Australia – Australian Commercial Disputes: FY22-23 Snapshot & Future Predictions.

A number of key trends emerged over the past year (or were foreshadowed for the year ahead) in the commercial disputes space which will have significant implications for businesses operating in Australia in terms of increasing the risk of both consumer and regulatory litigation and the potential for higher penalties in areas such as privacy and competition.

Before the first quarter closes on FY 23-24, set out below are some of the key trends and regulatory developments our team has observed in the data, privacy, greenwashing, IP, defamation, unfair contract terms, arbitration, administrative review spaces for FY22-23.

In addition to the below, looking forward, we expect that the following trends (which we are closely monitoring) will shape the commercial disputes landscape in FY23-24:

• the commencement of the National Anti-Corruption Commission from 1 July 2023. Our article regarding this can be found here;
• if implemented, the proposed reforms to the Privacy Act 1988 (Cth) (Privacy Act), including the introduction of a statutory tort for serious invasions of privacy or the direct right of action for interferences with privacy. Our article regarding this can be found here;
• if implemented, the proposed reforms to the provisions of the Corporations Act 2001 (Cth) regulating federal litigation funding schemes; and
• the possibility of judicial consideration of the new public interest defence under the uniform Defamation Acts if several cases before the courts where that defence has been pleaded by mass media do not settle.

Date/Privacy

Class Actions

Prior to FY22-23, only one data privacy class action had been commenced in Australia (which settled before being considered by the courts). Since that update, the landscape (and accordingly, the risk for businesses who experience a data breach) has changed significantly, with:

• three consumer-class actions having been commenced against Medibank and Optus in the Federal Court (with a further foreshadowed in respect of the Latitude Financial Services data breach);
• a consumer action having been filed by a self-represented litigant for compensation in respect of the Latitude Financial Services data breach;
• two shareholder class actions commenced against Medibank in the Victorian Supreme Court; and
• representative complaints regarding each of the above data breaches being investigated by the Office of the Australian Information Commissioner (OAIC) in tandem.

Each of the class actions above raise novel issues, for example, the application of common law causes of action such as negligence in a data breach context and the interpretation of various provisions of Australian data privacy legislation which have not, to date, been tested in the Courts (for example APP 11 of the Privacy Act). If successful, such cases may also open the floodgates for further class actions in this space. Any such claims (and corresponding risk to business) may be further bolstered by the introduction of a statutory tort for serious invasions of privacy or direct right of action for interferences with privacy, which are proposed to be introduced as part of the wide-ranging reforms to the Privacy Act (see our article here).

For more information about data privacy class actions in Australia, see our article here.

Regulatory Action

Regulation of data (including, but not limited to personal information) has become a key focus for Australian regulators in recent years.

In addition to the increased funding provisioned for privacy enforcement and other cybersecurity initiatives in the FY2023/24 budget (see our article here), various regulators have commenced enforcement actions which seek to apply more general obligations in a data/privacy context. For example, the following cases continued into this financial year:

• OAIC v Meta Platforms, Inc & Anor (NSD 246/2020):
  • This case is concerned with allegations by the OAIC that Meta (then, Facebook), between 12 March 2014 to 1 May 2015:
    • disclosed personal information of Australian Facebook users to the ‘This Is Your Digital Life’ app (the app) in breach of Australian Privacy Principle (APP) 6 in circumstances where most users did not install the app themselves, and their personal information was disclosed via their friends’ use of the app;
    • did not take reasonable steps to protect its users’ personal information from unauthorised disclosure, in breach of APP 11; and
    • as a result, exposed the personal information of various Australians to the risk of being disclosed to Cambridge Analytica and used for political purposes.
  • in March 2020, the OAIC brought proceedings against Facebook (now Meta) in the Federal Court in relation to Cambridge Analytica. Facebook attempted to set aside service of the legal documents on the US-based entity. In September 2020, the Federal Court found the OAIC had established a prima facie case that Facebook carried on business and collected personal information in Australia within the meaning of the Privacy Act through, amongst other things, its installation of cookies on Australian devices. That finding was made in the context of an application by Facebook for leave to appeal an interlocutory decision upholding service on the US-based entity. Facebook appealed the September 2020 decision and, in February 2022, the Full Federal Court dismissed the appeal. In September 2022, Facebook was granted special leave to appeal to the High Court but, in March 2023, that special leave was revoked (because the matter no longer raised an issue of public importance following a change to the Federal Court’s procedural rules).
  • the substantive proceeding, in which the OAIC is seeking civil penalties against Facebook, has returned to the Federal Court for consideration.
• ASIC v RI Advice [2022] FCA 496: in which the Federal Court read into Australian Financial Services License (AFSL) holders’ general duties an obligation to maintain adequate cybersecurity protections and mitigate cybersecurity risks, including holding AFSL holders responsible for the failure of any Authorised Representatives which perform work on its behalf. See our summary here.
• Australian Competition and Consumer Commission v Meta Platforms Inc [2023] FCA 842:
  • in July 2023, the Federal Court handed down a decision affirming the pecuniary penalty agreed, by way of way of an agreed statement, between the Australian Competition and Consumer Commission (ACCC), Meta Platforms Inc and two of its subsidiaries.
  • Meta’s subsidiaries, Facebook Israel Ltd. and Onavo, Inc., offered, advertised and promoted the Onavo Protect app (Onavo). Once installed, Onavo provided a VPN service. Onavo was listed in the app stores with wording such as “Protect Your Personal Info For Free” and “Onavo Protect: Helps Keep You and Your Data Safe”.
  • a large range of data was collected from Onavo users via the Onavo app and was shared with Meta for a range of purposes, including in relation to its advertising and marketing activities, improving its products and services and developing commercial strategies. Disclosures concerning how Australian consumers’ data would be used for such purposes were contained in the Terms of Service and Privacy Policy for Onavo Protect but were found not to be sufficiently prominent or proximate to the Listings.
  • by agreement, the Court declared that Facebook Israel Ltd. and Onavo, Inc. contravened ss 18 and 33 of the Australian Consumer Law by advertising and promoting Onavo Protect without making disclosures to Australian consumers that were sufficiently prominent and proximate to those listings that users’ data would be used for purposes other than providing Onavo Protect. Each entity was ordered to pay a pecuniary penalty of AU$10mil.

Greenwashing

We published a series of articles on the ACCC and ASIC’s continuing fight against greenwashing and misleading ESG claims (i.e. claims which misrepresent the extent to which a company, product, service or investment strategy is environmentally friendly, sustainable or ethical)  (see here and here).

Over the last financial year, ASIC has set out to combat greenwashing as a key enforcement priority as seen in the 23 corrective disclosure outcomes, 12 infringement notices it has issued, and first civil penalty proceedings it has commenced in respect of greenwashing since July 2022.

Listed as an enforcement priority for both the ACCC and ASIC for 2023-24, we expect to see a continuing ramp up of enforcement action in this space. In July 2023, the ACCC published its draft guidance for businesses on making ‘Environmental and sustainability claims’. The ACCC are currently seeking consultation from interested parties on this draft guidance which will close on 15 September 2023. See our comprehensive article here.

ASIC has recognised four of the most common greenwashing practices which it has targeted over the past 12 months:

1. Net zero statements and targets without a reasonable basis or which are factually incorrect.
2. Terms such as “carbon neutral”, “clean” or “green” which lack reasonable grounds.
3. Overstatements or inconsistent application of sustainability-related investment screens.
4. The use of inaccurate labelling or vague terms in sustainability-related funds.

As the spotlight is now front and centre on sustainability-related disclosures, organisations that make such claims should ensure they are made on reasonable grounds and can be supported on a factual basis.

A recent example of ASIC’s enforcement in respect of greenwashing is their action taken against Vanguard on 25 July 2023. In these proceedings, filed in the Federal Court, ASIC alleges Vanguard made false and misleading statements and engaged in conduct liable to mislead the public in representing that all securities in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) (Fund) were screened against certain ESG criteria.

Defamation

The Model Defamation Amendment Provisions (MDAPs), which commenced in several Australian States and Territories in 2021 (save for the Northern Territory and Western Australia), introduced a raft of changes to Australia’s defamation laws.  Some of the major changes included:

• making concerns notices mandatory and the requirements for them more prescriptive;
• abolishing the defence of triviality and introducing ‘serious harm’ as an element to the cause of action for defamation, which requires a plaintiff to prove that the defamatory publication has caused, or is likely to cause, serious harm to a person’s reputation.The question of serious harm must be determined early in the litigation unless there are “special circumstances” (see e.g. s 10A(5) Defamation Act 2005 (NSW)); and
• introducing a ‘public interest’ defence, which requires a defendant to prove that: (i) the matter concerns an issue of public interest, and (ii) the defendant reasonably believed that the publication was in the public interest.

Several decisions have been published since the introduction of these changes which provide guidance as to the interpretation of the new provisions.

In relation to ‘serious harm’, it has been held that a plaintiff needs to establish that serious harm has been caused or is likely to be caused as a fact, rather than the mere inherent tendency of the words to cause harm: see our articles on Rader v Haines and Newman v Whittington. 

Further, the nature of “special circumstances” which may justify the postponement of the determination of serious harm to a later stage in the proceedings was considered in Wilks v Qu (Ruling) [2022] VCC 620 at [40]-[46] and (Wilks v Qu (Ruling 2) [2022] VCC 1503 at [6]-[11]).

Finally, Zimmermann v Perkiss [2022] NSWDC provides an example of a case where the Court dismissed proceedings at an early stage because the plaintiff could not establish the ‘serious harm’ element. The publication was a one-to-one Facebook Messenger message which alleged that a former employee had stolen a pair of scissors from a dog grooming salon.

There has been only limited consideration of the public interest defence.  In Google v Barilaro [2022] FCA 650, for example, Rares J of Australia’s Federal Court suggested in obiter dicta that the public interest defence is only available to the publication of defamatory matter in electronic form that is first published on or after 1 July 2021, and that ‘a failure to invite comment from a plaintiff’ may contribute to, or perhaps even form the basis of, a conclusion that a publisher has not established the defence.

There are, however, several cases currently before the Federal Court in which mass media defendants are seeking to rely, in part, on that defence which means that unless those cases settle, there is further and detailed consideration of the defence on the horizon: see, for example, Heston Russell v Australian Broadcasting Corporation (heard in July 2023); Dr Munjed Al Muderis v Nine Network Australia (hearing to commence in September 2023), Bruce Lehrmann v Network Ten (hearing to commence in November 2023) and Bruce Lehrmann v Australian Broadcasting Corporation (date to be determined).

Finally, the decisions in Mr Peter V’Landy’s case against the Australian Broadcasting Corporation emphasise the strategic importance of formulating proper and precise imputations at an early stage of any defamation complaint. This importance has been heightened since the introduction of the MDAPs, with the changes to the concerns notice provisions requiring that the imputations pleaded in proceedings be those which were identified in the concerns notice.

It is, however, worthwhile noting that the Courts have also, in recent times, allowed applicants to  ‘reformulate’ imputations in limited scenarios.  In Stead v Fairfax Media Publications (2021) 387 ALR 123 for example, the Court found that an imputation not substantially different to the imputation pleaded was conveyed.  Similarly, in Roberts-Smith v Fairfax Media Publications [2023] FCA 555, the Court allowed the applicant to reformulate an imputation, relying on the principles found in Stead.

Unfair Contract Terms

In late 2022, we published a series of articles on the impending arrival of the new unfair contract terms (UCT) regime and penalties, commencing on 9 November 2023 (see here and here). The UCT regime is enforced by ASIC and the ACCC.

The new UCT regime widens the scope of businesses subject to the regime and prohibits businesses from proposing, or relying on (or purporting to rely on) unfair terms in a standard form contract. The overhauled penalty regime under the Competition and Consumer Act 2010 (Cth) (CCA) applies to breaches of the UCT regime. Breach of the UCT regime after 9 November 2023 expose businesses to penalties of up to $50 million or a penalty based on the benefit obtain from the breach or the business’ turnover during the infringing period.

Both ASIC and the ACCC have listed unfair contract terms as an enforcement priority for 2023-24. We expect to see a corresponding increase in enforcement activity from both regulators.

ASIC has backed up its public statements of its enforcement priorities. On 4 April 2023, ASIC commenced proceedings against Auto & General Insurance Company (Auto & General) who ASIC allege relied on an unfair term in its standard form contracts.

The impugned term requires customers to notify Auto & General “if anything changes about your home or contents”. ASIC alleges this is unfair because the term:

• imposes an obligation on customers to notify Auto & General if ‘anything’ changes about their homes or contents which customers cannot practically meet;
• imposes an unclear obligation on what the customer needs to disclose to Auto & General;
• suggests that Auto & General has a broader right to refuse claims or reduce the amount payable under claims if a customer does not meet this notification obligation; and
• could mislead or confuse the customer as to their true obligations and rights under the contract.

ASIC has also commenced proceedings against HCF Life Insurance Company Pty Ltd (HCF Life) alleging that a ‘pre-existing condition’ term contained in the contracts for its ‘Recover’ range of insurance products is unfair as it similarly purports to deny coverage if a customer did not disclose a pre-existing condition, even if a diagnosis had not yet been made.

As the new UCT Regime has not yet commenced, ASIC is seeking declarations that the terms are void in both instances These two proceedings should serve as stark reminders to the business community to review their standard form contracts for any potentially unfair terms in order to mitigate against the risk of falling under ASIC’s microscope once the new penalty regime kicks in.

Arbitration

In April 2023, the High Court of Australia unanimously upheld the decision of the Federal Court to enforce an arbitral award of €101 million in favour of Infrastructure Services Luxembourg S.à.r.l. against the Kingdom of Spain.

This decision made clear that:

• arbitral awards made against foreign states under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) may be recognised and enforced in Australia; as
• foreign state immunity (the principle whereby a foreign State is immune from the jurisdiction of the courts of Australia, except where an exception applies) may be waived by way of by implications inferred from the express words of a treaty in their context and in light of their purpose, and cements Australia’s standing as a pro-arbitration jurisdiction.

For more information about this decision, see our article here.

Administrative Review

The Federal Attorney-General has indicated that it will introduce legislation in 2023 to abolish the AAT and create a new federal administrative review body.

As part of the reform, in December 2022, the government released new AAT Appointment Guidelines.

We await the introduction of such legislation to assess the extent (and likely impact) of such changes.

Expert evidence

In May 2023, the Full Court of the Federal Court in the decision of New Aim Pty Ltd v Leung [2023] FCAFC 67, overturned a single judge Federal Court decision regarding the preparation of expert evidence and instruction letters.

In the primary decision, the primary judge:

• was not satisfied that the opinions expressed in the report by the expert witness truly represented her honest and independent opinions, on the basis that the report was not drafted entirely by her;
• was not satisfied that no matters of significance were withheld from the expert witness’ report;
• rejected the entirety of the expert witness’ evidence, as opposed to attaching little or no weight to it; and
• was critical of the letter of instruction being issued to the expert and the expert witness’ report having been prepared within a day of each other. The primary judge’s view was that this implicitly asserts that the expert witness had prepared the report within one day.

On appeal, the Full Federal Court found that the entirety of the evidence of an expert witness called by the Appellant should not have been rejected as:

• much of the report, and sections which appeared to have been drafted by the lawyers were factual propositions, based on materials provided by the expert to the lawyers; and
• it was clear from the evidence that the report was, in fact, not prepared in the space of one day, and it was not asserted, at any stage and, in particular, in the letter of instruction, to have been started on the date the letter of instruction was received.

The key takeaways for lawyers involved in the preparation of expert evidence are as follows:

• The point of a letter of instruction is not to act out of ritual. The material placed before the Court should make clear:
  • what has been provided to the expert; and
  • the questions that the expert was asked to address.
• There is no legal obligation to disclose in an expert report:
  • whether legal practitioners involved in the drafting of an expert report; and
  • all correspondence relating to the preparation of the report.
  However, there may be an ethical obligation to do so, depending on the circumstances.
• Whether oral advice conveyed by a legal practitioner to an expert is required (whether legally or ethically) to be documented and disclosed in an expert’s report, depends on all of the circumstances, including the nature of the advice conveyed to the expert and the relevance of it, if any, to the report or opinions expressed.
• It is common for a final letter of instructions, containing the final form of the questions to be answered by an expert, to be prepared shortly before an expert report is finalised, particularly where the issues are novel or complex or the questions require, for example, a position to be adopted concerning the correct construction of a statutory provision. The Federal Court Rules do not require that every single question asked of the expert during the course of the expert’s retainer be identified, but rather, the report must identify the question(s) the expert was asked to address in their report (at whatever point they were formulated), including where such questions are communicated orally. 

Referees

Over the past financial year, Australian Courts have increasingly begun appointing referees in commercial cases. Under applicable court rules, courts may refer proceedings, or a question arising in proceedings, to a referee for inquiry and to report back to the court. Issues referred to referees range from the determination of liability and damages, to the identification of candidates to conduct settlement distribution schemes. Generally, there are two types of referees:

1. a subject matter referee who has expertise in an area of specialised knowledge; and
   
2. an independent fact-finder, such as a retired judge or senior barrister, experienced in resolving factual disputes.

Factors relevant to a Court decision to appoint a referee include:

• referee availability;
• suitability of the issues for determination by a referee;
• whether the relevant issues are best handled by a judge rather than an expert;
• likely delay if the issues are determined by a referee as opposed to a Court;
• any inconvenience to a party resulting from delay where a matter is determined by the Courts as opposed to a referee; and
• whether the appointment may result in additional costs or reduce overall costs.

Some recent examples of referrals include:

• Gill v Ethicon Sàrl (No 10) [2023] FCA 228): Lee J sought to design a streamlined approach for the assessment of group member claims, and appointed Julian Sexton SC to prepare a “master report” assessing issues relating to damages and liability based on a set of “paradigm cases”.
• Group One Ltd v GTE Gesellschraft Für Technische Entwicklungen GmbH (No 2) [2023] FCA 366: a referee was appointed to inquire into and prepare a report on the quantum of damages and interest to be paid by the respondents, and whether indemnity costs should be ordered; and
• Davaria Pty Ltd v 7-Eleven Stores Pty Ltd (No 14) [2023] FCA 449: a referee was appointed to inquire into and report on the reasonableness of various solicitors costs.

Commercial disputes are particularly amenable to referees, given the (often) complex issues that arise.

For further information, please contact:

Julie Cheeseman, Partner, Bird & Bird

julie.cheeseman@twobirds.com