Re-opening of class closure in Federal class actions

By Jason Betts, Christine Tran, Aoife Xuereb, Brock Gunthorpe and Maddison Ives

In 2020, two decisions of the NSW Court of Appeal created considerable doubt on the availability of class closure orders in class actions filed in the Federal Court: see article here.

In February 2022, the Full Court was asked to clarify the position by addressing two reserved questions:

• Does the Federal Court of Australia have power pursuant to s.33ZF or otherwise to make an order, which has the effect of providing that any Group Member who by a specified deadline: (i) has not registered in accordance with the orders of the Court; or (ii) has not opted out of this proceeding in accordance with the orders made by the Court, will remain a Group Member for all purposes of this proceeding but shall not, without leave of the Court, be permitted to seek any benefit pursuant to any settlement (subject to Court approval) of this proceeding that occurs before final judgment?
• Does the Federal Court of Australia have power to approve a notice to Group Members giving notice to the Group Members that upon any settlement of this proceeding the applicant will seek an order, which, if made, has the effect of providing that any Group Member who by a registration date: (i) has not registered; or (ii) has not opted out in accordance with the orders made by the Court, will remain a Group Member for all purposes of this proceeding but shall not, without leave of the Court, be permitted to seek any benefit pursuant to any settlement (subject to Court approval) of this proceeding that occurs before final judgment?

Development

In brief, the Full Court held that:

• the Court has the power to order that notices be given to group members, requiring them to register their interest to participate in a settlement by a specified deadline and foreshadowing that, in the event an in principle settlement is later reached, the applicant intends to apply for an order that any group member who neither opted out nor registered will be bound by the settlement but will not be able to seek any benefit under the settlement (i.e. a class closure order to be made in the future as part of the settlement approval application) (33X(5) Notice);
• in the circumstances of the present case, given the power available to issue 33X(5) Notices, there is no power enlivened pursuant to s.33ZF to make orders precluding group members who neither opted out nor registered by the specified deadline (i.e. a class closure order made prior to settlement).

See Parkin v Boral Limited (Class Closure) [2022] FCAFC 47.

What does this mean for class action participants?

The practical effect of the Parkin decision is, by way of 33X(5) Notices, the parties will effectively be able to achieve class closure. It is anticipated that almost all group members wishing to participate in a settlement will take steps to register (and those who do not will likely be shut out from any settlement but remain group members for all other purposes).

Accordingly, the information obtained by way of a 33X(5) Notice will enable the parties to:

• obtain clarity and a proper understanding of the quantum of the claim to be resolved; and
• delimit the class size for the purpose of settlement negotiations.