Australia: Class Actions Comparative Guide

1 Legal framework

1.1 Is there a dedicated class action regime in your jurisdiction? If not, how is collective action typically brought?

In Australia, class actions (formally known as ‘representative proceedings') can be brought in either:

• the federal jurisdiction in the Federal Court of Australia; or
• the state jurisdictions in the state supreme courts.

The class action regime is contained in Part IVA of the Federal Court Act 1976 (Cth). The Queensland, New South Wales, Tasmania and Victorian Supreme Court regimes are modelled on the Federal Court regime (noting that there are some differences in each) while the remaining supreme courts follow different models. The Supreme Court of Western Australia recently introduced a regime similar to the Federal Court regime, but it has yet to commence.

1.2 Do any special regimes apply in specific sectors?

There are no sector-specific regimes in Australia in relation to class actions.

1.3 Are the courts in your jurisdiction generally considered sympathetic to class actions?

Class actions were first permitted in Australia in 1992. At this time, there were concerns that this would open the floodgates for large, unmeritorious claims which would stifle the Australian judicial system. However, more than 25 years on, the risk of a large number of class actions overwhelming the courts has not materialised. Rather, it is now well accepted that the class action regime has increased access to justice for individuals by allowing claims to be brought on behalf of a group of claimants where it may not have been commercial to bring those claims individually and as such, there would not have been such an opportunity.

The largest number of class actions are filed each year in the Federal Court and in the New South Wales and Victoria Supreme Courts. These courts are extremely well versed in class actions and have introduced processes to ensure they run as smoothly as possible, to reduce the delay and cost generally associated with class actions. For example, the courts publish practice notes (eg, the Federal Court Class Actions Practice Note) setting out:

• the steps which parties need to take before the first return date;
• the approach to discovery;
• the disclosure of funding arrangements; and
• case management hearings.

2 Parties

2.1 Who has standing to bring a class action in your jurisdiction?

To bring a class action in Australia in the federal jurisdiction, three requirements must be met:

• There must be at least seven group members;
• The claim must arise out of the same or similar circumstances; and
• The claim must have at least one common issue of law or fact.

Generally, class actions are brought by a single class representative who acts as the lead applicant. The lead applicant brings the claim on behalf of themselves and on behalf of all class members.

In some cases, there can be more than one lead applicant. This generally occurs:

• when there is more than one respondent; or
• where there are slight differences between the types of class members and it is fitting for the different sub-groups to be distinguished.

It may be necessary to appoint one or more sub-group representative applicants to represent the interests of the sub-group; although, depending on the circumstances, it may be sufficient to address group differences through a less formal ‘sample group member' process. The appointment of sub-group representatives has implications for control of the action and gives rise to potential adverse cost consequences for those representatives, whereas the appointment of sample group members will not.

2.2 Can representative bodies bring class actions in your jurisdiction? If so, which bodies may do so and what is the applicable procedure?

A prosecutorial body, such as the Australian Competition and Consumer Commission (ACCC), has the power to commence representative proceedings to seek collective relief on behalf of persons affected by an entity being prosecuted for a contravention of a statutory obligation.

In ACCC v Chats House Investments (1996) 142 ALR 177, Justice Branson accepted that the ACCC was authorised to bring a representative proceeding under Section 33D(1) of the Federal Court of Australia Act 1976 (Cth) despite the ACCC not being subject to the unlawful conduct, as long as their interests arose from the same or similar circumstances to those of the affected group members.

In ACCC v Golden Sphere International Inc [1998] FCA 598, the court considered that the ACCC may commence representative proceedings and that the common interest between the ACCC and the group members does not and need not extend to the relief that is sought. In this sense, the ACCC has a broad role to play in representative proceedings.

Apart from these circumstances, there are no specific processes for representative bodies to bring class actions in Australia. If a representative body were to be involved in a class action, it would have to be one of the seven or more group members as is required under the relevant legislation.

2.3 Can parties outside the jurisdiction be members of a class action? What requirements and restrictions apply in this regard?

Yes.

In BHP Group Limited v Impiombato [2022] HCA 33, the class contended that they suffered losses resulting from BHP's failure to disclose information about problems with the Fundao Dam in Brazil, which eventually failed. The class sought to include foreign residents who had owned shares in BHP entities in Australia, the United Kingdom and South Africa. In 2022, the High Court of Australia ruled that the foreign residents were not to be excluded from the class action proceeding.

A notable exception to this included where specific terms of the contract exclude parties from becoming group members. This was demonstrated in Carnival plc v Karpik (The Ruby Princess) [2022] FCAFC 149, where the Full Federal Court of Australia held that foreign resident cruise passengers who had signed up using the US terms and conditions, which included a class action waiver clause, should be excluded from the class.

Ultimately, whether parties outside the jurisdiction can participate in a class action in Australia will depend on the specific circumstances of each group member and how they became a group member with a relevant claim.

2.4 Which parties may be the target of a class action? Can parties outside the jurisdiction be the target of a class action? What requirements and restrictions apply in this regard?

Yes. If the party outside the jurisdiction has breached Australian law, it will be amenable to being joined to a class action suit.

If proceedings are commenced against a party outside the jurisdiction, there are several statutes which deal with the process by which international parties should be served with a claim. For example, the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1985 (‘Hague Service Convention') provides for the transmission of judicial and extrajudicial documents for service to countries which are a party to the convention. To serve a document under the Hague Service Convention, an Australian party must refer to the relevant state, territory or Federal Court rules. In the Federal Court of Australia, Part 10 of the Federal Court Rules 2011 (Cth) applies. Another way in which a claim can be served is under bilateral treaties with other countries (eg, South Korea and Thailand).

2.5 Do class actions proceed on an opt-in or opt-out basis?

Both the federal and state class actions regimes proceed on an opt-out basis. Typically, at some stage in the proceeding, the court will order an ‘opt-out notice' to be circulated. The opt-out notice will include a date before which group members must notify the court of their decision to opt out of the class action. If the group member does not opt out before the fixed date, it will be bound by any judgment in the proceedings on the common issues. If group members decide to opt out of the class action, they will not be bound by any decision in the proceedings and will not be eligible to participate in any settlement of the class action. As they are not bound by any decisions in the proceedings, they will be free to commence their own proceedings.

The court will make orders regarding the specific form and channels through which the notice will be communicated, including by advertisements in newspapers, radio, television, online or via social media. The court will also encourage direct communication of the opt-out notice to group members where appropriate and where that information is available.

Proceedings can also be commenced as a ‘closed class'. This is where the class is defined as parties that have met some additional qualifying criteria – most commonly, the entering into of a litigation funding agreement.

3 Forum

3.1 In what forum(s) are class actions heard in your jurisdiction?

In Australia, class actions (formally known as ‘representative proceedings') can be brought either in the federal jurisdiction in the Federal Court of Australia or in the state jurisdictions in the state supreme courts. The Queensland, New South Wales, Tasmanian and Victorian Supreme Court regimes are modelled on the Federal Court regime (noting that there are some differences in each); while the remaining supreme courts follow different models. The Supreme Court of Western Australia recently introduced a regime similar to the Federal Court regime, but it has yet to commence.

3.2 Who hears class actions in your jurisdiction (eg, judges or juries)?

Class actions in Australia, whether in the federal or state jurisdictions, are typically heard by judges. It is very unlikely that a class action in the federal jurisdiction would be decided by a jury (see Sections 39 and 40 of the Federal Court of Australia Act 1976 (Cth)). The likelihood in the state jurisdictions will vary according to each state's rules.

The matter will generally be heard and decided by a single judge, unless the matter has been referred or appealed to a higher court. For example, a matter may be referred to the Full Federal Court of Australia (comprising three or more judges) in circumstances including the following:

• The chief justice has determined that a matter is of sufficient importance that it is appropriate for the Full Court to hear the matter pursuant to Section 20(1A) of the Federal Court of Australia Act 1976 (Cth);
• The matter is brought in the court's original jurisdiction from a decision of a tribunal or authority while a judge of the court (or another court) is a member of the tribunal or authority (Section 20(2) of the Federal Court of Australia Act 1976 (Cth)); or
• The president of the Fair Work Commission refers a question of law (Section 608(2) of the Fair Work Act 2009 (Cth)).

3.3 Is there any opportunity for class action forum shopping in your jurisdiction? If so, what are the implications?

Yes. It is often the case that the claim will involve the contravention of national statutes or common law or equitable claims that have affected group members in multiple states, leaving the class with a choice of jurisdiction. That choice can be one between the federal or state-based court systems and, so far as the federal system is concerned, between the various state-based registries of the Federal Court.

Australia has a well-established and cooperative cross-vesting system in place under the Jurisdiction of Courts (Cross-vesting) Acts, so forum choice can be subject to challenge on a forum non coveniens basis.

4 Bringing a class action

4.1 What is the limitation period for bringing a class action in your jurisdiction? What requirements and restrictions apply in this regard?

Limitation periods depend on the cause of action of the class action and therefore can vary. When a class action is filed, the limitation period for each group member is suspended until either the group member opts out of the class or the proceeding is determined.

4.2 Do collective actions require certification? If so, what requirements must be met to obtain certification?

There are no requirements for class actions to be certified in Australia. However, class actions in the federal jurisdiction must meet the following criteria:

• There must be at least seven group members;
• The claim must be from the same or similar circumstances; and
• The claim must have at least one common issue of law or fact.

4.3 What are the formal requirements for bringing a class action?

To bring a class action in Australia in the federal jurisdiction, three requirements must be met:

• There must be at least seven group members;
• The claim must be from the same or similar circumstances; and
• The claim must have at least one common issue of law or fact.

4.4 What are the procedural and substantive requirements for bringing a class action? Do any minimum thresholds apply in this regard?

To bring a class action in Australia in the federal jurisdiction, three requirements must be met:

• There must be at least seven group members;
• The claim must be from the same or similar circumstances; and
• The claim must have at least one common issue of law or fact.

Once these requirements are met, procedurally, class actions are commenced by filing an originating process in the relevant court. An originating process must:

• define the group members to whom the class action relates;
• set out the nature of the claims made on behalf of the group members;
• describe the relief sought by the group members; and
• identify the questions of law or fact which are common to the group members' claims.

4.5 How are potential class members notified of the proceedings? Is there a deadline by which they must join the class action?

Both the federal and state class action regimes proceed on an opt-out basis, meaning that if a group member fits the class definition, they will automatically be included in the class action unless they take steps to remove themselves. Typically, at some stage in the proceedings, the court will order an ‘opt-out notice' to be circulated. This opt-out notice will include a date which group members are required to notify the court of their decision to opt out of the class action. If the group member does not opt out before the fixed date, it will be bound by any judgment in the proceedings. If a group member decides to opt out of the class action, it will not receive any settlement from the class action, but will be free to commence its own separate proceeding.

The court will make orders regarding the specific form and channels which the notice will be communicated, including by advertisements in newspapers, radio, television, online or via social media. The court will also encourage direct communication of the opt-out notice to group members where appropriate.

Proceedings can also be commenced as a ‘closed class'. This is where the class is defined as parties that have signed up with a particular funder under a litigation funding agreement.

4.6 How is jurisdiction over the class action determined?

Class actions may be brought in the federal or state jurisdictions (in Victoria, Queensland, New South Wales and Tasmania, and in Western Australia once its regime has commenced). The federal jurisdiction can only be exercised in relation to the constitutionally prescribed matters contained in Sections 75 and 76 of the Commonwealth of Australia Constitution Act 1901 (Cth). However, federal courts may adjudicate on non-federal claims within their accrued and/or associated jurisdiction.

The Jurisdiction of Courts (Cross-vesting) Acts (‘cross-vesting legislation') provide for the conferral of federal jurisdiction on state supreme courts (see Section 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) and Section 77(iii) of the Commonwealth of Australia Constitution Act 1901 (Cth)). The cross-vesting legislation also provides a mechanism through which a class action may be transferred to the most appropriate jurisdiction.

Claims which are based on federal legislation (ie, the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth) and the Competition and Consumer Act 2010 (Cth)) will most likely be brought in the federal jurisdiction.

The most appropriate jurisdiction for a class action will depend on several factors, including, but not limited to:

• the location of the lead applicant(s);
• where the claim originated;
• whether there are any choice of law clauses in relevant contracts;
• the balance of convenience for the parties and witnesses;
• costs and delay; and
• sometimes, financing considerations. (Contingency fees are available for class actions in the Supreme Court of Victoria. It is currently the only Australian jurisdiction to permit contingency fees.)

4.7 How is the applicable law determined?

The applicable substantive law is determined by the usual conflict of law principles. There is no difficulty for an issue in the case to be determined by foreign law if foreign law governs that issue. The procedural law applicable to the claim depends on the jurisdiction in which the claim is brought.

4.8 Under what circumstances (if any) must security for costs be provided?

Generally, where a third-party litigation funder is involved, the applicant will be required to provide security for the respondent's costs. With the increase in third-party funding arrangements, security for costs is often agreed between the parties without the need for an application to be made.

However, when deciding the entitlement to security for costs in class actions without third-party funding, there are two factors which differ from the traditional approach to ordering security. First, the Full Court of the Federal Court of Australia has held that even though class members are generally immune from adverse cost orders, this does not exempt them from being obliged to contribute towards the security for costs. Second, the traditional position that an impecunious person should not be ordered to provide security for costs has been challenged, but not necessarily disregarded.

The approach of the Federal Court of Australia is that it exercises its discretion to order security by considering, among other things:

• the type of claim;
• the attributes of group members; and
• the source of funding for the matter.

This could potentially include ordering security for costs against an applicant in the class who is a natural person.

In the Victorian and New South Wales Supreme Courts, the state statutes do not provide the same discretion for the courts to order security for costs. Instead, they must rely on their inherent power to make orders (see also Section 33ZF of the Supreme Court Act 1986 (Vic) and Section 183 of the Civil Procedure Act 2005 (NSW), for which authorities suggest grants jurisdiction to award security for costs). Nevertheless, both Victoria and New South Wales follow similar approaches to that of the Federal Court of Australia. The approach in Queensland, Tasmania and Western Australia remains largely untested.

5 Disclosure and privilege

5.1 What rules apply to disclosure in your jurisdiction? Do any exceptions apply?

In the federal jurisdiction, the rules that apply to discovery are contained in the Federal Court Rules 2011 (Cth) and the Federal Court Act 1976 (Cth). Each state jurisdiction has a separate act which governs disclosure.

In the federal jurisdiction, there is no obligation or right to discovery. If the parties cannot cooperate and come to an agreement as to the scope of documents to be produced to the other side, the party may make a request to the Federal Court for an order for discovery. This request will typically include a discovery protocol and a list of categories which narrow the scope of discovery. The court will then consider the parties' positions and may approve them if they are considered appropriate.

If the Federal Court approves a request:

• the party obliged to provide discovery must search for and produce documents in good faith, uninfluenced by any negative impact on the party (other than legitimate considerations such as privilege or confidentiality concerns); and
• discovery should be comprehensive and proportionate (Central Practice Note: National Court Framework and Case Management (CPN-1), Federal Court of Australia, 10 August 2022).

Where a party asserts that documents are unavailable or burdensome to access and disclose, it must provide further details as to why this is the case and how the party has dealt with the documents (ie, how it has stored, managed, accessed, destroyed and disposed of the documents).

If an order for discovery has been made, the parties have a continuing obligation under the Federal Court Rules 2011 (Cth) to make discovery.

5.2 What rules on third-party disclosure apply in your jurisdiction? Do any exceptions apply?

Rule 20.23 of the Federal Court Rules 2011 (Cth) empowers the Federal Court to make an order for discovery on a non-party person. To obtain such order, the applicant, being a party to the proceedings, must believe that the non-party person has or is likely to have had in its control documents directly relevant to an issue raised on the pleadings or affidavits.

Where an order is made, the non-party person is obliged to file the requested documents (Rule 20.23 of the Federal Court Rules 2011 (Cth)). The general rules of discovery mentioned above apply to the non-party, including the obligation to search for and produce documents in good faith (Central Practice Note: National Court Framework and Case Management (CPN-1), Federal Court of Australia, 10 August 2022).

An order for non-party discovery will be exercised only with caution and the applicant should have exhausted its rights to discovery against the other party to the proceeding. The court will generally decline to order discovery where the non-party holds documents subject to an obligation of confidentiality that it has reasonably undertaken.

The non-party is entitled to apply to the Federal Court for an order that the applicant seeking discovery must pay the non-party person's costs and expenses incurred in making discovery and complying with the order (Rule 20.25 of the Federal Court Rules 2011 (Cth)). In the context of class actions, the Federal Court of Australia Act 1976 (Cth) appears to provide the court with the power to make orders for discovery against group members (Section 33ZF(1) of the Federal Court of Australia Act 1976 (Cth)).

In addition, parties can file subpoenas against non-parties to the proceeding, requiring them to produce documents to the court. In the Federal Court, a subpoena can only be issued with the leave of the court and the applicant will need to explain:

• why the requested documents are relevant to the claim; and
• why that person or entity is likely to have those documents.

In the Supreme Court of New South Wales, leave is not required to issue a subpoena.

5.3 What rules on privilege apply in your jurisdiction? Do any exceptions apply?

Under the federal jurisdiction, an order for discovery does not require the production of any document that is privileged (Rule 20.02 of the Federal Court Rules 2011 (Cth)). The term ‘privilege' is not defined but can include:

• client legal privilege;
• privilege against self-incrimination;
• penalty privilege; and
• the privilege against exposure to forfeiture.

Client legal privilege applies to confidential communications between a client and its lawyer or the contents of a confidential document prepared by the client, lawyer or another person, for the dominant purpose of providing the client with:

• legal advice (Section 118 of the Evidence Act 1995 (Cth)); or
• professional legal services in relation to an Australian or overseas proceeding or anticipated proceeding in which the client is, may be, was or might have been a party (Section 119 of the Evidence Act 1995 (Cth)).

A natural person may also claim privilege over a document where there is real risk of self-incrimination or self-exposure to penalties (Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (No 3) [2018] FCA 1107).

A party is not entitled to claim privilege over a document on the ground that it relates solely to the party's own case and does not relate to or support another party's case (Rule 20.19 of the Federal Court Rules 2011 (Cth)).

5.4 What are the specific implications of the rules on disclosure and privilege in class action proceedings?

One implication of the rules of discovery in class actions is that unlike in traditional civil proceedings, in which both the applicant and respondent will likely have a similar number of documents to disclose, typically in class action proceedings the respondents will have a far greater number of documents to disclose than the applicant group members. This means that parties often disagree as to the obligations of discovery and will require an interlocutory application to be filed for the court to determine the proper scope of the discovery orders.

6 Evidence

6.1 What types of evidence are permissible in your jurisdiction? Is expert evidence accepted?

The evidence typically led in class actions can include expert evidence and lay witness evidence. Where applicable, evidence of independent technical experts in relation to any technical issue in the matter may be permissible, as well as evidence on quantum. Lay witness evidence can include evidence from witnesses or group members which is relevant to any issue raised in the matter.

Usually, evidence is given by written affidavits; however, in some cases the judge will order that evidence be given viva voce, meaning that the witness gives evidence in chief orally.

6.2 What is the applicable standard of proof in your jurisdiction?

In civil proceedings in Australia (including class actions), the standard of proof is ‘on the balance of probabilities'.

6.3 On whom does the burden of proof rest in class action proceedings?

As a civil proceeding, the burden of proof lies with the plaintiff to prove its case on the balance of probabilities.

6.4 What are the specific implications of the rules on evidence in class action proceedings?

The rules of evidence that apply to representative proceedings apply to any other proceeding in Australia.

A unique aspect of evidence in class actions is that proceedings may occur contemporaneously with, or following, other proceedings which deal with the same factual circumstances (eg, regulatory proceedings or other representative proceedings). Whether admissions made in one proceeding can be used in another depends on the rules of evidence.

The default position is that previous statements made by a person are inadmissible to prove the existence of the underlying asserted fact (Section 59(1) of the Evidence Act 1995 (Cth)). The exception is that this rule does not apply to evidence of an admissions or a previous representation:

• that was made in relation to an admission at the time the admission was made, or shortly before or after that time; and
• to which it is reasonably necessary to refer in order to understand the admission (Section 81 of the Evidence Act 1995 (Cth)).

The exception above does not apply to an admission of a third party. However, the third party may consent to the admission being used (Section 83(2) of the Evidence Act 1995 (Cth)). The exception is also subject to the court's discretion to exclude admissions (Sections 90, 135 and 136 of the Evidence Act 1995 (Cth)).

In class action proceedings, if a party seeks to rely on an admission of a corporate respondent, the court must consider the previous representation to be an admission where it was an admission made with authority (Section 87 of the Evidence Act 1995 (Cth)).

7 Settlement

7.1 Can the class action proceedings be discontinued without a full trial? If so, how, and what are the implications?

Class actions can be resolved by:

• a judicially approved settlement;
• discontinuance; or
• proceeding to trial and receiving a judgment.

The court can order that a class action no longer continue for any of the following reasons:

• The costs expected to be incurred would likely exceed the costs incurred if the group members brought separate proceedings;
• The relief sought by the group members is available in another proceeding;
• The class action will not efficiently and effectively deal with the group's claims; or
• It is otherwise inappropriate to continue to pursue the claim in the class action regime.

In determining whether a discontinuance can be ordered, the court will consider the following principles:

• Any order by the court is to have regard to the interests of the parties and group members that might be affected by the order;
• Any order approving discontinuance should not to have a substantive impact or adversely affect the rights of group members; and
• The court must scrutinise the order so it appropriately protects the interests of the group members as a whole (Davaria Pty Ltd v 7-Eleven Stores Pty Ltd [2020] FCA 1234 at [45] -[46]).

Unless the court provide otherwise, a party that files a notice of discontinuance will be liable to pay the costs of each other party to the proceeding.

When a discontinuance is ordered, the applicant may commence new proceedings against the same respondent. As there is no settlement or judgment, there can be no abolishment of the applicant's rights in the proceeding, res judicata or issue estoppel (Babscay Pty Ltd v Pitcher Partners (2020) 148 ACSR 551 at [22]).

7.2 Is court approval of the settlement required? If so, what factors will the court consider in this regard?

A class action cannot be settled or discontinued without the court's approval (see Section 33V(1) of the Federal Court Act 1976 (Cth)). In approving a settlement, the court considers whether it is a fair and reasonable compromise of the claims.

To settle a class action, there is a formal process by which the applicant's lawyers must notify group members of the settlement and give them the opportunity to object to the settlement.

When applying for the court's approval of a settlement, the parties will typically be required to address the following factors:

• the complexity and likely duration of the proceeding;
• the response of the group members to the settlement;
• the stage of the proceeding;
• the risks of establishing liability, loss or damage;
• the risks of maintaining a representative proceeding;
• the ability of the respondent to withstand a larger judgment against it should the case proceed to trial;
• the reasonableness of the settlement in light of the best possible recovery and all risks of litigation; and
• the terms of any advice received from counsel and/or independent experts in relation to the issues in the proceeding (Clauses 11.1-11.2 of Federal Court of Australia Practice Note CM 17).

The Australian courts have demonstrated an unwillingness to approve proposed settlements in circumstances where:

• not all class members will share in a premium for contributing to the funding of the class action;
• the proposed settlement fails to properly differentiate between different class members' claims;
• the proposed settlement provides a litigation funder with a commission which is greater than it is entitled to under the litigation funding agreement; or
• the legal fees and commission are not proportionate to what could reasonably be expected to be achieved if the matter continued.

8 Court proceedings

8.1 Are court proceedings in your jurisdiction public or private? If the former, are any options available to the parties to keep the proceedings or related information confidential?

Typically, Australian courts and their decisions are accessible to members of the public.

In the Federal Court of Australia, a person can search and inspect documents such as applications, pleadings, judgments, orders and submissions, unless the court or a judge has ordered that the documents are confidential (Order 46, Rules 6(1) and (2) of the Federal Court Rules 1979 (Cth)). A person that is not a party can apply to inspect other certain documents only with the leave of the court (Order 46, Rule 6(3)-(5) of the Federal Court Rules 1979 (Cth)). Leave will be granted where a document has been admitted into evidence or read out in open court.

However, there are several inconsistencies across state and Federal Court legislation and rules about:

• the types of documents that may be accessed;
• when public access can be presumed;
• whether leave of the court is required for access; and
• the release of transcripts to non-parties.

To assist with navigating these issues, the parties can agree to enter into a confidentiality regime with regard to confidential documents disclosed by either party, which can set out how the parties are to treat and keep documents confidential throughout the proceeding (eg, by requiring material referring to confidential documents to be filed to the court in a sealed envelope and to be opened only by an order of the court). If the parties cannot come to an agreement on the confidentiality regime, the party seeking to keep documents confidential can make an application for the confidentiality regime to be put in place by orders of the court.

8.2 What approaches do the courts typically take to class action proceedings? Are preliminary issues commonly tried first, or are test cases commonly heard? What are the implications of these different approaches for the proceedings?

In complex cases, the conventional course is for a class action to occur in two phases, with the first being the determination of the common issues. This usually also involves the determination of the lead applicant's case (including an assessment of the quantum of damages to be awarded to the lead applicant).

It is not usual for the first phase to include a determination of the quantum of damages of the whole group. However, the determination of the common issues will often provide the framework to be used in the second phase to resolve the remaining issues for the other group members.

This approach may vary if the court, in exercising case management principles, considers that it would be expedient to further reduce the scope of the first phase. For example, the court may order that the first phase should only determine the common issues and exclude the lead applicant's quantum case. Alternatively, the court could choose to refer out certain issues which are typically considered in the first phase, such as technical liability issues, to a court-appointed referee for determination.

Another exception to the conventional approach is when the court awards aggregate damages. This is a rare global award which covers all group members described or identified in the award rather than specifying amounts in respect of individual group members.

While the conventional first-phase trial will not usually consider the quantum for the group members apart from the applicant (unless aggregate damages are sought), the parties will inevitably be ordered to attempt to mediate before trial. Even though the loss of group members may not be required until the second phase, the plaintiffs must be able to provide a basis to assess group-wide losses for the purposes of mediation.

8.3 How do class action proceedings unfold in your jurisdiction?

Similar to general civil proceedings, class action proceedings in Australia follow the rules of the jurisdiction in which they are being run. For example, the typical stages of a class action proceeding include:

• preparation of pleadings;
• attendance of case management hearings to decide on timeframes and orders;
• discovery of documents pursuant to either a standard order for discovery or non-standard and more extensive discovery;
• preparation of expert and lay witness evidence;
• attendance of mediation;
• preparation for trial; and
• attendance of the trial.

There are additional procedural steps involved in class action proceedings, particularly at the beginning of the proceedings. For example, the Federal Court Class Actions Practice Note provides that:

• the parties must prepare a position paper summarising certain issues; and
• the applicant must disclose the funding arrangements, in advance of the first case management hearing.

8.4 What is the typical timeframe for class action proceedings?

The timeframe of a class action proceeding depends largely on the particular circumstances of the matter and nature of the claim. Class actions proceedings can take anywhere from 12 months to several years to be decided.

8.5 Is the decision issued in class action proceedings binding on all members of the class?

Yes, a judgment is binding on all class members that are defined as group members and have not opted out of the proceedings; but only as to the common issues. If a group member fails to opt out or register, it may still be bound by the court's decision, even though it may not have a right to recover any of the settlement sum. This is referred to as a ‘soft class closure'.

9 Remedies

9.1 What remedies are available in class actions in your jurisdiction?

The court can order a wide variety of relief in class actions. For example, it may:

• determine an issue of law or fact;
• make a declaration of liability;
• grant any equitable relief; or
• award damages. In awarding damages, the court may:
• • identify a specific amount for individuals or particular pools of group members;
  • identify methods of calculating a specific amount for individuals or particular pools of group members; or
  • determine an aggregate amount without specifying how much must be paid to individual group members.

9.2 Are punitive damages awarded in your jurisdiction?

Punitive (or exemplary) damages are rarely awarded in Australia.

Punitive damages are available at common law for a wide range of intentional torts; however, they are not available for claims of:

• defamation;
• breach of equitable obligations; or
• breach of contractual duty of confidence.

Aggravated damages are a different form of damages which are also available in Australia. Aggravated damages are awarded to a plaintiff that has suffered distress as a result of the defendant's actions. Conduct that causes the plaintiff to suffer shame or humiliation and causes injury to dignity or pride may attract an award of aggravated damages.

9.3 What factors will the courts consider in deciding on the quantum of damages?

The fundamental principle in assessing quantum of damages is that the quantum should only be that which is required to place the plaintiff in its original position.

The plaintiff bears the onus of proving that the defendant's conduct caused the loss claimed. At common law, the defendant bears the onus of proving:

• a failure to mitigate on the plaintiff's behalf; and
• any contributory negligence.

The onus is on the plaintiff to quantify damages. This may be done by presenting a report from an expert regarding the quantum and methodology for calculating the damages. For example, in a shareholder class action, there are a number of methodologies that can be adopted when quantifying losses, including the following:

• ‘No transaction' case: But for the alleged conduct, the shareholders would not have entered into any transaction;
• ‘Inflation' case: But for the alleged conduct, the shareholders would still have traded, but at an alternative hypothetical price;
• ‘Alternative transaction' case: But for the alleged conduct, the shareholders would have entered into an alternative transaction, such as an entirely different investment; or
• ‘Fundamental value' or ‘true value' case: This considers the question of what the shares were ‘truly' worth, using more traditional valuation methodologies such as a discounted cash-flow analysis when quantifying loss.

The quantum of damages is entirely dependent on the loss that has been suffered by the group members and the calculation of damages will depend on the facts of the case.

9.4 How are damages allocated among the members of the class?

Under Section 33Z(1)(e) of the Federal Court of Australia Act 1976 (Cth), the court may award damages for group members, sub-group members or individual group members consisting of specified amounts or amounts worked out in such manner as the court specifies.

Under Section 33Z(1)(f), the court can award damages in an aggregate amount without specifying amounts awarded in respect of individual group members only if a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment (see Section 33Z(3) of the act). The first instance of aggregate damages being awarded to a funded litigant in Australia occurred in 2022 in Williams v Toyota Motor Corporation Australia Limited (Initial Trial) [2022] FCA 34.

The first instance of aggregate damages being awarded pursuant to Section 33Z(1)(f) was in ACCC v Golden Sphere International [1998] FCA 598. The next award of aggregate damages was some 24 years later, in Williams v Toyota Motor Corporation Australia Limited (Initial Trial) [2022] FCA 34. That case is subject to appeal, including a challenge to the factual and legal basis for the award of aggregate damages. That appeal was heard in November 2022 and judgment is reserved.

Once the approach is determined, how damages are allocated depends on how the proceedings were resolved – that is, whether a settlement was reached or the matter proceeded to final judgment. In the former case, there is a set sum of money to be distributed to group members.

If there is a litigation funder involved, depending on the funding arrangements in place, the funder will usually be reimbursed for the costs it has spent in the proceedings. The funder will usually also be entitled to a portion of the settlement sum by way of a common fund order, a funding equalisation order or a group fund order (see question 11). Following that, the remainder of the settlement sum is distributed to group members.

If the case proceeds to a final judgment and a determination is made on the common questions, if a settlement is then not reached to determine the claims of the class, there is then a second stage of the proceedings in which individual group members need to come forward and prove their individual loss. At this stage, if a group member is unable to prove its individual claim, it will not be entitled to any damages.

10 Appeals

10.1 Can the court's decision in the class action be appealed? If so, on what grounds and what is the process for doing so?

Yes. Under the Federal Court of Australia Act 1976 (Cth), courts can hear appeals regarding:

• judgments of a judge in the Federal Court, whether interlocutory or final;
• judgments of a supreme court of a territory other than the Australian Capital Territory (ACT) or the Northern Territory (NT);
• certain judgments of the courts of a state, the ACT or NT (other than a Full Court of the Supreme Court); and
• certain judgments of the Federal Circuit Court.

Appeals are heard by the Full Court of three or more judges.

To succeed, the appellant must show that there was an error in the judgment, which could be because a finding is not supported by the evidence or an incorrect principle of law was applied.

In the Federal Court, a party wishing to appeal must complete a notice of appeal, which must be filed and served on the other party within 28 days (though a request for an extension of time can be made).

A party needs leave to appeal certain decisions (eg, interlocutory decisions), and such an application must be made within 14 days.

There are equivalent processes for appeals in each of the other state and territory courts.

In 2019, there was a historic joint sitting of the New South Wales (NSW) Court of Appeal and the Full Court of the Federal Court of Australia. The two-day hearing was conducted before three judges of the Full Federal Court and three judges of the NSW Court of Appeal relating to two class actions, Brewster v BMW Australia and Westpac Banking Corporation v Lenthall. Although the two class actions did not involve the same subject matter, both proceedings had given rise to a question regarding the court's power to make common fund orders; and as such, the chief justice of the Federal Court, the chief justice of the NSW Supreme Court and the president of the NSW Court of Appeal agreed to conduct the historic joint sitting.

11 Costs and fees

11.1 What costs and fees are incurred when litigating in your jurisdiction? Can the winning party recover its costs?

The costs and fees incurred in litigating class actions vary greatly and depend on the complexity of the particular case. For example, proceedings with many issues and multiple respondents will cost more to run than a proceeding with simple issues against only one respondent.

Class action litigation is typically more expensive than general litigation, as there are more procedural steps which are not present in individual litigation. For example, steps must be taken to notify group members of certain stages in the proceedings (eg, the ability to opt out of the proceedings) which can be very expensive, particularly if the class size is very large.

The courts in Australia have the power to order that an unsuccessful party pay the costs of the successful party, although the amount that may be recovered varies from court to court. Costs are at the discretion of the court. Unless it appears to the court that some other order should be made, costs follow the event. The usual adverse order for costs requires the unsuccessful party to pay the successful party's reasonable legal costs.

There are differing regimes for the determination of the reasonable legal costs that an unsuccessful party is obliged to pay.

11.2 How are the costs and fees allocated among the members of the class?

How the costs and fees are allocated among group members depends on whether a proceeding is funded by a litigation funder (and if so, the funding arrangements in place).

Where a litigation funder is present, the court will usually make either a common fund order (CFO) or a funding equalisation order (FEO).

A CFO has the effect of binding all group members to the terms of a funding agreement, not just those that have executed the agreement. The purpose of the CFO is to equalise the distribution of damages such that unfunded claimants must also contribute to the costs of the claim, including the funder's fee. A CFO usually involves the payment of a percentage of the action recovery to the litigation funder, plus reimbursement of the legal costs borne by the funder. It can be controversial as to whether the funder is entitled to reimbursement of adverse cost insurance (if any). A justification for the making of a CFO is to prevent ‘free riders' taking the benefit of the action without contributing to its cost.

There have also been some instances where the court has declined to make a CFO, but rather has made an FEO. An FEO also provides for deductions to be made from the amounts payable to group members that did not enter into funding agreements in order to spread the burden of the legal costs and funding commission across the group members. However, in the instance of an FEO, the funder's commission is capped at the amount the funder would have been entitled to from group members that had entered into a funding agreement.

Where no litigation funder is involved, class actions are usually run by law firms on a ‘no win, no fee' basis. In the jurisdictions where contingency fee arrangements are prohibited (ie, all jurisdictions except Victoria), lawyers are permitted to charge an ‘uplift' of up to 25% of ‘at risk' fees based on standard hourly rates.

The Victorian Supreme Court regime permits contingency fees to be paid to plaintiff law firms in class action proceedings. The new legislation provides that the liability for the payment of legal costs must be shared among the plaintiff and group members in the class action, known as a group costs order (GCO). The remaining jurisdictions in Australia are yet to implement an equivalent scheme. The main difference between a CFO and a GCO is that a CFO is usually exclusive of the cost reimbursement group members will also have to pay, while a GCO is inclusive of costs. As such, a GCO should result in a higher net return to group members.

11.3 What happens if the claim of a class member is withdrawn before the proceedings have terminated?

Generally, class actions in Australia are commenced on an open basis, meaning that claims are commenced and initially pursued on behalf of a defined group, regardless of whether all members of the group are aware of the claim when it commenced. As such, the applicant need not seek the consent of group members to commence a class action on their behalf.

Part IVA of the Federal Court of Australia Act 1976 (Cth) provides that, prior to a hearing of the claims in the representative proceeding, notice must be given to group members providing them with the opportunity to ‘opt out' of the proceeding. This has no impact on the progress of the claim itself, but means that the group member will not be bound by the outcome of the proceeding (where it resolves by settlement or judgment) and will be free to pursue its own claim.

If the representative applicant wishes to withdraw, however, the applicant must be substituted with another group member.

11.4 Do the courts manage costs during the proceedings?

Generally, the court will only have oversight over the costs which were incurred in the class action at the conclusion of the proceedings, when the plaintiff is seeking approval of the settlement or after judgment has been delivered.

One exception to this is in cases where two competing class actions have been consolidated and are being run jointly by two separate firms. In order to ensure that the interests of group members are protected, the court will have oversight of the costs being incurred throughout the course of the proceeding.

In these instances, it is common for the court to appoint an independent costs referee to enquire and report to the court on the costs incurred throughout the course of the litigation. In AMP Commissions and Insurance Class Action (Nigel Peter Stack & Ors v AMP Financial Planning Pty Limited (ACN 051 208 327) & Ors (VID489/2020), which is a proceeding being run jointly by two separate firms, in order to ensure that the group members' interests were protected, the court ordered that the firms establish a litigation committee for the making of decisions and appointed an independent costs referee to enquire and report on the costs incurred.

11.5 How do the courts assess the costs and fees at the end of the proceedings?

In the context of the settlement of a class action, the legislation requires that any settlement be approved by the court. Those powers provide a level of discretion in the courts to moderate the legal and other professional costs incurred in the conduct of the litigation, the third-party funder fees and interest, and to enquire into the probity of the funding arrangements.

It is common in the context of settlement approval applications for the applicant to engage, or for the court to appoint, an independent costs expert to report on the reasonableness of the costs incurred. This assists the court in determining how much the applicants' solicitors should be entitled to be reimbursed for their costs from the settlement sum.

If the matter proceeds to a final hearing, the successful party will usually be entitled to a costs order in its favour. If a party is awarded its costs and those costs are not agreed between the parties, they may need to proceed to a process known as a costs assessment. This is where a registrar (in the Federal Court) or an independent solicitor (in the Supreme Court of New South Wales) reviews the invoices and material and assesses what component of those costs were reasonably incurred. The costs assessor/referee will prepare a certificate of costs, which can then be enforced as a judgment by the party.

12 Funding

12.1 Is legal aid available for class actions in your jurisdiction? If so, what requirements and restrictions apply in this regard?

Class actions run by legal aid are not common in Australia. More commonly, legal aid organisations will take steps to refer their clients to class actions being run by law firms which have the capacity and resources to run class actions.

In 2004, Legal Aid NSW identified that large numbers of young people were being arrested for breach of bail where in fact their bail conditions had been varied at their last court appearance or had been dispensed with, or where the matter had been finalised. Ultimately, these findings led to the commencement of the Konneh class action.

In 2016, Legal Aid NSW commenced proceedings against five Cash AFX stores claiming breaches of the National Credit Code and other laws. Over 8,000 customers were group members in the class action.

The Australian Law Reform Commission has considered in the past whether there should be a special fund established to provide for the costs of parties involved in class actions. In its report, entitled Grouped Proceedings in the Federal Court, Report 46 (December 1988), it was envisaged that the fund would apply a merit test to any application for financial assistance and would "provide support for the applicants' proceedings and … meet the costs of the respondent if the action was unsuccessful". This was then mentioned in the Australian Law Reform Commission's 2019 report, but did not form part of the recommendations in the report.

12.2 Are contingency fees and similar arrangements permitted in your jurisdiction? If so, what requirements and restrictions apply in this regard?

‘No win, no fee' conditional costs agreements are permitted in Australia.

There are prohibitions on legal service providers obtaining a fee calculated by reference to the amount of a settlement or judgment in all states except Victoria.

In the jurisdictions where contingency fee arrangements are prohibited, lawyers are permitted to charge an ‘uplift' of up to 25% of ‘at risk' fees based on standard hourly rates. The permissible percentage uplift may vary from state to state.

In 2020, the group costs order (GCO) regime was introduced into the Supreme Court Act 1986 (Vic), allowing the Supreme Court of Victoria to make an order in class action proceedings providing for a plaintiff law firm to charge legal costs calculated as a percentage of any damages award or settlement.

The first successful GCO was made in Allen v G8 Education Ltd [2022] VSC 32. In that case, Justice Nichols approved the GCO proposed by the plaintiff, which fixed the fees of the plaintiff's law firm at 27.5% of the total award or settlement amount. In approving the GCO, Nichols considered it relevant that the GCO would cap the costs of the law firm and mitigate against the risk of having to pay adverse costs. Nichols considered that because the GCO would mean the plaintiff and group members would receive no less than 72.5% of any final award or settlement amount, it would provide the plaintiff and group members with a sense of certainty about their return.

As can be seen from this judgment, the central focus on the enquiry in respect of whether to grant a GCO is what would best promote the interests of the plaintiff and group members in the circumstances.

12.3 Is third-party funding permitted in your jurisdiction? If so, what requirements and restrictions apply in this regard?

Third-party litigation funding is permitted in Australia and is commonly used. However, third-party litigation funders are subject to some requirements and restrictions.

The Federal Court Class Actions Practice Note:

• requires disclosure to group members that are clients or potential clients of the applicant's lawyers of the applicable legal costs or litigation funding charges in class action matters; and
• sets out the manner in which these arrangements should be communicated.

The court must also be provided with a copy of any litigation funding agreement. Disclosure of a litigation funding agreement to other parties to the litigation is also required, with the disclosure being redacted to conceal information that might reasonably be expected to confer a tactical advantage.

Under legislation enacted in August 2020, litigation funders in Australia must hold an Australian financial services licence (AFSL). AFSL holders must abide by their licence conditions and the general conduct obligations under Section 912A of the Corporations Act 2001 (Cth). AFSL holders authorised to provide financial services to retail clients must also become members of an external dispute resolution scheme.

While there is presently no legislation or regulation in Australia that limits the fees that funders can charge, the court does play a role in determining what fee the funder is entitled to receive.

When it comes to the calculation of the funder's fee, the court will generally make either a common fund order (CFO) or a funding equalisation order (FEO). A CFO has the effect of binding all members of the represented group to the terms of a funding agreement, not just those which have executed the agreement, thereby equalising the distribution of damages such that unfunded claimants must also contribute to the costs of the claim. An FEO provides for deductions to be made from the amounts payable to group members that did not enter funding agreements in order to spread the burden of the funding commission across the group members. However, in the instance of an FEO, the funder's commission is capped at the amount the funder would have been entitled to from group members that had entered into a funding agreement.

12.4 What are the specific implications of such various funding arrangements in class action proceedings?

Where a third-party litigation funder is involved, specific implications include the following:

• Usually, the applicant will be required to provide security for the respondent's costs.
• The third-party litigation funder will generally have involvement in the day-to-day running of the claim and will have input into the strategy and claim management.
• In accordance with the Federal Court Class Actions Practice Note, litigation funding arrangements must be disclosed to the court, and to the respondent, at an early stage of the litigation.
• Due to the funder's entitlement to claim a percentage of any settlement or judgment, there is less certainty in terms of ultimately recovery to group members.
• Access to justice can be provided where law firms do not have the resources or ability to commence actions on a no win, no fee basis, or on the basis that a GCO will be sought.

Where there is no third-party litigation funder, the implications include the following:

• If the proceedings are commenced in the Supreme Court of Victoria, the law firm will be entitled to seek a GCO. This allows the firm to charge legal costs calculated as a percentage of any damages award or settlement. The implication of this is that there is only one deduction from the settlement pool, and as such there is more certainty to group members as to the ultimately percentage that will be distributed.
• A procedural step will be required at an early stage in the proceeding, in that the plaintiff will need to make an application for a GCO.

13 Trends and predictions

13.1 In which areas are class actions most commonly brought? Have there been any major cases of note in recent years?

Between 1 July 2021 and 30 June 2022, 54 new class actions were filed. The breakdown of types of claims filed was as follows:

• 13 security (or shareholder) actions;
• 13 consumer cases;
• nine claims against the government;
• eight employment actions;
• five financial product claims; and
• four other claims.
  

The most significant decision recently was that of the Full Court of the Federal Court of Australia in LCM Funding Pty Ltd v Stanwell Corporation Limited [2022] FCAFC 103.

Stanwell overturned a 2009 decision of the Full Court of the Federal Court in Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd (2009) 260 ALR 643, which held that in certain circumstances, a litigation funding scheme may constitute a managed investment scheme. In Stanwell, the Full Court of the Federal Court unanimously held that litigation funding schemes are not ‘managed investment schemes' (MIS) within the meaning of Section 9 of the Corporations Act 2001 (Cth) and that the decision in Brookfield was "plainly wrong".

The effect of this is that litigation funders no longer need to comply with the MIS regime, which was a problematic and expensive regime which was not well suited to the class action regime.

13.2 How would you describe the current class action landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The most significant development which will impact the class action landscape over the next 12 months was the change from a Liberal government to a Labor government.

In late 2021, the Liberal government put forward proposed legislation which sought to have litigation funders comply with certain regulatory regimes and regulate the amount of commission a funder could receive from a class action. The Labor government, which is now in power, has indicated it will not be proceeding with the proposed legislation, and the new approach by the Labor government may ultimately lead to a rise in funded class actions as greater certainty returns to the funded class action landscape.

The Honourable Mark Dreyfus KC MP, the attorney general, has announced that the current government is considering appropriate legislative reforms and will do so by considering the recommendations made by the Australian Law Reform Commission in its report Integrity, Fairness and Efficiency — An Inquiry into Class Action Proceedings and Third-Party Litigation Funders released in December 2018.

It appears from the comments made by the Labor government that any regulatory change will be bespoke to the class action regime and made with consultation of industry specialists.

There is also a trend towards actions being commenced in the Supreme Court of Victoria to seek a group costs order (GCO) (ie, firms being entitled to a percentage of any settlement or judgment). There is discussion within industry that GCOs will be nationalised in the future and contingency fee claims will be capable of being brought in other jurisdictions.

14 Tips and traps

14.1 What would be your recommendations for the smooth progress of class actions in your jurisdiction and what potential pitfalls would you highlight?

Running a class action is inevitably highly unpredictable. The progress of an action can depend on the attitude taken by the respondent, as well as whether you need to deal with any competing class actions from the outset. It is important to be prepared for protracted, hard-fought litigation.

It is also important to take time in preparing and budgeting litigation at the outset, to avoid unexpected costs and budget blow-outs.

Additionally, it is a good idea to engage experts and a counsel team at an early stage of the process to work through issues with them, with the client, and with the third-party litigation funder if one is involved.

It can also be advisable to take out after-the-event insurance in order to protect your client, the funder or your firm from an adverse costs order.

Ultimately, it is very important to stay abreast of the ever-evolving class action landscape and regulatory environment.

Contributors: Madison Smith (Associate) and Millie Byrnes Howe (Associate)

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.