Australia: Federal Court Of Australia Permits Respondents To Settle Individual Claims Of Class Action Members

Key Points

  • In some class actions, it may be convenient and cost-effective for the respondent to settle with class members individually. However, respondents have in the past been restrained from making such offers in some situations.
  • In Capic v Ford Motor Company of Australia Limited [2016] FCA 1020 ("Capic v FMCA"), the Federal Court of Australia declined to restrain the respondent from making settlement offers to individuals on the basis that the offers were neither unfair nor unjust.
  • The Court held that, unless exceptional circumstances are shown, settlement offers made to individual class members are not unfair or unjust if they are in writing, accurately explain the consequences of accepting and not accepting the offer, allow a sufficient period of time for acceptance that permits a genuine opportunity to obtain legal advice and makes it clear that the recipient is entitled to seek and might benefit from independent legal advice.

Background

In May 2016, Ms Capic filed a class action proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) against the Ford Motor Company of Australia Limited ("Ford Australia"). The class action concerned alleged defects in the automatic transmission mechanism ("PowerShift mechanism") in a range of identified models of the Ford Focus, Ford Fiesta and Ford EcoSport, which Ford Australia imported, sold, supplied and distributed in Australia.

Ms Capic claimed relief, on behalf of herself and members of an open class who had purchased the identified models between 2011 and 2016, for breach of a statutory guarantee under the Australian Consumer Law and for misleading and deceptive conduct arising out of the promotional literature distributed by Ford Australia on the PowerShift mechanism. The forms of relief claimed were a refund, damages and/or aggravated damages.

Ms Capic engaged a firm of solicitors ("Firm") on a no-win no-fee basis and without a litigation funder. The Firm maintained a website on which persons visiting could register and, upon doing so, they could, but need not, enter into a fee agreement with the Firm. As at the end of June 2016, 3,462 people had registered on the website and, by the end of July 2016, some 2,001 people had entered into retainer agreements with the Firm.

Ford Australia's Letters of Offers

Ford Australia wrote to a number of vehicle owners offering a full or partial refund or to allow the owner to exchange the vehicle for another model (in which case the owner was required to pay the difference in price). Each type of offer was in a standard form letter. If a recipient accepted the offer, he or she agreed, amongst other matters, to a confidentiality undertaking and to release Ford Australia, the relevant Ford dealer and associated parties from any claims relating to the vehicle.

Each offer was drafted to give the recipient at least 28 days to consider it.

Since June 2016, each letter of offer also included an information sheet that stated relevantly that:

  • a class action has been commenced against Ford Australia;
  • accepting the offer will constitute full and final settlement of any claims against Ford Australia and the vehicle owner will not be able to participate in the class action; and
  • the vehicle owner "may wish to seek legal advice and may benefit from this".

Perram J accepted that Ford Australia's letters were responses, on each occasion, to the vehicle owner making contact with Ford Australia and/or the dealer rather than, as was contended on behalf of Ms Capic, the letters being at Ford Australia's initiative.

Interlocutory Application

The proceeding before Perram J primarily concerned an interlocutory application brought by Ms Capic, which sought, by injunction, to restrain Ford Australia from sending the offers of settlement.

Ms Capic also sought an injunction to restrain Ford Australia from communicating with class members who were clients of the Firm and sought to impose a protocol by which Ford Australia would need to communicate with class members.

Legal Principles

In dealing with Ford Australia's offers to individual vehicle owners, Perram J found guidance in the Federal Court's decision in Courtney v Medtel Pty Ltd [2002] FCA 957; (2002) 122 FCR 168 ("Courtney"). In Courtney, Sackville J (as His Honour then was) ultimately granted an injunction restraining the respondents in the class action from making settlement offers for a period of time.

Perram J applied Sackville J's finding that s 33ZF(1) of the Federal Court of Australia Act 1976 (Cth) (the general power provision under Part VIA) allows the Court "to constrain or regulate, in appropriate circumstances, communications between a respondent and unrepresented [class] members". Perram J found that the role of such orders was supervisory, that is, to prevent unfairness or injustice. In this sense, His Honour found that the use of s 33ZF(1) in the context of settlement offers should mirror provisions in Part IVA that provided for the making of supervisory orders in specific contexts, such as ss 33X (Notice to be given of certain matters) and 33V (Settlement and discontinuance—representative proceeding). His Honour also noted from Courtney that "unfairness and injustice are not limited to unlawful behaviour". Further, it is the interests of the non-party class members which must be considered, "not the interests of those running the class action".

His Honour then cited, with approval, the standards that Sackville J had held in Courtney should generally be met in relation to settlement offers, ("Courtney standards"), namely:

  • the offer and any accompanying material should be in writing;
  • the documentation should accurately explain the consequences of accepting and not accepting the offer;
  • the offer should allow a period for acceptance that is sufficient for the class member to obtain legal advice, should the class member wish to do so; and
  • the documentation should make it clear that the class member is entitled to seek and might benefit from independent legal advice.

Decision

Applying the Courtney standards to Ford Australia's offers, Perram J found that the additional notice and the fact that each offer was drafted to provide at least 28 days for acceptance, meant that the standards were met. His Honour then expanded upon Sackville J's standards and stated at [23]:

There may be cases where a more rigorous regime may be necessary. As is often the case, context is everything. If the [class] members are definitionally under some disability relating to education or cognition, plainly a different approach may need to be taken.

Perram J addressed a number of submissions as to specific disadvantages or vulnerabilities that allegedly characterised class members. It was submitted on behalf of Ms Capic that many of the class members:

  • may be "desperate and vulnerable";
  • lacked bargaining power in relation to the offers;
  • were unaware of their rights under the Australian Consumer Law; or
  • were not adequately informed about consequences of accepting Ford Australia's offer and were not encouraged to obtain legal advice.

Perram J rejected each of these characterisations on the basis of the evidence before him. With respect to the first two submissions, His Honour referred to the fact that the class was composed of both retail and wholesale purchasers and the relative affluence connoted to the owners by the types of cars the subject of the class action.

In contrast, His Honour accepted Ford Australia's submission as to characterisation. His Honour held at [26]:

On the other hand, Ford pointed to some elements of the context which it said were important. It was, for example, inevitable according to Ford that people who felt their vehicle was defective would return it to the dealer from which it had been purchased and seek its repair or replacement, for vehicles generally come with warranties. That initial return of the car might engender a series of further returns and escalating, or at least continuing, disputation. It was this process which, according to the evidence, might lead to an offer eventually being made. A critical aspect of this process was that it was initiated by the customer, not Ford. It is not the case, as it was by contrast in Courtney, that Ford is seeking to contact [class] members to settle their claims. Rather, in the real world Ford has to deal with complaining customers as it has to be entitled, so it was submitted, to resolve their complaints. The presence of the class action, although not irrelevant, ought not to be permitted to obscure that aspect of the relationship.

Having found that Ford Australia's offers had met the Courtney standards and that there were no exceptional circumstances, Perram J dealt with a number of other submissions made on behalf of Ms Capic. His Honour rejected all of them on the basis that they did not impinge upon principles of fairness or justice so as to provide a basis upon which the Court could exercise its power under s 33ZF.

Accordingly, Perram J declined to make the injunction restraining Ford Australia from making the offers.

By the time the application was heard, Ford Australia indicated that it had no desire to communicate with the Firm's clients and was now in a position not to do so. Given that the offers were made in communications started by vehicle owners, Perram J found that a protocol restraining Ford Australia from initiating contact was unnecessary. As such, the other applications were also dismissed.

Ramifications

The Federal Court's decision in Capic v FMCA provides support to respondents' ability in class actions to deal with individual complaints on a case-by-case basis. In most situations, if offers to individuals are made in the course of communications initiated by potential class members and they meet the Courtney standards, the respondent will be protected from a restraining injunction. Accordingly, care must be taken in the wording of offers.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.