Morris (Australia) Ltd v Nixon. Below are arguments against such anapproach.

1 Focus On The Common IssuesNotwithstanding the challenges that are presented by representative proceedingswith significant non-common issues, it is submitted that the focus should remainon the common issues in determining whether they are efficient to resolvecollectively. As Einfeld J remarked when he considered an application from therespondents for discontinuance under s 33N(1) in Marks v GIO AustraliaHoldings: 7

!

I am not convinced that mere volume of evidence disqualifies a proceedingfrom being undertaken as a class action ... I am also not persuaded thatsubstantial differences in individual circumstances disqualify a case frombeing a class action. Part IVA anticipates that individuals in the group will havediffering circumstances ... As far as group actions providedfor by Part IVA areconcerned, what is relevant is similarity not difference ...72

68 Bright v Femcare Limited [2002] FCAFC 243.69 On that question see Part IV (C) (3).70 Bright v Femcare Limited [2002] FCAFC 243, [134] (Kiefel J).71 (1996) 63 FCR 304.72 Ibid 311-312 (emphasis added).


As Lindgren J noted in Bright v Femcare Limited,73 the legislation intends thatordinarily, a representative proceeding that has been properly commenced willcontinue to the stage of resolution of the common issues before consideration willbe given to discontinuance under s 33N.

2 Case Management ApproachDealing with complex multi-issue proceedings calls for a highly organised casemanagement approach in separating and dealing with the common anduncommon issues, and a high degree of confidence on the part of judges in theCourt's capacity to do so.

In early cases after the introduction of the Part IVA there seemed to be a degreeof reluctance on the part of the courts to exercise the discretion to discontinue infavour of respondents. This approach appears to have been based on the view thatthe new procedure should be encouraged, and the courts should, where possibleaccommodate the wishes of applicants to have their actions heard as classactions.74 More recently, there appears to have been a hardening of attitude. Inpart this reflects a growing concern, after the experience of complex multi-issueclass actions in Australia, that such proceedings may simply 'swamp the courts',both in number and complexity, as critics claim they already have done in theUnited States.75 Lengthy litigation also disadvantages tort claimants, whosecondition may deteriorate over the course of extended trials.76 In the UnitedStates, Federal class action filings have increased by more than 300 percent overthe past ten years, and State class action filings have increased by over 1,000percent.77 For instance, Judge Parker illustrates the point when he described the'odyssey of asbestos litigation' he presided over in Cimino v Raymark78 as having'consumed 133 days of trial time and produced 25,348 pages of transcriptprepared as daily copy. The docket sheet ... is 529 pages long. The court hasentered 373 signed orders.'79

Such judicial observations might suggest that the discretion to discontinuepursuant to s 33N(1)(c) is appropriate because a representative proceeding maysimply be too large for the court to handle efficiently or effectively.

However, as Judge Parker pointed out in respect of the Cimino v Raymarkasbestos litigation, despite the daunting size of the class action, the alternativewas to handle the 2,298 cases individually at a rate of thirty cases per month,which would have taken six and a half years, during which time 5,000 new cases

73 [2002] FCAFC 243, [18].74 S Stuart Clark, 'Representative Proceedings: A Work in Progress' (2001) 39(1) Law Society

Journal 54.75 Michael A Pope, 'Mass Torts Cases Are Swamping the Courts', The National Law Journal, October

6 1999; Jerrold Cripps QC, 'Don't Let American Litigation Terrors Scare Off Class Actions',Australian Financial Review (Sydney), 15 June 1995, 16.

76 Thomas E Willging, 'Mass Torts Problems and Proposals: A Report to the Mass Torts WorkingGroup' (Federal Judicial Center, January 1999), 13.

77 USA, 106th Congress, Senate Committee on the Judiciary, 'Report on the Class Action FairnessAct 2000 (Bill S.353)', Report No 106-420 (26 September 2000), 15 ('US Report on the ClassAction Fairness Act 2000').

78 Cimino v Raymark Industries Inc, 751 F. Supp. 649, 650 (E.D. Tex. 1990).79 Ibid 653.


would have been filed. Judge Parker also observed that over 400 claimants haddied while waiting for their cases to be heard.

The court should exercise its discretion to discontinue on the grounds ofinefficiency not because it finds the proceeding lengthy, complex and costly, butonly where an alternative is both available and more efficient.

3 Discontinuance Not 'In The Interests Of Justice'For the Court to exercise its discretion to discontinue on any of the grounds listedunder s 33N(1), it must be satisfied that it is in the interests of justice to do so. Itis submitted that where a representative proceeding is terminated because ofefficiency concerns, but there is no real prospect of group members bringing theirclaims individually, this cannot be in the interests of justice.

Further, the decision as to whether a class action will provide a more or lessefficient forum for resolution of claims presupposes that it is a choice betweenavailable options. It is submitted that in respect of group claims that have no realprospect of being brought individually, the s 33N(1)(c) 'efficiency' considerationdoes not apply.

In addition, where there are common issues to be resolved it cannot be in theinterests of judicial efficiency or the public interest to deal with them in separateproceedings. One of the two core purposes of the Part IVA legislation stated byCommonwealth Attorney-General Mr Michael Duffy in the second readingspeech80 was to enhance judicial efficiency by encouraging the adjudication ofindividual claims in a single proceeding. As Finkelstein J put it in Bright vFemcare, 'I simply do not accept that one action can cost more than what mayamount to hundreds of actions'.81

D Recommendations - Discretion To Discontinue

1. It is recommended that s 33N(1)(c) be amended so that the discretion todiscontinue will not be available where it is evident that group memberswill be denied access to justice. Efficiency should not take precedenceover access to justice. Section 33N(1)(c) should be amended so thatrepresentative proceedings may be discontinued in favour of a moreefficient proceeding, but only where the alternative proceeding isavailable.

2. Section 33N(1)(d), which gives the Court discretion to discontinue arepresentative proceeding that itfinds 'otherwise inappropriate', should beremoved.

The term 'otherwise inappropriate' is confusing and ambiguous,82 and inpractice has provided a second path for challenging the commencement ofrepresentative proceedings, even where the commencement requirementsofs 33C(1) have been satisfied, merely on the grounds that the proceeding

80 Second Reading Speech for Federal Court of Australia Amendment Bill 1991, above n, 3174.81 Bright v Femcare Limited [2002] FCAFC 243, [156].82 See Morabito and Epstein, above n24, 48 for support for the removal of s 33N(l)(d).


will be complex. 83

3. Section 33N(1)(b) should be removed. It provides that a representativeproceeding may be terminated on the ground that the relief sought can beobtained through another procedure. This clause is so wide as to permittermination where individual proceedings are theoretically available, butnot at all viable, say, where individuals have suffered only a small loss.The clause is arbitrary, and does not provide any guidelines for theexercise of the discretion.

V COMMENCEMENT ISSUES AND DISCRETION TODISCONTINUE: PHILIP MORRIS V NIXON

In Philip Morris (Australia) Ltd v Nixon84, the Full Federal Court accepted the

appeal of the respondents, Australia's three major tobacco companies, that a classaction should not continue against them. The applicants had claimed on behalf ofthemselves and the represented class that each member had contracted a smokingrelated disease as a result of being influenced by representations made by thetobacco companies. These representations encouraged them to begin or continueto smoke one of those companies' cigarettes, whilst the companies knew thatsmoking was addictive and caused disease. The claim was brought in negligenceat common law, and for misleading and deceptive conduct under s 52 of the TradePractices Act 1974 (Cth).

Sackville, Spender and Hill JJ held that:

1. The application did not satisfy the requirement in s 33C(I)(a) that eachgroup member must have a claim against each respondent. This wasbecause the applicants' pleadings did not reveal a case based on thecombined or collective conduct of the tobacco companies in influencingall of the class members, but rather each group member may have beeninfluenced to smoke a particular brand of cigarette by an individualrespondent.

2. The requirement in s 33C(1)(b) that the claims of each applicant and groupmember arise in similar or related circumstances was not satisfied becausethe claims of each of the thousands of group members arose fromdisparate representations made to them over a long period of time,resulting in different injuries with separate defences. 85

A Common Claim

Central to both the question of whether each group member had a claim againsteach respondent, and whether the claims arose in related circumstances was the

83 Respondents argue that where issues of related circumstances or common questions of law or factarise this adds to the complexity of the proceedings, and the Court should exercise its discretionto discontinue.

84 (2000) 170 ALR 487.85 Ibid 490 (Spender J), 523 (Sackville J).


issue of whether the respondents had engaged in collective conduct. At firstinstance, Wilcox J held that s 33C(1)(a) was satisfied because the applicantsclaimed that the respondents had collectively embarked on a course of conductdesigned to create a false community perception about the risks associated withsmoking. He stated that, 'If that claim can be made good, it would seem not tomatter that a particular claimant smoked cigarettes manufactured by only one ofthe respondents'. 86

Wilcox J, citing O'Loughlin and Drummond JJ in Silkfield Pty Ltd v Wong87 heldthat it is only necessary to establish a basis for making such a claim in thepleadings, and the appropriate time for establishing the validity of the claim maynot be until the proceeding is well advanced.88 The Full Federal Court was lessflexible in its approach, finding that to satisfy s 33C(1)(a) the pleadings mustdisclose material facts which demonstrate that seven or more persons have aclaim against each respondent, and that each group member has a claim againsteach respondent. 89 It found that the pleadings did not disclose collective conducton the part of the respondents,90 and it could not be deduced from the disparaterepresentations that each group member had been influenced by the conduct ofeach respondent. Therefore, the applicant failed to demonstrate the material factsthat established that each member of the class had a claim against eachrespondent.

In their pleadings, the applicants cited the activities of the Tobacco Institute ofAustralia, a body set up jointly by the tobacco companies for the purpose ofpublic relations and lobbying on behalf of the industry as a whole, as evidence ofcollective conduct by the tobacco companies. It is submitted that the Full Courtgave too little credence to this evidence in finding that the tobacco companies hadnot engaged in collective conduct. For instance, in Tobacco Institute ofAustraliav Australian Federation of Consumer Organisations Inc91 the same Court heldthat the Institute had entered into misleading and deceptive conduct byadvertising that passive smoking was not harmful to the health of non-smokers.

B Related Circumstances

At first instance, Wilcox J held that to determine whether the various claims wererelated, attention was to be paid to 'matters of commonality' rather than thedifferences. He found that the claims were related, satisfying s 33C(1)(b),because each claim arose in circumstances of alleged misleading conduct andbreach of duty of care.92 This interpretation was rejected in the Full Court bySackville J, arguing that the diversity of the representations made by the variousrespondents over such a long period meant that the group members' claims couldnot be said to have arisen in related circumstances.93

86 Nixon v Philip Morris (Australia) Ltd (1999) 165 ALR 515, 529 (emphasis added).87 (1998) 159 ALR 329,342.88 (1999) 165 ALR 515, 528.89 (2000) 170 ALR 487,514 (emphasis added).90 Ibid 518.91 (1992) 111 ALR 61.92 (1999) 165 ALR 515, 537.93 (2000) 170 ALR 487, 523.


Both Sackville and Spender JJ argued that this was not the kind of case that wasenvisaged by the ALRC in its Grouped Proceedings report as being appropriatefor a representative proceeding. Sackville J referred specifically to para 134 of thereport,94 which indicates that the representative procedure was designed for 'aseries of related but not identical transactions, such as similar representationsbeing made separately to different individuals'. He quoted this phrase as supportfor his view that the disparate nature of the representations in Philip Morris vNixon meant that a representative proceeding was neither appropriate norintended for such cases.95

It appears that Sackville J justifies his finding that there were insufficient relatedcircumstances on the basis that the disparate nature of the transactions in PhilipMorris v Nixon made it inappropriate for a class action. It is suggested thatSackville J has conflated the separate questions of commencement requirementsunder s 33C(1)(b), and discretion to discontinue for 'inappropriateness' unders 33N(1)(d).

As to the assertion that as a result of the diversity of representations the claims ofgroup members could not be said to arise in related circumstances, in Connell vNevada Financial Group Pty Ltd Drummond J said: 96

It is not, I think, an objection to proceedings being brought as representativeproceedings and founded upon an oral (or a written) representation made to thevarious class members that the representation may have been made ondifferent occasions and in a different form of words to each class member, solong as the Court can be satisfied that the substance and effect of what wasorally represented is the same.

Drummond 1's statement was cited recently with approval by Goldberg J inWilliams v FA! Home Security, where he said that one should approach a pleadingin a proceeding brought under Part IVA, where the substantial common issue oflaw or fact centres on representations made to a number of group members, witha degree of flexibility.97

Drummond 1's statement calls for a degree of relatedness between disparaterepresentations such that they are of common substance or effect. Here, thesubstance of the representations made by the tobacco companies was of the sameeffect. They implied that smoking tobacco was safe, or failed to inform theircustomers that it was not. It is implied in Sackville J's statement that to satisfys 33C(1)(b), the representations must come in series, and be related in time. Thisis' a more restrictive interpretation than the plain words of s 33C(1)(b) warrant.98

Paragraph 134 of the Grouped Proceedings report also states that the requirementthat claims arise from related circumstances is made to ensure that the applicant94 Ibid 512, 523.95 See Part IV (B) - s 33N(l)(d) should be removed, as the discretion to discontinue a representative

proceeding because it is 'otherwise inappropriate' leads to arbitrary decisions, not related toefficiency, that may deny access to justice to applicants.

96 (1996) 139 ALR 723, 728.97 Williams v FAI Home Security Pty Ltd (No 2) [2000] FeA 726, [12]-[16].98 For further discussion on this issue see Beach, above n 12, 26.


and group members have a 'community of interest', so that a class action will beefficient.

On the issue of community of interest, with all group members alleging smokingrelated illnesses, having been influenced by the representations of the tobaccocompanies, and all seeking damages for the resultant injuries, it is hard to see howthe interests of the group members could have been more connected.

C Discretion To Discontinue - Properly Exercised?

In Philip Morris v Nixon, Sackville J indicated that it was open to the Court todiscontinue the proceeding, using its discretion under s 33N(1).99 As has beenstated earlier in this paper, the primary purpose behind Part IVA is to provideaccess to justice for those who would otherwise be unable to bring an individualclaim. That purpose is defeated if representative proceedings are discontinued infavour of individual proceedings, when individuals concerned do not have thecapacity to bring them. It was argued in Part IV (C) (3) that the discretion todiscontinue under s 33N(1)(c) on the grounds of inefficiency was intended toapply only where there is a real possibility of pursuing group members' claimsindividually.

It could be argued that in light of the recent Los Angeles County Court decisionto award US$3 billion to an individual smoker1oo it can't be said that individuallitigation is unavailable to smokers, and the Court was entitled to exercise itsdiscretion to discontinue under s 33N(1)(c) on the grounds of inefficiency. First,the US result is not directly transferable to Australia, being an award of punitivedamages made by a jury, which has subsequently been drastically reduced onappea1. 101 Second, it is by no means certain that the majority of group members inPhilip Morris v Nixon could secure legal representation as individuals. The RandInstitute for Civil Justice cites empirical research which suggests that mass tortclaims either proceed in aggregate form or 'die on the vine' .102

However, assuming that individual litigation was available, the question for theCourt remains as to whether it would more efficient. Here the Court's decisionwill be shaped according to how well it believes it can case manage a complexclass action.

It appears that Sackville J was concerned by the Court's capacity to manage sucha complex case when he said that 'further pleading and endless managementissues would be raised'103 if it were to proceed. In a recently decided class actionin Florida, where the Court awarded US$145 billion against the five major UStobacco companies, that Court felt confident to manage the claims of a class

99 (2000) 170 ALR 487, 498.100 Richard Boeken v Philip Morris, Inc., et aI, Los Angeles County Superior Court, 6 June 2001,

unreported.101 On 9 August 2001 a Los Angeles County Superior Court reduced the punitive damages award to

US$100 million. See Gordon Fairclough, 'Judge Tosses Out Award in Philip Morris Case', TheWall Street Journal, 10 August 2001, A3.

102 Class Action Dilemmas, above n 15,30.103 (2000) 170 ALR 487, 521.


estimated at between 300,000 and 700,000, which comprised all Florida smokers(or their heirs) who had been affected or died as a result of smoking addiction. 104

To finalise the settlement the court will set up a complex system for assessing theindividual circumstances and issues, which include which brand of cigarettesthey smoked (ie determination of which respondent was liable).105

It is suggested that Australian superior courts are no less able to manage complexcases.

D Consequences Of Philip Morris V Nixon

1 Part IVA Not Suitable For Dispersed Mass Torts?Warren Pengilley writes that the decision in Philip Morris v Nixon demonstratesthat the Part IVA class action procedure is not designed for the resolution ofdispersed mass torts, where there are several injury-causing events occurring overa period of time, caused by different respondents. In other words, he believes therepresentative procedure should be restricted to single event mass torts which areeasy to identify and manage. 106 Others say that this is consistent with the positionin the United States where courts have refused to certify some mass tort claimsas class actions, because they fail the requirement in r 23(b)(3) of the FederalRules of Civil Procedure that the common issues predominate. 107

However, others argue that dispersed mass tort claims, despite the individualnature of defences and damages, are just the kind of action that is appropriate forrepresentative proceedings. 108 In Silkfield v Wong 109 the Full Federal Courtobserved that the kind of case that could best be run as a representativeproceeding was one arising out of a single act, omission or course of conduct orthe same act, or one involving an act, omission or course of conduct repeatedlymade or engaged in. Further, s 33C(2) makes it clear that a representative actioncan be brought where the claims of each group member are different and arise outof separate transactions or separate acts or omissions by the respondent.

Pengilley conceded that the effect of Philip Morris v Nixon may be that tobaccocompanies in Australia will be insulated and protected from the consequences ofthe injuries their own products have undeniably wrought. 110

104 Engle v R J Reynolds et ai, Case No 94-08273, Dade County, Eleventh Judicial Circuit, 14 July2000.

105 Warren Pengilley, 'Representative Actions Under the Trade Practices Act: The Lessons forSmokers and Tobacco Companies' (2000) 8(2) Competition and Consumer Law Journal 176, 182.

106 Pengilley, 'Class Actions Stumble: Tobacco Companies Win on Class Action Certification' (2000)16(3) Australian and New Zealand Trade Practices Law Bulletin 31, 32.

107 Belinda Thompson, 'Representative Proceedings in the Federal and State Courts - The Ben Hur ofAmbulance Chasing' (Paper presented at Advanced Civil Litigation Seminar: RepresentativeProceedings in the Federal and State Courts, Law Institute of Victoria, Melbourne, 17 July 2000), 12.

108 Ross Perret andAndrew Morrison, 'Mass Tort Litigation in Australia' (Paper presented at thePacific Rim Advisory Council Conference, Tokyo, 8 October - 1 November 2000<http://www.prac.org/materials/2000_Tokyo/ECommerce_Aus.html> at 1 March 2001; LarissaCook, 'Class Actions' (Paper presented at NSW Young Lawyers CLE - Plaintiff and Denfendant'sPerspectives on Group Actions, 17 November 1999),9; Pengilley, above n 106,31.

109 (1998) 159 ALR 329,347 (O'Loughlin and Drummond JJ).110 Pengilley, above n 105, 179.


If Pengilley is right and Part IVA can't be used for dispersed mass torts, then itappears that the Federal representative procedure is incapable of providing accessto justice in all but the most straightforward single event incidents, where claimsare closely related in time and direct consequence. This is not the kind ofpermissive approach to providing access to justice in class actions envisaged bythe High Court in Carnie v Esanda. 111 When the consequence for tort victims ofa restrictive judicial interpretation is a complete denial of justice, this is just thesituation when judicial flexibility is called for.

2 Failure To Achieve Public GoalsPengilley writes that 'everyone knows what tobacco companies have done, andthat their product is a major health and life risk' .112 He admits that from thesociologist's view the result in Philip Morris v Nixon is not just, but from a legalperspective the correct decision was made. Even if Pengilley is right that s 33C(1)was restrictively but correctly applied, when 'everyone knows' that thousands ofclaimants were injured because the respondents were negligent, and they areunable to obtain compensation because the current procedure won't accommodatetheir claims, then the representative procedure fails in its public goals ofproviding sanctions and a deterrent for recognised wrongs.

3 The 'Philip Morris Principle'Vince Morabito has labelled the Court's restrictive interpretation of s 33C(1)(a)in Philip Morris v Nixon so as to require each applicant and group member tohave a claim against each respondent as the 'Philip Morris principle' .113 Hesubmits that the Philip Morris principle, now applied in subsequent cases, hasresulted in an inability to bring class actions against multiple respondents, 'evenwhere the causes of action against the various respondents were linked by similaror common issues of fact or law'. 114

He argues that contrary to the conclusions of Sackville and Spender JJ, the ALRCGrouped Proceedings report does not support such a restrictive interpretation,and that it is contrary to the legislative intention of Part IVA of widening accessto the courts. 115

In Bray v F Hoffman-La Roche Ltd116 Merkel J agreed. Here the applicantcommenced a representative proceeding claiming relief including damages,suffered as a result of price fixing and market sharing by an alleged cartel ofinternational vitamin producing companies. The respondents argued that theapplicant's pleadings had failed to satisfy s 33C(1)(a) because not all members ofthe very wide class had a claim against each respondent.

111 See Part II (C)112 Pengilley, above n 105, 179.113 Vince Morabito, 'Class Actions against Multiple Respondents' (2002) 30(2) Federal Law Review

295,299.114 Morabito cites five subsequent cases where the Court found a failure to comply with s 33C(I) as

a result of the Philip Morris principle: Bright v Femcare Ltd [2000] FCA 742, [81] (Lehane J);Batten v CTMS Ltd [2000] FCA 915; Hunter Valley Community Investments Pty Ltd v Bell[2001] FCA 201 and [2001] FCA 1148; Sereika v Cardinal Financial Services Ltd [2001] FCA1715; Milfull v Terranora Lakes Country Club Limited [2002] FCA 178.

115 Morabito, above n 113, 330.116 [2002] FCA 1405.


Merkel J, citing Morabito's article, stated that in his opinion: 1l7

it is not altogether clear that the ... requirement [under s 33C(1)(a) that eachgroup member must have a claim against the respondent] was intended toapply where there are multiple respondents.

and that

the present case affords a good example of how the strict application ofs 33C(1)(a), in a case involving more than one respondent, might give rise torequirements and limitations that have little to do with the purpose or efficacyofPt IVA.

However, as a single judge he felt bound to apply the principles enunciated by theFull Court in Philip Morris v Nixon. In Bray that task was less problematicbecause the case was founded entirely upon the collective conduct of the cartel.

As in Philip Morris v Nixon, the respondents contended that to satisfys 33C(1)(a), the claims of all group members must be suitable for aggregating ina representative proceeding. In what amounts to a further contradiction of PhilipMorris v Nixon, Merkel J held that the issues of commencement and discretion todiscontinue are separate questions - there is no basis for reading into s 33C(1) arequirement that the claim must be suitable for a representative proceeding.

As noted in Part IV (A), respondents seeking to have a representative proceedingstruck out will usually make a 'double barrelled' attack upon the applicant'sfailure to satisfy the s 33C(1) commencement requirements, and appeal to theCourt's discretion to discontinue under s 33N(1).118 To that end, respondents havecommonly argued that the claims of some or all group members are unlikely tosucceed - therefore the Court should find that such claims are not valid claims forthe purpose of s 33C(1)(a), and/or that it should use its discretion unders 33N(1)(d) to discontinue the proceeding because it is inappropriate in arepresentative proceeding to bring uncertain claims. In Bray v F Hoffman-LaRoche, it was argued that because the claims of some group members againstsome respondents were likely to fail, that the pleadings would, in all likelihoodfail to satisfy the Philip Morris principle that each group member have a claimagainst each respondent, and in such circumstances the exercise of the Court'sdiscretion to discontinue was warranted.

In answer to this question Merkel J cited the Full Court119 in King v GIO AustraliaHoldings Ltd, which said that: 120

The fact that a person is ultimately adjudged to be entitled to succeed againstonly one respondent, does not mean that the person makes a claim against onlythat respondent. There is a world of difference between a claim and success onthe claim...

117 Ibid [9].118 Dr Jocelyn Kellam and S Stuart Clarke, 'Multi-Party Actions in Australia', in Hodges (ed), Multi

Party Actions, (2001) Oxford University Press, Oxford, 281.119 Which included Merkel J himself.120 [2000] FCA 1543, [7].


Whilst Merkel J did recognise that there were deficiencies in the applicant'spleadings in respect of defining the group and identifying their claims againsteach respondent, he held that this did not warrant discontinuance - rather theapplicant should be given the opportunity to re-plead the case.

Merkel J concluded that the applicants had a 'legitimate common grievance'l21against the cartel, and if they were unable to access Part IVA their grievanceswould be without practical redress.

It is suggested that Merkel 1's decision is correctly informed by the purpose ofPart IVA - to provide access, and not barriers to justice. Further, Merkel 1'sdecision provides an invitation to the Full Court to rethink the restrictiveinterpretation applied to s 33C(1) in Philip Morris v Nixon.

VI ADEQUACY OF REPRESENTATION

Courts in the United States have interpreted r 23 of the Federal Rules of CivilProcedure to permit 'settlement' class actions, where the action is certified forsettlement only and not litigation. In 'settlement' class actions the lawyers for theclass and the defendants enter into settlement agreements before the class iscertified, and ask the Court to certify the class as the parties have defined it, forthe purposes of settlement only, with no intention to litigate. 122 In AmchemProducts Inc. v Windsorl23

, the United States Supreme Court held that in order tofacilitate settlements involving broad classes, certain class certificationprerequisites in r 23 could be de-emphasised. Conversely, the Court held thatwhere a broad class is put forward for the purposes of settlement, othercertification prerequisites 'demand undiluted, even heightened attention in thesettlement context'. 124 One requirement where the Court found that more cautionis warranted is for adequacy of class representation, under r 23(a)(4).

The author's view is similar. In Parts II to V, it was proposed that the requirementsfor relatedness and commonality of issue should be reinterpreted (or perhapsrelaxed) in order to reduce the barriers to justice for tort claimants. However, indispersed mass tort class actions the interests of group members may vary. Thereis potential for conflict of interest where some group members have presentinjuries, but others who have been exposed to the same risk may have latent onsetinjuries, or may not yet be aware of their losses at all. As all members of the group(who have not opted out) will be bound by the class settlement or judgment it isimperative that their separate interests are adequately represented.

A Present Versus Future Claimants

The United States Senate Committee on the Judiciary recognised a growing trendamong plaintiff lawyers to gather the largest class actions possible, on behalf of

121 [2002] FCA 1405, [78].122 USA, Federal Judicial Center, Manual for Complex Litigation, Third, (1995), [30.45] ('USA

Manual for Complex Litigation').123 521 U.S. 591,117 S. Ct. 2231 (1997).124 Ibid 2248.


hundreds of thousands or even millions of consumer group members. 125 Theincentive, the Committee says, is clear. Why sue on behalf of just 1,000 peoplewhen you can sue for one million on the same issues with little more effort, butdramatically increase your fees. The problem with such broad claims is that theaction may be run on a 'lowest common denominator' basis. Persons withlegitimate present injuries will be lumped together for litigation or settlementpurposes with the mass of group members who may have been exposed to therisk, but never actually develop an injury. The Committee argues that the interestof the class lawyers is clearly not in obtaining appropriate compensation for thefew group members who have present injuries, but in obtaining a mass settlementwhich also ensures the size of their fees.

The interests of present and future claimants may conflict over the way in whichsettlement or damages funds are administered. 126 Where funds are limited, say inthe case of insolvency of the respondent, present claimants may seek maximumimmediate recovery, but future claimants may wish to preserve funds until latentinjuries can be identified or new claimants become aware of their injuries. Futureclaimants will feel pressured to participate and not opt out of the settlement,regardless of whether their injuries have matured, for fear that the limitedsettlement funds will be exhausted.

The Court must also consider the problem of notice to future claimants. Thosewhose injuries are not yet apparent may not be aware that they have a claim. Asthey are unknown to the class action, this group cannot be given proper notice oftheir right to participate in the action or their right to opt out.

B Adequacy Of Representative Party

One way to try to ensure adequate representation for different interests is the useof separate sub-groups. This is permitted under s 33Q, where the Court may givedirections establishing sub-groups and appointing sub-group representativeparties for the purpose of determining issues that are not common to all groupmembers.

Another way is to replace the representative party with another group member ifit is apparent that they are not able to adequately represent the interests of allgroup members. Section 33T provides the Court with power to substitute arepresentative party or sub-group representative party on application of a groupmember or sub-group member.

However, as will be discussed in Part VII (B), group members may play only asmall role or may not even be aware of the litigation. Section 33T does notprovide adequate protection for the majority of group members who have little orno involvement, if the Court has power to consider the adequacy of representationonly on the application of a group member.

125 US Report on the Class Action Fairness Act 2000, above n 77,20.126 See generally USA Manual for Complex Litigation, above n 122.


It is recommended that Part IVA be amended so that the Court must satisfy itselfat the commencement of a class action that group members are adequatelyrepresented.

It is also recommended that when approving settlements in mass tort class actionsthe Court must satisfy itself that there is an adequate reserve for future claims.

C Adequacy Of Class Lawyers

The issue of adequacy of class lawyers was considered in Johnson Tiles Pty Ltdv Esso Australia Ltd. 127 After deciding that three separate class actions against thesame respondent should be consolidated, Merkel J considered what would benecessary to ensure that all group members had adequate representation. He madeorders under s 33T that it would be in the interests of group members for lawyersfrom two of the separate class actions to combine and jointly represent the class.This implies that s 33T gives the Court power to make orders in respect ofadequacy of representation of both the representative party and class lawyers.

In classes where there are present and future claimants (or other divisionsbetween different interest groups) the Court should satisfy itself that classlawyers can adequately represent the interests of all groups. Where this is notpossible the Court should order separate legal representation for the differentinterest groups. Professor David Shapiro notes that assessing the adequacy ofclass lawyers requires consideration of not only the potential for conflict ofinterest within the group but also the lawyers' experience and ability to representthe class in the particular matter. 128

However, having multiple lawyers to represent the separate interests of classgroups may create its own problems. Multiple lawyers who represent the specificinterests of different groups, say present and future claimants, may findthemselves in conflict when negotiating a settlement with the respondent. Thismay leave different groups vulnerable to 'divide and conquer' tactics ofrespondents in settlement negotiations, leading group members to compete andbe played off against each other. 129

Such competition between groups was evident in the Dow Coming breast implantclass action. According to Paula Shelton of Slater & Gordon, who acted for thegroup of Australian claimants, United States lawyers representing United Statesclaimants saw Australian claimants as competitors in their attempt to obtain themost advantageous compensation from Dow Coming's bankruptcy settlement. 130

According to Hawke, competition between lawyers with a direct financial interestin the settlement led to 'politicking', and manoeuvring for advantage in settlementnegotiations. This frustrated rational attempts at settlement by respondents, andenormously increased the class's own costs.131

127 (1999) ATPR ~41-679.

128 David L Shapiro, 'Class Actions: The Class as Party and Client' (1998) 73 Notre Dame LawReview 913, 958-59.

129 F G Hawke, 'Class Actions: The Negative View' (1998) 6(1) Torts Law Journal 68, 77.130 Liz Porter, 'Foot Soldiers in an Epic Battle', The Age (Melbourne), 27 May 2001, 1, 10.131 Hawke, above n 129, 74.


Professor Susan Koniak describes how, in the landmark asbestos class actionGeorgine v Amchem Products Inc. ,132 several plaintiff lawyers representingindividual claimants and groups negotiated favourable terms in the settlement fortheir own clients, with little regard for the interests of future claimants andunknown group members. 133

Having either single or multiple class lawyers may lead to undesirable outcomesfor class members. On balance, it is suggested that the risk is greatest if differentinterest groups do not have separate representation. Future claimants' cases aremore tenuous than those of present claimants, and this gives rise to a real risk oftheir claims being compromised at a discount in order to achieve a settlement. 134

In any event, whether the class has single or multiple lawyers, close judicialsupervision of class lawyers is still required, as advocated in Part IX.

It is recommended that where there is a risk that a single law firm cannotadequately represent the interests of multiple groups of class members,separate lawyers be appointed. Even where there are several class lawyers,the Court must ensure the interests ofall group members (including those whoare unknown) will be adequately represented. Also, the adequacy ofboth classlawyers and representative parties should be considered as a thresholdquestion to be satisfied at the commencement ofa class action.

VII SETTLEMENT

A Settlement Provisions In Part IVA

Settlement of representative proceedings is dealt with under ss 33V and 33W.The approval of the Court is required for the settlement of:(a) a representative proceeding - s 33V(1); or(b) the representative party's individual claim - s 33W(1).

Although neither section expressly refers to settlement of an individual groupmember's claim, or the claims of some but not all group members, Branson J inACCC v Chats House Investments Pty Ltd stated that it was 'obvious' that s 33Vpermitted settlement of any substantive claim against a respondent, or anyrespondent where there are several. 135

Where a representative party seeks leave to settle their individual claim andwithdraw as the representative for the group, notice must be given to groupmembers (s 33X(1)(c)), and the representative party must first have anapplication to have another person substituted as the representative partydetermined by the Court (s 33W(4)(b)).

132 Georgine v Amchem Products Inc. 157 F.R.D. 246 (1994).133 Susan Koniak 'Feasting While the Widow Weeps: Georgine v. Amchem Products, Inc.' (1995) 80

Cornell Law Review 1045.134 Hawke, above n 129, 79.135 (1996) 142ALR 177,184.


B Settlement and conflict of interest

In the United States, the powerful financial incentive of contingency fees drivesplaintiff lawyers to assume the risk of class action litigation. Given the addedcomplexity of class actions, and the added risks of running no win / no feelitigation, it seems reasonable that there be some incentive to encourage classlawyers to take on such cases. 136 No win/no fee arrangements are valuable inproviding access to justice for group members with small claims and limitedfinancial resources. Also, having specialist plaintiff class action law firms maycontribute to the judicial efficiency of class actions. 137 However, class lawyers canbe motivated by the prospect of substantial fees for relatively little effort byreaching settlement early in the class action proceeding.

In Australia, contingency fees are not available in all states, and are limited to aspeculative uplift of 25%, but, as in the United States, Australian class lawyersusually assume the risk of litigation by acting under no win/no fee agreements.This still provides Australian class lawyers with a strong incentive to settle, toensure a return on their considerable investment in the litigation. For instance, inKing v AG Australia Holdings Ltd, Moore J noted that the class lawyers hadunderwritten the costs of the litigation to almost five million dollars. 138 In a studyin the United States by the Rand Institute for Civil Justice of ten class actionsbetween 1994 and 1996 which resulted in a settlement, the study found that classlawyers were sometimes interested only in finding a settlement that defendantswould agree to, rather than assessing what class members had actually lost,considering whether they were likely to succeed at trial, and then negotiating afair settlement on that basis. 139

Because of the nature of class actions, group members and even applicants maybe virtually absent from the process, which opens the door for questionablepractices by class lawyers.

From the respondent's perspective there will always be the incentive to settlelitigation as early as possible and more inexpensively than the merits of the casemight suggest. However, as Posner J of the US District Court observed, 140

defendants may face pressure to settle even unmeritorious claims:

Certification of a class action, even one lacking in merit, forces defendants tostake their companies on the outcome of a single jury trial, or be forced by thefear of bankruptcy to settle even if they have no legal liability... [Defendants]may not wish to roll these dice. That is putting it mildly. They will be underintense pressure to settle.

In the United States, this pressure is compounded by the costs rule whereby eachparty pays its own litigation costs. However, in Australia, as in the United States,

136 See Vince Morabito, 'Contingency Fees in Federal Class Actions' (1999) 73(12) Law InstituteJournal 86.

137 Willging, above n 76, 44.138 [2002] FCA 872, [10].139 Class Action Dilemmas, above n 15, 18.140 In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir.Ill.1995), 1299 (Posner J).


when the respondent's incentive to settle early, more cheaply, and with as littlepublicity as possible intersects with the class lawyers' incentive to settle to obtaina return on their investment, this raises the possibility of collusion and conflict ofinterest.

If class lawyers settle too early and too cheaply the class action loses its deterrentfunction and group members may be inadequately compensated. For example, inKamilewicz v Bank of Boston141

, the Alabama State Court approved a settlementawarding a maximum of US$8.76 to individual class members while classlawyers received more than US$8.5 million in fees. One group member recountedhow she received US$4 from the class settlement, but was charged US$80 inlawyers' fees approved by the Court in the settlement. 142

After discussing conflict of interest in the Australian context in Williams v FA!Home Security Pty Ltd (No 4y43 in Part VIII, recommendations are made inPart IX for stronger judicial control in order to avoid the consequences of conflictof interest in settlement.

VIII SETTLEMENT AND CONFLICT OF INTEREST:WILLIAMS V FAI HOME SECURITY

In Williams v FA! Home Security Pty Ltd144, a firm of plaintiff lawyers acted for a

class who claimed they had been misled by untruthful sales representations whichinduced them to purchase home alarm systems. The applicant claimed in tort fornegligent misstatement, and under ss 52, 53 and 74G of the Trade Practices Act1974 (Cth). On 7 February 2000, the 'A Current Affair' TV program ran a storyon the manner in which FAI Home Security had marketed and sold its alarmsystems, and interviewed a solicitor from the class lawyers about therepresentative proceeding, who said: 145

The members of the class are ordinary Australians who have purchased FAI SecurityGuard home alarms in good faith ... Well it's a very important case for consumers. Ahundred and fifty thousand devices of this type were sold throughout Australia andNew Zealand. It's a big case.

On 23 October 2000, the parties reached agreement to settle the proceeding,subject to the Court's approval pursuant to s 33V. The terms of the proposedsettlement included:

(a) the respondents would pay $1,000 each to only the 495 group memberswho had registered with the class lawyers;

(b) the respondents would pay directly to the class lawyers $415,000 $440,000 on account of their fees; and

141 92 F.3d 507 (7th Cir. 1996).142 US Report on the Class Action Fairness Act 2000, above n 77, 16.143 [2000] FCA 1925.144 Federal Court of Australia, Victorian District Registry, V 383 of 1999.145 As cited in Williams v FA! Home Security Pty Ltd (No 4) [2000] FCA 1925, [8].


(c) the three key partners of the class lawyers' firm who acted for the classwould sign an agreement that they would not accept further instructionsfrom any person in relation to this claim.

The settlement was conditional upon:(a) the Court allowing the applicants to amend the definition of the class so as

to limit it to only those group members who had signed a fee agreementwith the class lawyers; and

(b) the Court approving the settlement pursuant to s 33V, and ordering that theproceeding be dismissed with no order as to costs.

The effect of the settlement was that only the known group members wouldbenefit, and the unknown group members would effectively be removed from theclass action.

A Approval of settlement

Pursuant to s 33V, a representative action may not be settled without the approvalof the Court. Section 33X(4) provides that unless 'it is just to do so, an applicationfor approval of a settlement under s 33V must not be determined unless notice hasbeen given to group members'. The applicants' motion sought orders that therespondent give notice under s 33X to all group members that a settlement hadbeen reached, and that the Court had permitted the applicants to amend theirapplication to confine the class to only the known group members who hadcontacted the class lawyers and signed agreements with them; not so much noticeof a proposed settlement as a fait accompli.

The question as Goldberg J saw it was whether, pursuant to s 33V, it was just toapprove the settlement without first requiring notice to be given to all groupmembers146 to allow them to put their views before the Court,147 or register withthe class lawyers and join the settlement. 148

Subsequently, after a notice of the proposed settlement was given to the class bynewspaper advertisements in March 2001, pursuant to Goldberg 1's orders, 88further members of the class contacted the class lawyers and objected to thesettlement because they were to be excluded from it. 149 Goldberg J approved thesettlement on the basis that the respondent undertook to extend the settlement tothe 88 further members on the same terms. 150

B Conflict Of Interest

What of the bigger picture of the interests of all group members? Goldberg Jrecognised that the proposed settlement had given rise to a potential151 conflict

146 [2000] FCA 1925, [31].147 Ibid [23].148 Goldberg J indicated at [34] that even though the proposed settlement was limited to 495

members, if new members became 'known' it might not be appropriate to approve any settlementwhich excluded them.

149 Williams v FA! Home Security Pty Ltd (No 5) [2001] FCA 399, [9].150 Ibid [20].151 In the author's opinion the conflict of interest was very real rather than merely 'potential'.


between the interests of the known group members in settling and obtainingcompensation, and the unknown members who would be 'cast adrift from anyrepresentative proceeding'. 152 Counsel for the applicants argued that if thesettlement was not approved the known group members would lose the benefit ofthe settlement. 153 However, counsel for the applicants were, after all, supposed tobe representing the interests of all group members. In making his decision,Goldberg J considered the primary purpose of the Part IVA legislation, in givingcollective access to justice to those who would otherwise be denied it. 154 At thesame time, Goldberg J reflected on the term of the settlement whereby threepartners of the class lawyers could not act in future for the discarded groupmembers. 155 He was concerned whether the term might be unenforceable as anunreasonable restraint of trade, but the clear implication is that it was nowunlikely that the unknown group members would be able to obtain justice via afurther class action against FAI Home Security, as the solicitors who knew thecase best would not act for them. 156

C Narrowing The Class - Permissible?

For the settlement to proceed the Court would have to agree to the applicantsamending the application so as to narrow the definition of the class to only thosewho had made contact with the class lawyers. Goldberg J's judgments suggestthat he acted on the understanding that this is permissible. Indeed, s 33K(1) statesthat '[t]he Court may at any stage of a representative proceeding, on applicationmade by the representative party, give leave to amend the applicationcommencing the representative proceeding so as to alter the description of thegroup'. However, it is arguable that it was never envisaged that s 33K would beused to narrow rather than enlarge the definition of the class.

Section 33K is headed 'Causes of action accruing after commencement ofrepresentative proceeding'. Section 33K(2) provides that '[t]he description of thegroup may be altered so as to include a person'l57 whose cause of action accruedafter the commencement of the representative proceeding. This suggests that theCourt's power to allow the amendment of the class description is for the purposeof enlarging and not narrowing the class. If Parliament intended to provide apower to narrow the class it could have been provided expressly in the legislation.In the Victorian class action legislation, s 33KA(2)(b) of the Supreme Court Act1986 expressly provides power for the Court to order that a person cease to be aclass member. However, Part IVA of the federal legislation does not include suchan express power.

The above interpretation is supported by the Group Proceedings Bill proposal andits explanatory memorandum in the ALRC's Grouped Proceedings report, the

152 [2000] FCA 1925, [22].153 Ibid [32].154 Ibid [28].155 [2001] FCA 399, [21]-[26].156 Counsel for the applicants argued that the rights of the unknown group members were preserved

as a result of the settlement. While their rights may have been preserved, it is argued that theircapacity to pursue those rights was greatly diminished.

157 Emphasis added.


forerunner to the Part IVA legislation. Clauses 14 and 15 of the proposed Bill,which deal with amendment of the description of the class are headed 'Additionof further group members: incomplete groups', and 'Addition of further groupmembers: causes of action accruing after commencement'.158 In Ryan v GreatLakes Council, Wilcox J allowed the amendment of the class description for thepurpose of adding applicants, as a simpler and more direct alternative to thejoinder of applicants. 159 In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd, MerkelJ ordered that two separate representative proceedings against the samerespondent be consolidated, and the application be amended to combine theclasses. 16o

Goldberg J did recognise that the potential rights of group members would beinfringed if he allowed the definition of the class to be narrowed, but would onlygo so far as to say that it would be unjust for this to take place unless membersof the class had been put on notice of what was proposed. In this regardFinkelstein J's comments in Lopez v Star World Enterprises Pty Ltd161 areinstructive:

With regard to the application under s 33V, my principal task is to assesswhether the compromise is a fair and reasonable compromise of the claimsmade on behalf of the group members. I am not so much concerned with theposition of the [representative applicant] who, after all, has solicitors andcounsel to advise him ... The group members are not protected in this way.

It seems clear that the Court has power to reject a settlement under s 33V if itfinds that the settlement results in unfairness to group members. According toFinkelstein J, the interest of absent class members should be protected whenmaking that decision. Finkelstein J also referred to the need to inform classmembers before approving a settlement. In Williams v FA! Home Security,Goldberg J did order that group members be informed of the settlement bynewspaper advertisements, but this was not a substitute for the Court's overridingduty to determine whether the settlement was in the best interests of all classmembers.

D Lawyer's Duty To The Class

Finkelstein J went on to say that group settlements under s 33V are permissibleeven where some members of the group are under a disability.162 He found thatthis is so because the scheme envisages that all members of the group, includingthose who may be under a disability, will be adequately represented by thoseacting on their behalf. 163 This creates an obligation on the part of those whorepresent them to ensure that their claims are properly put. That obligation is also

158 Australian Law Reform Commission, Grouped Proceedings in the Federal Court, Report No 46(1988), 157-158 ('Grouped Proceedings').

159 (1997) 149 ALR 45, 48.160 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (1999) ATPR ,-r41-679, 42688.161 (1999) ATPR ,-r41-678, 42669-70.162 Ibid 42671.163 This is evident from s 33F(1), which states that it is not necessary for a person under a disability

to have a next friend or committee merely in order to be a group member.


implied by s 33E(1), which provides that, subject to certain exceptions ins 33E(2), the consent of a person is not required to be a group member in arepresentative proceeding. If a person can be drawn into a representativeproceeding without their consent, then this implies an obligation on behalf of theapplicant and class lawyer to properly represent their interests. It seemsincongruous that class lawyers can jettison from the proceedings the very personswhom they have an obligation to adequately represent.

As Branson 1 put it in ACCC v Chats House Investments Pty Ltd: 164

The purpose intended to be served by s 33V(1) is obvious. [The court shouldbe satisfied] that any settlement or discontinuance of representativeproceedings has been undertaken in the interests of the group members as awhole, and not just in the interests of the applicant and the respondent.

E Requiring The Class To Opt In

By requIrIng absent group members to contact the applicant's solicitors toconfirm that they wish to participate in the settlement, Goldberg 1 has effectivelyconverted Part IVA in this proceeding from an 'opt out' to an 'opt in' procedure.Under s 331, ordinarily a group member must opt out by giving written notice,otherwise they are fixed as part of the class for the purposes of litigation orsettlement. An opt out scheme was incorporated in Part IVA because:

It ensures that people particularly those who are poor or less educated, canobtain redress where they may be unable to take the positive step of havingthemselves included in the proceedings. 165

Goldberg J's decision to require class members to register would seem to be atodds with the purpose of the procedure. There is some wisdom in requiring groupmembers to opt in where there is a limited pool of funds, as Finkelstein 1 did inLopez v Star World Enterprises Pty Ltd,166 where the respondent company was inliquidation. In Williams v FAI Home Security there was no such constraint. Whilstit was argued by the applicant that the unknown group members' rights were'preserved', it was as though the decision to 'opt out' had effectively been madefor them, and it was not likely that those 'preserved' rights would ever be pursued.

It would appear that Goldberg 1 made the decision to approve the settlementbecause he was persuaded by the applicant's argument that there was no viablealternative, and the known group members should not lose the benefit of thesettlement. However, there is always an alternative to approving a proposedsettlement. If a settlement is found to be unfair, the class action continues, and theclass lawyers continue to represent all members of the class in litigating theaction to its conclusion. Under s 33Z, the Court has a range of alternativemethods of assessing aggregate damages, to deal with the claims of both knownand presently unknown group members.

164 (1996) 142 ALR 177, 184.165 Second Reading Speech for Federal Court of Australia Amendment Bill 1991, above n 13,3174.166 (1999) ATPR ~41-678.


Ordinarily it will be in the respondent's interests to broaden the group forsettlement as much as possible and close the class in order to fix its liability. 167

The fact that the respondent embraced a settlement that 'preserved' the rights ofthousands of potential claimants suggests that the respondent believed there waslittle danger of the remaining group members' claims ever being brought outsideof this class action - all the more reason why they should not have been castadrift.

F Williams v FAI Home Security - Conclusions

Williams v FA! Home Security reinforces the concern that in settlement classactions, where there is more than one group within the class, there is a potentialfor conflict of interest. Under r 23(a)(4) of the US Federal Rules of CivilProcedure, a class action will not be certified unless the Court is satisfied that theinterests of the class will be adequately represented. This has often resulted in arequirement that different lawyers represent different sub-groups. This casepresents an argument for such a rule under Part IVA.

Finally, whilst there is no suggestion that the class lawyers' fees recouped in thesettlement were excessive, (the Court accepted the evidence of an independentconsultant that the fees charged were fair, and the class lawyers did not charge the25% uplift fee that was permitted under the Legal Practice Act 1996 (Vic)), it isworth noting that the solicitors' fees amounted to around 43% of the totalsettlement. Whilst it is not suggested that the class lawyers sacrificed the interestsof group members in favour of securing their own fees, the case serves tohighlight the potential for conflict between the interests of class lawyers and thatof group members which can be 'traded off in a settlement class action.

G Courtney v Medtel Pty Limited -Postscript to Williams v FAI Home Security

In Courtney v Medtel Pty Limited,168 the same firm of class lawyers who inWilliams v FA! Home Security argued successfully to narrow the class in order toensure a settlement for their directly represented group members, this time soughtto prevent the respondents making offers of settlement directly to group membersthat they did not directly represent.

In this proceeding, the applicant represented persons who have had, or wouldneed to have their heart pacemakers removed as a result of a hazard alert aboutpotential malfunctions. The applicant argued that the respondents should beprevented from making settlement offers to unrepresented group members, andthat either the Court or the applicant first approve the offers.

This time, the class lawyers raised the concern that any diminution in groupnumbers resulting from individual settlements could threaten the viability of theproceeding, because the remaining group members and particularly those directlyrepresented by the class lawyers would have to bear all of the costs.

167 McMullin v leI Australia Operations Pty Ltd (1998) 156 ALR 257,258-60 (Wilcox J).168 [2002] FCA 957.


In a pointed remark, Sackville J referred to the class lawyers' conduct in Williamsv FA! Home Security, saying, hypothetically, that if the class lawyers' purpose innarrowing the class in that case had been to prefer their own interests, then clearlythey could not do so here by seeking to keep the class intact. 169 After all, inarguing against the settlement offers being put directly, counsel made much of thefact that most of the unrepresented group members were elderly, and would bereliant upon the class lawyers. Further, counsel argued that the class lawyersowed a fiduciary duty to the unrepresented group members, and therefore had animportant role to play in protecting their interests. l7O

In deciding whether the Court should take on the role of approving settlementoffers, Sackville J considered whether Part IVA gives the Court such power.Section 33V(1) gives the Court power to approve the settlement of arepresentative proceeding, but he held that this does not extend to approving thesettlement of individual group members' claims. I

?1 However, he held that the verybroad discretionary power in s 33ZF(1) to 'make any order the Court thinksappropriate or necessary to ensure that justice is done in the proceeding' did givethe Court power to intervene.

Sackville J recognised that the respondents' offers may have been misleading, anddesigned to induce immediate acceptance of settlements by individual groupmembers over the telephone. He therefore felt some kind of intervention waswarranted. However, he placed that 'supervisory' role in the hands of theapplicant, by requiring the respondents to provide details of any offers to theapplicant in advance, giving the applicant time to make any application to theCourt prior to offers being made.

As Sackville J implied by citing Williams v FA! Home Security, there is a real riskthat class lawyers' own interests may conflict with that of group members. As therespondents argued during proceedings, a possible motivation for this applicationwas to preserve the fund as a means of ensuring the payment of the class lawyers'fees.

In the end, Sackville J handed the supervisory role to the applicant because he feltthat it was inappropriate for the Court to directly intervene in settlementnegotiations. With respect, it is submitted that is precisely what the Court shoulddo. In the circumstances that the Court had concerns that the respondents' offerswere misleading and oppressive, and recognised the possibility for conflict ofinterest or even collusion on the part of lawyers, the supervisory role should staywith the Court. Further, in the event that the applicants were unsatisfied with theterms of offers put by the respondents, they would be referred to the Court, andthe Court would ultimately have to decide upon them. I72

169 Ibid [57].170 Ibid [26].171 Ibid [45]. Cf ACCC v Chats House Investments Pty Ltd (1996) 142 ALR 177 where Branson J

held that s 33V did permit the settlement of individual group members' claims.172 Compare with King v AG Australia Holdings Ltd [2002] FCA 872, in which Moore J held that

any offers of settlement to group members must first have the approval of the Court.


Because the nature of Part IVA means that many group members will usually beunrepresented, and because of the recognised risk ofconflict between the interestof class lawyers and unrepresented group members, the Court must take a moreinterventionist role in the supervision of offers and settlements.

IX JUDICIAL CONTROL OF CLASS ACTIONS

.. .it is precisely because of the flexible utility of the representative action thatjudicial control of its conduct is important, to ensure not only that the litigationas between the plaintiff and defendant is efficiently disposed of but also thatthe interests of those who are absent but represented are not prejudiced by theconduct of the litigation on their behalf.

Brennan J in Carnie v Esanda Finance Corporation Limited173

A Requirement For Sufficient Maturity

In his paper written for the United States Federal Judicial Conference Report onMass Tort Litigation, Thomas Willging speaks of a 'lifecycle' in mass tortlitigation. 174 He suggests that the conventional wisdom in mass tort casemanagement is to require test cases to be conducted in order to understand the fulldimensions of the tort. When the issues of causation, liability and defences areproperly understood it is then efficient to aggregate cases.

Professor Elizabeth Cabrasser disagrees. She suggests that the concept of theimmature tort is vague and, using the criteria set down in the rules of procedure,judges are able to determine whether class actions will be efficient or not. 175

Professor David Shapiro suggests a case management alternative that retains thebenefit of the maturity approach. He recommends that where the issues in a masstort case are new, the class should be given provisional certification only, untildiscovery and/or bellwether trials are conducted. 176 This is a wise approach forreasons in addition to efficiency. Where a claim arising out of a mass tort is to belitigated for the first time, the issues and the result may be uncertain. To bring theclaim as a class action risks an adverse result to which the entire class will bebound. However, as discussed in Part IV, litigating a mass tort as a class actionmay be the only way for claimants to gain access to justice.

On the issue of costs, it is suggested that running a test case as a first stage in aclass action will not result in cost inefficiency. Having clarified and litigated the(common) issues in the test case, the length and complexity of the subsequentclass litigation is contained.

It is therefore recommended that Part IVA be amended to give the Courtdiscretion to order that a test case be conducted as a first stage ofa class action.

173 (1995) 127 ALR 76, 8l.174 Willging, above n 76,30.175 Elizabeth J Cabrasser, 'The Road Not Taken: Thoughts on the Fifth Circuit's De-Certification of

the Castano Class' (1996) SB24 ALI-ABA 433, 450.176 Shapiro, above n 128, 935.


Once the outcome of the test case is known, all parties are in a better position todecide whether to continue with litigation, settle, or opt out of the class action.

B Control Of Settlements And Lawyers' Fees

A report on class action procedures by the United States Senate Committee on theJudiciary found that the current US class action system is plagued by problemsand abuses which are largely attributable to 'inadequate judicial supervi,sion' .177 Ifjudges approve settlements that are not in class members' best interests, and thenreward class lawyers for obtaining such settlements, they provide incentive forunmeritorious litigation and abuse of the representative procedure.

This focus on judicial control is supported by a study of ten class actions by theRand Institute for Civil Justice in which it concluded that how judges control andmanage class actions significantly determines the fairness of the outcome. l78 Itfound that the key components in judicial control of damages class actions werescrutiny of settlements and lawyers' fees. 179

1 Scrutiny Of Proposed SettlementsSection 33V requires that settlements must be approved by the court, but does notspecify criteria that judges should use to decide whether or not to grant approval,other than that such orders are 'just'.

In Lopez v Star World Enterprises Pty Ltd, Finkelstein J said in relation toapproval of settlements that his principal task is to assess whether thecompromise is a fair and reasonable one in the interests of all group members,but the Court must inevitably rely on the solicitor and counsel for applicant toput evidence before it that the proposed compromise is in the interests of thegroup members. 18o Finkelstein J recognised that this may place them in aposition of conflict, where the interests of the applicant differ from those of thegroup. There may also be conflict where the solicitor and counsel's owninterests in proffering a settlement differ from those of the class. The risk ofboth such conflicts was apparent in Williams v FAI Home Security, discussed inPart VIII.

Given the possibility for conflict of interest on the part of those on whom theCourt relies when approving settlements, judges should refer to specific criteriawhen considering the fairness of settlements, and not merely the elastic conceptof whether a settlement is 'just'.

It is recommended that judges should:ask what the estimated losses were, and how those losses were calculated;

• ask for an assessment of the damages class members would be entitled tounder judgment if their claim was successful;

177 US Report on the Class Action Fairness Act 2000, above n 77, 8.178 Class Action Dilemmas, above n 15,24-25.179 Ibid 31.180 (1999) ATPR ~41-678, 42670.


require settling parties to detail their plans for distribution of thesettlement, including proposed notices to class members, 181 whetherpayments to class members will be automatic or whether class memberswill be required to apply for payment;exercise caution when there is a significant non-cash component to thesettlement, and require estimates for redemption of the non-cashcomponent; andtaking the above into account, require an estimate of the actual amountdefendants will pay.

The Court's responsibility for the fairness of class action settlements should notend with formal approval of those settlements. Experience in US class actionssuggests that in many cases the actual compensation paid was significantly lessthan the amount agreed upon in the settlement. 182

As a result, courts should:require that settlement administrators report on the distributions made toclass members, and whether they are in line with projections made as partof the settlement application; andrequire annual reports where settlements are to be distributed overextended periods.

2 Scrutiny Of Lawyers' FeesIn Part VII, it was noted that class lawyers, who usually operate on a no win/nofee basis have a direct financial interest in concluding settlements. However, therisks of conflict of interest that were discussed in regard to Williams v FA! HomeSecurity can be limited by close scrutiny of settlements and fees. 183

In the ALRC Grouped Proceedings report, the Commission recommended thatthe Court must approve fee agreements to ensure that they are fair andreasonable. 184 However, there were no express provisions included in Part IVAgiving power to regulate fee agreements, and in Johnson Tiles Pty Ltd v EssoAustralia Ltd,185 Merkel J held that lawyers in class actions were free to negotiateprivate fee agreements, subject to other applicable laws. He also recognised thatthis gave rise to the potential for exploitation of group members by class lawyers,and that 'costs agreements with group members can result in unfair orunreasonable outcomes'.186 In Johnson Tiles Pty Ltd v Esso Australia Ltd, classlawyers asked group members registering their interest in the proceedings to enterinto a fee agreement which included a 25% speculative uplift. There are no

181 Notice of application for approval of settlement must ordinarily be given to group membersbefore settlement can be approved, pursuant to s 33X(4).

182 Class Action Dilemmas, above n 15, 19. Reasons given include inadequate notice of settlementto class members, inappropriateness or difficulty in redeeming non-cash or coupon basedcompensation.

183 The ALRC recommended in Grouped Proceedings, above n 158, that class lawyers should befree to enter into contingency fee agreements in order to encourage access to justice forclaimants, subject to close judicial scrutiny.

184 Grouped Proceedings, above n 158, para 293.185 (1999) 166 ALR 73l.186 Ibid 738.


special provisions in Part IVA dealing with fee agreements between solicitors andclass members, and this agreement conformed to the provisions of the LegalPractice Act 1996 (Vic).

However, the class lawyers had given the Court an assurance that group memberswould only be liable for taxed costs (and then only with the approval of theCourt), and had not informed the Court of the uplift fee arrangement. Under thefee agreement, group members became liable for individual costs, and Merkel Jexercised the Court's supervisory jurisdiction under s 23 of the Federal Court ofAustralia Act 1976 (Cth) and its broad discretionary power under s 33ZF toprevent the lawyers enforcing the agreements without having informed groupmembers in the opt out notice of their potential liability.

In the ALRC Managing Justice Report No 89, the Commission continued toadvocate for specific provisions requiring judicial approval of fee agreements. 18

?

It is recommended that Part IVA be amended to give the Court direct regulatorypower to ensure that fee agreements are fair and reasonable, and not merely apower to reject an agreement unless group members have been notified of itsdetails.

C Control Of Interlocutory Applications

In Part VII (B), it was noted that lawyers for respondents in Australia are underless pressure to settle than in the United States, where each party pays its owncosts. In Australia, in the event that the respondent succeeds in the proceeding, orthe applicant withdraws, the respondent may receive an award of its costs. Thismay act as an incentive to respondents to engage in a war of attrition, by makingapplication on every point possible in order to prolong proceedings and build upcosts. As Peter Gordon and Lisa Nichols noted, in the Longford gas explosionclass action, Esso, facing damages from the claims of possibly hundreds ofthousands of gas consumers, has 'chosen to litigate every point available to it' .188

On one hand, a respondent is entitled to know the case pleaded against it, and theapplicant's pleading must adequately disclose the cause of action and the facts onwhich it relies. Further, the respondent is entitled to take issue with the applicant'spleadings if it believes that the commencement requirements under s 33C(I) havenot been met.

On the other hand, a war of attrition causing the applicants to incur prohibitivecosts, engaged in by respondents with the express purpose of avoiding a trial,amounts to an abuse of process, and a denial of access to justice.

In Bright v Femcare Limited, a proceeding which has been before the FederalCourt eleven times since October 1999, Finkelstein J warned that such tacticswere an emerging trend in Australian class actions, and urged the Court toovercome such tactics by ensuring that the parties 'do not become bogged down

187 Australian Law Reform Commission, Managing Justice: A Review' of the Federal Civil JusticeSystem, Report No 89 (2000), [7.126].

188 Gordon and Nichols, above n 14, 7.


in what are often academic or sterile arguments about pleadings, particulars,practices and procedures', and by bringing the action on for speedydetermination. 189

X CONCLUSION

A Access to Justice

In its Access to Justice: An Action Plan report the 'Access to Justice' committeeestablished by the then Commonwealth Minister for Justice remarked that, 'Theobjective of equality before the law is unattainable if people experience barriersthat prevent them from enforcing their rights'. 190

For mass tort claimants, those barriers are contained within the commencementprovisions of Part IVA. It is the author's contention that the courts are interpretingthe requirements for commonality of claim and related circumstancesrestrictively, causing class actions with meritorious claims to fall at the firsthurdle. These difficulties are compounded for claimants in dispersed mass torts.Where there are multiple respondents, as is often the case in product liabilitymass torts, there are added barriers in satisfying the commencementrequirements.

Even though the complex nature of mass tort claims calls for a highly organisedcase management approach that could best be implemented in a representativeprocedure, courts are exercising their discretion to discontinue class actions onthe grounds of 'inefficiency' or 'inappropriateness'. It is the author's contentionthat the notion of inefficiency has been allowed to take precedence over access tojustice. Where there is little chance that claimants can bring their claimsindividually, it cannot be in the interests of justice to discontinue a class action,and thus contrary to the purpose of Part IVA to do so. As Spender J noted in Wong& Ors v Silkfield Pty Ltd, 191 Part IVA is 'meant to be a flexible procedure toadvance the interests of justice'. However it appears that in relation to thecommencement provisions, the Court's inflexibility is a barrier to theadvancement of legitimate mass tort claims.

As Moira Rayner notes

Industry and institutional interests - with influence, access to money, adviceand professional representation - can act as they please, even if they are'wrong', if no remedy can be invoked. 192

189 [2002] FCAFC 243, [160].190 Access to Justice Advisory Committee, Commonwealth Parliament, Access to Justice: an Action

Plan (1994), xxxvii.191 (1998) ATPR ~41-613.

192 Rayner, above n 21, 48.


In Philip Morris v Nixon, Part IVA failed to accommodate the group claims ofsmokers, when in other courts the very same respondents were admitting thattheir product causes lung cancer. 193

Recommendations were made for a more flexible interpretation of ss 33C and33N to accommodate the complexities of dispersed mass tort claims. It is hopedthat the recent, more flexible interpretation in Bray v F Hoffman-La Roche signalsa change in the Court's approach.

B Control Of Settlements And Fees

Whether the power of the 'monsters' are directed to doing social good ratherthan harm depends substantially on how well judges control the litigationprocess.

Professor Deborah R Hensler194

Even when mass tort claimants overcome the barrier of access to the courts, theyare still at particular risk of obtaining less than fair outcomes. In the Report onMass Tort Litigation commissioned by the Chief Justice of the United States,195 itwas found that the nature of dispersed mass torts, which are commonly dividedbetween present and future claimants, and with exposure to the cause often takingplace over decades, leaves claimants susceptible to inadequate representation inclass actions, and conflict of interest and collusion on the part of lawyers insettlements.

These risks are not confined to the United States, where lawyers have a directfinancial incentive in early settlement. In Australia, lawyers acting under nowin/no fee agreements and speculative uplift fees also have a financial interest inconcluding settlements. In Williams v FA! Home Security, it was demonstratedthat class lawyers failed to act in the best interests of the class as a whole innarrowing the class and proffering a limited settlement. The Court failed to rejectthe settlement, even though it recognised the class lawyer's conflict of interestand the less than optimal outcome for the majority of class members. In Courtneyv Medtel, even though the Court recognised that settlement offers werepotentially misleading, and that class lawyers may in particular circumstancesprefer their own interests over that of the class, the Court handed the 'supervisory'role to a party who itself should have been subject to judicial supervision.

Decisions such as Williams v FA! Home Security, made under broad discretionaryrules in the interests ofjustice, have the potential to set undesirable precedents. Itappears that it is now possible for class lawyers to discard the majority of the

193 Richard Boeken v Philip Morris, Inc., et al, Los Angeles County Superior Court, 6 June 2001,unreported.

194 Deborah R Hensler, 'Revisiting the Monster: New Myths and Realities of Class Action and otherLarge Scale Litigation' (2001) 11(2) Duke Journal of Comparative & International Law 179,196. As to the term 'Monster', Hensler notes that the public in the United States perceives classactions as litigation 'Monsters'.

195 USA, Report of the Advisory Committee on Civil Rules and the Working Group on Mass Tortsto the Chief Justice of the United States and to the Judicial Conference of the United States,Report on Mass Tort Litigation, (15 February 1999).


class in favour of limited settlements on behalf of only those group members whohave fee agreements with them, with the consequence of ensuring the lawyers'full remuneration.

As a result, recommendations were made for judges to employ more stringentcriteria in supervising and assessing the fairness of settlements, and for Part IVAto be amended to give the Court direct power to regulate fee agreements.

C 'Crisis' Averted

The Report on Mass Tort Litigation cited above was commissioned by the ChiefJustice of the United States in response to what many saw as a crisis in mass tortclass action litigation, swamping the courts and failing to provide faircompensation for claimants. However, like Judge Jack Weinstein,196 the authorbelieves that the class action procedure provides the most efficient mechanism forthe resolution of dispersed mass tort claims, and holds the potential for fairoutcomes for claimants and respondents, provided that the controls recommendedabove are implemented.

It is not suggested that in its ten years of operation Part IVA has alreadyengendered a crisis in mass tort class actions in Australia, however cases such asPhilip Morris v Nixon and Williams v FA] Home Security indicate that Part IVAis capable of producing many of the same pitfalls for claimants as experienced inmass tort class actions in the United States. These pitfalls are avoidable. Withsome flexibility on the part of the courts in accepting dispersed mass tort classactions, appointing separate lawyers to represent different interest groups andunrepresented class members, close judicial control of the proceedings, and strictmonitoring of lawyers' fees, then a 'crisis' such as experienced in the UnitedStates will be averted, and the Minister's purpose for Part IVA to 'give access tothe courts [and providing fair outcomes] to those in the community who havebeen effectively denied justice because of the high cost of taking action'l97 maywell be achieved for mass tort claimants.

196 Jack B Weinstein, 'Notes for Discussion of Mass Tort Cases and Class Actions' (1997) 63Brooklyn Law Review 581, 585.

197 Second Reading Speech for Federal Court of Australia Amendment Bill 1991, above n 13,3174.

mass tort class actions under the federal court of australiaact: justice for … · 2018. 1....

Documents