In McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd  FCA 947, two open class securities class actions (the McKay proceedings and the Basil proceedings) had been brought against Bellamy’s under Pt IVA of the Federal Court of Australia Act 1976 (Cth) which concerned the same subject matter and the same causes of action. The McKay proceedings were open class proceedings, but currently over 1,500 McKay group members had entered into litigation funding agreements with IMF and retainer agreements with Slater & Gordon. The Basil proceedings had been commenced shortly after the commencement of the McKay proceedings but in its description of the persons represented, it excluded the McKay applicant and persons who had signed litigation funding agreements or retainer agreements in the McKay proceedings. The Basil proceedings were also open class proceedings but presently had over 1,000 group members who had entered into litigation funding agreements with ICP Capital and retainer agreements with Maurice Blackburn.
The question posed by Beach J was: “Should either or both proceedings be allowed to continue? If one only, which one? And if both, as two open class proceedings or in some other configuration?”
In rejecting a consolidation of the two proceedings, his Honour said that, absent agreement by both sets of lawyers and funders, consolidation would create many difficulties, particularly given different litigation funders and different funding models. As for the option of making a s 33N(1) “declassing” order in relation to one of the proceedings, his Honour said that he did not consider that that was an appropriate option either. In particular, each of the proceedings, in comparison to hypothetical individual actions, was an efficient and effective process to resolve common issues. Further, contrary to submissions of Bellamy’s, the commencement of a second bona fide set of Pt IVA representative proceedings does not of itself establish any vexation, oppression or an abuse of process. His Honour also said that there were real difficulties in saying that the interests of justice would dictate a stay of the Basil proceedings if one were to consider the position of the signed up 1,000 group members who had not participated in the McKay arrangements but had chosen to enter into funding agreements and retainers with ICP Capital and Maurice Blackburn.
His Honour concluded: “In summary, I have determined not to permanently stay one of the proceedings. Rather, I propose to close the class in the Basil proceedings, to allow the McKay proceedings to remain as open class proceedings, and to have a joint trial of both proceedings as then so reconstituted; in essence, one open class and one closed class. Group members in the closed class proceedings will be excluded from the open class proceedings to avoid overlapping group membership (and by corollary, vice versa).” His Honour explained later that as to “presently unsigned group members in both proceedings, they will … be captured by the McKay proceedings and can choose to maintain membership thereof or opt out”. His Honour acknowledged that duplication of costs and expenses was an important consideration but said that the duplication could be minimised by case management procedures which he intended to put in place.
In deciding which proceeding should have its class closed which in turn raised the question, which was the preferable proceedings for unsigned group members in both proceedings, his Honour listed eight non-exhaustive considerations as relevant: “(a) The experience of the practitioners. (b) The costs the practitioners expected to charge for all work performed. (c) The funding terms in each of the proceedings (d) The resources made available by each firm of solicitors. (e) The fact that one of the proceedings was commenced first in time would generally carry little weight nut that might do so, if one had been on foot for significantly longer than the other and was therefore more advanced. (f) The number of group members signed up to each of the proceedings. (g) Whether each of the proceedings would proceed without a common fund order, and the terms of any proposed common fund order that might be sought. (h) The position adopted by each funder on the question of security for costs and generally their resources to meet any adverse costs order.”
His Honour concluded that on balance it was appropriate to close the Basil class. As to comparing the two proceedings, criteria (a), (d), (e), (f) and the first aspect of (g) were neutral. However, as to criterion (h), although there were no difficulties concerning the McKay proceedings, there were unresolved questions concerning the Basil proceedings — issues had been raised about the financial position of ICP Capital which were relevant to security for costs and the funding of adverse costs orders. Further, his Honour found that the ICP Capital funding arrangements were more opaque and evolving than the IMF funding arrangements and the court had less confidence in the financial strength and capacity of ICP Capital than in that of IMF. Relatedly, there were some small risks concerning its ability to deal with adverse costs orders and the question of insurance.
Lastly, his Honour also said that it was likely that “in the case management of both proceedings I may give directions to achieve the following efficiencies after discussing the matter further with counsel”. Those efficiencies were (in brief) that the two applicants have only one counsel team between them, that both should negotiate as one with the respondent on an electronic discovery protocol and categories for discovery, that there should be a joint trial of both proceedings and that the lawyers for both use reasonable endeavours to agree on proposed expert evidence, consult before preparing, filing and serving any evidence, use reasonable endeavours to progress each of the proceedings in a similar manner, cooperate in the conduct of any interlocutory application and confer about key dates.