Cooperation between representative plaintiffs to resolve multiplicity disputes may be a relevant factor in class action beauty parades 

And is not necessarily unlawful anti-competitive behaviour

What you need to know

• Where there are competing class actions, the Court will consider a range of factors to determine which arrangement would be in the best interests of group members. These factors will vary from case to case. 

• The Victorian Court of Appeal has held that the Court may have regard to cooperation between representative plaintiffs and their lawyers that leads to the consolidation of some of the competing class actions.

• The Court observed that the process of putting competing proposals to the Court is "far from a truly competitive process", and the cost at which legal services are provided to group members is not the predominant consideration in determining multiplicity disputes. 

• The Court rejected a submission that orders directing representative plaintiffs in competing class actions to confer with the aim of resolving the multiplicity issue "gave legitimacy or lawfulness to conduct that would otherwise be unlawful" (eg due to the effect of this on competition).

• The Court below accepted that there was a risk of costs duplication arising from the involvement of two law firms in the consolidated proceeding, but found that the risk could be appropriately managed by a "costs monitor order". In view of this, the Court of Appeal rejected a submission that the Court below did not have regard, or did not give sufficient weight, to potential costs duplication in the consolidated proceeding. 

The competing class actions

Kajula was one of four representative plaintiffs who commenced a class action against the defendant.  Three of the class actions were commenced in the Federal Court of Australia, and one was commenced in the Supreme Court of Victoria. The other three representative plaintiffs, represented by different law firms and funders, agreed to consolidate their proceedings in the Supreme Court of Victoria. Kajula sought to stay the other proceedings and continue with its own. 

The Supreme Court of Victoria held that the consolidated group proceeding should proceed to trial and the Kajula proceeding should be permanently stayed.  The Court found that the application was "finely balanced", as many of the factors commonly used to distinguish competing class actions were "neutral" in this case (eg the representative plaintiffs were each represented by firms with experience in shareholder class actions, and each were seeking a group cost order (GCO) fixed at the same rate).  

Ultimately, a "material" factor for the Court in resolving the carriage dispute was that the parties and practitioners involved in the consolidated proceeding had a "proven track record" of cooperation, which gave the Court confidence that they would act efficiently and cooperatively in the best interests of group members going forward.  

Kajula applied for leave to appeal the permanent stay of its proceeding. 

Application for leave to appeal dismissed

Kajula argued that: 

• cooperation between plaintiffs and lawyers in the consolidated group proceeding was irrelevant to determining the carriage dispute; and 
• by giving prominence to this factor, the Court failed to give appropriate weight to other factors, such as the risk of duplicated costs and the suitability of the lead plaintiffs.  

It also argued that that Court's decision elevated cooperation over the multi-factorial analysis that the Court was required to carry out in determining the multiplicity dispute, and would undermine competition between class action proponents to group members' detriment. 

The Victorian Court of Appeal dismissed Kajula's application.  The key findings were:

No precedent created

• The Supreme Court's decision was an example of the Court considering and weighing all the relevant factors in resolving a carriage dispute in accordance with the established principles.  (See our previous update here on the High Court's multi-factorial approach to managing competing claims.) 
• At a threshold level, the Supreme Court's decision concerned a matter of practice and procedure and Kajula had not established any substantial injustice or any error of principle that warranted a grant of leave to appeal.  

Cooperation not irrelevant to carriage dispute

• "Cooperation" (which the Court defined as "representative plaintiffs and their lawyers in competing group proceedings working together in order to resolve or reduce the matters for dispute in a multiplicity dispute in a time and cost-effective manner") may be a relevant factor in resolving a carriage dispute.  In particular, the Court considered that past cooperation may "be viewed as an indicator of future cooperation in the proceeding more generally".

• The Supreme Court did not elevate cooperation above all other factors.  Instead, the Supreme Court had regard to several factors, many of which were neutral. Accordingly, on the facts of this case, cooperation was ultimately the most influential factor in the Supreme Court's decision. 

Relevance of "competition" 

• The Court of Appeal observed that the process of putting alternative proposals to the Court for the arrangements for managing competing class actions is "far from a truly competitive process", and "'competition' is not really an apt label for what occurs in this context". 
• First, the Court observed that "the economic logic of free market for goods or services is not directly relevant to the determination of multiplicity disputes" because "the court is not predominantly guided by reference to the cost at which legal services are provided".  Instead, the best interests of group members are determined by considering a range of factors (including "the just, efficient and timely resolution of relevant proceeding" and "court resources and judicial time").
• Second, the Court observed that group members are protected by various legal duties, including fiduciary, professional and/or contractual obligations of the lead plaintiff and their legal representatives.
• Third, the Court observed that the Court has a "supervisory and protective role" in class actions, which provides a "significant safeguard against any detriment to group members resulting from a lack of competition".
• Finally, the Court observed that "multiplicity of proceedings is not to be encouraged and competing group proceedings run by different firms of solicitors, with different funders, may in principle be inimical to the administration of justice".
• The Court of Appeal also observed that while the "competitive influence" of one of the competing proposals may be  a relevant factor, "the Court is not required to scrutinise the minutiae of the competitive behaviour of the parties to determine which position adopted by which party  and their legal advisers has led to the particular (if any) benefit for the group members". 

Potential for costs duplication

• The Court below considered it would be appropriate to make "cost monitor orders" for the consolidated proceeding if it proceeded (as there were two law firms involved). These included that "costs incurred as a result of two law practices acting rather than one shall not be recoverable" from the defendant or group members, and that there be periodic inquiries by a costs referee (with the costs of the inquiries to be borne by the plaintiffs' law firms).
• The Court of Appeal rejected Kajula's submission that the Court below did not have regard, or did not give sufficient weight, to issues of cost duplication due to the involvement of two law firms in the consolidated proceeding. The Court of Appeal noted that the Court below did identify costs duplication as a risk, but considered this factor to be neutral as it could be appropriately managed by the costs monitor order.
• The Court of Appeal also noted that, in addition to the "costs monitor order", the GCO (which capped recoverable costs) incentivised the two law firms to work cost effectively, and the Court could also reduce the cost recovery in the GCO rate if it considered this appropriate.

Where to from here?

• Where there are competing class actions that are similar in terms of factors typically considered by the Court (eg funding arrangements and costs, experience of legal representatives, etc), this case may provide an incentive for representative plaintiffs and law firms to seek to consolidate their proceedings.
• It remains to be seen what (if any) impact this case will have on the competitive dynamics of competing class actions. 
• It is suggested that the Court will have a particularly important supervisory and protective role to play in matters involving consolidation of competing class actions where there is no remaining competing proposal by a representative plaintiff and their legal representatives and/or funder.
• While the involvement of multiple law firms in a consolidated class action creates a risk of costs duplication, the Court may not consider this issue significant if there are appropriate orders or arrangements in place to manage the risk (eg independent monitoring and periodic review of costs incurred by the law firms involved).  

See: Kajula Pty Ltd v Downer EDI Ltd [2024] VSCA 236

Authors: Ian Bolster, Partner; Thomas Storer, Partner; Srishti Natesh, Senior Associate and Jordon He, Lawyer.