Twenty-five years after the introduction of Australia's federal class action regime, class action law remains a significant element of the country's litigation landscape. Enhancements to Australia's class action jurisprudence in 2017 included developments in the class closure process, the coordination of competing class actions, and a newly implemented common fund approach to setting litigation funder's fees.

This Jones Day White Paper reviews these and other developments and lists the class actions matters that were commenced and resolved in 2017.

2017 marked the 25th anniversary of the federal class action regime in Australia which is embodied in Part IVA of the Federal Court of Australia Act 1976 (Cth). 2017 also saw the enactment of a class action regime in the State of Queensland, making it the third state after Victoria and New South Wales to adopt class actions. The class action is an important part of the Australian litigation landscape and consequently a key risk for entities operating in Australia. A clear understanding of class action law and practice is central to understanding the contours of that risk.

Australian class action jurisprudence was further refined in 2017 with developments in:

  • the class closure process whereby the group members are required to register to be able to participate in a class action settlement;
  • the management of competing class actions, which has become a common occurrence, especially for shareholder claims;
  • the newly adopted common fund approach to setting litigation funder's fees;
  • discontinuance of class actions; and
  • abuse of process.

Each is discussed below. Class actions law may also be set for reform with the Victorian Law Reform Commission due to report on 31 March 2018 on its inquiry concerning access to justice by litigants who seek to enforce their rights using the services of litigation funders and/or through group proceedings (class actions). At the end of 2017, the Australian Law Reform Commission was also tasked with investigating the regulation of legal costs and litigation funding in class actions, conflicts of interest and class action settlement distributions.

This White Paper also sets out the class actions that were commenced and settled in 2017.


Class Closure Process

The Australian class action procedure, like that of many other jurisdictions such as the United States and Canada, adopts an opt out model. The Australian class action legislation provides that a class action can be commenced without the express consent of group members and that all of the claimants who fall within the group definition are part of the class action. However, group members must be given an opportunity to exclude themselves, or opt out, of the class action. Group members who remain within the defined group are bound by the outcome of the proceedings.

To achieve finality in an open class action, where a monetary award or settlement is assessed or distributed, it is necessary to identify the particular class members to whom the monetary award or settlement is to be given. Australian courts, at the request of the parties, have made "class closure" orders which require group members to come forward and register their interest. The orders have frequently had the effect that failure to register means that the group member cannot participate in any recovery, whether by settlement or judgment, and the group member's claim is extinguished or barred. The approach has been criticised as undermining the access to justice goal of an opt out class action but has persisted as a practical necessity to achieve finality.

In Jones v Treasury Wine Estates Limited (No 2) [2017] FCA 296, the Federal Court altered the above orders. Registration was required to facilitate a mediation, and group members could participate in any settlement only if they had registered. If a settlement was achieved and approved by the Court, then unregistered group members obtained no recovery and lost their right to claim. However, unlike past orders, if no settlement was reached, then unregistered group members could still participate in any judgment.

The judgment was appealed to the Full Court of the Federal Court of Australia. While the Full Court did not need to expressly address the novel class closure order, it chose to provide guidance as it considered class closure to be an important part of class action procedure: Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98.

The primary judge expressed doubt that the Court had power to make an order, before the initial trial of a class action, to extinguish a group member's right to share in the fruits of a subsequent judgment unless the group member took steps to register in the proceeding. However, the judge did not rule on that question and instead addressed the issue as an exercise of discretion, ruling that it was not necessary or appropriate to make orders extinguishing the unregistered group members' claims at that time.

The Full Court considered the power to make class closure orders. It accepted that requiring group members to take active steps to "register" in order to share in a settlement of a class action undercut to some extent the opt out rationale underpinning the class action regime. However, the Full Court found that there was power to make a class closure order relying on s 33ZF of the Federal Court of Australia Act 1976 (Cth) which provides: "the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding". If a class closure order facilitates the desirable end of settlement, then it may be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding and therefore appropriate under s 33ZF. Settlement is facilitated because it allows a better understanding of the total quantum at stake in the proceedings. Moreover, the Full Court stated that an important aspect of the utility of the class action was its ability to achieve finality not only for group members but also for the respondent.

The Full Court endorsed the primary judge's remarks in relation to discretion and used them to express a number of cautions. The Full Court warned of the need to be vigilant before making a class closure order that, in the event settlement is not achieved, operates to lock class members out of their entitlement to make a claim and share in a judgment (at [76])—"the facilitation of settlement is a good reason for a class closure order but, if settlement is not achieved, an order to shut out class members who do not respond to an arbitrary deadline is not". Further caution needed to be exercised in relation to the stage at which a class closure order is made. The earlier the order, the greater the opt out rationale was likely to be harmed. The Full Court expressly stated at [77] that "the Court should usually not exercise the discretion to make a class closure order based merely on a respondent's assertion that it is unwilling to discuss settlement unless such an order is made". This was based on a view that it is the nature of opt out class actions that the respondent will be faced with uncertainty regarding the quantum of class members' claims because the number of claimants may be unknown.

After providing the above guidance, the Full Court recognised that (at [79]):

Whether it is appropriate to order class closure is a question of balance and judicial intuition. The Court must take into account the interests of the class as a whole in requiring class members to take steps to facilitate settlement, and consider the surrounding circumstances including the point the case has reached, the attitude of the parties, and the complexity and likely duration of the case.

The Full Court found that the class action legislation provided Australian courts with the power to make class closure orders. The power may be exercised to facilitate the goal of settlement. The Full Court also endorsed the approach of the primary judge which changed prior practice and provided that if no settlement was reached, then unregistered group members could still participate in any judgment. It is to be expected that this form of class closure order will become the standard procedure.

The use of class closure orders to facilitate settlement was further considered in Hardy v Reckitt Benckiser (Australia) Pty Limited [2017] FCA 341 ("Hardy v Reckitt Benckiser"), Kamasaee v Commonwealth of Australia & Ors (No 8) (Class closure ruling) [2017] VSC 167 ("Kamasaee") and Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited (No 2) [2017] FCA 1231 ("Petersen Superannuation Fund").

In Hardy v Reckitt Benckiser, a consumer class action in relation to alleged misleading statements about pain relief medication, the respondents sought class closure to facilitate mediation. The respondent argued that it needed to know who was claiming in the class action to be able to determine its maximum theoretical liability to group members. The Court declined to make the orders. The Court regarded the likely size of the group and the possibility that there may be many group members with modest claims who have not yet registered as a consideration that weighed against the making of a class closure order before the initial trial. The trial would be relatively short (two to three days), and a mediation could still be useful as it would allow consideration of how to assess the claims of group members.

In Kamasaee, 1,905 asylum seekers detained in the Manus Island Regional Processing Centre sought compensation based on claims of negligence and false imprisonment. The defendants sought class closure orders to determine how many group members will ultimately participate in any settlement so that they could meaningfully quantify the damages sought. The plaintiff objected to the orders based on there being sufficient information already available to the defendants to determine compensation. The Court declined to make the orders based on a number of characteristics of the group members, including that at least 25 percent of the class reside outside Australia and thus they may not receive the notice or be able to obtain assistance in understanding and complying with it. Additionally, others may harbour apprehensions that in the event that they were to take the positive step of opting in to the proceeding, their prospects of participating in any resettlement may be jeopardised.

These decisions may be contrasted with Petersen Superannuation Fund, where the applicant alleged that losses were caused to it and the group members by failures in the operation of a financial product. The respondents sought a registration or class closure process to facilitate a mediation that the Court had indicated it would order. The applicants objected to such a process, including because the group members must have been known to the respondents having completed application forms to obtain the product. The Court referred to Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98 and ordered that a registration process occur as the respondents could not ascertain the likely amount of the losses which the group members might claim.

Competing Class Actions

Competing or multiple class actions addressing the same or similar claims have become a regular occurrence, with courts needing to determine how to choose between or manage the class actions. In 2017, the Queensland Floods and Bellamy shareholder class actions gave rise to this issue.

The Queensland Floods class action was originally brought in the Supreme Court of New South Wales through a closed class that had been commenced in July 2014 ("Rodriguez proceeding"). A second class action was commenced by Philip Hassid as the representative party on 9 January 2017 ("Hassid proceeding"). The Hassid proceeding was commenced in response to amendments to the Rodriguez proceeding that excluded group members' claims for pure economic loss. After the amendments, the Rodriguez proceeding pursued only claims for damage to real and personal property and consequential loss. The Hassid proceeding sought to bring claims for pure economic loss but, through the group definition employed, inadvertently created a situation where group members with both property and pure economic loss claims pursued the property claims in both class actions. Rodriguez sought to strike out that part of the Hassid pleading that created the overlap for three main reasons: it creates conflicting duties for the legal representatives, it will cause uncertainty and the incurring of excessive costs for Rodriguez during the opt out process of the Hassid proceeding, and it is likely to adversely affect the prospects of the Rodriguez proceeding settling. Beech-Jones J agreed with these contentions and struck out the part of the Hassid pleading that created the overlap.

In McKay Super Solutions Pty Ltd (Trustee) v Bellamy's Australia Ltd [2017] FCA 947, Beach J dealt with two open class actions, the McKay proceedings (which also had 1,500 signed-up group members) and the Basil proceedings (which also had 1,000 signed-up group members) by closing the class in the Basil proceedings so that it was limited to the signed-up group members only and allowing the McKay proceedings to continue as an open class action. This had the result that unsigned group members could be part of the McKay proceedings only, and an overlap in group membership, which could be an abuse of process, was avoided. Both class actions would be jointly case managed with a view to conducting a joint trial. The respondents' application for a permanent stay of either class action was denied, principally because it would interfere with the choice of lawyer and funder by a large number of group members.

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