FEDERAL COURT OF AUSTRALIA Zoetis Australia Pty Ltd v Abbott [2019] FCAFC 153 Appeal from: Application for leave to appeal: Abbott v Zoetis Australia Pty Ltd (No 2) [2019] FCA 462 File number: NSD 589 of 2019 Judges: ALLSOP CJ, PERRAM AND BEACH JJ Date of judgment: 30 August 2019 Catchwords: REPRESENTATIVE PROCEEDINGS – application for leave to appeal – where primary judge refused to make an order for security for costs in primary application – where applicant alleges error by primary judge in failing to undertake balancing exercise in Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153; 130 FCR 317 and Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 – no error found that went to basis of primary judge's exercise of discretion – no basis for conclusion that primary judge failed to undertake appropriate balancing – application for leave to appeal refused with costs Legislation: Federal Court of Australia Act 1976 (Cth), s 43 Cases cited: Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153; 130 FCR 317 Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 Date of hearing: 30 August 2019 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 13 Counsel for the Applicant: Mr LV Gyles SC with Mr S Fitzpatrick Solicitor for the Applicant: Piper Alderman Counsel for the Respondent: Mr C Barry QC with Mr JE Rowe Solicitor for the Respondent: LHD Lawyers ORDERS NSD 589 of 2019 BETWEEN: ZOETIS AUSTRALIA PTY LTD Applicant AND: RACHAEL ABBOTT Respondent JUDGES: ALLSOP CJ, PERRAM AND BEACH JJ DATE OF ORDER: 30 AUGUST 2019 THE COURT ORDERS THAT: 1. The application for leave to appeal be refused with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Revised from the transcript) ALLSOP CJ: 1 This is an application for leave to appeal from orders made by a primary judge who was the docket judge in refusing an order for security for costs in the primary application. The underlying suit is a representative proceeding brought in relation to the so-called Hendra virus vaccine. 2 The relevant facts giving rise to the claims needs not be dealt with at any length. They are referred to sufficiently in the reasons of the primary judge. His Honour's reasons encompass a statement of principle in [5]–[18], which, with one exception, is said to be free of error. The one criticism – and it is a central criticism – that is made on the application for leave for appeal is contained within [15] of the learned primary judge's reasons, which take the following form: Critically, however, context is everything, and nothing in Bray or Madgwick should be seen as delimiting or attenuating the broad discretion the Court has to order, or decline to order, security. It is a discretion to be exercised judicially, having regard to a consideration of the particular facts of the case: Merribee Pastoral Industries Pty Limited v Australia and New Zealand Banking Group Limited [1998] HCA 41; (1998) 193 CLR 502. If they are relevant, the factors that may be taken into account are unrestricted, and the weight to be given to them depends upon the fact's own intrinsic persuasiveness and its impact on other circumstances which have to be weighed: see Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114; Morris v Hanley [2000] NSWSC 957 at [11]–[21]; Acohs Pty Ltd v Ucorp Pty Ltd [2006] FCA 1279; (2006) 155 FCR 181 at 185-186 [12]. 3 In the clear and helpful written submissions of senior counsel and counsel for the applicant, criticism is made of [15] of the judgment and of the primary judge's comment that nothing in Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153; 130 FCR 317 (Bray) or Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 (Madgwick) should be seen as delimited or attenuating the broad discretion of the Court that the Court has to order or decline to order security. As I will indicate shortly, the essence of the complaint of the applicant is that the primary judge has failed to balance the considerations said to be required in Bray and Madgwick. 4 It is at this point helpful to say something about the decision in Madgwick. There was a unanimous view of the Court that there had been error by the primary judge in that case. Relevantly for disposition of this application, consideration can be given to the joint judgment of myself and Justice Middleton. The essential error of the primary judge in that case was a failure to undertake the kind of balancing that was referred to in [15] because, at least in part, the primary judge had the view that any order for security would undermine the protection provided for by s 43(1)(a) of the Federal Court of Australia Act 1976 (Cth). That error was at the core of the miscarriage of the discretion in Madgwick. 5 In [98]–[99] of the reasons of Justice Middleton and myself, two things were done: first, in [98], we sought to be pellucid that we were not laying down exhaustive general principles or particular principles as to how to approach security for costs applications in class actions. The terms of paragraph 98 were as follows: It is not necessary or appropriate to deal at length with the question of security for costs in class actions. Some of the points made by the primary judge about the difficulties involved in security for costs applications in class actions have force. Depending upon the make up and surrounding circumstances of the claims and the class, it may be very difficult to be precise about risk or likelihood of stultification and what is fair to expect the group as a whole to put up as security. Such a broad evaluation may be attended by many considerations, including proper care not to undermine the availability of the procedure of Pt IVA that was intended by Parliament to provide broad access to justice for the common aspects of multiple claims. That said, it may not be fair on respondents to be placed at risk of having relevantly impecunious applicants as the only source of financial solace should they be successful. 6 In [99], we directed our attention to the critical facts in that case that the applicants and group members entered commercial transactions for their own reasons. They were commercial transactions for the minimisation of taxation, which involved the undertaking of commercial liabilities. Those persons had sufficient assets or income to warrant the decision to enter those arrangements and receive the hoped for commercial and fiscal advantages. Things went awry in those arrangements and they were being sued for liabilities that they had apparently, in the commercial arrangements, undertaken. The same parties in the class action now sought to lay off responsibility to those who had advised them. The Court was of the view, as reflected in [99], that, in these circumstances where there was no risk of stifling the action, the appropriate response was to order for security for costs. For completeness, I set out [99] of the reasons in Madgwick: Here, as we have already said, the applicants said group members entered commercial transactions for their own reasons. They had sufficient assets or income to warrant the decision to enter the arrangements and receive the hoped for commercial and fiscal advantages. The commercial or other advantages of the investments have not materialised. The applicants on behalf of themselves and the group members wish to engage in commercial litigation to repair the position they find themselves in. Some of those group members are persons of significant means. Some invested a lot; some invested little. All made a choice of a commercial character to enter arrangements to advance their asset or income position. It seems entirely fair that those standing to benefit from such litigation make a real, but not oppressive, contribution to a fund to secure the costs of the respondents. The most obviously fair and appropriate approach would be rateable by reference to the investments. There would be a need, in setting the amount, not to risk stifling the action. Given, however, the nature of the underlying claims and proved ability of at least a not insignificant number of group members to contribute, an order for some security is appropriate. 7 In my appreciation of the reasons of the learned primary judge, he carried out the kind of balancing that was required. In [31], he expressly took into the account the submissions of the now applicant for leave to appeal the respondent in the proceedings. 8 His Honour then looked at a number of considerations, none of which I am persuaded were forbidden considerations in looking at the matter. In debate and in argument, the matter really came down to a view that, within [44], the primary judge could not have found the matters he did. Paragraph 44 was in the following terms: Notwithstanding the lack of worth of this evidence, as noted above, I am satisfied that if I was to order security for $450,000, to the extent that any group members were prepared to put up security, an eventuality that is far from assured, it would only be a very small proportion of group members. 9 His Honour had dealt with these matters in the preceding paragraphs in a way that was based in part on the evidence that was before him and based in part on the use of his common sense in relation to the kind of litigation that was before him and the nature of the likely group members. For my part, I am unpersuaded that his Honour committed any factual error that was an error that went to the basis of the exercise of his discretion. In my view, the reasons of the primary judge contain a comprehensive consideration of those matters which he took to be relevant. 10 In my view, there is no basis to think that his Honour failed to undertake the appropriate balancing and take into account the potential prejudice to the respondent in making the order that he did. The beginning of the learned primary judge's reasons and, in particular, some of the comments at [21] would indicate that the matter has not been prosecuted in a way that could be said to be a model of litigation progress. The matter, however, was not dealt with on the basis that that aspect fell at the centre of consideration. 11 In my view, the applicant has failed to demonstrate that the reasons of the primary judge are attended by sufficient or, indeed, any real doubt as to the proper undertaking of the principal task, which was set out by him correctly in [5]–[18]. For those reasons, I would refuse the application for leave to appeal with costs. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop. Associate: Dated: 3 September 2019 REASONS FOR JUDGMENT PERRAM J: 12 I agree with the reasons given by the Chief Justice. I detect no error in the approach of the primary judge. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 3 September 2019 REASONS FOR JUDGMENT BEACH J: 13 I would also refuse leave to appeal for the reasons given by the Chief Justice. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Beach. Associate: Dated: 3 September 2019