Jancauskas, Rebecca --- "Product liability class actions in Australia" [2015] PrecedentAULA 48; (2015) 129 Precedent 23

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PRODUCT LIABILITY CLASS ACTIONS IN AUSTRALIA

By Rebecca Jancauskas

In a product liability class action, a representative applicant or applicants bring proceedings on behalf of at least six other people who have the same or similar claims for damages. The claims arise from a product or products that have a safety defect, are not of merchantable quality or are not fit for their purpose. The action is brought against a common respondent or respondents (usually the manufacturer/s and supplier of the product/s) by the representative party, who shares questions of law or fact with individuals who meet the definition of the class, known as group members.

The applicant commonly commences an action on behalf of all persons in Australia who have been implanted with, taken or used a product, and who have suffered injury or loss as a result. Group members are bound by the outcome of the proceeding unless they opt out.

Product liability class actions have largely proceeded in the Federal Court, where representative actions have been available since 1992. Between 1992 and 2009, product liability and defective goods actions constituted the greatest percentage of total class actions filed, at 22.4 per cent. This dropped to only 5.3 per cent of total class action claims filed in the post-insurance crisis reform era between 2004 and 2009.^[1] The last five years has seen a resurgence of sorts, with a number of product class actions having been filed and resolved.

Products that have been the subject of representative actions have historically fallen into the following categories:

• food/drink;

• consumer goods;

• pharmaceuticals;

• medical devices; and

• cigarettes.

The principal framework for representative actions in Australia’s federal jurisdiction is found in Part IVA of the Federal Court of Australia Act^[2] (FCAA), which sets out the requirements for the commencement and conduct of proceedings.

CAUSES OF ACTION

Product class actions are concerned with the liability of manufacturers and suppliers of goods for damages following a breach of their common law duty of care; the Trade Practices Act 1974 (Cth) (TPA); and/or the Australian Consumer Law (Cth) (ACL).^[3]

Part V Division 2A and Part VA of the TPA and Part 3-2, Division 1 and Part 3-5, Division 1 of the ACL set out the circumstances in which a consumer may make a claim,^[4] including:

• where the goods were not reasonably fit for a particular purpose or a disclosed purpose (s74B TPA or s55(1) ACL);

• where the goods were not of merchantable or acceptable quality (s74D TPA or s54(1) ACL); or

• where the goods do not provide the degree of safety that persons are generally entitled to expect or have a safety defect (s75AD TPA or s138 ACL).

The liability imposed by these provisions of the TPA and ACL is strict.

A causal link between the defect and the injury suffered must be established.

THRESHOLD REQUIREMENTS

The threshold requirements to commence a class action are set out in s33C(1) of the FCAA, which provides that where:

1. seven or more persons have a claim against the same person or entity; and

2. the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and

3. the claims of all those persons give rise to a substantial common question of law or fact;

a proceeding may be commenced by one or more of those persons as representing some or all of them.

Seven or more persons

It is not necessary to obtain the consent of nor provide any specific details about the group members. Section 33H(2) of the FCAA provides that group members do not need to be named or identified, or the number of group members disclosed. A representative party must just be able to satisfy the court at some appropriate time that their claim is common among at least six other persons.^[6]

Against the same person or entity

At least seven persons (including the applicant) must have a claim against at least one respondent. Section 33C of the FCAA doesn’t provide express guidance regarding the degree of commonality required between group members and multiple respondents. There has been considerable confusion over the last 15 years as to whether it is necessary for each group member to have a claim against each respondent where there are multiple respondents.^[7]

The most recent examination of the issue by the Full Court was in September 2014 in the matter of Cash Converters International Ltd and Others v Gray,^[8] where it was held that s33C(1) is satisfied if there are seven or more persons with claims against the same respondent, and that it is not necessary for each group member to have a claim against each respondent.

Same, similar or related circumstances

When group members share the same or similar circumstances they should more easily be able to meet the criteria established in s33C(1) than when circumstances are merely related. When claims are only related, there is a threshold judgment on whether the similarities or relationships between circumstances giving rise to each claim are sufficient to merit their grouping as a representative proceeding.^[9]

In Phillip Morris (Australia) Ltd v Nixon,^[10] the Full Court concluded that the circumstances were not sufficiently related in light of there being three tobacco companies as respondents, 182 different brands of cigarettes and different advertisements, promotions and other public statements over a period of 39 years.

However, the level of divergence of individual issues that is acceptable within the framework of a class action under Part IVA is unclear. In the product liability context, the product is central. Many products are on the market in a number of models, sizes and specifications and are available in different strengths with different options and upgrades. A key question, therefore, is what degree of divergence between products is permitted?

Defining the class so as to include similar or related products affords the benefits associated with economies of scale, including reduction of the costs of litigation by spreading the burden among group members. There are, however, advantages for applicants and group members in narrowly defining the products that are the subject of the proceedings, as doing so can contain costs and the number of individual issues to be litigated. A broader class may contain group members with significant differences in their circumstances and may well face additional burdens, costs and risks flowing from the need to prove individual causation and damages.

Substantial common issue of law or fact

‘Substantial’ does not indicate a large or significant issue but instead is ‘directed to issues that are ‘real or of substance’.^[11] The issue does not need to be one that is a significant or core issue in the case.^[12]

The common issue can be one of law or fact. A common issue is one which, when determined in the representative party’s case, enables the court to determine that issue for all group members. An issue that involves consideration of particular circumstances or characteristics of a group member will not be a common issue; for example, questions of causation.^[13]

Yet the existence of some individual issues does not disentitle a group from commencing a class action. There is no requirement that the common issues between class members predominate over the individual issues. A complete identity between the claims of group members is not required. The commonality requirement can be satisfied notwithstanding that the claims are not exactly the same against each respondent and do not seek exactly the same relief.

Subgroups

Within a represented group, there may be a number of questions that are common only to certain segments of the group as a whole. Some differences or individual issues can be accommodated by establishing a subgroup. The establishment of a subgroup can enable the court to determine common issues of law or fact that are discrete to a particular subset of group members. In a product liability proceeding which concerns multiple products, issues specific to a particular product could be dealt with by creating a subgroup and appointing a subgroup representative.

PRODUCT LIABILITY CLASS ACTIONS IN RECENT YEARS

A number of representative product liability proceedings have been filed in the last five years, including:

• Peterson v Merck Sharp and Dohme (Aust) Pty Ltd (No. 7) [2015] FCA 123 (applicant unsuccessful, settled) (Vioxx)

• Rowe v Grunenthal GmbH [2014] VSC (settled) (Thalidomide)

• Collin v Aspen Pharmacare Australia Pty Ltd [2013] FCA 1336 (settled) (Permax)

• Erin Downie v Spiral Foods Pty Ltd and Others [2015] VSC 190 (settled) (Bonsoy)

• Winterford v Pfizer Australia Pty Ltd [2015] FCA 426 (settled) (Cabaser)

• Casey v DePuy International Ltd [2012] FCA 1370 (settled) (DePuy knees)

• Stanford & Another v DePuy International Ltd & Another NSD 213 of 2011 (currently in the Federal Court) (DePuy hips)

• Davis v Ethicon Sarl and Others NSD 1590 of 2012 (currently in the Federal Court) (Transvaginal mesh)

Vioxx

Representative proceedings were commenced by Mr Peterson in 2006 in the Federal Court against Merck Sharp & Dohme. Mr Peterson, who suffered a heart attack while taking the arthritis drug Vioxx, alleged that his consumption of Vioxx contributed to his heart attack. Mr Peterson was successful at first instance. On appeal, the Full Court concluded that it was not proven that, but for the taking of Vioxx, Mr Peterson would have suffered a heart attack. While the Full Court left open the possibility of group members successfully pursuing individual claims, Mr Peterson's personal claim was found to fail primarily on the question of causation as Mr Peterson possessed other significant risk factors for heart attack (including hypertension and obesity).

On 17 May 2013, Justice Jessop refused to approve an application for approval of a settlement in these proceedings. His Honour found that the settlement proposal was neither fair and reasonable or in the interests of group members as a whole. His Honour’s concerns with the proposal included that it represented an ‘obvious injustice’ to group members who, unlike Mr Peterson, might anticipate a favourable judgment on the question of causation. The gate criteria made no distinction between those group members who have significant risk factors for heart attack and those who do not.

In February 2015, the Court approved a revised settlement. The sum of $497,500 is to be distributed between the 1660 group members according to a points system which recognises the differential impacts of existing personal circumstances predisposing to the occurrence of myocardial infarction.

Thalidomide

In 2010, a class action was filed in the Victorian Supreme Court by Lynette Rowe against Grűnenthal GmbH on behalf of those born in Australia and New Zealand who suffered congenital deformities and whose mothers consumed Thalidomide while pregnant with them. A second class action was commenced in 2011 against Grűnenthal and the Australian distributor, Diageo. A settlement of $89 million with Diageo (Grűnenthal refused to contribute to the settlement) was approved by the Court in February 2014, and around 100 people were estimated to be eligible to participate in the settlement.

Permax

Mr Collin brought proceedings against Aspen Pharmacare Australia and Eli Lilly Australia in the Federal Court in 2010 on behalf of Australians who had taken Permax, a drug prescribed for treatment of Parkinson's Disease, restless legs syndrome and pituitary tumours, and who suffered loss as a consequence of the alleged side effects of changed and abnormal behaviour such as compulsive gambling, compulsive spending, compulsive eating and hyper-sexuality. In December 2013, settlement of the action was approved by the Court in an undisclosed sum.

Bonsoy

A class action was launched in 2010 by Erin Downie against Spiral Foods and two Japanese manufacturers in respect of Bonsoy soy milk, which was subject to a recall in December 2009 after high levels of iodine were identified. It was alleged one glass of milk contained 50 times the recommended daily intake of iodine. The applicant and group members reported serious health effects, including heart palpitations and losing muscle function. The settlement of $25 million, which was approved by the Court in January 2015, represents the highest settlement of a food safety class action in Australia.

Cabaser

In 2010, Ian Winterford brought proceedings in the Federal Court against Pfizer Australia. The medications that were the subject of the action, Cabaser and Dostinex, were designed to treat Parkinson’s disease. It was alleged by the applicant that the respondent failed to warn consumers that possible side effects of the drugs included compulsive gambling, hypersexuality, compulsive spending and compulsive eating. A settlement was approved on 7 May 2015, the terms of which have not yet been announced.

DePuy knees

In 2010, proceedings were commenced by Pamela Casey in relation to the De Puy LCS knee implants. A claim was brought against DePuy as the manufacturer and Johnson & Johnson Medical Pty Ltd as the Australian distributor. The applicant alleged that the implants were unfit for their purpose and not of merchantable quality; that the implants had a safety defect; and that the respondents had been negligent. The implants were recalled in 2009. A settlement framework was approved by the court in December 2012, according to which group members were compensated depending upon the number of surgical procedures they have endured as a result of the failure of their implant and the severity of their injuries.

DePuy hips

In 2011, two proceedings were filed by Tammy Stanford and Jamie Dunsmore in the Federal Court against UK manufacturer DePuy Orthopaedics and its Australian distributor, Johnson & Johnson. Approximately 5,000 ASR hip implants were implanted in Australia. The implants were recalled in 2010. Recipients of prostheses that failed required revision surgery. The two proceedings were consolidated in 2012. The trial in this proceeding, which is listed for 16 weeks, was still underway at the time of writing.

Transvaginal mesh

In 2012, Julie Davis commenced a representative proceeding against Swiss and American manufacturers of transvaginal mesh and tape products and the Australian distributor, Johnson & Johnson. The implants are designed to treat prolapse and stress urinary incontinence and have resulted in a range of complications, including recurrence, infection and incontinence. Over 39,000 implants have been implanted in Australia. The proceedings allege negligence and contraventions of the TPA and Civil Liability Act on the part of the respondents. The claim is currently on foot in the Federal Court.

CONCLUSION

Class actions involving defective products form a slim proportion of the representative proceedings that have been brought in recent years. Only two representative proceedings involving a pharmaceutical product and a medical device have been pursued to judgment to date, so there is a relative paucity of jurisprudence in the area of product liability class actions in Australia.

Further judicial guidance for practitioners seeking to interpret the relevant statutory provisions and more commentary from the bench as to determining specific and general causation issues would be of great assistance to those practising, and seeking to practise, in this area.

Rebecca Jancauskas is a partner in the Class Actions division of Shine Lawyers, Brisbane. PHONE [phone] EMAIL [e-mail].

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^[1] V Morabito, ‘An empirical study of Australia’s class action regimes’ (2009) p26.

^[2] Federal Court of Australia Amendment Act 1991 (Cth).

^[3] Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010.

^[4] The ACL came into effect from 1 January 2011 and each state and territory adopted it, with the Fair Trading Acts and the TPA’s consumer protection provisions being repealed from 31 December 2010.⁵ Some parts of the ACL are essentially the same as the TPA provisions. Others contain modified versions of the now repealed sections, while other divisions extend new consumer protections not present in the TPA. The TPA continues to apply to proceedings arising under that Act that were commenced before 1 January 2011 and acts or omissions which breached its provisions prior to that date.

^[6] Symington v Hoechst Schering Agrevo Pty Ltd (1997) 78 FCR 164.

^[7] The issue was first considered in Symington v Hoechst Schering Agrevo Pty Ltd (1997) 78 FCR 164 at 167. The first appellate court to consider the issue was in Philip Morris (Australia) Ltd v Nixon [2000] FCA 229; (2000) 170 ALR 487, [126] to [127]. Though the issue was not in dispute in that case, the court in Philip Morris accepted that s33C(1) requires each group member to have a claim against each respondent. This was followed in several cases including Bright v Femcare Ltd [2000] FCA 742; (2000) 175 ALR 50 at 81, King v GIO Holdings Ltd [2000] FCA 617; (2000) 100 FCR 209 at [29] to [31] and Patrick v Capital Finance Corporation (Australasia) Pty Ltd (2001) FCA 1073 at [7]. The Full Court reconsidered the issue in Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153; (2003) 130 FCR 317, [129], [130] and [248], and held that the decision in Philip Morris was wrong, concluding that not requiring the applicants and each group member to have a claim against each respondent fits squarely with the language of s33C(1) and satisfies the policy behind the introduction of Pt IVA. Debate as to whether the discussion of this issue in Bray was obiter or not raged in the years that followed, and conflicting decisions in cases such as Guglielmin v Trescowthick (No. 2) [2005] FCA 138; (2005) 220 ALR 515 and Kirby v Centro Properties Ltd [2010] FCA 1115; (2010) 189 FCR 301 resulted.

^[8] [2014] FCAFC 111.

^[9] Zhang v Minister for Immigration [1993] FCA 489; (1993) 45 FCR 384 at 404.

^[10] [2000] FCA 229; (2000) 170 ALR 487.

^[11] Wong v Silkfield Pty Ltd [1999] HCA 48; (1999) 199 CLR 255 at 267.

^[12] Brisbane Broncos Leagues Club v Alleasing Finance Australia Pty Ltd [2011] FCA 106.

^[13] Guglielmin v Trescowthick [2004] FCA 326 at [129].