Introduction
The increasing number of representative (or class) action proceedings in New Zealand has continued with the release of the judgment in Whyte v The a2 Milk Company Limited [2023] NZHC 22 this week. The a2 Milk Company Limited (A2) has been granted a reprieve from litigation in New Zealand, with the High Court granting the representative orders sought by the plaintiff but staying the proceedings in favour of parallel Australian proceedings. This has significant implications, particularly for those with operations in both Australia and New Zealand.
In this update, we briefly comment on the High Court's decision, with particular focus on the consequences for future trans-Tasman litigation in the individual and representative context.
Context
Between 19 August 2020 and 10 May 2021, A2 forecasted its upcoming revenue and the earnings for the 2021 financial year in statements to the New Zealand and Australian stock exchanges. The allegation is that these statements were misleading or deceptive, and/or that A2 otherwise breached its continuous disclosure obligations.
Two representative proceedings were filed in Australia in October and November 2021, seeking to represent NZX and ASX shareholders and relying on both Australian and New Zealand law. The two proceedings have been consolidated into a single proceeding (the Australian proceeding). In November 2022, the Supreme Court of Victoria decided that it had jurisdiction to determine claims under New Zealand legislation in the Australian proceeding.
Proceedings were filed in May 2022 in New Zealand (the New Zealand proceeding). Like the Australian proceeding, the plaintiff seeks to represent NZX and ASX shareholders, but his claims only rely on New Zealand law. The allegations broadly track those made in the Australian proceedings.
Two applications were recently heard: (i) the plaintiff's application for representative orders; and (ii) A2's application for a stay of the New Zealand proceeding pending determination of the Australian proceeding.
Stay of proceedings
A2 sought to stay the proceedings under s 24 of the Trans-Tasman Proceedings Act 2010 (TTPA), which has two limbs:
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that the Australian court has jurisdiction to determine the matters in issue between the parties – the High Court held in short order that there could be no question about Australian jurisdiction here; and
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that the Australian court is the more appropriate court to determine the matters in issue between the parties to the proceeding – this was the subject of more detailed analysis by the High Court.
In determining whether the Australian court is the more appropriate court, s 24(2) sets out a list of factors that the New Zealand courts must take into account (which are familiar from other conflict of laws contexts).
The High Court focused on the appropriate law and the existence of related proceedings. Although New Zealand law may be more plaintiff friendly, both New Zealand law and Australian law were pleaded in Australia and New Zealand – in that sense, any juridical advantage could be obtained in the Australian proceeding. The underlying premise of s 24 is that New Zealand courts are best placed to apply New Zealand law, but, as both countries' laws applied, the factor was essentially neutral.
The existence of related proceedings also supported a stay – the High Court pointed to the risk of contradictory judgments and the undermining of the efficiency that the TTPA is attempting to achieve. This was despite a canvassing of case management strategies, which identified some interesting new approaches. One approach discussed was that taken in Re Halifax, where a cross-border insolvency claim was heard by New Zealand and Australian judges simultaneously through video conferencing technology – see our earlier update on Halifax here.
The remaining factors were dealt with quickly. For example, the residence of the parties was considered to have little weight because neither the place where shareholders live nor A2's manufacturing bases had any connection to the underlying dispute.
Representative orders
The High Court also granted Mr Whyte's application for representative orders. A2 opposed the representative order application on the basis that the New Zealand proceeding was a duplicate of the Australian proceeding. The High Court accepted that there was substantial overlap between the two actions but considered the stay would adequately deal with these issues.
Key takeaways
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This decision confirms that Australian courts can have jurisdiction to hear and determine claims under New Zealand legislation. That is significant, particularly for those with operations on both sides of the Tasman. It means that (as has happened here) New Zealand law claims can be argued alongside a larger (and hence likely more economic) set of Australian law claims.
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The Victorian decision itself makes for useful reading, and will be of relevance to future New Zealand courts when determining whether they are the appropriate forum to hear and determine claims under a New Zealand statute. See the (typically illuminating) blog post by Associate Professor Maria Hook here on the subject.
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Although the representative orders application was only subject to brief analysis, this decision is yet more guidance on the operation of New Zealand's non-statutory approach to class actions. The Law Commission's recommendation of a statutory regime is an area to keep an eye on (see our update on the Law Commission's final report on class actions and litigation funding here).
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In short, litigation strategy on both plaintiff- and defendant-side will need to account for the risk of parallel litigation across the ditch, with all that means for complexity, cost and delay, as well as access to justice.
This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.