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. These goals of improving access to justice and enhancing court efficiency in resolving mass claims have continued to be guiding policy drivers.
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, Tasmania in 2019, and Western Australia in 2022.
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 asserted to be 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, Tasmania 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:
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 or entity 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. Recently, the New South Wales Court of Appeal has indicated that soft class closures are not available in New South Wales courts. This represents a divergence of interpretation of almost identical provisions by the Federal Court and New South Wales courts.
In October 2022, the High Court of Australia ruled that a class action is defined by description of group members. Those 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 will settle 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 time-frames 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 can sometimes 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. However, this is not always the case.
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.
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.
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:
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:
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:
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.
In 2022, a change of Federal Government saw a marked change and proposed reversals of the previous government’s “unfair treatment” of class action plaintiffs to facilitate access to justice.
Diverging judicial opinions on whether the Federal Court has the power to make a common fund order (CFO) and when in a class action proceeding might seem a classic lawyer’s problem. However, it goes to the heart of the profitability of litigation funders’ funding model and consequently impacts access to justice; a principle that underpins Australia’s class action regimes.
Currently, environmental and climate-related class actions in Australia have all been directed against the Federal Government adopting well-established legal common law principles and statute with mixed success. However, it is unlikely that these recent decisions will be the final word in the class action arena.
Climate-related litigation against corporate entities operating in Australia are now well established. In circumstances where the alleged misconduct is asserted to have harmed a broad class of individuals, the class action regime in Australia will be seen as offering an avenue to pursue ESG-related claims.
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The class action framework in Australia continues to evolve. Australia is one of the most popular destinations for large class actions in the world. It has a mature litigation funding market and a favourable class actions statutory framework. Class action law and practice is now well developed, but some aspects require judicial or legislative clarification. Within the next 12 months, Australia’s highest court will answer several fundamental questions of class action law and practice. Growth areas for class actions include privacy and cybersecurity, consumer claims and ESG and climate change.
Litigation Funding
Litigation funding continues to support a high level of class action activity in Australia. Australia has one of the most advanced markets for litigation funding in the world. It continues to be a popular destination for domestic and overseas litigation funders. Developments in Australia have shaped the litigation funding market globally.
The recent introduction of US-style contingency fee arrangements in the Supreme Court of Victoria in 2020 has fundamentally changed the Australian litigation funding market and by extension the destination of class actions. In recent times, the Australian funding market has been largely divided into (i) “group costs orders” for class actions commenced in the Supreme Court of Victoria and (ii) “common fund orders” (CFOs) for class actions commenced in the Federal Court of Australia (as well as the New South Wales Supreme Court).
CFOs have differed from GCOs in three respects. First, GCOs are paid to the solicitors acting for the plaintiff, whereas CFOs are paid directly to a litigation funder. Second, GCOs are often made at an early stage of the proceeding. CFOs can only be awarded at the conclusion of proceedings. Third, in general, GCOs have tended to result in a greater net return to group members. What they have in common is that both are usually calculated or expressed as a specified percentage of the amount of any award or settlement.
The GCO legislative regime is unique to Victoria and has been a magnet for claims to be filed in that court. One potential limitation arises from legislation in Australia (“cross-vesting legislation”) generally requiring proceedings within Australia to be determined in the more appropriate forum. In the Arrium class action proceedings (Bogan v The Estate of Peter Smedley (Deceased) [2023] VSCA 256), the Victorian Court of Appeal declined to transfer the proceedings to the New South Wales Supreme Court even though New South Wales had stronger connecting factors than Victoria. The court held that the fact a GCO had been made was a relevant factor in exercising the discretion whether to transfer (or “cross-vest”) the proceeding to New South Wales, and the GCO would not “travel” (or remain in force) in the court of another Australian jurisdiction. The proceeding has been removed to the High Court for determination. The High Court will determine whether a GCO is in fact relevant to a transfer and whether a GCO travels to another court (which would otherwise not have had the power to make a GCO). The High Court’s decisions will likely have significant implications for the ability of a plaintiff (or a plaintiff’s solicitors) to choose to file a class action in Victoria to take advantage of the GCO regime.
Developments in GCOs
The Supreme Court of Victoria has now developed a relatively mature jurisprudence in relation to GCOs. The principles are also relatively well-settled and have been restated in a number of decisions (a recent summary appears in – eg, Norris v Insurance Australia Group Ltd [2024] VSC 76 at [13]-[18]). While the court made use of contradictors in early applications for GCOs, it is now not unusual for a GCO to be made on application from the plaintiff, with little or no submission from the defendant, but subject to interrogation from the court.
Matters on which the court has placed emphasis in determining whether to make a GCO have included:
GCOs have been made within a range of 14–40%, with a median rate of 24.5%. In one decision (Warner v Ansell Limited [2024] VSC 491) the court accepted that a 40% rate of return may be considered proportionate or reasonable on a prima facie basis for a resolution amount of up to AUD50 million, but that a “more conventional rate” of 25% is appropriate for any part of the resolution amount that is above AUD50 million as reflecting a more proportionate and reasonable rate of return.
The GCO regime does not mean that there is no longer a role for litigation funders in the Supreme Court of Victoria; it is not uncommon for a law firm to enter into an agreement with a third-party funder to pay part of the legal costs or share adverse costs risk, in exchange for a share of GCO proceeds (eg, 5 Boroughs NY Pty Ltd v State of Victoria (No 5) [2023] VSC 682 at [35]-[40]).
The Court recently handed down its first settlement approval of a proceeding in which a GCO had been made: Allen v G8 Education Ltd (No 4) [2024] VSC 487. The decision included the first consideration by the court of whether to amend a GCO. The court determined not to vary the GCO, having considered evidence of, among other things, the law firm’s charges on an hourly basis, its return on investment, and a calculation of its internal rate of return. The court indicated that such evidence would generally be of assistance in future applications, while noting that a settlement approval was not an occasion for a hearing de novo as to the appropriateness of a GCO. The law firm appeared as intervenor in the application and made submissions in support of the amount of the GCO in its favour.
Developments in CFOs
There have been important recent decisions by the Full Federal Court of Australia that seek to clarify and extend the operation of CFOs.
Between 2016 and 2019, the Federal Court regularly made CFOs at an early stage of the class action proceedings. In 2019, the High Court in BMW Australia Ltd v Brewster (2019) 269 CLR 574 (“Brewster”) ruled that the federal class action regime (and its New South Wales equivalent) did not empower courts to make commencement CFOs. This led to uncertainty as to whether CFOs could still be made at settlement of class actions. Whilst the Federal Court continued to make settlement CFOs from 2019 to 2023, a split in authority at first instance culminated in the decision at first instance in Davaria Pty Limited v 7-Eleven Stores Pty Ltd (No 13) [2023] FCA 84, holding that the Federal Court did not have power to make a CFO at settlement. As a result of that decision, a question of law was referred to the Full Court in a separate and unrelated proceeding to determine the issue of power to make a CFO at settlement. In Elliott-Carde v McDonald’s Australia Limited [2023] FCAFC 162, the Full Court of the Federal Court (Beach, Lee and Colvin JJ) confirmed that the Federal Court has the power to make settlement CFOs if the court is satisfied that it is just to do so. Nevertheless, some uncertainty has persisted in the absence of authoritative determination by the High Court of Australia in light of its decision in Brewster.
Then, in R&B Investments Pty Ltd (Trustee) v Blue Sky (Reserved Question) [2024] FCAFC 89, the Full Federal Court went further and held that the power to make CFOs extends to making a so-called “Solicitors’ CFO” providing for a percentage of the settlement or judgment sum to be distributed to solicitors acting for the class action (otherwise than as payment for costs and disbursements). The Full Court rejected arguments that Solicitors’ CFOs would give rise to an impermissible fiduciary/professional conflict of interest. The Full Court held that whether it is just to make a Solicitors’ CFO will require an individual evaluation of the evidence before the court and the terms of the proposed CFO in a particular case, including whether the solicitors have adhered to their professional and fiduciary obligations to group members.
Unlike in Elliott-Garde and Davaria above, a party to the proceedings (the defendants to the proceedings) was able to file special leave applications to the High Court of Australia. Special leave has been granted. The High Court will now determine the power to make a Solicitor CFO and is also likely to finally determine whether there is power to make a CFO at settlement in favour of funders. The applicants have indicated they also intend to seek to have Brewster overruled. If the High Court upholds the Full Federal Court’s decision that there is a power to make Solicitors’ CFOs it might reverse the trend of increased filings of class actions in the Supreme Court of Victoria.
Competing Class Actions
With higher volume of class action filings has come increased competition for carriage of representative claims. Adapting means of avoiding multiplicity of proceedings developed in chancery practice, courts have developed principles for resolving carriage disputes by weighing relevant discretionary factors. Four recent trends stand out.
First, competition appears to be driving improvements in headline funding terms available to group members. In Victoria, Professor Morabito has found that against the median rate of around 24.5% across all GCOs, the median GCO rate was 21.2% across four claims in which multiplicity contests were joined. In DA Lynch v Star Entertainment Group [2023] VSC 56, Nichols J awarded carriage to a class action which proposed a GCO rate of 14% (adjusted downwards from the plaintiff’s initial proposal of 22%), the lowest GCO rate approved by the courts to date.
The availability of GCOs is also placing downward pressure on funding commissions. According to Professor Morabito, in the post-GCO landscape, the funding commissions approved by courts pursuant to CFOs have decreased from approximately 23.9% to 21.1%. Greentree v Jaguar Land Rover Pty Ltd [2024] FCA 1209 illustrates this dynamic; Lee J invited one funder to proffer terms limiting its commission to the same ceiling fixed by a competing GCO proposal.
Second, courts have shown growing concern to regulate the process of competition over funding terms between rival claimants. In Victoria, recent decisions emphasise the importance of “one-bid” procedures, and the integrity of those procedures, in serving the overarching purpose: Edwards v Hyundai [2024] VSC 301. In the Greentree dispute, the Full Federal Court overturned Lee J’s grant of a subsequent opportunity to improve its bid to one funder as a denial of procedural fairness: Jennings v Jaguar Land Rover Australia Pty Ltd [2024] FCAFC 62.
Third, as the Supreme Court of Victoria experiences more filings of class actions, there have been increased incidences of competing class actions being filed in different courts. Since 2019, a joint protocol of the Federal Court and Victorian Supreme Court has provided for case management before judges from both courts concurrently to resolve multiplicity issues. In Edwards v Hyundai Motor Company Australia Pty Ltd [2023] FCA 1134 and Jowene Pty Limited v Downer EDI Limited [2023] FCA 924, Federal Court class actions were transferred to the Supreme Court of Victoria under that protocol.
Fourth, courts’ willingness to take pleadings at face value in carriage disputes is diminishing. In Star Entertainment Group, noting a trend of claimants advancing longer claim periods, broader group member definitions, or further causes of action, Nicholls J cautioned against “adopting a ‘broadest case is better’ approach”, noting that this could result “in the encouragement of the formulation of claims designed to win carriage”.
Imitation or replication of earlier filings by later entrants has also attracted closer scrutiny. Identity of pleadings has been held against later claimants in carriage contests, where that identity bespoke a lack of due diligence and independent judgement on the part of those acting for the later claimant.
Class Closure Orders
“Class closure orders” in the Australian context may generally be described as orders requiring group members in an open class to register in order to participate in any settlement of a proceeding, under threat of having their claims extinguished by the settlement for no compensation if they neither register nor opt out.
Whether there is power to make such orders has been the subject of much debate in recent years. In Victoria, there is a specific power to make such orders in its class action statute (Supreme Court Act 1986 (Vic), Section 33ZG). In other jurisdictions, there is no such express power. The Federal Court however, has frequently made such orders under Section 33ZF of the Federal Court of Australia Act 1976 (Cth).
In two decisions, Haselhurst v Toyota Motor Corporation Australia Ltd [2020] NSWCA 66; 101 NSWLR 890 and Wigmans v AMP Ltd [2020] NSWCA 104; 102 NSWLR 199, the NSW Court of Appeal held that it was beyond power to make a class closure order, and to issue a notice to group members advising them of a plaintiff’s intention to seek such an order. The court reasoned in each case that such orders were neither necessary nor appropriate to ensure that justice was done in the proceeding, and would create a conflict of interest between registered and unregistered group members, all of whom are represented by common lawyers.
However, in Parkin v Boral Ltd (Class Closure) [2022] FCAFC 47; 291 FCR 116, the Full Federal Court came to a different view to that adopted in Wigmans. The court considered the decision in Wigmans to be “plainly wrong”, as being inconsistent with the breadth of the notice power conferred upon the court, based upon an incorrect premise as to the right of group members not to take positive steps prior to the resolution of common questions of liability, and placing undue weight on conflicts of interest the court considered to be inevitable.
The NSW Court of Appeal, sitting as a bench of five, recently returned to the question in Pallas v Lendlease Corporation Ltd [2024] NSWCA 83. The court considered that its earlier decision in Wigmans was not “plainly wrong” and that the Federal Court in Parkin had not expressed sufficiently persuasive reasons to justify that conclusion.
An appeal in Pallas was heard by the High Court in November 2024 and can be expected to resolve the split which has emerged between the NSW Court of Appeal and the Federal Court on this issue.
On issues of discretion, in Alford v AMP Superannuation Ltd (No 2) [2024] FCA 423, the court declined to make a class closure order sought by a defendant over a plaintiff’s opposition, reasoning that in the circumstances of that case registration would not be necessary for most group members to be able to be paid their share of any settlement or judgment.
In Kilah v Medibank Private Ltd (No 2) [2024] VSC 519, the court considered it appropriate to make a class closure order which would expire shortly after an early mediation (rather than, as the defendant had sought, the day before trial), among other things on the basis that such an order was more conducive to settlement at mediation.
Emerging Areas for Class Actions
The range of areas for class actions continues to expand and evolve.
Shareholder class actions
Historically, shareholder class actions have constituted a significant proportion of class actions commenced in Australia. Typically, as with the vast majority of class actions, shareholder class actions are settled prior to any trial or judgment and often for substantial settlement sums. Shareholder class actions received a boost by the decision of the Federal Court (Beach J) in TPT Patrol Pty Ltd v Myer Holdings [2019] FCA 1747 (“Myer”) confirming the availability of market-based causation (like in the United States). However, there have been three recent judgments where shareholders have failed to secure an award of damages in high-profile class actions against large, listed corporates: Crowley v Worley Limited (No 2) [2023] FCA 1613; Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited (No 5) [2024] FCA 477; and McFarlane as Trustee for the S McFarlane Superannuation Fund v Insignia Financial Ltd [2023] FCA 1628. Those judgments have raised significant questions about how causation, loss and damage can be established and quantified by plaintiffs in shareholder class actions. Those judgments have also raised questions about the kind of expert evidence necessary to establish and quantify loss and damage, including event study expert evidence.
Appeals have been filed in the Worley and Commonwealth Bank decisions with the former to be heard in March 2025 and the latter to be heard in November 2024. The Worley appeal also invites the Full Court to consider the correctness of Myer on market-based causation. The outcome of these appeals, including any further appeals to the High Court, will likely have significant implications for the shape and attractiveness of shareholder class actions in Australia.
ESG and climate change class actions
Environmental, social and governance (“ESG”) and climate change issues continue to dominate corporate governance in Australia and globally. There is also an emerging global trend of using public international law principles or instruments, directly or indirectly, to attack large corporates in relation to climate change issues, especially where those corporates have extolled their adherence or commitment to those norms. The obligations contained in the Paris Agreement to achieve net zero is a notable example. It now appears widely accepted that Australian law requires any material exposure to climate change risks to be adequately disclosed and incorporated into various financial disclosures mandated by the Corporations Act. Companies that fail to adequately disclose those risks or make climate-related commitments without a reasonable basis will be vulnerable to shareholder class actions for misleading and deceptive conduct. Many disclosures relating to climate change and climate change risk constitute future matters. As such, those disclosures will be regarded as misleading unless made with a reasonable basis. Overseas experience also suggests there is real potential for class actions in tort for nuisance or negligence for a company’s contributions to climate change where those contributions have led to very adverse environmental outcomes for local communities. Such claims might also extend to parent companies located outside of Australia where those adverse environmental outcomes arose from the acts and omissions of foreign subsidiaries over which the foreign parent exerts substantial control and influence. To be sure, claims of this kind are likely to prove challenging under Australian law, but the potential for properly constructed class actions in this area still exists.
Privacy and cybersecurity
Significant data breach class actions continue to make their way through Australian courts, against a background of important legislative changes. Plaintiffs have adopted different strategies in their prosecution of claims against ASX-listed Medibank, in relation to a data breach that occurred in October 2022. A consolidated consumer class action is running in the Federal Court based on misleading or deceptive representations about the company’s cybersecurity controls. A consolidated shareholder claim against Medibank is on foot in the Supreme Court of Victoria, which focuses on the company’s alleged breaches of continuous disclosure obligations in relation to its IT controls. Another consumer class action has been filed in the Federal Court against the Optus group, relating to a data breach that occurred in September 2022. Around 10 million current and former Optus customers are potentially affected.
These claims commenced before the anticipated amendments to the Privacy Act currently making their way through Parliament. The Privacy and Other Legislation Amendment Bill 2024 provides, for the first time, an express statutory tort cause of action for serious privacy breaches. An important threshold issue for claims brought under the anticipated legislation is that claims will be limited to intentional or reckless breaches, and there is no cause of action for negligence. Claimants will therefore have to meet the higher standard of demonstrating reckless disregard in relation to any allegedly inadequate cybersecurity controls. More favourably for claimants, the Bill allows for substantial monetary claims for emotional distress. This in part addresses the question to date whether affected persons in data breach cases have a more than nominal damages claim where there is no obvious economic loss.
Employee class actions
Representative claims brought on behalf of employees for unpaid wages and entitlements continue to be filed and prosecuted with regularity. Two notable proceedings in this area recently settled for some of the largest sums achieved to date in class actions. The federal government of Australia has agreed to settle a claim by First Nations people in the Northern Territory for around AUD200 million. The applicants claimed for compensation for work undertaken between 1933 and 1971, where little to no payment was received for the work and the workers instead were given food and items in kind. The beneficiaries of the settlement will include the spouses and children of the affected workers. This is the latest instalment in a series of cases brought in relation to the “stolen wages” of Aboriginal and Torres Strait Islander peoples, with earlier settlements having been reached with the Western Australian and Queensland governments.
At a state level, the Supreme Court of NSW approved a proposal to pay AUD230 million to settle a claim brought by junior doctors. The proceedings against the state of NSW and NSW Health sought compensation for unpaid wages for overtime, meal break entitlements and superannuation. The settlement covers more than 15,000 junior medical officers who worked long hours at NSW hospitals at the start of their careers during their internships and residencies. Similar proceedings continue in Victoria whilst proceedings in the Australian Capital Territory have settled.
Consumer claims
Numerous consumer class actions have been brought against global vehicle manufacturers in the past several years. Ford and Toyota owners were successful at trial in their respective cases in the Federal Court, in relation to their vehicles’ defective transmission systems. An important issue as to whether post-purchase events could be used to reduce the quantum of damages went on appeal to the High Court. The High Court ruled that damages should be determined by reference to the reduction in value of the defective vehicles at the time of supply. The free repairs offered by the manufacturers would not be taken into account. On the other hand, Volkswagen owners lost their case at trial in the Supreme Court of NSW in a matter concerning defective airbags manufactured by Takata. The High Court has now denied the car owners’ application for special leave to appeal and those proceedings are at an end.
A shift in consumer claims is evidenced by recent claims launched against mass retailers specialising in electronics, home appliances and home entertainment goods. These matters involve a much larger class than the vehicle cases, with smaller claims on a per class member basis. They also involve a move away from causes of action based directly on defective goods, to claims relating to extended warranties sold to customers.
A class action has been commenced in the Supreme Court of Victoria against ASX-listed JB Hi-Fi, on behalf of consumers who purchased extended warranty protections between 2011 and 2023. The proceedings target the selling of these policies to consumers already covered by the Chapter 3 guarantees in the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act (Cth) 2010). The guarantees include the right to goods of acceptable quality that are fit for purpose. Although consumers have statutory remedies of refunds, repairs and replacement of defective goods within a reasonable time after purchase, warranties were sold for initial periods during which the prospects of a defect were minimal. The plaintiffs also have a claim for misleading and deceptive conduct, based on misrepresentations made by the company as to their consumer rights which affected their capacity to act as properly informed consumers.
Two competing class actions have been brought in the Supreme Court of Victoria against the ASX-listed Harvey Norman group, which includes Joyce Mayne and the Domayne furniture brand. The allegations similarly target the upselling of warranties to consumers where those protections are already available to them under their statutory consumer guarantees. One of the filed proceedings includes a claim that the warranties are financial products, in circumstances where Harvey Norman did not hold the requisite financial services licence to sell the products.
International class actions and overseas claimants
Australian courts have been sympathetic to class action claims brought by overseas claimants. For example, the High Court of Australia has recently confirmed that the Australian class action regime permits class actions to be brought on behalf of group members who are not resident in Australia. A large class action was successfully brought in the Australian courts relating to a Montara oil spill which caused damage to thousands of Indonesian seaweed farmers. All of the group members were victims outside of Australia but jurisdiction was sufficiently established by reason of the defendants being Australian corporations.
This trend is expected to continue. Whether Australian courts will entertain the kind of claims that have been brought on behalf of overseas claimants in English courts is an open question. Specifically, the English Court of Appeal has allowed more than 200,000 Brazilian claimants to proceed with their claims against the defendant UK company (BHP Group plc) arising from the catastrophic collapse of the Fundao Dam in South-East Brazil. It can be expected, however, that claimants and funders will attempt to bring claims of this kind in Australian courts, especially where those claims relate to climate change and mass tort claims for environmental damage inflicted upon overseas local communities where there is no effective local remedy or class action mechanism and the alleged wrongdoer is a large corporate with its centre of gravity and assets in Australia. In many respects, Australian law is conducive to international claims of this kind because its class action framework and funding market is mature and the test of forum non conveniens in Australia is somewhat more relaxed (“clearly inappropriate forum”). At the same time, it remains to be seen how Australian courts will react to essentially foreign claims of this kind being litigated through Australian courts.
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