BMW Australia Ltd v Brewster; Westpac Banking Corporation v Lenthall [2019] HCA 45

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Facts

  • In the Westpac matter, Lenthall commenced representative class action proceedings in the Federal Court.
  • Lenthall alleged that Westpac’s financial advisers breached their obligations in relation to advice given regarding life insurance policies.
  • In the BMW proceedings, Brewster commenced representative proceedings in the NSW Supreme Court against BMW Australia Ltd (“BMW“) due to the national recall of BMW vehicles fitted with defective airbags.
  • Both the proceedings were funded by litigation funders.
  • In each proceeding, the litigation funder had entered into a litigation funding agreement with a small number of group members.
  • Common funds orders (“CFO“) were made by the courts in both sets of proceedings. A CFO is an order that requires that all participating members contribute a percentage of any award of damages to the litigation funder regardless of whether the class member had signed a litigation funding agreement or been joined to the case.
  • BMW and Westpc challenged the court’s ability to make a CFO under each respective procedural legislation (the Federal Court Act 1976 (Cth) (“FCA“) and the Civil Procedure Act 2005 (NSW)(“CPA“)).

Issues

  • BMW and Westpac appealed to the High Court and argued that:
    • In the absence of clear words, the power to make a CFO could not be implied into s183 of the CPA or s33ZF of the FCA;
    • It was inconsistent with the exercise of judicial power under Chapter III of the Constitution; and
    • The power involved the acquisition of property without providing “just terms” contrary to s51(xxxi) of the Constitution.

Held

  • The High Court by majority (Kiefel CJ, Bell, Keane, Nettle, Gordon JJ) allowed the appeals and held that, properly construed, neither s 33ZF of the FCA or s 183 of the CPA empowers a court to make a CFO.
  • The Court determined that the Acts’ statutory provisions conferred broad powers on the Court to make necessary orders to ensure that justice is done.  However, a CFO is an order that defines the relationship between a party  (the class members) and a third party (the litigation funder). A CFO cannot be described as necessary to ensure justice in a proceeding.
  • The Court distinguished that the provisions allowed a court to make orders about how a class action should proceed. However, a CFO was an order about whether an action can proceed at all and was therefore beyond the statutory powers.
  • Because the principal issue was resolved in favour of the appellants by a majority of the Court, it was not necessary to determine whether the relevant provisions of the FCA and the CPA infringe Ch III of the Constitution or are contrary to s 51(xxxi) of the Constitution.

Full Text

The full text is available here: http://eresources.hcourt.gov.au/showCase/2019/HCA/45


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