Collective Redress & Class Actions 2023 Comparisons

Australia’s class action regime was enacted into legislation in 1992 in the Federal Court of Australia with the implementation of Part IVA of the Federal Court of Australia Act 1976 (Cth). Part IVA was introduced following the publication of a report titled “Grouped Proceedings in the Federal Court” by the Law Reform Commission in 1988. The central aim of the class action regime was to promote access to justice by providing a mechanism for individuals to obtain redress in a way that could be pursued more cheaply and efficiently than would be the case with individual actions.

Australia’s separate state supreme courts have gradually followed suit and enacted their own class action regimes, which are modelled on the Federal Court’s class action regime. The Victorian Supreme Court was the first state to implement a class actions regime in 2000, followed by the New South Wales Supreme Court in 2011, the Queensland Supreme Court in 2017 and Tasmania in 2019. Western Australia is the most recent state to introduce a class action regime, following the enactment of the Civil Procedure (Representative Proceedings) Act 2022 in September 2022.

In 2016, the Full Federal Court of Australia delivered its decision of Money Max International Pty Ltd v QBE Insurance Group (2016) 245 FCR 191, which made the first common fund order in Australia, allowing third-party litigation funders to obtain a funding commission from settlements or judgments without having entered into a funding agreement with each class member. Since the Money Max decision, the Australian class actions landscape has seen a greater proliferation of funded litigation, leading to a greater focus on the role and regulation of litigation funders by law reform bodies and governments, including in reports published by the Victorian Law Reform Commission (VLRC) and the Australian Law Reform Commission (ALRC) in 2018.

Above all, the law reform reports focused on increasing access to justice and ensuring that successful outcomes in class actions are not unduly eroded by legal and funding fees. Following the VLRC report, the Victorian Supreme Court introduced group costs orders (GCOs), which permit plaintiff law firms to calculate costs as a percentage of any award or settlement obtained in a class action. However, the federal government has yet to implement the recommendations made by the ALRC in 2018.

In 2020, the federal government abruptly introduced greater regulations on litigation funders, requiring funders to comply with the same regulatory requirements as managed investment funds. These regulations were short-lived, as they were repealed following the change in government in 2022.

The Australian representative proceeding regime is not based on any international jurisdiction despite there being some commonalities. Australia’s class action regime has been described in an academic context as “one of the most liberal class action rules in the entire world”.

The substantial difference between the USA, the most widely known representative proceedings jurisdiction, and Australia is the absence of a certification process in Australia. Instead, there is a considerably lower threshold requirement, being that the claims of group members arise from similar or related circumstances, and give rise to substantial common issues. Australia requires a minimum class size of only seven group members, whereas in the US, there must be so many group members that joinder of all group members is impracticable.

Regarding costs, Australia differs in that there is the potential for an adverse costs order to be made, meaning that a representative claimant will usually be required to pay the defendant’s costs if they are unsuccessful (although the amount payable is the amount assessed by the court and is typically a fraction of the costs charged). Furthermore, a defendant may be entitled to seek an order requiring the claimant to provide security for its costs, which in its simplest form will constitute a payment of cash into the court’s account. As for the claimants’ costs, unlike in the United States, Australian law firms are generally prohibited from entering into a retainer for a percentage share of the resolution sum, pursuant to the relevant statutes governing their professional obligations. Non-solicitor financiers are subject to no such restriction. As a result, it has been very common in Australia for class actions to be funded by a third-party funder, who pays the legal costs of the action upfront and bears the risk of adverse costs, but collects a percentage share of any ultimate resolution sum, including a premium which compensates the funder for the risks taken.

That being said, the Victorian State jurisdiction has recently allowed percentage contingency fee arrangements to be made by court order (see 4.9 Funding and Costs), which can make it more commercially viable for law firms to fund representative proceedings. This is the only jurisdiction to expressly allow this funding arrangement, which is common in the United States, where large plaintiff law firms often self-fund proceedings.

Regarding representative claimants, there is a general position in Australia that large institutional investors such as banks do not wish to be representative claimants due to potential reputation risk, and as such, representative claimants are commonly, in shareholder class actions, self-managed super funds or individual/retail investors. In these circumstances, access to third-party litigation is often required and as such is common in Australia.

This issue does not arise in Australia.

The key features of the Australian class action regime, as set out in Part IVA of the Federal Court of Australia Act (the “Federal Act”) and equivalent provisions of State legislation, are outlined below. Section references are to the Federal Act.

• A class action may be commenced by a representative applicant if certain threshold requirements are met (s 33C) (see 3.2 Definition of Collective Redress/Class Actions). The applicant has conduct of proceedings on behalf of the group members and has fiduciary obligations to them.
• Australia has an opt-out process in which all group members are bound by any settlement or judgment reached in the class action unless they opt out of the proceedings (s 33J).
• A class action may only be settled or discontinued with the approval of the court (s 33V). The court must assess whether any settlement is fair and reasonable in the interests of group members.
• The court has broad case management powers in respect of a class action (s 33ZF). The court has a protective and supervisory role in relation to the interests of group members.

Representative proceedings can be commenced in most areas in which the courts have jurisdiction. Most representative proceedings are bought in the federal jurisdiction. The areas in which claims can be commenced include:

• shareholder and investor actions;
• consumer actions (such as product liability and misleading and deceptive conduct);
• natural disaster actions (such as the various claims relating to bushfires or floods);
• cartel and competition actions;
• infrastructure or nuisance claims (such as the Sydney Light Rail litigation);
• personal injury and medical negligence;
• environmental management or contamination actions (such as the Murray-Darling water management litigation, or the PFAS contamination claims);
• other claims involving a duty of care to a large group;
• human rights actions;
• workplace or trade union actions;
• immigration law; and
• data and privacy breaches.

There has been an increasing trend over the last year in the filing of data and privacy breach claims as well as automotive or product liability claims.

Representative proceedings in Australian jurisdictions are a procedural mechanism that can be conveniently used for the resolution of multiple individual claims. For a claimant to commence a representative proceeding in any Australian jurisdiction, the following threshold must also be met:

• There must be at least seven people as group members.
• With the exception of Western Australia, the group members must each have a claim against the same defendant (although the group members may also have related claims that are against different defendants).
• The claims of all those group members must arise from the same, similar, or related circumstances.
• The claims of all group members must give rise to substantial common issues of law and fact.
• In Western Australia, it is possible to bring a representative proceeding that involves claims against multiple respondents regardless of whether the group members have claims against the same respondent.

Practical examples of the above include shareholders who were misled by representations of a company and incurred losses, patients who suffered harm from similar medical treatments using a specific product, or vehicle owners who purchased the same model vehicle with the same defect.

Representative proceedings may be commenced even where the proceedings will need to be followed by individual assessments of damages or individualised equitable relief due to any group members having entered into their own contracts/agreements with defendants or where there have been separate acts or omissions against individual class members. The issues common to the group members must be substantial but do not have to be the most substantial issues in dispute. For example, claims may involve the conduct of a corporate group but where the individual contracts were with separate franchisees of that group such that there are claims against the group entity and separate claims against the particular franchisees. In such circumstances, the court has express power to make directions for the determination of non-common issues, including allowing a group member who did not commence the proceedings to appear for the purpose of determining an issue that relates to them or to a subset of group members including them.

Representative proceedings can be commenced in the Federal Court or the State Supreme Courts of Victoria, New South Wales, Queensland, Tasmania, Western Australia, or South Australia as long as the thresholds in 3.2 Definition of Collective Redress/Class Actions are met.

The primary mechanism for commencing a representative proceeding in a particular court will involve filing a particular form of originating process and other formal documents.

The Australian Competition and Consumer Commission, Australia’s competition and cartel regulatory body, may also commence representative proceedings in the Federal Court on behalf of group members. The relief sought in these proceedings may be injunctive or declaratory relief (considered to be non-personal relief), or damages and compensation (considered to be personal relief).

Commencement

The federal and state jurisdictions have their own differing procedures for commencing representative proceedings which share many similarities. All proceedings are to be commenced by one or more representative claimants on behalf of group members, and must meet the threshold outlined in 3.2 Definition of Collective Redress/Class Actions.

Commencing a representative proceeding in a particular court will involve filing a particular form of originating process (such as a writ, claim form, statement of claim, or originating application) and other formal documents. The originating process, and some of the other documents, must then be served on the defendants, with the timeframe for service varying between courts. Pleadings may be prepared and served after the originating process in some jurisdictions.

International Defendants – Jurisdiction

Jurisdictional issues often arise in Australian representative proceedings involving financial products as many defendants will be registered in the United States, Europe, or other jurisdictions. There are complex rules that apply regarding the overseas service of the proceedings. This may involve an application to the court for leave to serve the proceedings.

A defendant located overseas may challenge the jurisdiction of the court. Such disputes can be very legally complicated. Grounds for such a challenge include defective service of the originating process, the Australian court being an inappropriate forum, or the prospects of success being insufficient to warrant putting the overseas defendant to the trouble of defending the claim.

Representative Action Procedure

The pleadings (which, depending on the court, may be contained in or served with the originating process) must describe or identify the class members, specify the nature of the claims and the relief sought, and specify the common questions of law or fact. The pleadings must be prepared so that the representative claimant’s individual claim can be used to determine the common questions/issues, any questions/issues specific to the representative claimant, and also any other sample groups if identified.

Following filing, the proceedings are typically allocated to a judge. See 4.6 Case Management Powers of Courts for further information regarding case management in federal jurisdictions.

In Victoria, together with the writ, the representative claimant’s lawyers must file a “group proceedings summary statement” which must explain the proceedings to group members using clear, concise, and simple language. This statement is to be made available to all group members as soon as practicable and is often published on the lawyer’s website and uploaded to the Victorian Supreme Court website.

There are also obligations on the claimants to disclose funding and cost arrangements and agreements in some jurisdictions (see 4.9 Funding and Costs).

The first case management hearing is usually held within six weeks of the defendant’s lawyers entering their appearances. By the second case management hearing, the parties should have discussed and identified their positions regarding:

• any issues concerning the definition or identification of group members;
• any issues concerning satisfaction of the threshold requirements for the commencement of a group proceeding;
• a timetable for the filing of defences and further pleadings;
• any joinder of additional parties;
• the utility of discovery orders and what documents may be relevant;
• the use of sample group members and mode for conducting the trial;
• a timetable for the determination of interlocutory matters;
• a timetable for determining the form and content of orders for the notification to group members of the proceeding and of their right to opt out;
• whether the defendant(s) propose(s) to seek an order for security for costs; and
• a protocol for communicating with unrepresented group members.

Competing Proceedings

A prevalent issue in Australian representative proceedings is the filing of multiple representative proceedings by different claimants and law firms (often backed by different funders or funding mechanisms) against the same defendant. This multiplicity of proceedings needs to be resolved as such “competing” proceedings are technically an abuse of process. Typically, resolution is achieved either by these parties agreeing to work together and consolidating the proceedings or by way of a contest between them for “carriage” of the class action, also referred to as a “multiplicity contest”. The latter requires the court to receive evidence, conduct an additional hearing, and then make a multi-factorial assessment of the various pros and cons of the proposed resolutions of the issue. The tests that the court applies to determine this has been the subject of High Court authority identifying numerous relevant factors, but in practice the outcome is highly dependent on the circumstances of the particular case. Inevitably this causes some delay.

General Procedure

Following commencement, there are procedures regarding opt-out notices (see 4.4 Class Members, Size and Mechanism (Opt In/Out)) and settlement (see 4.12 Settlement and ADR Mechanisms). The opt-out process is always conducted whether the proceedings settle, or a trial is held.

As outlined in 1.2 Basis for the Legislative Regime, Including Analogous International Laws, Australia does not have a certification process for class actions and as such, once filed, they will continue to proceed as representative proceedings unless the court makes orders to de-class the proceedings.

Representative proceedings in all Australian jurisdictions may be commenced by one or more representative claimants so long as they represent a combined group of seven or more. A representative claimant does not need to have suffered the highest or greatest damages from the group. They may have only suffered a small quantum of monetary damages.

The Australian Competition and Consumer Commission, Australia’s competition and cartel regulatory body, may also commence representative proceedings in the Federal Court on behalf of group members.

Each proceeding that is commenced must have a definition section that specifies who is a member of a class action. The definition may exclude people from the class action. For example, where proceedings are brought on behalf of shareholders against a company, directors of the company who also held shares will typically be excluded.

Australian representative proceedings utilise an “opt-out” mechanism, in which proceedings are commenced without the consent of all group members, but those group members will be given the opportunity during the proceedings to “opt out” and not be treated as a group member. This enables such group members to not be bound by any settlement or judgment in the representative proceeding and to commence their own individual proceedings. Any group member who does not opt out will be bound by any judgment of the court, including any settlement. It should also be noted that in Australia, for a representative proceeding to be settled, the terms of the settlement must be approved by the court.

As the “opt-out” system can enable group members to obtain a “free ride” on the efforts of the representative claimant, it has been very common in Australian class action history for actions to be commenced which at the outset only included group members who had signed a funding agreement with the litigation funder known as a “closed class”, creating a de facto “opt-in” class action. However, alternative court orders that require “free riders” to contribute to costs and funding commissions have decreased the desirability of “closed class” actions in the last 15 years. These are addressed further in 4.9 Funding and Costs.

Given the significant implications of the opt-out mechanism to a group member’s legal rights, the courts exercise their case management powers throughout this process, ensuring that the opt-out process is sufficiently supervised. The courts will usually set a specific date by which group members are required to opt out, particularly in advance of any mediation. This process is facilitated by a written notice, approved by the court, being distributed to known group members, as well as by public advertisement (in newspapers and/or online).

Courts are increasingly ordering members of the class to register their intent to be part of the proceedings. Should a group member fail to register, they may be prohibited from progressing their claim further. Registration is often done concurrently with the opt-out process, and details are usually included in the same written notice. This usually involves group members being required to register with the lawyers running the representative proceedings.

As outlined in 3.2 Definition of Collective Redress/Class Actions, there is a minimum class of seven, however, there is no maximum limit to the class size.

Additional parties are often joined to existing representative proceedings where it is necessary or beneficial to determine matters that are in dispute or may be in dispute in the future. Common examples of this are where proceedings are commenced against a company, its auditors, and its directors for making certain representations that resulted in group members suffering loss or damages. In these matters, the insurers of these defendants may be joined to the proceeding to enable a determination to be made as to whether, if the defendants are found liable, their insurance policies will pay out any damages to group members. It is also possible for other parties to make an application to the court themselves to be joined to the proceedings, although there must be sufficiently commonality to the proceedings.

Joinder is also relevant to competing class actions, a topical issue in Australia with several high-profile proceedings determined in the last 12 months and more presently before the courts. In relation to joinder of these claims, the court is able to exercise its broad powers to make any order it sees fit to manage the proceedings. Competing claims may be merged together, resulting in representative claimants or defendants from a competing claim being added to another.

Finally, representative proceedings that involve separate claims may be case managed together to ensure these claims are efficiently managed together in circumstances where there is not enough commonality to merge the claims. Examples of this case management procedure include the Takata Airbags litigation, in which claims against individual vehicle manufacturers were commenced involving similar vehicle defects.

The courts in both the federal and state jurisdictions have extensive case management powers to assist them in resolving the common issues and claims. The exercise of these powers commences shortly after a claim is filed.

In the federal jurisdiction, the claim may be allocated to an appropriate judge who will then manage the claims as they progress. This often includes all interlocutory issues up to and including the trial of the common issues. Before the first case management hearing, the federal courts require the applicants to provide them with a copy of any costs agreement and a copy of any litigation funding agreement.

It is common for the first case management hearing to be an “exchange” between the barristers or counsel of all parties, with a view to addressing the issues and facts that are in dispute, and to set a timetable to progress the proceedings.

Similar procedures exist in the state jurisdictions, however, in the Victorian State jurisdiction, the representative claimants must also file a document known as a “group proceeding summary statement” for publication, which must include the below information. They are also required to file a “litigation information summary statement” if the matter is funded which identifies the funder, how charges are calculated, the basis of these, and how group members can obtain further information:

• the law firm acting for the plaintiff;
• the role and responsibilities of the plaintiff in the proceeding;
• the identity of any litigation funder, how group members may obtain further information about the litigation funder and the terms of any funding being offered;
• whether any other group proceedings have been, or are likely to be, filed that relate to the same subject matter as the present group proceeding;
• how legal fees and disbursements will be charged, including the impact of any funding arrangement; and
• who group members may contact for further information (and should advise that group members will not be charged for such enquiries).

Test Cases

In Australia, the initial trial of the representative claimant’s claims is used as the trial for determining the common questions for all group members. A “preliminary trial” or “special trial” may be heard by the courts to determine other unique grounds that would narrow the issues in dispute at the main initial trial. Such preliminary trials are rare but are used, for example, to determine jurisdiction or limitations issues.

The use of test cases in Australia has a long history in workplace and industrial disputes brought by unions, who commence these cases against employers to set precedents that can be applied in later workplace disputes. A recent example involved litigation against a national bank by a union representing only four managers regarding excessive additional hours. Lee J of the Federal Court recently questioned whether such cases would be more efficiently brought as representative proceedings, which may provide greater transparency to the other union members, particularly with respect to any settlement on behalf of those members.

The length and timetable of representative proceedings in Australia are largely dependent on the particular claim and whether they are filed in the Federal Court or a state or territory court.

Representative proceedings in the Federal Court tend to progress faster than proceedings commenced in state and territory courts due to the extensive case-management system. Plaintiffs and defendants benefit from their proceedings being allocated to a specific judge who typically manages and hears all interlocutory applications as well as the final trial. Proceedings in state and territory courts often do not receive the same level of case management due to their increased caseloads.

The Victorian Supreme Court also uses judicial registrars in addition to judges to assist with case management. They assist judges with their day-to-day caseloads and specialise in pre-trial steps, including direction hearings, interlocutory disputes on topics such as security for costs, the completion of discovery, subpoena production, and ensuring timetable deadlines are met. It is notable that parties can apply for a judge to conduct a de novo review of a judicial registrar’s determination, which unlike a conventional appeal requires the issue to be completely re-heard, which increases costs and may result in greater delay.

The increasing trend of competing claims being filed in the weeks and months following an initial claim has the tendency to result in delays to the standard case management timetable of the courts. This is due to additional hearings and conferral processes that must occur to allow the court to determine which proceeding should progress. In May of 2023, Beach J of the Federal Court observed that “the Court is vexed if not plagued by competing class actions...” when faced with three inter-related representative proceedings. Two further representative proceedings were subsequently filed against Medibank, the same defendant, after these comments were made.

The resulting hearings and additional work may be extensive and costly, often resulting in a delay to proceedings. Despite this, the process has the benefit of the court having an increased level of oversight at the beginning of a claim and the “best claim” is allowed to continue. Commonly, defendants are involved in these disputes, being provided an opportunity to provide submissions and to ensure that all relevant claims are articulated and advanced together from the beginning.

Both the Federal and state jurisdictions have powers to vary the length or timetable of representative proceedings, and also to dispose of proceedings. Timetables are usually amended in circumstances where additional work or steps are required, a party’s health necessitates an extension, or where a separate proceeding or judgment would assist in the resolution of that proceeding.

Where a defendant to a class action puts forward an argument that can be said to raise no reasonable defence, is frivolous, vexatious, evasive, ambiguous, likely to cause prejudice, embarrassment or delay, or is otherwise an abuse of process, a plaintiff may apply to have that argument struck out at an early stage so that they are not put to further cost and time addressing it. This power cuts both ways and defendants can employ it as well. At times this can speed up the timetable, although in other cases it can result in some procedural delay if other steps are put on hold while the point is being resolved. However, if the strike out application renders the claim or the defence untenable, then it is very likely to result in an early discontinuance or settlement of the proceedings.

The Federal, Victorian and New South Wales jurisdictions also allow for the court to determine specific questions separately from the main trial, which is particularly beneficial if it would dispose of the proceedings in the same way as a strike out. Typically, these will be legal questions where all of the facts capable of being relevant to the question are not in dispute. For example, suitable questions could include determining the availability of a statutory limitation on liability for damages, as in the Murray Darling water management litigation.

Where competing representative proceedings are commenced, the courts frequently dispose of or stay one proceeding, ordering the other proceeding to continue (possibly in a consolidated form).

Costs

Similar to many Commonwealth and other jurisdictions, representative proceedings in Australia follow the general “loser pays” rule: following a trial or hearing, an order will be made requiring the unsuccessful party to pay the other party’s costs. These costs are assessed by the court against certain standards of reasonableness and/or using schedules of standard costs, such that they are typically reduced from the full amount charged, but do include not only lawyers’ fees but also disbursements paid to barristers, experts, and IT providers, which in representative proceedings are substantial. Notably, this rule does not apply to group members, who are protected from having cost orders made against them as they generally do not provide any instructions or have a say in how costs are incurred.

A defendant may be entitled to seek an order requiring the claimant to provide security for its costs, which in its simplest form will constitute a payment of cash into the court’s account.

Where a proceeding is successful in obtaining a financial return, it is typical for the legal costs to be shared among all group members by way of a “costs equalisation order” at the conclusion of the proceedings, whereby each group member pays a share of the legal costs pro-rated with respect to the size of that group member’s return.

Third-Party Funding

In Australia, large institutional investors such as banks generally do not wish to be representative claimants due to complex commercial interests and potential reputation risk. As such, representative claimants are commonly individuals or small businesses. In shareholder class actions these may be self-managed super funds or individual/retail investors.

In these circumstances and due to the risk of adverse costs orders, it is commonplace for those commencing representative proceedings in Australia to obtain litigation funding from a third-party entity. Third-party litigation funding enhances access to justice, which is particularly important in representative proceedings where there is often a high cost in commencing and running proceedings to trial.

Where litigation is funded, it is common practice for a funder to only enter a “litigation funding agreement” with only a small number of group members, but not the whole class. In these circumstances, if the class is “open” then the “opt-out” system can enable unfunded group members to obtain a “free ride” on the costs incurred and risks taken by the funder. Alternative court orders that require “free riders” to contribute have been made within the scope of the court’s procedural powers (albeit not without legal challenges), to ensure that all group members equally share the cost of the litigation funding and that funded group members are not penalised. These are known as “funding equalisation” and “common fund” orders.

Funding equalisation orders

Funding equalisation orders are made at the conclusion of proceedings. These orders take the total amount that funded group members are contractually obliged to pay to the funder out of their share of the judgment or settlement sum, and redistribute that figure equally across all group members, pro-rated with respect to the size of each individual group member’s return.

Common fund orders

A common fund order (CFO) describes a collection of orders that require each group member, irrespective of their contractual funding status, to pay to the funder a fixed percentage rate from their return out of a settlement or judgment. CFOs were originally made early in proceedings pursuant to the court’s general powers under s33ZF of the Federal Act, which gave funders certainty so they did not need to spend resources marshalling group members and signing them up to funding agreements in order to make the action financially viable, and would not need to consider “closing” the class by excluding unfunded group members from the proceedings (which can motivate group members to sign funding agreements but in practice may decrease the total number of participating group members). However, an order confirming the actual distribution of the payment was generally made under the court’s power to distribute settlement funds pursuant to s33V of the Federal Act.

In 2019, Australia’s apex court, the High Court in the case of BMW Australia Ltd v Brewster determined that the making of CFOs at the early stages of proceedings were not within the court’s power under s33ZF. Practitioners proceeded on the understanding that a CFO could still be sought at the hearing of the court’s approval of settlement of proceedings (“settlement CFOs”). In February 2023, relying on comments in the Brewster case, O’Callaghan J of the Federal Court held that settlement CFOs were not available in Davaria Pty Ltd v 7-Eleven stores Pty Ltd (No 13), but this was overruled and settlement CFOs were confirmed available by the Full Federal Court in Elliott-Carde v McDonald’s Australia Limited in October 2023. At the time of writing, it remains to be seen whether this judgment will be appealed to the High Court but the present authority is that settlement CFOs are available.

In light of these developments, whether the equivalent or similar power exists following a trial and order for the distribution of damages (as opposed to an agreed settlement) also remains to be seen.

In the McDonald’s judgment, and in the Federal Court cases R&B Investments Pty Ltd (Trustee) v Blue Sky and Greentree v Jaguar Land Rover Australia, Lee J has endorsed the availability of a “solicitor CFO”, being equivalent to a CFO but involving a payment to a solicitor instead of payments being solely to a funder, on the basis that a court order does not trigger any breach of the prohibition on Australian solicitors entering into costs agreements which provide for payment of a contingency fee calculated by reference to the resolution sum (for example, s 183(1) of the Legal Profession Law Application Act 2014 (Vic) or s183(1) of the Legal Profession Uniform Law 2014 (NSW)). The availability of such orders is also likely to be considered in further judgments and may be appealed.

Group cost orders

Group cost orders (GCO) were introduced in 2020 in the state of Victoria. A GCO allows a law firm to be paid its costs at the resolution of the claim by receiving a percentage of the final judgment or settlement amount. The GCO will also oblige the law firm to pay any adverse costs orders instead of the representative claimant, and provide any security that the court orders the claimant to provide. This effectively places the solicitors in the position of the third-party funder while also enabling them to be compensated for risk in the same way. The GCO regime was created to further increase access to justice in circumstances where other funding models did not previously make the proceedings financially viable.

No win, no fee

There are other ways in which plaintiffs can practically run class actions in Australia without paying for the legal costs. A common approach is for solicitors to act on a “no win, no fee” basis (NWNF), where the solicitor’s costs are only paid and recovered at the conclusion of the proceedings or at settlement. The NWNF funding model is facing increased scrutiny, as the solvency and ability of a law firm to resource proceedings efficiently, meet any adverse costs order, and give advice that is unaffected by the commercial risk to the firm are increasingly topics of debate.

Disclosure of Funding and Costs

Relatively unique to the collective redress space, in the federal and Victorian jurisdictions, solicitors for representative claimants must provide the court with copies of its costs agreements and any litigation funding agreements at the commencement of proceedings. Further, the solicitors must provide the litigation funding agreement (and in Victoria, also the costs agreement) to the defendants, albeit sensitive privileged information may be redacted. Updated copies of each of these must be supplied in various circumstances. Similar provisions exist in the Victorian jurisdiction, where even further public disclosure is required.

It is widely recognised that a significant challenge in preparing for and commencing a representative proceeding is the gathering of sufficient evidence to determine whether a claim should be filed. Australian courts have been attempting to lower the costs and time associated with the discovery process, and parties must now make an application for leave to obtain discovery.

Generally, parties are now only entitled to discovery where it has been demonstrated that the documents/information will assist in and are necessary to determine the issues that are in dispute in the claim. For this reason, discovery is usually only ordered after the exchange of claims, defences, and, at times, affidavits or evidence outlines from lay witnesses. The court also exercises its case-management powers during the discovery process, ensuring that the parties provide reasonable discovery, including by the creation of categories of discovery.

Where categories are not used, the “standard” discovery order will require the parties to provide copies of all relevant documents in their possession, custody or control which they intend to rely on at trial, which adversely impact their case or support their own case, and any other documents they are ordered to discover by the courts. Parties are required to produce a list of all documents discovered, and are often required to explain the steps taken by the parties to identify any relevant documents.

It is common for issues regarding privilege to also arise during the discovery process. The most common of these is legal professional privilege (also known in Australia as client legal privilege). The various federal and state Evidence Acts govern privilege issues when evidence is adduced at trial, while common law governs privilege concerns that arise before trial. Both the Evidence Acts and common law have their own tests to determine privilege. The Evidence Acts create privilege when documents have been prepared for or created for the dominant purpose of a solicitor providing legal advice, or professional legal services. Common law requires communications to be confidential, have been passed between the client and their lawyer, and have been made for the dominant purpose of providing or obtaining legal advice for the purpose of litigation.

Two additional areas of privilege that arise commonly in representative proceedings are that of “without prejudice” communications, and commercially sensitive documents. Without prejudice communications are those that were created with the aim of attempting to resolve or settle a dispute (including the current proceeding). Commercially sensitive documents, unlike legally privileged documents, must typically still be produced for inspection in an unredacted form, although a party can apply for restrictions on who can view these (eg, restricted to lawyers only), or may be ordered by the court to be suppressed or not published if mentioned during the trial.

In Australia, the court has capacity to provide various forms of relief in representative proceedings. Remedies available include awarding momentary damages, granting equitable relief (such as performance of contractual acts, or an injunction), declaring liability of a defendant for an act, and ultimately determining an issue of factual or legal dispute.

When damages are awarded, they can be awarded on an aggregate basis (a set percentage or amount across the whole or a specific portion of the class) or on an individual group member basis. The courts will often use independent experts or referees to assist in the determining of damages, including the creation of smaller specific classes of group members that may be eligible for only certain damages.

Unlike the United States where jury trials for representative proceedings are common and large exemplary or punitive damages are often awarded, in Australia, representative proceedings are heard before judges only, and these forms of damages are not generally awarded.

The most common alternative dispute resolution procedure utilised in representative proceedings is mediation. Mediation may occur at any stage of proceedings, although it is common for mediation to be held after the exchange of evidence or expert evidence, or in the weeks leading up to the commencement of trial. The court may order a mediation to occur at a particular time during the proceedings.

In Australia, the court must approve any discontinuance or settlement of representative proceedings. As representative proceedings involve the representation of group members who do not control the litigation, the court will assess whether it is fair and reasonable for group members’ claims to be discontinued or compromised and settled on the terms proposed. A separate hearing or hearings of the settlement takes place and will often involve the issuing of a settlement notice (similar to the opt-out notice) informing the group members of the settlement and allowing them to make any objections. The court may also appoint a “contradictor”, which is typically a law firm and counsel who may critique the settlement or some aspect of it, acting solely in the interests of the group members.

The court may, if not convinced that the settlement is not in the interests of group members, reject the settlement or request further information from the parties.

Arbitration and other forms of alternative dispute resolution are rare in representative proceedings.

In Australia, judgments in representative proceedings are binding on all or a subset of group members, other than those who have opted out; this is why the opt-out process discussed in 4.4 Class Members, Size and Mechanism (Opt In/Out) is so important. Judgments in representative proceedings can determine the common issues, declare liability, and grant relief, including equitable relief or awards of damages. Judgments may determine each individual group member’s claim, but if any individual issues need to be resolved in order to do so, then the court will if practicable outline a claims resolution process by which group members’ claims can be determined against a test or formula outlined in the judgment.

Judgments in representative class actions tend to take longer to be written and delivered due to the complexity of the proceedings, particularly as they must address each common issue between the group members. Judgments must also be clear as to which sections, reasons or orders apply to which group members and who will be impacted. Further, in the primary judgment, the court will not usually determine any non-common issues, and as such, it will be necessary for the issues unique to other group members to be determined subsequently. The courts will exercise their case management powers to facilitate the determination of remaining non-common issues.

As outlined in 4.11 Remedies, there are multiple remedies that may be awarded as part of a judgment. Most commonly, the court will make an award for damages. The amounts or how the amounts should be calculated for all group members, individual group members or subsets of group members will be outlined in the judgment as noted above, as well as some matters in which aggregate damages amounts may be ordered without specifying individual circumstances. For example, the court could simply order a damages award of 15% of the purchase price of a motor vehicle.

Although judgments are technically enforced in the same way as any other judgment in Australia, there is not generally a need to utilise enforcement methods in representative proceedings. Where the solvency of the defendant or the responsiveness of an insurance policy is in question, third parties may be joined to the proceedings as outlined in 4.5 Joinder and the liability of those parties can be determined by the court.

Representative proceedings in Australia are constantly evolving, raising new and novel procedural or legal issues over recent years.

The regulation of third-party litigation funding in Australia continues to be the subject of policy development and legislative reform. Following the election of a new federal government in 2022, there has been a noticeable shift away from the short-lived implementation of stringent regulations observed under the previous government. Among other things, these regulations required litigation funders to hold an Australian Financial Services License (AFSL) and be regulated under the Managed Investment Scheme (MIS) regime in order to fund collective redress and class actions in Australia. The explanatory statement for the legislation overturning these regulations specifically stated that “the MIS and ASFL regimes were not designed or intended to regulate the litigation funding industry”.

Legislative reform during 2023 has been focused on the scope of areas where representative proceedings can be commenced, particularly in the area of privacy as a result of the significant increase of cyberattacks resulting in data breaches. As outlined in the 2023 Trends and Developments article, representative proceedings in the privacy space are increasing, due partly to the rise in cyberattacks on and data breaches by Australian businesses.

Privacy and data breach incidents impacted Optus and Medibank, two of the largest companies in the Australian telecommunication and Australian healthcare markets respectively. The 2023 Trends and Developments article addresses the Medibank data breach and its impact on the representative proceedings practice space in Australia.

2023 has seen significant reform in the area of privacy regulation in regard to increased maximum penalties that may be imposed on offenders for serious or repeated infringements on the privacy of an individual. However, reform is still anticipated in respect of the rights of individuals to bring claims seeking remedies such as compensation for a breach of privacy provisions.

The Australian Attorney-General released the Privacy Act Review Report at the beginning of 2023. The report outlined 116 recommendations. Two proposals are particularly noteworthy:

• Proposal 26 outlined the recommendation for the provision of a direct right of action in order for individuals (and classes of individuals) to apply to the courts for relief in relation to an interference with privacy.
• Proposal 27 outlined the recommendation of the introduction of a statutory tort for serious invasions of privacy. This follows a previous recommendation by the Australian Law Reform Commission in 2014 and by the Australian Competition and Consumer Commission in 2019.

These proposals are particularly prudent following the Office of the Australian Information Commissioner’s 2020 “The Australian Community Attitudes to Privacy Survey” in which 78% of respondents believed they should have the right to seek compensation in the courts for a breach of privacy. Please see the 2023 Trends and Developments article for commentary regarding the recent litigation against Medibank following an alleged cyberattack in late October 2022.

Despite general support for these recommendations, subject to changes in the proposed models, potential defendants to these claims such as those in the media, credit reporting, the healthcare industry and more broadly by the Business Council of Australia have, as anticipated, opposed these proposals.

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

Presently, ESG claims in Australia have predominantly been the domain of regulatory action or litigation commenced by non-governmental organisations, but a small number of class actions have been launched and it is anticipated that ESG issues will increasingly be the subject of class actions.

For example, in July 2020, a class action was commenced on behalf of sovereign bond investors which sought declaratory relief against the Australian government for failing to disclose climate change risks in bond issue documents. In October 2021, two Torres Strait islanders launched a class action against the Australian government, alleging that the Commonwealth is in continuing breach of a duty of care to take reasonable steps to prevent harm to Torres Strait Islanders from climate change, including but not limited to its failure to establish scientific emissions targets.

In May 2023, the Australian Securities and Investments Commission (ASIC) announced a focus on greenwashing. In the year to date, ASIC has commenced three greenwashing proceedings, including against Active Super, alleging that it made misrepresentations that it was an ethical and responsible superannuation fund that eliminated investments that posed a risk to the environment.

This scrutiny comes as ASX-listed companies have been publicising their pledges to achieve net-zero emissions and marketing investment products as ethically conscious and environmentally friendly. Under s 769C of the Corporations Act 2001 (Cth), such statements may be representations about future matters and taken to be misleading if the statements are not based on reasonable grounds, for example, if net-zero commitments are made without appropriate strategies in place to achieve them.