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Australian proceedings favoured in trans-Tasman class actions

20 Mar 2023

| Author: Jamie Dierick

High Court Rules 2016 r4.24 – leave to commence a representative proceeding – power to stay proceedings under s 24 of the Trans-Tasman Proceeding Proceedings Act 2010 – factors to consider in determining whether the Australian court is the more appropriate court – Australian courts’ jurisdiction under New Zealand legislation – management of class actions – opt-in class representative proceedings – opt-out class representative proceedings – consolidation of proceedings – costs

Whyte v The a2 Milk Company Ltd [2023] NZHC 22 (Edwards J)

Between 19 August 2020 and 10 May 2021, The a2 Milk Company (a2) made statements to the Australian Stock Exchange and New Zealand Exchange Main Board about its revenue and earnings forecasts.

The plaintiff in the class action proceedings, Kevin Whyte, sought leave to commence an opt-in class representative proceeding against a2 in relation to the same statements made to the NZX and ASX during the relevant period.

Whyte alleged the statements resulted in an inflated price for a2 shares during the relevant period. However, the share price subsequently fell as more accurate forecasts of a2’s revenue and earnings before interest, taxes, depreciation and amortization margin were disclosed to the market. As a result, Whyte, on behalf of the other representatives, claims the statements were misleading or deceptive.

Prior to Whyte’s claim, two opt-out class representative proceedings were filed in the Supreme Court of Victoria. These claims have now been consolidated. The plaintiffs in that proceeding allege the statements were misleading or deceptive and that a2 contravened its continuous disclosure obligations under both Australian and New Zealand law.

Every person Whyte sought to represent would give irrevocable instructions to their solicitor to take the necessary steps to opt out of the Australian proceeding.

The High Court granted Whyte his application for leave to commence a representative proceeding.

However, the court was also required to determine whether it should grant the order sought by a2 under s 24 of the Trans-Tasman Proceedings Act 2010 (TTPA) to stay Whyte’s representative proceeding, pending judgment on liability in the Australian proceeding or final settlement.

This required the court to consider the facts under s 24(1), namely, whether the Australian court had jurisdiction to determine the claims brought, and whether it was the more appropriate court.

The court was quick to decide on the first point, stating that “[p]lainly the Australian court would, and does, have jurisdiction in this case”.

Although more determination was given to which jurisdiction was more appropriate, the court ultimately held in favour of the Australian court, placing emphasis on the similarity of the Australian proceedings and Whyte’s representative claim.

As a result, a2’s application to stay Whyte’s proceedings was granted. The court did reserve leave for Whyte to apply to lift the stay if there is a material change of circumstances.

Applicable principles – extensive discussion of principles of class actions – power to stay proceedings – conflict of laws – representative action rule – managing multiple class actions – opt-in/opt-out rules – case management tools and joint trials.

Held: The plaintiff’s application for leave to commence a representative proceeding is granted. The defendant’s application for a stay is granted. This proceeding is stayed pending delivery of a judgment on liability in the Australian proceeding, or final settlement of the Australian proceeding, whichever occurs first. Leave is reserved to the plaintiff to apply to lift the stay of proceeding if there is a material change of circumstances.

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