Collective Redress & Class Actions 2022

Last Updated November 08, 2022

Australia

Law and Practice

Authors



Clayton Utz is a leading Australian law firm, known for its independent culture and engaging approach. With over 163 partners and 1,300 employees across all of Australia's commercial city centres, the firm is able to bring together teams of lawyers with the right mix of legal and commercial skills to match the needs of its clients, and by so doing, it has built a reputation for innovative and incisive advice. Clayton Utz is a full-service commercial law firm and its lawyers have diverse and broad-ranging legal experience across a range of industry sectors. The firm's strength lies not only in the range of skills and depth of expertise held by its individual lawyers, but also in their ability to work together effectively as a full-service, national team.

Australia's current class action regimes have a developmental history of over 30 years. In 1988, the Australian Law Reform Commission (ALRC) published a report recommending that a class action regime be introduced in the Federal Court of Australia. The ALRC's express rationale was that group proceedings would reduce the costs for individuals seeking to bring a claim, thereby improving access to justice. Group or representative proceedings (as they have become known) were also thought to enhance court efficiency and consistency in the determination of common issues. On 5 March 1992, Part IVA of the Federal Court of Australia Act 1976 (Cth) came into force, setting out in detail a set of procedures to be used for representative proceedings in the federal jurisdiction. 

In January 2000, the Victorian Supreme Court Act 1986 was amended to include its own regime for representative proceedings. In 2011, New South Wales amended the Civil Procedure Act 2005 to do the same, followed by Queensland in 2016 and Tasmania in 2019. Most recently, in 2022, the Western Australian parliament introduced a statutory class action regime. 

As the federal procedure has been in force for more than 20 years, the balance of this chapter will refer to the provisions in the Federal Court of Australia Act (the “Act”). 

The Australian representative proceeding regime is not modelled expressly on that of any other jurisdiction. While there are some similarities to the US class action regime, there are material differences. Firstly, Australia's regime has a very low threshold for the commencement of class actions. Essentially, all that is required is that there are seven or more persons with claims against the same person and those claims are in respect of, or arise out of, the same, similar or related circumstances and give rise to substantial common issues of law or fact. Secondly, there is no certification process. Rather, it is up to the respondent to move to have the class action "de-classed". Finally, unlike the US regime, there is no requirement for "numerosity" or that the common issues predominate. The Australian regime only requires there to be a matter or issue of substance that is common. 

There is no applicable information in this jurisdiction.

As noted in 1.1 History and Policy Drivers of the Legislative Regime, Australia has representative proceeding regimes at the federal level as well as in some states. The federal regime is prescribed in Part IVA of the Act. The state courts of Victoria, New South Wales, Queensland and Western Australia each have their own statutory regimes. While the various regimes are similar, there are some differences. For example, in the New South Wales Supreme Court (where representative proceedings may be brought for claims based on negligence or for breaches of New South Wales statutes), class actions may be brought on behalf of a defined, limited group of identified individuals; not only an open, generally specified class. Furthermore, NSW class actions may be commenced against several defendants, even if not all of the group members have a claim against all of the defendants. In Victoria, the relevant legislation was recently amended to allow lawyers representing the plaintiffs and group members in class actions to charge percentage-based contingency fees in certain circumstances. This is a feature that is currently unique to Victoria's regime. 

Representative proceedings can be brought in most areas of law in which the Federal Court of Australia has jurisdiction. The areas in which claims have been brought include: 

  • financial services; 
  • investment schemes; 
  • shareholder litigation; 
  • failure of infrastructure; 
  • environmental contamination; 
  • real estate investments/marketing; 
  • consumer finance; 
  • immigration law; 
  • product liability; and 
  • anti-cartel proceedings. 

Representative proceedings may be commenced whether or not the relief sought is or includes equitable relief, or consists of or includes a claim for damages, even if the claim for damages would require individual assessment. Representative proceedings may also be commenced whether or not the proceedings concern separate contracts or transactions between the respondent in the proceedings and individual group members, or involve separate acts or omissions of the respondent done or omitted to be done in relation to individual group members. 

Representative proceedings are defined under the Act to be proceedings commenced under Section 33C. Section 33C provides that where seven or more persons have claims against the same person and the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and the claims of all those persons give rise to a substantial common issue of law or fact, then a proceeding may be commenced by one or more of those persons as representing some or all of them. "Substantial" in this context has been interpreted by the courts to mean "real or of substance", rather than "large" or "of special significance". 

See 2.1 Collective Redress and Class Action Legislation. Representative proceedings can be brought in the Federal Court or certain state Supreme Courts. 

Requirements

Basic

As noted in 3.2 Definition of Collective Redress/Class Actions, representative proceedings can be commenced where at least seven persons have a claim against the same (legal) person and all of those claims give rise to a substantial common issue of law or fact. However, it is not a requirement that the common issues predominate over individual issues. All that is required is that there is at least one “substantial” common issue of law or fact. The High Court of Australia has interpreted “substantial” as meaning "of substance" rather than denoting a certain size.   

No certification

Furthermore, as noted in 1.2 Basis for the Legislative Regime, Including Analogous International Laws, the Australian representative proceeding regime has no certification requirement. This means that the proceedings do not need to be judicially certified as appropriate to be brought in this form. Therefore, once a representative proceeding that meets the basic requirements has been commenced, it will continue until it is resolved or until the court determines that the proceeding should not continue as a representative proceeding. This decision usually involves an assessment of whether it is “in the interests of justice” for the proceeding to continue in this form.   

Option to opt out

Once a representative proceeding commences, all group members must be given notice of their right to opt out of the proceeding before a specified date. This notice must be given as soon as practicable and must be given before the trial begins.   

Representative proceedings may be commenced by a single representative claimant (or sometimes several claimants) for and on behalf of group or class members. Where a person has a sufficient interest to bring a claim on their own behalf, they are taken to have sufficient interest to bring the claim on behalf of the class. 

The Australian competition regulator, the Australian Competition and Consumer Commission (ACCC), is also permitted under certain federal provisions to bring representative proceedings as a form of enforcement. These proceedings may be brought on behalf of persons who have suffered, or are likely to suffer, loss or damage by reason of conduct which contravenes those federal provisions. 

The question of who belongs to a class is determined entirely by the definition of the class. While there is a minimum of seven class members, there is no upper limit on the number of people that may be in the class. Any person who falls within the class definition is automatically a group member, and once proceedings have commenced, the court fixes a date by which group members must opt out if they do not wish to be involved in the proceedings. This is done by providing written notice to the court. Anyone who is within the class as defined that does not opt out in time will be bound by any judgment of the court. Given this dynamic, the courts adopt a supervisory role over the group members, as their rights will be affected by proceedings that they may not even know are taking place. This supervisory role is seen across many rules and case management principles that govern representative proceedings. 

Recently, the federal and Victorian courts have also shown a willingness to require claimants who do not opt out of proceedings to positively signal their intention to make a claim, through a registration process. In some cases, that registration process takes place at the same time as the deadline to opt out. Claimants who do not opt out but fail to register may be barred from making their claims. The Federal Court has also permitted classes to be defined as only including persons who have registered with a particular litigation funder (and their lawyers). In effect, such an order also operates as an informal opt-in system. In October 2022, the High Court of Australia ruled that a class action is defined by description of the group members. Claimants do not have to be present or domiciled in or citizens of Australia in order to be valid group members. 

Court rules across the jurisdiction allow third parties to be joined to proceedings in a range of circumstances. For example, in New South Wales, the court may order a person to be joined where it considers that they ought to be joined as a party, or where this is necessary for the determination of the matters in dispute. A third party may also apply to the court themselves to be joined as a party, either as a plaintiff or a defendant. However, given the requirement that there be a substantial common issue of law or fact, the joinder of additional parties to representative proceedings may raise issues with respect to maintaining sufficient commonality. 

Judges presiding over representative proceedings in Australia have extensive case-management powers as, by their very nature, the proceedings rely on constant management. For example, the court has substantial powers regarding all notices issued to group members. Federal Court judges often finalise the exact wording of notices and make specific orders with respect to how the notices will be published. Another case-management power under the Act that is commonly deployed in representative proceedings is the use of a referee. Judges will often order that a specific question be considered by a referee who will then report their findings to the court.

Test Cases

In respect of test cases, there is no established precedent. Some representative proceedings begin with the determination of the lead applicant's case as a means of answering common questions for all group members. At other times or in other jurisdictions, the court may try preliminary issues of law or fact (or mixed fact and law). Typically, trials of preliminary issues have only been used on special grounds, such as to substantially narrow the field of controversy or shorten the trial, or where this would result in a significant saving of time or money.

Subgroups

If the determination of common questions would not or does not finally determine the claims of all group members and there are questions common to the claims of only some group members, the court may direct that those questions be determined by subgroups. The court may also allow an individual group member to take part in the proceeding for the purpose of determining a question that relates only to the claim of that member. If the subgroup questions or the individual questions cannot be adequately dealt with, the court can direct that further proceedings be commenced. 

The timeframes for proceedings are highly dependent on the particular case and the nature of the claim. It may take anywhere between six months and several years for a matter to be heard and determined. Federal Court proceedings tend to be heard faster than those in the state and territory supreme courts. This is partly due to the Federal Court’s case-management system, in which proceedings are allocated to a particular judge who manages, hears and determines the case, and partly due to the higher caseloads in state supreme courts. 

There are provisions in all jurisdictions for expedited hearings in appropriate circumstances. Examples of such circumstances include the health of a party to the proceedings. On the other hand, the courts also have the power to stay or dismiss proceedings that are considered vexatious, frivolous, or an abuse of process. 

Costs

As is common in many jurisdictions, the "loser pays" rule applies in Australian representative proceedings. That is, the unsuccessful party is typically ordered to pay the costs of the successful party. These costs include not only out-of-pocket expenses such as court filing fees, but also the professional fees of legal representatives. However, the costs ordered do not usually amount to the total or actual costs accrued by the successful party. Costs orders are generally calculated with reference to a court scale that limits the amounts that a successful party can claim for disbursements and services performed by their lawyers. 

In unsuccessful representative proceedings, however, the "loser pays" rule does not apply to all the group members, other than those group members that commenced the proceeding. That is, the law protects all other group members from having adverse costs orders made against them. This is an element of the court's supervisory role over group members whose rights are being affected by proceedings over which they had little control. The "lead applicants" who commenced the representative proceedings, on the other hand, may be liable for adverse costs orders if the proceedings do not succeed. Equally, they may have costs orders made in their favour where the proceeding is successful. 

Funding

Third-party funding of litigation is permitted in Australia. It is common in representative proceedings for professional litigation funders with no other interest in the matter's outcome to fund the action in exchange for a percentage of any judgment or settlement. If the proceeding is unsuccessful, the funder does not receive a return on its investment. Funders usually form agreements with a number of group members but not the entire class. However, group members that do not enter these agreements still ultimately benefit from the funding if the matter succeeds. The courts have used several mechanisms to try to resolve this apparent unfairness at the time of settlement or judgment, including by requiring all group members to contribute towards the costs of the litigation, regardless of whether they registered with the third-party funder. This concept, known as a "common fund" has recently been embraced by the Federal Court in certain circumstances. 

In Victoria, the relevant legislation has recently been amended to allow lawyers to charge contingency fees in certain circumstances. These are fees calculated by reference to the judgment or settlement sum awarded to the client, usually in the form of a percentage. Rather than simply permitting law firms to charge contingency fees, the reforms have allowed the courts to make a "group costs order", which may include a contingency fee structure. The court may do so if satisfied that it is appropriate or necessary to ensure that justice is done in the proceeding. At the time of writing, several class actions have been commenced intending to seek a group costs order. Only one application has been heard so far, in which the court declined to grant the order. 

Discovery

Historically, discovery has been available as a right in Australian proceedings. However, over time, the courts have substantially reformed their approach in order to mitigate the burdens of cost and time associated with the process. Discovery is now subject to leave of the court and will only be permitted where it has been demonstrated as being necessary to the determination of issues that are genuinely in dispute. Furthermore, the courts will play an active role in case-managing discovery, and there is a focus on parties making reasonable efforts to provide discovery. 

Where ordered, a party is obliged to discover (meaning identify and provide access to) all documents in its possession, custody or power which are relevant to a matter at issue in the proceedings. Discovery takes place at the pre-trial stage so that discoverable documents relevant to the case are disclosed before the hearing commences. Generally, relevant documents will be: 

  • documents on which the party relies; 
  • documents that adversely affect the party’s own case; 
  • documents that support another party’s case; 
  • documents that adversely affect another party’s case; and 
  • documents that are required to be disclosed by a relevant practice direction. 

Parties must make a list of all discovered documents, and each party’s list is sworn and then provided to the other parties. Parties are entitled to inspect each other’s documents and to make copies, except for documents in relation to which a claim for privilege has been made. Much of this process now occurs using electronic systems and will therefore also deal with document-specific metadata. 

The obligation to discover all relevant documents continues throughout the proceedings. This means that any document created or found after providing initial discovery must also be discovered. 

Privilege

Evidence in representative proceedings is subject to "legal professional privilege" as it is known under common law, or "client legal privilege" as it has been renamed under the uniform Evidence Acts in the federal jurisdiction and some states. The uniform Evidence Acts govern issues of privilege where evidence is being adduced at trial, while common law covers privilege in the pre-trial stages. 

Under the uniform Evidence Acts, confidential communications will be privileged if they were made and/or prepared for the dominant purpose of providing legal advice, or for the provision of legal services relating to actual or anticipated litigation. A similar threshold applies under common law, through a three-step test. Additionally, a third kind of privilege known as "without prejudice privilege" also applies. This form of privilege applies to communications between parties that are generally aimed at settling or resolving proceedings. These communications cannot later be put into evidence without the consent of all parties. 

A broad range of remedies is available through representative proceedings, including equitable relief and damages, even where the claim for damages would require individual assessment. 

There are a number of alternative dispute resolution mechanisms available to parties in representative proceedings. These mechanisms, including mediation and arbitration, may be engaged voluntarily by the parties or may be ordered by the court. It is common for a court to order mediation at some stage in a representative proceeding, while arbitration is comparatively rare. 

The Act requires that representative proceedings may not be settled or discontinued without the court's approval. The approval process takes place in court, with the wording of the settlement notice being finalised by the judge, and it is then ordered to be distributed. This means that the settlement is typically not private or confidential. 

When approving a settlement, the court determines whether it is a fair and reasonable outcome. This decision must take into account the interests of the group members as a whole, not only the lead applicant and respondent. The assessment is an active process, because settlement approval is a protective mechanism that must safeguard the interests and rights of group members. The court will consider the material presented and the advice provided by counsel as to the prospects of success, as well as the risk of any loss if the case were to proceed. The court may reject a settlement that has been agreed by the parties if it is not satisfied that the outcome is in the interests of the group members as a whole. 

Under the Act, the court may: 

  • determine an issue of law or fact; 
  • make a declaration of liability; 
  • grant any equitable relief; 
  • make an award of damages; 
  • make an award of damages for group members, subgroup members or individual group members, consisting of specified amounts or amounts worked out in such a manner as the court specifies; 
  • award damages in an aggregate amount without specifying amounts awarded in respect of individual group members (where a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment); or 
  • make such other order as the court thinks just. 

The court must also make provision for the payment or distribution of the money to the group members that are entitled to it. The court may also give directions in relation to the manner in which a group member is to establish their entitlement to share in the damages and the manner in which any dispute regarding such an entitlement is to be determined. 

Any judgment of the court binds either all the group members, or a subset of group members specified by the court. As such, the judgment must describe or otherwise identify the group members who will be affected by it. Group members who have opted out of the proceeding are not bound by the judgment. 

Beyond this, judgments under Part IVA of the Act are enforced in the same way as any other judgment of the Federal Court of Australia. 

Australia's continuous disclosure laws, which play an important role in shareholder class actions, were recently amended. Breaches of continuous disclosure obligations will now only attract civil penalties where a company has knowledge, or is reckless or negligent with respect to, whether the information would have a material effect on the price or value of securities. Prohibitions on misleading and deceptive conduct have also been amended to a corresponding extent, so that officers of corporations will not be liable where continuous disclosure obligations have been contravened, unless the requisite mental element has been proven. These changes are expected to reduce the number of future class actions in this area. 

In December 2020, the Federal Government Joint Committee on Corporations and Financial Services published a report titled "Litigation Funding and the Regulation of the Class Action Industry". The report made 31 recommendations for legislative and procedural reforms. Areas of proposed reform included: 

  • dealing with multiple proceedings making the same allegations against the same defendants; 
  • improving transparency and management of potential conflicts of interest; 
  • proportionality of costs incurred during proceedings; 
  • increased regulation of litigation funding; 
  • greater uniformity across jurisdictions; and 
  • an ongoing relaxing of continuous disclosure laws. 

While the last of these recommendations has recently been acted upon as noted in 5.1 Policy Development, it remains to be seen which of the other proposed reforms will be taken up. The recent change of federal government saw a relatively rapid reversal of a proposed set of reforms with a clear policy signal that representative actions would not be suppressed or stymied by regulatory intervention.

Licence Requirements

In August 2020, the Corporations Regulations 2001 (Cth) were amended with the effect that litigation funders would fall within the regulatory regime relating to managed investment schemes, from which they had previously been exempt. The central consequence was that litigation funders would now be required to hold an Australian Financial Services Licence in order to fund Australian proceedings. 

Recently, the Australian Securities and Investment Commission (ASIC) has signalled its intention not to re-make exemptions that have similarly excused certain lawyers from these regulations. Specifically, lawyers that wish to use conditional costs arrangements, such as "no win, no fee" structures, will also be required to hold Australian Financial Services Licences if these reforms are passed. 

Most recently the Federal Court has cast doubt on the status of litigation funding agreements as managed investment schemes. The election of a new government has also seen a discernible shift away from the regulation of funders, although this is not to suggest that the federal government will abandon regulatory management altogether. 

The prudential management of third-party litigation funders remains in an ongoing state of flux. 

Brexit has had no impact on collective redress and class actions in Australia.

In March 2020, most Australian courts transitioned to virtual hearings. In the second half of 2022, the courts began to return to a more traditional method of operating, including in-person hearings. 

During the height of the pandemic, the use of online court platforms was largely supported in the legal industry, particular in the civil and commercial arena. Even as face-to-face appearances have returned, a large number of case-management hearings, interlocutory hearings and final hearings will continue to take place, or be available as needed, through audio-visual links. These web conferences are considered very efficient, particularly for case-management hearings, and are likely to continue to be used to varying degrees even when the pandemic recedes. 

In addition, a number of representative proceedings have been commenced that have arisen directly out of COVID-19. These include representative proceedings brought against: 

  • governments, over financial losses caused by lockdowns; 
  • aged care providers, over alleged failures to protect their residents from the virus; 
  • security companies, over alleged negligence in managing quarantine hotels; 
  • a cruise ship operator, for alleged negligence and breaches of Australian Consumer Law; and 
  • insurers, who have refused to pay out businesses for losses during government-mandated closures. 
Clayton Utz

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Trends and Developments


Authors



Clayton Utz is a leading Australian law firm, known for its independent culture and engaging approach. With over 163 partners and 1,300 employees across all of Australia's commercial city centres, the firm is able to bring together teams of lawyers with the right mix of legal and commercial skills to match the needs of its clients, and by so doing, it has built a reputation for innovative and incisive advice. Clayton Utz is a full-service commercial law firm and its lawyers have diverse and broad-ranging legal experience across a range of industry sectors. The firm's strength lies not only in the range of skills and depth of expertise held by its individual lawyers, but also in their ability to work together effectively as a full-service, national team.

Introduction

The most notable and broad-reaching events shaping class actions in Australia over the last 12 months have been: 

  • the change in federal government following the May election; and 
  • the progressive, now rapid, easing of COVID-19 restrictions.

To these society-wide shifts, the interested reader might then add more prosaic developments:

  • how courts manage class actions that persist after an initial “common issues” trial;
  • the special-purpose role of contradictors;
  • the increasing use of court-appointed referees;
  • the attraction of contingency fees in Victorian class actions; and
  • how traditional defence firms decide that the grass is greener on the other side. 

The New Federal Government

The incoming Albanese Labor federal government has moved quickly to reverse a range of measures intended to place increased regulatory restraint on the commencement of group proceedings, especially securities-related class actions. It is expected that the new government will generally favour the availability of such actions to achieve redress for groups of claimants, particularly the socially disadvantaged and employees. That said, the debate in relation to the appropriate prudential management of funders and the returns available to investors and legal representatives looks set to continue. 

There is increasing acknowledgement that those elements which the Federal Court is required to formally supervise, including the basis on which actions are funded and judgments or settlements are distributed, are onerous and a significant, and increasing, burden on the judicial workload. This is especially true where, in the absence of clear legislative or regulatory standards, the court is placed in the position of arbitrating both the adequacy of class representation and the commercial return for investors and lawyers alike.  Regardless of political philosophy, the new federal government will likely decide to explore whether these are matters where the Federal Court needs to have such an extensive level of involvement in the absence of more formal regulatory standards.       

As a federation, the national electoral change does not necessarily have an immediate impact on state governments. At the state level there is a broadly consistent set of class action regimes with Western Australia having finally joined the pack by enacting a similar regime for actions commenced in that state. However, the diverse political make-up across the states means that different approaches are evident. The federal focus on the management of third-party funders properly reflects the exercise of federal powers to control such entities. At the state level, the more common focus will be the return for funders and the legal costs to be derived from such actions. As canvassed below, this is most evident in the State of Victoria where contingency fees are now permissible in class actions. 

The “End” of COVID-19

It is a misnomer to suggest that the pandemic is over. Yet, in most social and economic settings, the restrictions that were in force to manage the height of the pre-vaccine risk and more recent variants have abated or been removed altogether. The civil courts, which had boldly learnt to conduct much of their business in a virtual manner, have returned to something akin to business as usual. Trials are back to being heard in person, especially as most civil claims are dealt with by a judge alone. 

Consistent with the events of 2020 and 2021, the volume of class actions commenced in the Australian courts which have such schemes, showed signs of slowing and possibly, longer-term contraction. However, it is difficult to say whether that change in the rate of commencement was not also in response to the direction in which the federal government was headed before the May 2022 election. At the least, these forces both played a role. The only jurisdiction to show any identifiable increase in commencement of claims was Victoria – and it seems plain that this was encouraged by the availability of contingency fees rather than the relatively extreme lockdown measures adopted by the state government. 

It follows that the various Australian class action commentators, whether academic or legal media, anticipate a likely lift in the rate of commencement of actions as we return to the new post COVID-19 legal normal. Certainly, the general media now routinely cites the prospect, risk or threat of a class action in response to almost every unexpected social or commercial event.  The normalisation of group proceedings as a curative answer to adverse outcomes may well have been the case prior to COVID-19. It now seems (or sounds) firmly entrenched as an “option” on the pathway out. 

There are a number of trends and issues which are less generally applicable and more narrowly observed by those practising in the area. These trends are not new over the last 12 months but have, in the authors’ opinion, shown notable development in that period. So much so that they are currently issues which are routinely raised in the assessment of progress or utility of Australian group proceedings.

Managing Class Actions After an Initial Trial

In a legal world where most disputes are settled and where the resolution of group proceedings is still the most common path, some class actions do still proceed to an initial trial of the applicant's individual claim and those issues which are common to the applicant (as representative party) and all group members. Subject to appeal, the judgments that are then delivered and the final orders made in such trials do not generally dispose of the actions as a whole. In fact, depending on the scope of the common questions, an action may only progress to a point where other questions have to be asked or the judicial focus must turn to the management of all the residual individual claims. In some cases, a de-classing order may then be appropriate, to leave individuals to choose whether to make use of the common findings that have been made. However, that outcome is less likely if it is thought that individual claims will not be pursued and the social purpose of the collective redress scheme is thwarted. 

In each Australian jurisdiction, legislative schemes afford the court extensive powers to case-manage class actions. While those powers have been extensively explored in the interlocutory preparation of cases for an initial trial, they are less commonly required to manage the situation where an initial trial has been heard, an appeal may or may not affect that outcome but no resolution has been reached between the parties. In this environment, what was hitherto a range of powers used to generate a uniform decision must now work to corral and push potentially hundreds of thousands of individual claims into a mechanism which either forces a settlement or determines claims on their own merits. This is not a comfortable area because, in this situation, no one size fits all. The very scheme that enabled the massing of claims to achieve collective redress must grapple with a mass that might not have emerged but for the availability of class actions in the first place. 

This is not to suggest that collective redress does not have a socially and commercially useful, indeed critical, purpose. Rather, it forces the courts, and the parties, to consider more innovative means to pair like with like and reduce replication. 

Early indications suggest that the path for actions at this stage will be determined largely by the views of the judge to whom the action has been assigned for ongoing case management. In part, this is trite because so much is true of all such actions. However, in part, it is because the ability of the court, on an application by a party or of its own motion, to direct how residual claims are to be managed that enables such guidance to be considerably blunter than is the norm in ordinary civil and commercial claims. Hence, the power to create sub-classes, groups and issues; the power to refer matters to a non-judicial or quasi-judicial investigator. And the power to oblige parties to mediate and to shape the forum within which that process takes place.   

Well short of fundamental determinations like class closure and the final adjudication of rights, these are nevertheless measures that expect judges to shape the conduct of mass individual claims by reference to legislatively stated social requirements, referred to as "Overarching Obligations". These are quite removed from the more traditional field of play. Again, this is not to suggest that such measures are not appropriately placed in the hands of the modern judiciary or that traditional inter partes litigation is the only appropriate legal mechanism. It is that all players in such actions, including the judiciary, must adjust their approach and expectations after an initial trial because the only certainty is that the courts will not hear and determine individual claims. This is the case even if such claims are the by-product of the very scheme intended to redress them all to the extent they are common to each other. 

These issues are producing a level of novel interlocutory development, which has been somewhat more pronounced recently as, inevitably, the number of class actions leads to a volume of cases which defy initial trial and press on into the uncertain area that follows. This is certainly a continuing trend. 

Contradictors

When a court is asked to approve the proposed settlement of a representative proceeding, the central question for determination is whether the proposed outcome is in the interest of the group members. This includes both represented and un-represented group members and is seen as a fundamental element in the court’s supervisory jurisdiction in this area. 

Self-evidently, most proposed settlements are agreed between the principal parties. The respondent(s) to the claim want the court to approve the settlement and therefore support the applicant(s) and their legal representatives in the pursuit of that outcome. The court is therefore faced with an application which is by consent and not contested. Individual group members can, and a small number often do, proffer written concerns or objections. More rarely, such objectors will appear to be fairly heard on the approval application. However, they are usually unrepresented, and they are rarely accommodated.

The court may be obliged to consider the interests of all group members but it cannot advocate in those interests. Many such actions involve funders and the return to the funder is, in itself, an integer in the approval process, but the court is also required to assess the self-interest and appropriateness of an entity that may, for approval purposes, also appear in support of the application. In this mix, the court has no party appearing that will necessarily offer a full and properly articulated challenge to the scheme. In short, the court lacks a contradictor. 

The appointment of a contradictor on a settlement approval is not novel.  However, the willingness of courts to do so of their own motion is a clear trend. Recognition that an independent voice to test the adequacy of the proposed outcome for group members is a prudent measure became something of a blinding reality in light of the truly appalling, and illegal, behaviour of the legal representatives for claimants in the Banksia Securities class action. In that case, a financial loss class action conducted in the Supreme Court of Victoria, Justice John Dixon appointed a contradictor because of some concern that the legal representatives for class members were seeking or had procured payment for their services through unorthodox means. It emerged that almost all senior members of that legal team, led by a senior Victorian (then) Queen’s Counsel, had created a scheme to enable them to earn both illusory fees and (then illegal) contingency returns via fraudulent conduct. The contradictor’s role turned from exploring the adequacy of the proposed settlement to an investigation into the conduct.  By necessity, it was a brutal process. The result saw the disbarring of the senior legal representatives, their bankruptcy and disgrace and, sadly, the profession’s shame. An uncommon yet salutary tale which will be at the forefront of judicial minds when assessing settlements in coming years. 

In this context, perhaps the most significant driver for the appointment of a contradictor will not be the Banksia ghost story. Perhaps it will be the degree to which the schemes proposed by class action lawyers and funders are actually transparent – not hidden behind a cloak of confidentiality often used when a lump sum is to be divided among claimants who may have claims of variable quality and value. 

Referees

The commentary above in relation to the management of initial class action trials and remnant individual claims references the court’s willingness to use interlocutory measures that are more direct in their operation. To that one might add the word “inquisitorial” when considering the emerging use of court-appointed referees to investigate and report on specific issues, including technical matters, certain liability issues and, especially, the assessment of quantum. 

There is nothing novel about the availability of referees and court-appointed experts to be used in complex civil litigation. There is however a tradition which places the resolution of questions of fact and law in the hands of the court to determine through a two-party contested model. It is noticeable that as class actions have become more common, larger and relatively complicated, the courts have been prepared to deploy a more inquisitorial, mezzanine approach to narrow the issues that are ultimately required to be judicially heard and determined. In some cases (and jurisdictions) that approach has acquired something of a “usual” form. The court is very likely to inject a referee into the case at an early juncture to settle technical factual disputes and in the post-trial phase in order to identify a methodology by which individual claims ought be assessed. 

The relevant legislative schemes enable the court to commission a referee to investigate, usually technical issues, through a wide range of compulsive powers. Apart from allowing the referee to decide how best to conduct the inquiry and report to the court, it is also a means by which the parties are forced to respond to what the referee does or does not require, rather than to shape the case and evidence that they wish to present. The inquiry results in a report which is then considered by the court, subject to submissions from the parties as to its accuracy and applicability. Not surprisingly, the perceived threshold for challenging a referee’s findings is high. Once adopted, that report becomes, in effect, findings in the case on the issues. It will thereby truncate what might otherwise have been adduced as factual or expert evidence. It will be apparent that this fits reasonably neatly with the court’s increasing resistance to the use of experts procured by the parties, the resulting contest of opinions and the court then deciding which opinion, often among many, to prefer. 

This trend raises important issues for those in civil and commercial litigation generally. A relative lack of control is the most significant change to be appreciated. Preparing materials that will be objectively persuasive without engaging in a standard form of advocacy is also a new stylistic challenge.  Understanding how the referee’s view of the issues they are commissioned to investigate will affect the class or claim as a whole requires close attention from the earliest stage.   

Contingency Fees

As noted above, but worthy of separate comment, is the advent of contingency fees as a means by which lawyers can be paid for their services in class actions in Victoria. 

In line with law reform recommendations made at a state level, Victoria embraced the concept that, under court supervision and through some significant rules of procedure, the lawyers for the applicant in a Victorian class action could be entitled to recover their professional costs as a percentage of the amount recovered by the applicant and group members. 

This notion is far from novel for North American readers. However, it remains heresy in much of the common law world and for the moment, in Australia, outside the state of Victoria. In the wider Australian framework, lawyers can recover their professional costs by reference to rates or items of work actually performed in the conduct of the action. Those fees can be assessed or taxed. The lawyers cannot otherwise be a beneficiary of the outcome achieved by the claimants. Such fees, and the basis upon which they are calculated, are material to any application for approval of a settlement.

In 2021 and 2022 there was a reduction in the rates at which representative proceedings commenced, everywhere except in the Supreme Court of Victoria. 

It remains to be seen whether the availability of such fees remains confined to Victoria, or whether the rate of claims was due to some other factors peculiar to Victoria. The trend suggests that the law reform measure is attractive to the legal profession (giving them a way into the market now dominated by third-party funding) and other jurisdictions may decide it is necessary to allow such reform in order to remain “attractive” to complex class action cases.   

Jumping the Fence

Finally, but more informally, it is curious to note the willingness of a small number of firms who have long advised and represented the interests of corporate and commercial clients, including in the defence of group claims, to accept instructions to conduct claims on behalf of funders, applicants and group members. This is not to suggest there is any professional or social reason why they cannot choose to do so. However, from the authors’ perspective, it does raise a complex set of issues in terms of the expectations that commercial clients have as to the way in which their external counsel, rather than the traditional Bar, operate in the promotion and protection of their collective interests. Clearly, those concerns are not insurmountable, and it may be a trend that develops further as the economic “head winds” that are coming behind the pandemic make their presence felt. 

Clayton Utz

Level 15
1 Bligh Street
Sydney
NSW 2000
Australia

+612 9353 4193

+612 8220 6700

cloveday@claytonutz.com www.claytonutz.com
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Law and Practice

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Clayton Utz is a leading Australian law firm, known for its independent culture and engaging approach. With over 163 partners and 1,300 employees across all of Australia's commercial city centres, the firm is able to bring together teams of lawyers with the right mix of legal and commercial skills to match the needs of its clients, and by so doing, it has built a reputation for innovative and incisive advice. Clayton Utz is a full-service commercial law firm and its lawyers have diverse and broad-ranging legal experience across a range of industry sectors. The firm's strength lies not only in the range of skills and depth of expertise held by its individual lawyers, but also in their ability to work together effectively as a full-service, national team.

Trends and Development

Authors



Clayton Utz is a leading Australian law firm, known for its independent culture and engaging approach. With over 163 partners and 1,300 employees across all of Australia's commercial city centres, the firm is able to bring together teams of lawyers with the right mix of legal and commercial skills to match the needs of its clients, and by so doing, it has built a reputation for innovative and incisive advice. Clayton Utz is a full-service commercial law firm and its lawyers have diverse and broad-ranging legal experience across a range of industry sectors. The firm's strength lies not only in the range of skills and depth of expertise held by its individual lawyers, but also in their ability to work together effectively as a full-service, national team.

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