South Australia – No longer the rogue class action state

17th Mar 2022

In 1976 the federal government introduced Part IVA of the Federal Court of Australia Act 1976 providing a structure for representative proceedings or class actions. The Act introduced an opt out model that meant everyone who fell within the class definition was part of the class unless they chose to opt out. A fundamental purpose of the legislation was to enable large numbers of claimants who had meritorious claims but could not afford the costs of bringing a case to have access to the law. In order to take advantage of this legislation, the class had to allege and prove a breach of Commonwealth law to give the court jurisdiction. An obvious lacuna was that claimants alleging a breach of common law of state law could not take advantage the federal legislation.

Most states’ legislation mirrors the Commonwealth legislation with the advantage of uniformity of jurisprudence. South Australia did not follow the rest of the states and produced its own brand of legislation by an amendment to the Supreme Court Rules 2006. The amended Rules provided for a class action to be commenced in the ordinary way but had to be endorsed by the Court to enable it to continue. The requirements for endorsement are not dissimilar to the federal legislation and would be considered reasonable.

However, r 194(1)(a) provided in relation to security for costs, inter alia:

‘(1) The Court may order a plaintiff to provide security for costs if—

(a) the action is brought in a representative capacity and the plaintiff is insolvent or would have insufficient resources to meet an order for costs if the action were to prove to be unsuccessful’

Proude V Visic (No 3) [2012] SASC 234 was a case involved a claim for damages caused by a bushfire. The Court concluded rule 194(1)(a) applied to the case and said:

‘In all of the circumstances, it is appropriate to order security for costs in favour of each defendant.  If I had been satisfied that Mr Proude would prosecute his action to trial if he were only claiming his own losses, that Mr Proude is himself funding the action and that the costs which would incurred by the defendants in a purely personal action by Mr Proude would not be substantially less than the costs they will incur on the representative action proceeding to trial, it is likely that I would have declined to order security for costs. However, I have found that the reality is that this action will only proceed to trial because it is a representative action and because its prosecution is not being funded by Mr Proude alone. In the particular circumstances, and weighing all factors for and against making an order, it is appropriate to adopt the approach broadly outlined by the Full Court of the Federal Court in Bray and order security for costs’ (at [171]).

An impecunious person with a meritorious property damages claim could not satisfy a court that:

  1. he or she would prosecute the case if he was claiming his own losses;
  2. he or she is funding the action;
  3. the costs which would be incurred by the defendants in a purely personal action by him/her would not be substantially less than the costs they will incur on the representative action proceeding to trial; and
  4. the action would only proceed as a class action.

In Schofield v TFS Manufacturing [2020] FCA 1526, Lee J reiterated the relevant principles in relation to Security for Costs under Part IVA, including the following:

This proceeding is precisely the sort of case contemplated by the Australia Law Reform Commission when it produced its landmark report, Grouped Proceedings in the Federal Court, Report 46 (Australian Government Publishing Service, 1998) at 165. This report, published prior to the development of the modern market of litigation funding, contemplated that the proposed legislative scheme would provide an effective mechanism for persons with small or relatively modest claims to obtain access to justice’ (at [7]). 

An intended purpose of representative proceedings is to give access to justice to people who cannot afford it. The effect of Clause 194(1)(a) and the decision in Proude was that access to justice was denied to vulnerable people in South Australia unless they could get funding or other access to funds to provide security for costs. Typically, security is in the vicinity of one million dollars in a representative proceeding whereas the claim may be less than one hundred thousand dollars. 

Practically this was a not-so-subtle protection of large transgressors from meritorious claims by vulnerable and impecunious claimants.

2020 SA Supreme Court Rules

The 2020 rules have been amended numerous times up to January 2022 but in their current iteration they provide:

'The Previous Rules are repealed’ (at [1.3]). 

The 2020 rules are more extensive, comprehensive and introduce class action procedures very similar to Part IVA – they provide an opt out procedure, do not restrict application for security for costs as in 2006, and would appear to open the door to Lee J’s exposition to the purpose of class actions – thus bringing South Australia more in line with the jurisprudence of the rest of Australia.

The ALA would like to thank JE Rowe for this contribution. 

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The views and opinions expressed in this article are the author's and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA)

JE Rowe was a member of the NSW Police force before being called to the Bar in 1970. He practised in crime for a number of years but thereafter has practised in civil jurisdictions including the High Court, Supreme Court, District Court and various tribunals. John has run many high-profile cases including the first significant class action to come to hearing being the Helix Case. John has appeared in various state and federal courts in Victoria, Western Australia and Queensland. John’s practice over the last 30 years has seen a specialisation in initiating and running class actions.

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Tags: South Australia JE Rowe Class action