Australia: Supreme Court class actions: ‘opt-out proceedings’ and their potential to hinder a global settlement


In this case, the proposed settlement of a class action was jeopardised by a lone person who had opted out of the group and had commenced her own separate proceeding10. Appeal Justice Beach in A v Schulberg & Ors [2014] VSC 18011 recently ruled on an application to require the opt out member rejoin the class.

This interesting judgment arises in the context of the high profile class action involving various patients of anaesthetist Dr James Peters who was found guilty of infecting the patients with the hepatitis C virus during their medical procedures. Dr Peters had the hepatitis C virus. During his criminal hearing a court found that Dr Peters self-administered the anaesthetic drug fentanyl (to which he was addicted) before using the same needle to anaesthetise his patients thereby passing on the virus.

Slater & Gordon commenced a class action common law claim on behalf of some 60 odd patients of Dr Peters who had been infected with the hepatitis C virus (the group proceeding). The representative plaintiff in the group proceeding was known as 'A'. The defendants to the group proceeding were the principal of the surgery Dr Schulberg, the day hospital Croydon Day Surgery and the Australian Health Practitioners Regulation Authority. Section 33J of the Act permits a person who would otherwise fall within a group, to opt out of a group proceeding. One of Dr Peters' patients, "M", successfully applied to the Court to opt out of the group. She had in fact commenced her own separate proceeding against the same defendants (the individual proceeding) but not served the writ until the group proceeding was well advanced.

The opt out

The Court ordered date for group members to opt out of the group proceeding was 30 May 2013. Despite commencing her own proceeding, M did not opt out of the group before this date.

On 26 August 2013, following an application by the defendants to have the individual proceeding permanently stayed or dismissed as an abuse of process, His Honour Justice Beach (as he then was) exercised the court's under section 33KA of the Act to order that M cease to be a group member. The upshot of this ruling was that M became an 'opt out' but, given the overlap in subject matter, the court ordered that the individual proceeding was to be heard and determined at the same time as the group proceeding.

Difficulties with settlement

The defendants made a settlement offer in the proceedings of a fixed lump sum payment, which was to be distributed among the group members and to M to be determined by Slater & Gordon (the proposed settlement).

The offer was conditional on both proceedings being resolved. The issues in dispute were identical in both claims and the costs of defending the individual opt out claim were not substantially different from the costs of defending the group proceeding. The group representative A had been ordered by the trial judge to share with M's lawyers all expert evidence, chronologies, the court book index and other materials ahead of trial. In effect the procedural orders armed M with the work product of Slater & Gordon for no fee. The solicitors for M had not prepared any liability case against the defendants which was subsequently frankly admitted by M's Counsel in open court.

The settlement offer was acceptable to the group. However, as M refused to agree to the proposed settlement, neither proceeding was able to be resolved at that time.

Can an 'opt out' be ordered back in to the group?

The group plaintiff listed the matter for directions before the Court and informed the judge that the position taken by M was hindering settlement of the group proceeding.

Beach JA considered whether he had the power to revoke his earlier order under section 33KA of the Act, so as to effectively compel M to re-join the group. Beach JA's canvassed the prospect that, after re-joining the group, M could object to the settlement at the approval hearing if she so desired but she would not be able to prevent the settlement from occurring.

Beach JA ultimately ruled that he did not have power to revoke the 'opt out' order. At paragraph [12] His Honour noted that:

"there is nothing in Part 4A that suggests it was ever the intention of the Parliament that individuals who did not want to participate in a group proceeding might be compelled to join in, and be bound by the result of, such a proceeding. Indeed, while s 33KA of the Act permits the Court to make an order that a person cease to be a group member, there is no provision in Part 4A that, in terms, permits the Court to order a person to be a group member".

At paragraph [15] his Honour went on to say that:

"[w]hile one might wish it were otherwise, the mere fact that it is now seen to be in the interests of the plaintiff in the group proceeding, the group members and the defendants, that the plaintiff in the individual proceeding be brought back into the group for the purpose of effecting a proposed compromise, these matters alone cannot, without more, form a basis for over-riding the will and rights of the plaintiff in the individual proceeding".

His Honour also considered whether an opt-out plaintiff could be compelled to re-join the group using the Court's power under section 33ZF of the Act, which permits the Court to make "any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding". Again however, His Honour observed that whilst he could make an order in the group proceeding, the opt out proceeding was not a proceeding within Part 4A of the Act and such a course appeared "contrary to the whole scheme12" of the Act.


The opt-out model under Part 4A of the Act entitles individuals to bring their own claims and Beach JA's ruling demonstrates that the Court will not interfere with this entitlement, even in circumstances where the Court might consider that to "fold the plaintiff in the individual proceeding back into the group proceeding" would likely meet "many of the objectives and overarching obligations of the Civil Procedure Act 201013".

Further, as Beach JA noted at paragraph [11], it was the "defendants' choice not to settle with the plaintiff in the group proceeding or any group members, unless the plaintiff in the individual proceeding is a party to the settlement".

However, once a person whose interests do not differ greatly from the group achieves an opt-out, that person may make resolution of the overall claim difficult, particularly in personal injury claims where a consistent approach toward all injured persons is desirable.

Whilst every individual has a right to bring his/her own claim, a lone 'opt out' creates tensions and difficulties for defendants and insurers, particularly in the settlement process. The defendants in this matter were hindered in their attempts to achieve a global settlement of claims. Further, the plaintiff in the group proceeding was placed in the position of having to face the prospect of running a lengthy and expensive trial when she (and the group she represented) were prepared to accept the sum offered by the defendants.

This matter demonstrates the difficulties created by the opt out system. Of course, M could have opted out at any time within the opt out period but on this occasion she failed to do so and was only permitted to proceed with her separate proceeding with the leave of the court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Edward O'Brien
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