Australia: Australian Court "Closes Class"

Dismisses Claims of Class Action Members Prior to Judgment or Settlement

Key Points

  • In Australia, class actions operate by way of an opt-out model that does not require the consent or identification of class members at the time the proceedings are commenced. As such, there can be significant uncertainty in settlement negotiations as to which (and accordingly how many) members will ultimately register to share in any settlement amount. To conclude a class action in which the class members receive compensation or other personal benefit, it is necessary to identify the class members. This usually occurs through a class closure process by which class members must register their participation.
  • In Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332 ("Lam (No 5)"), opt-out notices and a class closure process had occurred, but 84 class members had neither opted out nor registered their participation in the class action. On the respondent's application, the Supreme Court of New South Wales determined that it would dismiss, finally, the claims of those 84 class members. The decision is novel in terms of its timing—prior to any judgment or settlement.
  • The decision in Lam (No 5) establishes a route for parties to achieve greater certainty in seeking to quantify a class action claim and reaching a settlement. However, the court must ensure that adequate notice is given to unregistered members who stand to lose their rights to compensation.

Background

On 4 November 2010, Qantas Flight 32 departed Changi Airport in Singapore with 469 passengers and crew on board, only to perform an emergency landing manoeuvre shortly after takeoff due to engine failure. A class action against the manufacturer of the plane's engines, Rolls Royce PLC, was commenced in the Supreme Court of New South Wales on behalf of those who were onboard the flight and suffered a psychological injury.

By the time the application the subject of Lam (No 5) was heard, the class action was already at an advanced stage.

On 20 June 2014, the Court made orders for the sending of "opt-out" notices, and approximately 30 people opted out of the class action. In February 2015, the Court made orders to give effect to a "class closure" process. Class closure involves the court making orders to require class members to identify themselves by a certain point in time as having an interest in any judgment or proposed settlement. If class members fail to identify themselves, although they remain part of the class action, their claim is extinguished and they forfeit the right to participate in any settlement or judgment in favour of the class.

The process operated differently in relation to those class members with foreign contact details and those with Australian contact details. The Court removed passengers with overseas contact details who did not register with the representative party's solicitors from the class.1 This was done because "they may not receive notification of the existence of these proceedings, [there is] a likelihood that, even if they do, they are unfamiliar with the Australian legal system and [there is] a strong probability that there is no simple answer to a question about the effect of any binding settlement on their right to litigate in their home jurisdiction".2 The Court also determined that those passengers with Australian contact details remained in the class but could not participate in any settlement or resolution without leave of the Court.3

Further orders were made in March 2015 that required class members to register with the representative party's solicitors by June 2015 and thereafter provide basic particulars of their claims. In light of class members' continuing entitlement to opt out of the class action, (further) opt-out notices were issued to class members containing relevantly the following passage:4

If you have a claim for psychological injury arising from the engine failure incident on Qantas Airbus flight QF32 on 4 November 2010 and you do not register your claim by the deadline or otherwise opt out of the proceedings, you will be bound by any settlement of the class action but will not, without otherwise obtaining the Court's permission, be entitled to claim a share of any settlement moneys. Also, if you do not register and a settlement is proposed, you will not be notified of this settlement proposal and will not have the opportunity to oppose the settlement. This means that you will lose the right to sue the defendant for any injury or loss suffered and will lose your rights to any compensation.

Subsequently, settlement negotiations progressed to a stage at which fault in workmanship was admitted by the defendant. Each class member needed to establish that he or she had suffered a recognisable psychiatric illness as a result of the events consequent upon the engine failure and the level of damages he or she could recover.

In June 2016, orders were made establishing a regime for registered members to provide detailed particulars and some material in support of their claim. The orders also addressed class members who had not registered by the June 2016 deadline and provided that they could apply for leave of the Court to pursue any claim by August 2016. The representative party's solicitors were ordered to forward notices to nonregistered members advising of the effect of the orders. These notices also contained the following statement:5

If you do not apply for leave by 1 August 2016, or the Court does not grant you leave to make a claim for compensation, you will lose the right to claim compensation arising from the events of 4 November 2010 for the defendant, and the Court will dismiss the claim that you have against it.

After the August 2016 deadline had passed and none of the 84 unregistered class members had opted out or filed an application for leave, Rolls Royce PLC applied to the Court for orders dismissing the claims of the unregistered members. Rolls Royce PLC also sought an order confirming that the first-sought order "operates as a final determination" of the unregistered members' right to claim relief against it.6

Reasoning

Rolls Royce PLC argued that the Court had power to make the orders it sought under the Court's general power provision for class actions under the Civil Procedure Act 2005 (NSW), s 183. That section provides:

183 General power of the Court to make orders

...

In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order that the Court thinks appropriate or necessary to ensure that justice is done in the proceedings.

Beech-Jones J noted the cases submitted on behalf of Rolls Royce PLC, where notices were sent to class members advising that if they neither registered their claims nor submitted material in support of their claims, their right to compensation would be extinguished.7 His Honour also noted Matthews v SPI Electricity Pty Ltd [2013] VSC 17; 39 VR 255 and the examples cited therein,8 where the orders on their face appeared to determine, adversely, a class member's claim.

Beech-Jones J held that the regime provided for class actions by Part 10 of the Civil Procedure Act 2005 (NSW) would be significantly undermined if the Court could not make orders finally determining a class member's rights and it could not do so before the representative party's claim was determined. His Honour also considered that Part 10 contemplated orders such as those sought by Rolls Royce PLC. In particular, his Honour found there was support for the orders in the words of s 182(2), which provides:9

182 Suspension of limitation periods

...

(2) The limitation period does not begin to run again unless either the member opts out of the proceedings under section 162 or the proceedings, and any appeals arising from the proceedings, are determined without finally disposing of the group member's claim.

His Honour observed that s 182(2) necessarily contemplates the Court making orders of the type sought by Rolls Royce.

The Court granted Rolls Royce PLC's application and made orders dismissing the claims by unregistered class members and that the dismissal operate as "a final determination of the rights of the individual [class] members ... to claim damages or other relief against [Rolls Royce PLC]"10 for the relevant event.

Ramifications

Opt-out class actions were adopted in Australia to extend access to justice to as many persons as possible. Consequently, opt-out class actions do not require the consent or identification of class members at the time the proceedings are commenced. However, to conclude a class action in which the class members receive compensation or other personal benefit, it is necessary to identify the class members. Identification is usually achieved through the closing of the class.

Class closure has attracted criticism because access to justice for those facing social or economic barriers may only be facilitated up until they are required to identify themselves and document their claim. The factors that may prevent a person signing up to a class action when it is commenced may still apply at the time of a settlement. Moreover, the class members' claims may be extinguished without them receiving any compensation. However, this does not remove the truism that compensation cannot be assessed or distributed if the identity of a class member remains unknown. Consequently, courts have been concerned to ensure that they balance the practicalities of concluding a class action with fairness to class members.

Lam (No 5) stands out from past cases involving class closure due to the timing of the orders. The Court not only closed the class but dismissed the claims by unregistered class members prior to any judgment or settlement.

It is important to note, however, that implicit throughout Beech-Jones J's decision in Lam (No 5), and in the authorities his Honour cited, is that proper notice must be given to unregistered parties.11 In Lam (No 5), unregistered members were given repeated notices that, if they did not either opt out or register their claims, they would have to apply for leave of the Court to pursue their claims. They were advised on each occasion that failing to do so would result in their losing their rights to claim compensation.

Footnotes

[1] Lam v Rolls Royce PLC (No 3) [2015] NSWSC 83 at [29]-[30]; Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332 at [3]-[4].

[2] Lam v Rolls Royce PLC (No 3) [2015] NSWSC 83 at [29].

[3] Lam v Rolls Royce PLC (No 3) [2015] NSWSC 83 at [31]; Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332 at [4].

[4] Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332 at [5].

[5] Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332 at [7].

[6] Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332 at [8].

[7] King v AG Australia Holdings Limited [2002] FCA 1560 at [6]; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 2) [2003] VSC 212 at [65].

[8] Matthews v SPI Electricity Pty Ltd [2013] VSC 17; 39 VR 255 at [31].

[9] Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332 at [13] (Beech-Jones J's emphasis).

[10] Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332 at [16(2)].

[11] See M Legg, "The Controversial Class Closure Mechanism: Is it Fair?" (2015) 2 (April) Law Society of NSW Journal 72.

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”

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
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 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.