An update in the Class Actions space following the decision in BMW Australia Ltd v Brewster

Lenthall v Westpac Banking Corporation (No 2) [2020] FCA 423: An update in the Class Actions space following the decision in BMW Australia Ltd v Brewster [2019] HCA 45; (2019) 94 ALJR 51

This interlocutory application arose as a consequence of the decision of the High Court of Australia in BMW Australia Ltd v Brewster[1] (Brewster).  The applicants, Gregory John Lenthall, Sharmila Lenthall and Shane Thomas Lye, asserted that a notice ought to be sent to group members informing them that:

  1. The common fund order (CFO) (which imposes on all group members an obligation to pay a third party litigation funder a funding commission irrespective of whether a group member has entered into a funding agreement) made in this proceeding was set aside by the High Court in Brewster; and
  2. The applicants intended to seek an order at the conclusion of the proceedings to distribute the burden of costs, fees and all other expenses, equitably among all persons who have benefited from the class action (described as an “Expense Sharing Order” by Lee J).

The respondents, Westpac Banking Corporation and Westpac Life Insurance Services Ltd, in resisting the form of the draft notice proposed by the applicants, raised the following arguments which Westpac submitted should be answered in the negative:

  1. Whether the Court has power to give a notice containing all the content proposed and, in particular, the content in the draft notice, which goes to the issue of informing group members that one option the group members can take is to sign a funding agreement with the funder of the proceeding and foreshadows an Expense Sharing Order; and
  2. Whether, as a matter of discretion, the Court should approve the content of the draft notice.

In relation to whether the Court has power to give a notice containing the proposed content, Lee J stated that the argument in relation to whether the Court had “power” was a “distraction” and raised the importance of Division 3 of Pt IVA of the Federal Court of Australia Act 1976 (Cth) (Act) which deals with notices.

His Honour, Lee J, pointed out that section 33X(1)(a) (where notice must be given to group members regarding commencement of proceeding and right of group members to opt out of the proceeding) and section 33Y(2) (where form and content of a notice must be approved by the Court) provided express power for the Court to approve the content of the notice including by providing to group members information relevant to their decision to opt out.

Lee J was satisfied that “a notice should be sent which not only provides for opt out, but also include the important information that the CFO is no longer operative, and the real world consequences that flow from this reality.” It was considered important to Lee J that group members were made aware of the “realities of the circumstances” in which they were in as a result of an error made earlier in the proceedings.

In relation to whether, as a matter of discretion, the Court should approve the content of the draft notice, Lee J, while remaining conscious of the observations made by the High Court that a CFO was “beyond the purpose” of the legislation, stated that the whole point of the notification regime was to ensure that the group members were provided information relevant to their rights and which may affect their claim. The Court held that this was a matter that should be notified to group members pursuant to the power conferred by s 33X(5) of the Act.

In relation to sending the information to group members, Lee J proffered that rather than continuing to send complex information via written form to group members in class actions, it was time for new modes of communicating complex information to be considered.

Further, rather than approve the draft notice proposed by the applicants, Lee J prepared a “simple opt out notice” that sought to convey the complex information, inviting the parties to consider the form of the notice as well as asking the parties to consider whether it would be appropriate and practicable to approve a supplementary notification in some audio-visual form to be sent to group members.

In light of the above, parties should have due consideration to the form and content of notices to be sent to group members so that the information conveyed can be easily understood, allowing group members to make informed decisions affecting their legal rights.

[1] [2019] HCA 45; (2019) 94 ALJR 51

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