Running class actions on both sides of the ditch

It is a welcome development in the streamlining of litigation and effective management of class actions in the New Zealand courts

Sophie East and Tim Shiels

The High Court recently stayed a high-profile class action in New Zealand while a similar class action on the same facts is advanced in Australia.

The decision, Whyte v The a2 Milk Company Limited, provides useful guidance on the circumstances where a proceeding (particularly a class action) will be stayed in New Zealand due to a competing proceeding across the Tasman.

It is a welcome development in the streamlining of litigation and effective management of class actions in the New Zealand courts. Importantly, the case also confirms that Australian courts can have jurisdiction to consider claims under New Zealand legislation. This may lead to such claims being bundled into larger Australian-based class actions.

The competing proceedings

Zealand

a2 is registered in New Zealand under the Companies Act 1993 and listed on both the ASX and NZX. The cases relate to various statements a2 made to the ASX and NZX in late 2020 and early 2021.

It’s alleged that statements made in a2’s FY21 earnings guidance, and subsequently to the stock exchanges, did not adequately take account of several factors which would impact the company’s financial performance and likelihood of achieving the forecasts.

In October and November 2021, the plaintiff shareholders launched two class actions against a2 in the Victorian Supreme Court in Australia. Both claims alleged a2’s statements were misleading and deceptive and that the company breached its continuous disclosure obligations by not withdrawing the representations or disclosing the matters that affected the achievement of the guidance.

Both alleged breaches under Australian law, with one claim also alleging breaches under New Zealand law. Ultimately, the two Australian class actions were consolidated into one proceeding. The Victorian Supreme Court subsequently ruled that it had jurisdiction to determine the New Zealand law claims, including to grant relief.

In May 2022, a New Zealand-based plaintiff, Kevin James Whyte, launched a similar class action against a2 in the New Zealand High

Court. The claim was for the same alleged breaches of continuous disclosure obligations and misleading and deceptive conduct as in the Victorian actions, but was made only under New Zealand law.

By the hearing date, several investors had opted-in to the proceeding, including a financial institution representing 3907 beneficial owners (3812 of whom reside in New Zealand). Each participant in the New Zealand class action also agreed to opt out of the Australian class action so there would be no overlap between the classes of plaintiffs.

Whyte sought leave from the New Zealand High Court to begin the class action, a step required under the High Court rules. In turn, a2 applied to stay the proceedings under the Trans-Tasman Proceedings Act 2010 in a bid to halt further progress of the proceeding.

Justice Rebecca Edwards’ decision on both issues was released late last month.

The court approved the application for leave to commence the class action without much difficulty. Justice Edwards concluded there was a requisite commonality of interest between Whyte and the class members, and the members of the proposed class all consented to representation.

The judge considered that any arguments about overlapping class actions were best dealt with by considering a stay under the TransTasman Proceedings Act rather than when determining whether to grant leave to commence the class action.

The Australian legislation

The Trans-Tasman Proceedings Act was enacted in 2010 with the stated objective of streamlining “the process for resolving civil proceedings with a trans-Tasman element in order to reduce costs and improve efficiency”.

Under s 24 of the Act, a New Zealand court may stay a proceeding if it is satisfied an Australian court has jurisdiction to determine the matter between the parties and “is the more appropriate court to determine those matters”.

In determining whether an Australian court is the more appropriate, a New Zealand court may consider several factors, including the location of those involved, the underlying facts, the most appropriate law to apply and whether a similar proceeding has already been started against the defendant in an Australian court. If both those limbs are satisfied, the New Zealand court has discretion as to whether to grant a stay.

In this case, the court had little difficulty in concluding that the Victorian Supreme Court had potential jurisdiction to determine the matters between the parties. The real question for the court was whether the Victorian Supreme Court was the more appropriate to determine the issue.

The determination

The court gave little weight to the fact that the representative

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