Brewster v BMW Australia Ltd

1. [1]

   BATHURST CJ: I agree with Bell P.

2. [2]

   BELL P: By orders made on 16 September 2020, Sackar J removed the following separate question to the Court of Appeal in representative proceedings (the Brewster Proceedings) pending between Mr Owen Brewster (Mr Brewster) and BMW Australia Ltd (BMW):

3. [3]

   Although the separate question does not use the term “common fund order”, Mr Kirk SC, who appeared with Mr Prince for BMW, contended that an order requiring a non-funded group member to make a payment of an amount to a funder out of the proceeds of any settlement by way of return on expenditure, commission or other similar remuneration to the funder was of the essence of a “common fund order”.

4. [4]

   The Brewster Proceedings are one of a set of some seven representative proceedings commenced in 2017 and 2018 concerned with allegedly defective motor vehicle airbags manufactured by Takata Corporation. The seven sets of proceedings have been case managed together in the Equity Division of this Court and have been set down for the trial of common questions for some 8 weeks commencing 3 May 2021.

5. [5]

   A mediation of the proceedings has also been ordered, to take place before the Hon PA Bergin SC on or before 15 March 2021.

6. [6]

   This is not the first time the Brewster Proceedings have been before this Court: see BMW Australia Ltd v Brewster (2019) 366 ALR 171; [2019] NSWCA 35 (BMW (CA)); see also Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia; Brewster v BMW Australia Ltd (2020) 101 NSWLR 890; [2020] NSWCA 66 (Haselhurst).

7. [7]

   In BMW (CA), the Court held that the general words of s 183 of the Civil Procedure Act 2005 (NSW) authorised orders binding group members to a regime whereby, in exchange for a commitment to fund the entirety of the litigation, funders are presumptively entitled to a proportion of a judgment or settlement if and when it is obtained. Such an order was referred to in those proceedings as a “common fund order”: see, for example, at [28].

8. [8]

   This Court’s decision in that matter was reversed by the High Court in BMW Australia Ltd v Brewster (2019) 94 ALJR 51; [2019] HCA 45 (BMW (HC)). In that case, the High Court, by majority, held that neither s 183 of the Civil Procedure Act (the Act) nor s 33ZE of the Federal Court of Australia Act 1976 (Cth) (expressed in materially similar terms) empowered the Supreme Court or the Federal Court respectively to make a “common fund order”. In the words of Kiefel CJ, Bell and Keane JJ at [1]:

9. [9]

   In his separate, dissenting judgment, Gageler J (at [104]) posited the following description of what he understood to be a common fund order:

10. [10]

    In the course of argument Mr Kirk did not accept this as an accurate description of what is generally contained in common fund orders. That position was revealing because it illustrated the point made in Haselhurst at [2] as to “the vice of short form labels”.

11. [11]

    The most cursory review of the burgeoning case law concerning class actions discloses that a wide variety of orders may be made following the settlement of particular proceedings. That variety may be driven by a range of factors including the nature of the issues involved, the size and nature of the members of the class and the size of any settlement sum.

12. [12]

    The issue sought to be raised by the separate question referred to this Court in the present case concerns whether or not group members not party to a litigation funding agreement with Regency Funding Pty Ltd (Regency) could nonetheless be ordered by the Court to pay an amount of money to that funder out of the proceeds of any settlement by way of return on expenditure, commission or other similar remuneration to the funder pursuant to s 173 of the Act.

13. [13]

    Mr Brewster has entered into a funding agreement with Regency but, as at the time of the hearing of BMW (HC), only 33 other group members had apparently signed up to that funding agreement and the evidence before the Court in the present case suggested that, since the High Court’s decision, Regency has not pursued a “book build” with other group members, who it is estimated number almost 200,000.

14. [14]

    Section 173 of the Act, with which the separate question is concerned, provides that:

15. [15]

    By way of contrast, it may be noted that s 183 of the same Act, which was the focus of consideration in BMW (HC), provides that:

16. [16]

    An important aspect of the majority’s decision in BMW (HC) was that s 183 was construed as a “gap-filling” power: see at [69], [70], [145] and [147]. Nothing said in the three judgments which together comprised the majority called into question the vitality and importance of the long-established principle associated with Owners of Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54 (Shin Kobe Maru) that “[i]t is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words”. See also FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 283–284 and 290; [1988] HCA 13; Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 185, 202–203 and 205; [1992] HCA 28 (Knight). In the latter case, which involved the question of power to award costs against a non-party to proceedings, Gaudron J observed (at 205) that:

17. [17]

    Section 173 of the Act, by contrast with s 183, is not a gap-filling provision but is directed towards a particular context, viz. the settlement of representative proceedings, which requires the approval of the Court. It also contemplates, in subsection (2), the making of “such orders as are just” with respect to the distribution of any money paid under a settlement. This is a section which classically “confers jurisdiction” and “grants powers” within the meaning of those expressions as used in Shin Kobe Maru. Of s 173 of the Act, the plurality said in BMW (HC) at [89] that:

18. [18]

    Against this background, I turn to the competing contentions of the parties in the present case.

The competing contentions

1. [19]

   BMW contended that the answer to the question referred for separate determination is “no” and that any such order would be functionally equivalent to the common fund order which was held not to be authorised by s 183 of the Act in BMW (HC). BMW submitted that:

2. [20]

   On the other hand, Mr Gleeson SC, who appeared for Mr Brewster with Ms Holmes and Ms Caristo, made a series of cascading arguments as to why the question should either not be answered or, if answered, should not be answered in the negative.

3. [21]

   First, he contended that the question is hypothetical and that there is no power to answer it because there is no “matter” in the constitutional sense, it being common ground that the underlying dispute is one in the federal jurisdiction. (A notice under s 78B of the Judiciary Act 1903 (Cth) was issued but no Attorneys-General intervened). Mr Gleeson submitted that an answer to the question would not quell an extant controversy between the parties because it presupposes a settlement of the proceedings which may or may not eventuate as a result of the forthcoming mediation and, even if settlement were to eventuate, the terms of any such settlement may or may not entail or require the making of an order of the kind which the separate question contemplates. BMW resisted the contention that there is no matter before the Court in the requisite constitutional sense.

4. [22]

   Second, Mr Gleeson contended that, even if there were power to answer the question, the Court has a discretion not to answer the question and should exercise its discretion not to do so. In this context, he contended that, even if any settlement led to the need for the Court to make an order pursuant to s 173(2) of the Act, consideration as to whether or not such an order should be made and, in particular, whether or not such an order would be “just with respect to the distribution of any money” should await the emergence of facts said to be material to a consideration of this question including:

5. [23]

   BMW accepted that the Court has a discretion not to answer the separate question posed but said that the Court can and should do so, and that the various matters referred to in the previous paragraph have no relevance if there is no power under s 173 to make an order of the kind that the separate question contemplates.

6. [24]

   Third, criticism was made of the form of the question sought to be answered, the specific argument being put that the order contemplated in the separate question did not reflect the kind of order which the plurality in BMW (HC) described as a common fund order because: (i) it would not be an order sought at an “early stage of representative proceedings”; and (ii) would not necessarily result in the discharge of liability to a funder “as a first priority of any moneys so recovered” (compare the description of the common fund order provided by the plurality in BMW (HC) at [1] and noted at [8] above). As such it was put that whatever the majority in BMW (HC) may have said about the common fund order under consideration in that case could not be transposed to the different context of an order being made following a settlement of proceedings, the precise terms of which is known.

7. [25]

   In this context, it was pointed out in the course of argument that the description in the separate question of a payment of an amount to the funder “out of the proceeds of any settlement by way of return on expenditure, commission or other similar remuneration to the funder” could apply to a “funding equalisation order” (FEO) which the majority in BMW (HC) held at [89] would be within power once a settlement was reached. Consequently, Mr Kirk sought to amend the separate question as follows:

8. [26]

   Fourth, it was submitted on behalf of Mr Brewster that, in any event, BMW (HC) did not make it plain, or so plain as to compel a negative answer to the question posed, that an order of the kind contemplated in the separate question would necessarily be beyond power. So much was vigorously contested by BMW.

Consideration

1. [27]

   The question of whether or not there is a matter in the constitutional sense itself involves a constitutional question. Such questions should only be answered where necessary to do so: see, for example, Lambert v Weichelt (1954) 28 ALJ 282 at 283; Wurridjal v Commonwealth (2009) 237 CLR 309; [2009] HCA 2 at [355]; Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322; [2013] HCA 53 at [148]; Duncan v New South Wales (2015) 255 CLR 388; [2015] HCA 13 at [52]; Knight v Victoria (2017) 261 CLR 306; [2017] HCA 29 at [32]; and Searle v Commonwealth of Australia (2019) 100 NSWLR 55; [2019] NSWCA 127 at [184].

2. [28]

   It is not necessary to decide the question as to whether or not the current proceedings present a “matter” in the constitutional sense because I am of the opinion that, even on the assumption that they do, it is not appropriate to answer the question posed:

3. [29]

   The High Court made plain the unwisdom of answering questions without a “proper factual basis” in its decision in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9 at [59]. The majority in that case said, in a well known observation at [56], that “[i]t is contrary to the judicial process and no part of judicial power to effect a determination of rights by applying the law to facts which are neither agreed nor determined by reference to the evidence in the case.” Earlier, the majority had indicated that the purported answering of such questions was anathema to the “efficient administration of the business of courts”: at [49].

4. [30]

   Of the five considerations noted in [28] above, the first four cannot be gainsaid. In relation to the third, in Haselhurst, Payne JA at [44], with whom the other members of the Court agreed, observed of the order there in question that “[u]ntil the legal and practical effect of that order is understood, it is not possible to address the questions of power and miscarriage of discretion.” Where, as in the present case, there is no actual or foreshadowed order, the sound common sense of his Honour’s proposition is all the more pronounced.

5. [31]

   As to the fifth consideration, there is no question that the parties were at issue as to what the majority decided in BMW (HC) and the ramifications of that decision for whether or not a common fund order could form part of any settlement that might be reached by the parties. So much emerged from the sequence of solicitor correspondence between Ashurst for BMW and Quinn Emanuel for Mr Brewster which Mr Kirk took the Court through in the course of argument but which it is unnecessary to recite in these reasons.

6. [32]

   That parties to an ongoing set of proceedings disagree as to what a particular authority decides or stands for, or what it might imply for related questions or arguably analogous issues, is by no means unusual. Indeed, many matters that settle are influenced by that very uncertainty.

7. [33]

   There may also be room in any given case for contest as to what constitutes “seriously considered dicta” of the High Court in the sense in which that expression was used in Farah, noting that the High Court’s criticism of this Court in that case (at [134]) was of it reaching a decision “in the face of long-established authority and seriously considered dicta” of a majority of the High Court; see also Pape v Federal Commissioner of Taxation (2009) 238 CLR 1; [2009] HCA 23 at [473]; and R v Richards [2017] QCA 299 at [124].

8. [34]

   It certainly cannot be said that there is a long or well-established course of authority in the High Court as to the making of common fund orders in the context of a settlement of representative proceedings.

9. [35]

   The obvious importance of consideration by intermediate appellate courts of “seriously considered dicta” of the High Court does not carry with it an obligation to speculate upon what the High Court might decide in a future case concerned with a different statutory provision. One must also bear in mind that, as was said by Mason CJ, Brennan, Dawson and Toohey JJ in Jones v The Queen (1989) 166 CLR 409 at 414; [1989] HCA 16:

10. [36]

    It is also of course somewhat invidious to characterise any dicta falling from a justice of the High Court other than as “seriously considered” and it will not always be possible, without a thorough review of the transcript of hearing and the submissions advanced, to gauge the extent to which a matter was argued in earlier High Court proceedings.

11. [37]

    In this context, Mr Kirk made the submission on more than one occasion in the course of oral address that many of the arguments advanced on behalf of Mr Brewster in the hearing of the separate question had been put and rejected in BMW (HC). Even if that be assumed to be so, they were no doubt put and considered in the context of the precise question tendered for consideration in that case and by reference to the stage in the proceedings at which s 183 was there being sought to be invoked. It does not follow as a matter of logic that an argument or arguments which have not found favour in the context of consideration of one statutory provision will ipso facto not find favour in a different statutory and factual context. This is so even though dicta in one decision may be thought to point to a position that an individual justice or justices may or even would be likely to take if the precise question arose in a future case.

12. [38]

    The factual context of a settlement being presented to the Court for approval is very different to the situation, at the commencement or an early stage of litigation, where the Court is asked to approve an order nominating a particular percentage or commission which a funder may extract from any settlement ultimately reached or judgment ultimately given, when that sum is not known and the attitude of group members towards the settlement is also unknown. Moreover, at the point of settlement, ex hypothesi, the Court making the order will not be concerned with whether the litigation will be funded going forward or the risks which may be entailed in providing funding. Those risks will have been taken and be spent. The Court will be armed with “hard” information rather than speculative possibilities as to key integers, by reference to which its discretion may be exercised to approve a settlement and make any orders with respect to distribution (including to third parties such as solicitors administering any settlement fund): cf BMW (HC) at [68].

13. [39]

    In these circumstances, one can well understand an argument that it is just in all the circumstances for a funder to receive a measure of recompense out of the overall settlement sum for its contribution to the realisation of the settlement pool beyond that which may result from a FEO, as that term was described in the plurality judgment in BMW (HC) at [86]. A conclusion to that effect may be influenced by the size of the overall settlement sum, the amount proposed to be paid to group members, the number of group members who signed up to the funding agreement, the amount that would be required to be paid to the funder if a FEO were made, the degree of risk involved in funding the action, and the length and complexity of the proceedings.

14. [40]

    Without knowing any of these matters, and absent clear statutory language requiring such a conclusion, it would be unusual, to say the least, for a superior court to conclude, in an a priori way, that a settlement could not be approved or that it would not be just that an order be made for an amount to be paid out of the overall settlement sum to a funder, even if the amount so ordered exceeded that which would have been contractually payable by those group members who had signed up to a funding agreement.

15. [41]

    The majority judgments in BMW (HC) do not say expressly that s 173 precludes a court from making an order of the kind contemplated by the separate question and, on my analysis, with the possible exception of the judgment of Gordon J at [141], do not by implication or necessary inference require such a conclusion to be reached. Whether or not a majority of the High Court would reach such a conclusion is a matter of speculation which is not appropriate for this Court to engage in, especially in the evidentiary vacuum which exists in the current case cf Cantor v Audi Australia Pty Ltd (No 5) [2020] FCA 637 at [419]. It should be noted in this context that the decision in BMW (HC) was one made by reference to the terms of a notice of motion seeking an identified actual order that had been sought in the underlying proceedings. That is not so in this case.

16. [42]

    The plurality placed principal focus on orders made at the outset of the proceedings and responded to what was in essence a policy argument to the effect that such orders should be permitted so as to incentivise litigation funding: see, for example, BMW (HC) at [83] and [126]–[127]. The plurality rejected such an argument as not falling within the purpose of the Act and found that the Court lacked the tools to identify what proportion of an unknown potential common fund would be “necessary and appropriate” in advance of the proceedings having been run or a settlement achieved: see, especially, BMW (HC) at [67]. The position may be materially different at the time of settlement or judgment when many more facts are known, cf BMW (HC) at [68] and [38] above.

17. [43]

    To the extent that the plurality in BMW (HC) made observations at [85]–[90] about “common fund orders” under a heading “Common fund orders and funding equalisation orders”, those observations are to be understood in the context of the common fund order that was being considered by the Court in that case and the different source of statutory power which it was contended authorised the making of such an order at the outset of the proceedings.

18. [44]

    The question as to whether or not it is just that a particular order or proposed order be made, whether it be characterised as “a funding equalisation order” or a “common fund order”, is best determined in the context of known facts, both in respect of the precise terms of the proposed order as well as the facts of the case more generally. The inquiry as to whether or not a proposed order is “fair and reasonable” or just in all the circumstances may embrace a wide variety of considerations. For example, an order that BMW might characterise as a common fund order may, depending upon the facts of the particular case, amount to less in terms of quantum than a funding equalisation order.

19. [45]

    Further, nothing said in BMW (HC) was addressed to the question whether the phrase “distribution of any money” in s 173(2) of the Act should be construed in the limited way urged by Mr Kirk. Prima facie, the observations of Gaudron J in Knight, endorsed in and taken together with the principle associated with Shin Kobe Maru, tend against such a narrow construction. That question, too, is best left for determination in a non-hypothetical context.

20. [46]

    The complexity of all of these matters and my assessment that the answer to the question is not clearly governed by BMW (HC) is such that the wisdom of not answering the separate question posed in a factual vacuum is, in my view, compelling.

21. [47]

    For the above reasons, the separate question should be answered “the Court declines to answer the separate question at this stage of the proceedings”.

22. [48]

    BMW, which agitated for the propounding of the separate question, should pay the costs of the hearing in this Court.

23. [49]

    PAYNE JA: I agree with Bell P.