Federal Court of Australia
Parkin v Boral Limited (Class Closure) [2022] FCAFC 47
ORDERS
| ||
Applicant | ||
AND: | BORAL LIMITED (ACN 008 421 762) Respondent | |
DATE OF ORDER: | 28 March 2022 |
THE COURT ORDERS THAT:
1. The questions reserved pursuant to s 25(6) of the Federal Court of Australia Act 1976 (Cth) (Act) and r 30.01 of the Federal Court Rules 2011 (Cth) arising in relation to the applicant’s amended interlocutory application filed 14 December 2021 and the respondent’s interlocutory application filed 24 February 2021 be answered as follows:
1 Does the Federal Court of Australia have power pursuant to s 33ZF of the [Act] or otherwise to make an order in terms of prayer 9 of the Interlocutory Application (or in substantially similar terms), which has the effect of providing that any Group Member who by the Class Deadline (as defined in the Interlocutory Application): (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?
Answer: This question is inappropriate to answer in the abstract, but in the present case, and given the availability of the specific power available under s 33X(5) of the Act to give a notice to group members in the form contemplated by Question 2, no power under s 33ZF is enlivened.
2 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 Mr Parkin 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?
Answer: Yes, pursuant to s 33X(5) of the Act.
2. There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
MURPHY AND LEE JJ:
A INTRODUCTION
1 In this securities class action, a judge of the Court has made an order pursuant to s 25(6) of the Federal Court of Australia Act 1976 (Cth) (Act) and r 30.01 of the Federal Court Rules 2011 (Cth) reserving for determination by the Full Court the following two questions, arising in relation to interlocutory applications filed by each of the parties.
2 The interlocutory application filed by the applicant, Mr Parkin, gives rise to the following question for determination (first question):
Does the Federal Court of Australia have power pursuant to s 33ZF of the [Act] or otherwise to make an order in terms of prayer 9 of the Interlocutory Application (or in substantially similar terms), which has the effect of providing that any Group Member who by the Class Deadline (as defined in the Interlocutory Application filed by Mr Parkin): (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?
3 Given its importance to the first question, prayer 9 of Mr Parkin’s application should be set out in its precise terms:
Subject to any further order of the Court, and pursuant to section 33ZF of the Act, any Group Member who by the Class Deadline [being the date by which Group Members are required to opt out or register]: (i) has not registered in accordance with the manner provided for in Order 5 to 8 above; or (ii) has not opted out of this proceeding in accordance with the orders made by the Court (including Order 2 above) (Unregistered Group Member), 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.
4 The application also seeks a miscellany of other orders dealing with both opt out and a “claim registration” process in advance of a Court ordered mediation. The primary position of both parties is that the prayers for relief in this application should be made by the docket judge.
5 The interlocutory application filed by the respondent, Boral, gives rise to the following question for determination (second question):
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 Mr Parkin 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?
6 As its primary position, Boral seeks the same orders as Mr Parkin. In the alternative, in the event the Court concludes that in the circumstances of the case s 33ZF is not a source of power to make an order in terms of prayer 9 of Mr Parkin’s application, Boral’s application seeks an order in terms of prayer 3, as follows:
The notices to group members which are Annexures B and C to [Mr Parkin’s application] are amended so as to state that upon any settlement of this proceeding Mr Parkin will seek an order, which, if made, has the effect of providing that any Group Member who by the Class Deadline: (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.
(Emphasis added).
7 In relation to the first question, as can be seen, apart from dealing with opt out, the intention of the parties is to put in place a regime whereby group members provide, in advance of the mediation, identified details of their claim against Boral. If relevant details are not provided by a group member by a specified date (Class Deadline), which group member has not opted out, then if a settlement is approved, that group member (Unregistered Group Member) is not, without leave of the Court, permitted to seek any benefit pursuant to any settlement. Hence, subject to further order, the regime anticipates the happening of an event (being an exercise of power) at a future time if, and when, the Court is called upon to consider whether it should approve a settlement. Put another way, by the orders, notification is given that the group members’ representative, Mr Parkin, may be putting before the Court for approval (on the basis that it is fair, reasonable, and in the interests of the group members as a whole and as between group members) a settlement whereby any Unregistered Group Member will not enjoy any benefit other group members would receive, being those group members who had taken the step of registering by providing the relevant details (Registered Group Members). The orders also provide that, if there is no approved settlement prior to judgment, the Unregistered Group Members would be able to take the benefit of any judgment obtained at the initial trial and proceed to maintain their individual claim against Boral.
8 The orders sought in relation to the first question are a version of what has become known as a “soft closure order”. Some have deprecated what they have described as the use of “jargon” in class actions procedure. For two reasons, in the present instance, critics have a point. First, orders for soft closure do not result in “closing” an “open class action” by transmogrifying it into a “closed class action” (where group membership is defined by reference to some registration or sign-up process); rather, the order proposes a demarcation between group members: Registered Group Members (sometimes called “participating” group members) and Unregistered Group Members (sometimes called “non-participating” group members), which demarcation only has an effect if a settlement is later reached by the parties and approved by the Court. Secondly, there is a danger about dealing with questions of power in the abstract: one must be cautious in assuming determinations as to power reached in other cases which involve some bespoke form of “class closure” order, necessarily transpose to other forms of orders.
9 But despite these important limitations, the use of shorthand can assist by conveying concepts of complexity with economy and simplicity, and there is some use in the well-known label, in part because it distinguishes “soft closure” from “hard closure”, as discussed below.
10 In relation to the second question, again, apart from dealing with opt out, the intention of the parties is to put in place a regime whereby group members provide, in advance of the mediation, identified details of the claim against Boral. The essential difference from the terms of the proposed orders giving rise to the first question is that this proposed order provides only that group members are to be given notice that, upon any settlement of the proceeding, Mr Parkin intends to seek an order in a settlement approval application under s 33V which, if made, will have the effect of providing that any group member who has not registered by the Class Deadline is not, without leave of the Court, permitted to seek any benefit pursuant to any settlement (subject to Court approval) of the proceeding that occurs before final judgment. The notice foreshadows an application for class closure which the applicant intends to later make, and such an order does not at that point occasion any change in the status of that group member.
11 Like with many other aspects of class action procedure, to understand why closure orders came to be made in other class actions, and why they are commonly thought by class action practitioners to have utility, it is necessary to revisit some foundational aspects of how Pt IVA deals generally with the claims of non-party group members. It is only when this hinterland is appreciated and considered that one can best come to understand the context and purpose of the provisions within Pt IVA. In addition, as explained below, there must be a focus on the precise terms of the order sought when considering questions of power.
12 The balance of these reasons will be divided into the following sections:
B THE EVIDENCE
C THE KEY LEGISLATIVE PROVISIONS
D THE “HINTERLAND” – HOW PT IVA DEALS WITH CLAIMS
E CLASS CLOSURE ORDERS GENERALLY AND THE CASES
F THE CONTRADICTOR’S SUBMISSIONS
G CONSIDERATION
H ORDERS AND CONCLUSION
B THE EVIDENCE
13 The parties rely on the affidavits of Julian Schimmel, a principal of Maurice Blackburn, the solicitors for Mr Parkin, affirmed 7 February 2022, and of Jason Betts, a partner of Herbert Smith Freehills, the solicitors for Boral, affirmed 8 February 2022. Although we are presently concerned with issues of power, and the utility of the proposed orders is a distinct consideration, the evidence adduced does provide part of the context in which the power to make the orders is sought to be invoked. Further, and more specifically, the evidence allows the Full Court to consider when a pre-condition to the exercise of power under s 33ZF exists: that is, whether the proposed order can be conceived of as being “appropriate or necessary to ensure that justice is done in the proceeding” (being words of limitation on the exercise of this “gap filling” power).
14 Both Mr Betts and Mr Schimmel are experienced class action lawyers, and their evidence broadly reflects the rationale for the making of class closure orders evident in the remarks of the Full Court in Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; 252 FCR 1 (at [74]–[75] per Jagot, Yates and Murphy JJ). They were not cross-examined and we accept their evidence. They deposed that in an open class action like the present case (in which the group definition does not have a limiting criterion such as having registered with or entered a retainer or a funding agreement with a particular firm of solicitors or litigation funder):
(a) the identity of all eligible group members is not known or knowable to the parties; and
(b) even if the identity of all eligible group members were in fact known to the parties, it would always be necessary for group members to take an active step to identify themselves if a settlement is reached so that their share of any settlement monies can be calculated and payment of such monies to them can be effected.
15 They gave evidence that an order in the terms of prayer 9 will facilitate settlement of the proceeding by defining the population of participating group members and enabling their losses to be better assessed before mediation, and by allowing greater finality of litigation for Boral upon any settlement. Mr Schimmel and/or Mr Betts also deposed that:
(a) such an order will advance the prospects of settlement as it will allow the parties to have a better understanding of the total quantum of group members’ claims, and will allow offers and counter-offers by the parties to be made on a more secure footing;
(b) the assessment of aggregate claim value allowed by such an order is important for Mr Parkin’s lawyers as it allows them to have more confidence that they are in a position to recommend a settlement offer to Mr Parkin. Such an order will also permit the lawyers to have more confidence in assessing whether, in the circumstances of the case, any proposed settlement is fair and reasonable and in the interests of group members such that it is likely to be approved by the Court. On Boral’s side, Mr Betts’ evidence is that in the absence of a class closure order, many respondents are unwilling to countenance settlement;
(c) unless such an order is made, Mr Parkin’s lawyers will be in the dark as to the number of group members who might later make claims against the settlement fund and the estimated quantum of their claims. This requires assumptions to be made about the likely “participation rate” of group members in any settlement before Mr Parkin’s lawyers can be in a position to recommend a settlement. Such assessments are rife with uncertainty and, when wrong, can seriously reduce the parties’ preparedness to settle a class action (thus reducing the utility of the regime). For example, on the applicant’s side, if more group members participate in the settlement than was estimated to be likely, that will dilute group member’s entitlements, perhaps to the point that the applicant’s lawyers no longer regard the proposed settlement as fair and reasonable, or to the point that the Court is not prepared to approve it. Mr Betts referred to the available techniques for structuring a settlement of an “open” class action but gave evidence that they all involve considerable uncertainty as to the number and value of alleged claims of group members at the time of mediation, and accordingly involve a significantly increased risk that the mediation will be unsuccessful; and
(d) such an order will assist Boral in achieving finality (to the extent the Pt IVA regime allows); it will mean that Boral can resolve the universe of potential claims against it (save for the claims of group members who opt out) which avoids the prospect of another class action and reduces the prospect of a slew of individual claims.
C THE KEY LEGISLATIVE PROVISIONS
16 Mr Parkin and Boral each contended that the source of the power to make an order in terms of the first question is s 33ZF of the Act, as an exercise of power incidental to the power in s 33V. In relation to the second question, they contended that the source of the power to make an order in the terms contemplated is s 33X(5). The Contradictor argued that those provisions are not a source of power to make an order in the terms of either the first or second question.
17 Section 33ZF is in Div 6 of Pt IVA, headed “Miscellaneous”. It provides:
General power of Court to make orders
(1) 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 the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
(2) Subsection (1) does not limit the operation of section 22.
18 Section 22 is concerned with the Court’s obligation to grant “all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward” in the matter.
19 Section 33V is in Div 2 of Pt IVA. It provides:
Settlement and discontinuance—representative proceeding
(1) A representative proceeding may not be settled or discontinued without the approval of the Court.
(2) If the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court.
20 Section 33X is in Div 3 of Pt IVA. It provides:
Notice to be given of certain matters
(1) Notice must be given to group members of the following matters in relation to a representative proceeding:
(a) the commencement of the proceeding and the right of the group members to opt out of the proceeding before a specified date, being the date fixed under subsection 33J(1);
(b) an application by the respondent in the proceeding for the dismissal of the proceeding on the ground of want of prosecution;
(c) an application by a representative party seeking leave to withdraw under section 33W as representative party.
(2) The Court may dispense with compliance with any or all of the requirements of subsection (1) where the relief sought in a proceeding does not include any claim for damages.
(3) If the Court so orders, notice must be given to group members of the bringing into Court of money in answer to a cause of action on which a claim in the representative proceeding is founded.
(4) Unless the Court is satisfied that it is just to do so, an application for approval of a settlement under section 33V must not be determined unless notice has been given to group members.
(5) The Court may, at any stage, order that notice of any matter be given to a group member or group members.
(6) Notice under this section must be given as soon as practicable after the happening of the event to which the notice relates.
(Emphasis added).
21 Section 33Y is a machinery provision concerned with notices under s 33X. Among other things, it provides that the form and content of any notice to be given to group members must be approved by the Court; further, the way in which the notice is to be given to group members must be as specified by the Court: s 33Y(2) and (3).
22 Section 33K provides:
Causes of action accruing after commencement of representative proceeding
(1) The Court may at any stage of a representative proceeding, on application made by the representative party, give leave to amend the application commencing the representative proceeding so as to alter the description of the group.
(2) The description of the group may be altered so as to include a person:
(a) whose cause of action accrued after the commencement of the representative proceeding but before such date as the Court fixes when giving leave; and
(b) who would have been included in the group, or, with the consent of the person would have been included in the group, if the cause of action had accrued before the commencement of the proceeding.
(3) The date mentioned in paragraph (2)(a) may be the date on which leave is given or another date before or after that date.
(4) Where the Court gives leave under subsection (1), it may also make any other orders it thinks just, including an order relating to the giving of notice to persons who, as a result of the amendment, will be included in the group and the date before which such persons may opt out of the proceeding.
(Emphasis added).
D THE “HINTERLAND” – HOW PT IVA DEALS WITH CLAIMS
23 In Dyczynski v Gibson [2020] FCAFC 120; 280 FCR 583 (at [325]–[343]), among other things, Lee J dealt with: (a) how a person becomes a group member; (b) how a person who is a group member ceases to be a group member; and (c) how the claim of a group member is determined in whole or in part. What follows draws upon that analysis but it merits synthesising and restating in order to appreciate how Pt IVA deals with the claims of group members generally.
24 Pt IVA permits a class action to be commenced by a representative party on behalf of group members (s 33C) whose consent is generally not required (s 33E) but who must be given notice of and an opportunity to opt out of the proceeding (s 33J): see BMW Australia Ltd v Brewster [2019] HCA 45; 269 CLR 574 (at [108] per Gageler J).
25 Section 33C(1) identifies the circumstances when a class action may be commenced including that the group members must have a “claim” against a respondent which has identified aspects of commonality. As has often been explained, a “claim” is a broad concept and to speak of a group member or proposed group member having a “claim” is not to speak of them as having a right or entitlement to relief; rather, the “claim” (as the word implies) is the existence of a set of circumstances existing anterior to, and separately from, the class action, which, through the exercise of judicial power, may ground a right or entitlement to relief when that person’s rights and entitlements against another person are considered and then determined.
26 These are the claims which the class action mechanism then proceeds to resolve. Speaking broadly, it does so in two ways: first, either following a contested hearing or hearings, or secondly, by approving a settlement resolving the claims.
27 As to the first way, this usually occurs after an initial trial of common issues. Following the determination of common issues, orders are made pursuant to s 33ZB. The “statutory estoppel” arising upon the making of s 33ZB orders is the mechanism by which non-party group members are bound by the determination of common questions. The answer to the common questions might (but might not) determine the individual claims of group members. This will depend upon the nature of the claim, and the nature of the answer. In the common circumstance when the answer to a common question or questions is not determinative, it will be necessary for the group members’ claims to then be determined, usually following a “declassing” order.
28 It is the second way that is presently relevant, that is, a resolution of the claims advanced by the representative applicant, which is the subject of an application for settlement approval. Again, but in a different way, the approval of a settlement is accompanied by a binding order under s 33ZB and will amount to a quelling of the grouped individual controversies between one group of actors (the group members) and another (the respondent). Of course, such a controversy is only allowed to be determined without hearing from non-party group members to the extent the controversy involves common issues.
29 We are about to enter upon our fourth decade of modern class actions. Particularly in securities class actions, experience demonstrates that, by an overwhelming margin, Court-approved settlements are the most common way group members claims are resolved in Pt IVA class actions. As was noted in Perera v GetSwift Ltd [2018] FCA 732; 263 FCR 1 (at [30] per Lee J), this characteristic of this type of litigation is both striking and singular. The result of all of this is that there is a potential procedural contradiction in the way in which securities class actions are often conducted and managed. On the one hand, one goes through the solemnity of making orders on the basis that the litigation will be the subject of an initial trial at which contested issues will be determined, while on the other hand, one recognises that this rarely happens. As was noted in GetSwift (at [34]) “the time has come for the Court to recognise the reality” that securities class actions “are overwhelmingly likely to resolve by a bargain, subject to Court approval”.
30 One of the ways by which this reality is recognised is the focus of the docket judge, consistently with the requirement in Pt VB of the Act to facilitate the just resolution of claims as efficiently and inexpensively as possible, on assessing when a mediation should be ordered to take place. This important case management decision is primarily informed by an evaluation of when the prospects of a successful outcome of settlement discussions are at their maximum. In this context, it is now common for the Court to make orders requiring provision of information by respondents, the applicant or group members to allow those mediating to be apprised with sufficient information to form a conscientious view as to a proposed settlement.
31 With these general aspects of Pt IVA procedure and experience in mind, it is now appropriate to deal with class closure orders.
E CLASS CLOSURE ORDERS GENERALLY AND THE CASES
32 Much has been said about the responsibilities of those acting for applicants to ensure that any settlement proposed to the Court must not be put forward unless the practitioner considers, on reasonable grounds, that it can be advanced as a settlement that is fair and reasonable and in the interests of group members. As those experienced in acting for applicants in class actions are aware, the proper ethical discharge of this responsibility may sometimes necessitate awkward conversations and unwelcome advice. Senior practitioners particularly must be sensitive to the possibility that the economic interests of funders or solicitors may favour compromise in cases where running the proceeding to a judgment is likely to produce a more favourable outcome from the perspective of group members.
33 It is well and good to pay regard to the need for those acting for applicants to be apprised of sufficient information, including class and claim size and potential recovery, so as to allow them to discharge their duties in participating in settlement discussions. But depending upon the nature of the case, it can be equally important for those acting for respondents at a mediation to be aware of sufficient information as to the nature and quantum of the claims advanced against their client. And as the saying goes: it takes two to tango.
34 It must also be remembered that in the context of settlement discussions, the solicitors acting for respondents have duties to their clients. Sometimes those duties will extend to doing their best to ensure that if a class action settles, their client is freed from the vexation that copycat litigation could spring up, like the Lernaean Hydra. Cutting off each source of future conflict (to the extent possible) is often an important part of the role of a respondent’s lawyer participating in the negotiation and finalisation of a proposed settlement. Depending upon the circumstances, there can be cases where settlement is only possible (or its prospects are materially increased) if a respondent is able to be assured that the claims of all group members will be resolved if a settlement is approved.
35 It was in recognition of this reality that courts were persuaded to not only require the exchange of relevant details about the size of any claim, but also to make class closure orders.
36 Such orders were usually made by consent on the applicant’s application. The application was supported by evidence that the parties considered that a registration regime would facilitate settlement. They took different forms and were made without any detailed analysis. But in whatever form they were made, they had two basic components: first, they required group members to take a positive step to “register” their interest in participating in any settlement by a particular date; and secondly, they prescribed a consequence of non-registration, namely that the unregistered group member would not be able to participate in any settlement that is subsequently approved by the Court as fair and reasonable, but would otherwise remain a group member for all purposes (unless the Court ordered otherwise). Eventually, speaking in broad terms, the orders could be seen to take two forms.
37 The less common was termed, in the lingua franca of Pt IVA practitioners, a “hard closure” order, being a closure of the class which forever extinguishes a group member’s rights to share in the fruits of a subsequent judgment unless the group member takes steps to register in the proceeding. By way of contrast, as explained above, the more common was a “soft closure” order, being a more subtle instrument, operating only upon a settlement taking place by a specified date in the future – usually a date chosen to allow enough time for a scheduled mediation to occur and for any prospective s 33V application to be determined or, less frequently (and as proposed here by Mr Parkin’s interlocutory application), the date of judgment. It follows that if there is no settlement, there is no fetter upon group members who fail to register by the Class Deadline continuing to participate in the class action.
38 When one appreciates the rationale of any type of class closure order, it is easy to understand why orders effecting a hard closure became the subject of significant criticism.
39 In Melbourne City Investments (at [74]), Jagot, Yates and Murphy JJ explained that the power to make any form of class closure order was gained from s 33ZF of the Act. Notably, Pt IVA does not contain an express statutory power directed to making such orders, and in this respect differs from the Victorian class action regime in Pt 4A of the Supreme Court Act 1986 (Vic), where s 33ZG expressly provides that an order made under s 33ZF may set out a step that group members must take to be entitled to obtain a benefit from the proceeding, and specify a date after which the group member who has not taken that step will not be so entitled.
40 The Full Court observed (at [75]) that an order requiring group members to register their claims to participate in a settlement facilitates settlement, because it allows both sides to have a better understanding of the total quantum of group member claims, permits the settlement amount to be capped by reference to the claims of participating group members, and assists in achieving finality. Their Honours stated (at [74]) that “if a class closure order operates to facilitate the desirable end of settlement, it may be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding and therefore appropriate under s 33ZF”.
41 In the decision the subject of appeal in Melbourne City Investments, the primary judge, Foster J, in Jones v Treasury Wine Estates Ltd (No 2) [2017] FCA 296 (at [58]–[62]), expressed doubt that the Court had power to make a hard closure order that would “extinguish” a group member’s rights, but despite expressing those doubts as to power, his Honour refused the application on discretionary grounds: see also Melbourne City Investments (at [71]). The Full Court agreed (at [71]) with the exercise of his Honour’s discretion and, when it came to hard closure orders, said the following (at [76]):
[W]e share the views expressed by the primary judge in relation to a class closure order that also precludes class members from sharing in a subsequent judgment. In our view, the Court should be cautious before making a class closure order that, in the event settlement is not achieved, operates to lock class members out of their entitlement to make a claim and share in a judgment. That is, the facilitation of settlement is a good reason for a class closure order but, if settlement is not achieved, an order to shut out class members who do not respond to an arbitrary deadline is not.
42 Following upon Melbourne City Investments, in Gill v Ethicon Sàrl (No 2) [2019] FCA 177; 134 ACSR 649 (at [8]–[9]), Lee J noted:
8. … in order for me to be able to make the order sought by the respondents, at the very least, I would need to “think”, in the present context of the Part IVA opt-out regime, that it is appropriate that the relevant group members’ claims be extinguished for all time in the event that they do not respond timeously to a court notice requiring them to take active steps to, in effect, “opt-in” to the proceeding. The whole point of class closure orders is to provide some certainty (or at least some guidance) to a respondent as to the nature and quantum of the case advanced against the respondent by non-parties in appropriate cases. As noted above, in circumstances where this information can be provided without extinguishing group member claims for all purposes, it is not self-evident to me how such a “hard” closure order could ever be either necessary or appropriate in the relevant sense (absent, perhaps, an outlier case of a very small sophisticated group conducting litigation as a common enterprise).
9. Before leaving these general observations I should make a final point: I have already referred to the undesirability of “fixed” rules when dealing with issues of practice and procedure. It should not be assumed that “soft” closure orders will always be appropriate as a pre-condition to settlement discussions or prior to a Court approved mediation. It is case dependent. It is possible to imagine, for example, that such an order may not be utile when the claim made by an applicant is for an award of damages in an aggregate amount without specifying amounts awarded in respect of individual group members (see s 33Z(1)(f) of the Act).
(Italics in original).
43 The next development that should be mentioned is the decision of the High Court in Brewster, dealing with the proper construction of s 33ZF, in the different context of “common fund” orders.
44 The plurality (Kiefel CJ and Bell and Keane JJ) said (at [50]) that the Act authorised an order “to advance the effective determination by the Court of the issues between the parties to the proceeding”. Their Honours found (at [3]) that s 33ZF did not extend to making an early common fund order, as s 33ZF empowered the Court to make orders as to how an action should proceed in order to do justice but not whether the action can proceed by making an order to assure a potential funder of the litigation of a sufficient level of return upon its investments to secure its support for the proceeding. More generally, their Honours observed that the question of funding is not an issue between the parties to the proceeding, but rather relates to a third party and, in this sense, is not connected with advancing the proceeding. The plurality explained (at [47]):
While it has rightly been acknowledged that the power conferred by [s 33ZF] is broad, it is one thing for a court to make an order to ensure that the proceeding is brought fairly and effectively to a just outcome; it is another thing for a court to make an order in favour of a third party with a view to encouraging it to support the pursuit of the proceeding, especially where the merits of the claims in the proceeding are to be decided by that court. Whether an action can proceed at all is a radically different question from how it should proceed in order to achieve a just result.
(Italics in original).
45 The observations of the plurality in Brewster in relation to the power to make a common fund order under s 33ZF were not seen by a number of judges of this Court as any impediment to making a soft closure order, and such orders continued to be made by consent of the parties. But in 2020, the Court of Appeal of New South Wales delivered two decisions which departed from this widely accepted understanding: Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2020] NSWCA 66; 101 NSWLR 890 and Wigmans v AMP Ltd [2020] NSWCA 104; 102 NSWLR 199.
46 Despite the approach endorsed by the Full Court in Melbourne City Investments, the consequence of the two Court of Appeal decisions is that in at least two subsequent first instance decisions of this Court, it has been held that Haselhurst should be followed and that s 33ZF does not authorise the making of a soft closure order: see The Owners – Strata Plan No 87231 v 3A Composites GmbH (No 3) [2020] FCA 748 (at [206]–[214] per Wigney J) and Furnell v Shahin Enterprises Pty Ltd [2021] FCA 73; 386 ALR 245 (at [20]–[74] per White J). It follows that it is necessary to examine these two Court of Appeal decisions in some detail.
47 In Haselhurst, the principal judgment was delivered by Payne JA, with whom Bell P, Macfarlan and Leeming JJA and Emmett AJA agreed. His Honour emphasised the importance of construing the order the subject of appeal noting (at [44]) that “[u]ntil the legal and practical effect of that order is understood, it is not possible to address the questions of power and miscarriage of discretion”. The order the subject of the appeal provided:
Pursuant to [s 33ZF] of the Act, any Group Member who neither opts out in accordance with Order 12 nor registers in accordance with Order 15 on or before the Class Deadline shall remain a Group Member for the purposes of any judgment or settlement but, in the event that an in-principle settlement is reached before the commencement of the trial on the common issues and that settlement is ultimately approved by the Court, shall be bound by the terms of the settlement agreement and barred from making any claim against the Defendant in respect of or relating to the subject matter of this proceeding, including participating in any form of compensation or otherwise benefiting from any relief that might be ordered or agreed.
48 This order was construed by Payne JA (at [108]) as one which “contingently extinguishes unregistered group members’ rights against the respondents”. It was also characterised by Bell P (at [12]) as “an order which destroys a person’s cause of action within the limitation period, without a hearing and with no guarantee that the person will necessarily know the outcome or the consequences of their failure to register”.
49 The Court of Appeal concluded (at [99] per Payne JA and at [11] per Bell P) that the construction of Pt 10 of the Civil Procedure Act 2005 (NSW) (CPA) preferred by the majority of the High Court in Brewster, was inconsistent with the dicta in Melbourne City Investments concerning the power to make class closure orders. The Court held (at [122] per Payne JA; see also at [12] per Bell P) that s 183 of the CPA, the NSW cognate to s 33ZF, did not authorise an order which provided that unregistered group members who did not opt out would remain a group member for the purposes of any judgment or settlement, but in the event of settlement “shall be bound by the terms of the settlement agreement and barred from making any claim against the Defendant in respect of or relating to the subject matter of [the] proceeding, including participating in any form of compensation or otherwise in benefitting from any relief that might be ordered or agreed”.
50 It can be seen (at [105]) that central to Payne JA’s conclusion that the impugned order was beyond the scope of the power in s 33ZF was the fact that:
[T]he effect of Order 16 is to address a matter, the barring of a claim held by a group member, which is addressed in [s 33V] in the case of a settlement and [s 33Z] in the case of a judgment, in each case supplemented by the specific power in [s 33ZB] to make judgment binding on all group members. It is, so the plurality in Brewster explains, incongruous to read a power into [s 33ZF] when other provisions of Pt [IVA] make specific provisions apt to accommodate that task but which operate at the conclusion of the proceeding. The power to bar a claim held by a group member is one that arises at the conclusion of a representative proceeding…
51 Then came Wigmans. Unlike Haselhurst, the order being considered in Wigmans did not purport to “bar” or extinguish the claims of unregistered group members. Nor did it affect those claims in any way. Rather, it was merely for the provision of notice, where the form of the notice contained statements of an intention to seek a subsequent order at the time of settlement approval that would exclude from participation in the distribution of the settlement sum those who had not registered in accordance with the procedure specified in the notice. Even though the orders and notice merely foreshadowed a present intention to seek the order if and when a settlement was reached, it was held by Macfarlan, Leeming and White JJA to be beyond power.
52 Their Honours reasoned (at [104]) that the question was whether the “practical effect of the orders conforms with the statute”, noting (at [79]) that the orders and notice were contrary to a “fundamental precept” of the class action regime, confirmed by the High Court in Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27; 211 CLR 1 and Brewster, that group members are entitled to do nothing until following either a settlement or judgment. Indeed, it was said (at [123]) that the orders and notice had the effect of prevailing upon group members to make a binding decision before a settlement or judgment had occurred as to whether they should register.
53 The orders and notice were also said to give rise to an “insoluble” conflict between the applicant and those group members who had registered on the one hand, with those group members who had chosen not to register their claims on the other hand: see [118]–[121]. Their Honours held that notices to be sent to group members, pursuant to the cognate to s 33X of the Act, which informed recipients of the applicant’s intention, in the event a settlement was reached, to apply to the Court for an order that unregistered group members will not receive any benefit pursuant to the settlement, were contrary to the legislative regime, and not within power: see [3], [132].
54 The additional authority to which reference should be made in any detail is the decision of Beach J in Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Ltd [2021] FCA 475. His Honour (in obiter) approved of orders which are in substantially the same terms as prayer 9 of Mr Parkin’s interlocutory application and held that they were within power: see [75], [96]. His Honour (at [76]–[80], [95]) distinguished those orders from the orders the subject of consideration in both Haselhurst and Wigmans. However, his Honour ventured five broader observations that warrant setting out in full (at [82]–[94]):
82. First, an order of the kind under consideration, as was made by the docket judge, does not effect a contingent extinguishment of group member choses in action at all. Indeed, the notion of a contingent extinguishment is to my mind problematic in any event. If there is a contingency, nothing has been extinguished. But there is more. If that contingency is expressed in an interlocutory order, which is susceptible to variation, it is unclear how anything could be said to be extinguished if the contingency itself may be redefined or removed by a later and final order.
83. Second, BMW was directed to a different problem, where the purpose of the early common fund order was said to be to ensure the economic viability of a proceeding and to put it on a stable foundation so that it could go ahead. It was said that such a purpose was extraneous to dealing with the substantive rights of group members in the proceeding. Now I might say that in many cases where early common fund orders have been made, that was not the purpose. But in any event, a class closure order is not in the same category. Its purpose is not extraneous to dealing with the substantive rights of group members in the proceeding. Indeed, the opposite. Its very focus is on how those substantive rights are to be adjusted inter se in the event that the proceeding settles.
84. Third, I should note for completeness that The Owners – Strata Plan No 87231 v 3A Composites GmbH (No 3) [2020] FCA 748 occurred in a different context and not for the purpose identified in Melbourne City Investments of facilitating the desirable end of settlement. It can be put to one side.
85. Let me now say something about Wigmans. In Wigmans, the Court considered the form of a proposed notice to group members which referred to an intention on the part of the applicant and respondent that in the event a settlement were reached, they would apply for an order excluding any group member who had neither registered nor opted out by the relevant deadline from receiving any benefit pursuant to the settlement. In other words, they did not propose a barring order of the kind which failed in Haselhurst. The notice was to flag an intention that group members who did not register in a timely way may receive nothing from the settlement. The Court held that the orders made issuing the notice were beyond power.
86. It was said that what was proposed was contrary to a fundamental precept [of the cognate of Pt IVA], confirmed by the High Court in Mobil Oil v State of Victoria (2002) 211 CLR 1, because (at [79]):
… If what is contemplated by Komlotex and AMP comes to pass, group members who take no positive step will gain no benefit from any settlement and will have their rights extinguished. Indeed, it is reasonable to expect that the extinction of passive or unregistered group members’ rights would be one of the drivers of any settlement between registered group members and AMP. This prima facie gives rise to a conflict between group members who are registered and those who are not.
87. It was said that a fundamental precept was that the representative applicant acts for all group members, and that group members may do nothing prior to a settlement and still reap its benefit. It was said that a settlement whereby registered group members receive payment but unregistered group members receive nothing but have their rights extinguished “is contrary to the essence of the opt-out regime. This prima facie falls squarely within what was held in Haselhurst” (at [95]). It was said that the fact that the proposed notice only communicated a present intention to seek a future order extinguishing rights was not the end of the analysis, as the question was “whether the practical effect of the orders conforms with the statute” (at [104]) which it did not do; it was said that the present intention was proposed to be deployed to prevail upon group members to make binding decisions as to whether to opt out. Further, it was said that what was proposed gave rise to a conflict between group members who were registered and those who were not, and that a conflict was real, immediate and direct because the representative would be propounding a settlement where registered group members receive nothing and have their rights extinguished, notwithstanding that the representative applicant is meant to be representing them.
88. More generally, in Wigmans the parties also accepted that Haselhurst was correct and Wigmans was premised upon its correctness. But if Haselhurst is problematic, then the Wigmans foundation is problematic. But Wigmans has problematic aspects even if Haselhurst was not problematic.
89. First, Part IVA is not inconsistent with group members being required to take a positive step before settlement or judgment at an initial trial. Now Part IVA generally permits group members to adopt a passive stance, but they can be required to give, for example, discovery in some circumstances; see Regent Holdings Ltd v State of Victoria (2012) 36 VR 424. As was said in Regent Holdings (at [12]), concerning the statement of the High Court in Mobil Oil (being the same passage cited in Wigmans):
…that statement does not mean that it is of the essence of a Pt 4A proceeding that group members not be required to take any positive step before common questions of liability have been resolved. Read in context, and understood against the background of the case with which the High Court was concerned, it means no more than that there are some Pt 4A actions in which that is likely to be so. This case illustrates that there will be circumstances in which group members may be asked to take some step before common questions of liability are resolved.
90. So, it is not a fundamental precept of representative proceedings that group members can never be required to take any positive step at an early stage in the proceeding. I said in Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469 at [47] to [52]:
I accept that group members other than the lead applicant can be and have been compelled by court order to actively participate in representative proceedings at a time prior to the first stage trial and without any s 33Q or s 33R consideration coming into play. Examples of such compulsion include the following contexts:
(a) Provision of discovery has been compelled in at least four cases (P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176; Thomas v Powercor Australia Ltd (No 1) [2010] VSC 489…; Regent Holdings…and Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2011] ATPR 42-361).
(b) Provision of particulars of group members’ claims has been compelled in at least seven cases (Kirby v Centro Properties Ltd (2011) 84 ACSR 87 (No VID 326 of 2008), pursuant to an order made on 14 February 2011; Thomas; Meaden v Bell Potter Securities Ltd [2011] FCA 136; Regent Holdings; Weimann v Allphones Retail Pty Ltd (No 3) [2009] FCA 1292; Murphy v Overton Investments Pty Ltd [1999] FCA 1123 and Williams v FAI Home Security Pty Ltd [1999] FCA 1771).
(c) Provision of a contribution towards security for costs has been contemplated in at least one case, namely Madgwick v Kelly (2013) 212 FCR 1 where it was held that an order for security for costs was appropriate, and that it was fair that the group members who stood to benefit from the proceeding make a real but not oppressive contribution to a pool of funds for security.
(d) Provision of particulars of group members’ identities has been compelled in order to facilitate the service of subpoenas (Kirby v Centro Properties Ltd, unreported, Federal Court of Australia, 8 February 2011, transcript of hearing at T22 and T45).
But the context of these examples is all important.
Discovery and particulars of group members’ claims may be accelerated in order to facilitate a mediation so that there can be an adequate appraisal of potential quantum ranges for the total class and the avoidance of a disproportionate level of information asymmetry.
Discovery and particulars from group members may be accelerated because they are relevant to the trial on common issues. For example, in a cartel proceeding where a common issue at the liability stage is whether an arrangement to price collude was put into effect involving a large number of customers over a long time frame over an entire industry, inputs into a multiple regression linear analysis (to establish a positive value for the relevant dummy variable) may require data from all group members, so that a statistical analysis can be performed for the first stage trial in order to determine whether the arrangement was put into effect.
More generally, discovery from particular group members may be accelerated because they might have documents relevant to one of the common issues.
But to admit of these possibilities and justifications does not support the proposition that whenever the Court perceives it to be convenient, such an acceleration can be or should be ordered. Section 33ZF still needs to be satisfied. Moreover, in the present case the application that I am addressing is not covered by the foregoing scenarios.
91. Second, it is interesting, but not determinative, that when the Victorian Parliament enacted Part 4A of the Supreme Court Act 1986 (Vic), they included s 33ZG, which gave specific power to require group members to take a step to be entitled to benefit, but prefaced s 33ZG with the words “[w]ithout limiting the operation of section 33ZF, an order under that section may –”. So, s 33ZG was declarative or elaborative of the general grant of power conferred by s 33ZF, which is common to both Pt IVA and the Victorian legislative analogue (see Muswellbrook Shire Council v Royal Bank of Scotland NV [2016] FCA 819 at [21] per Rares J).
92. Third, there is nothing in BMW that requires the conclusion that s 33ZF cannot be called in aid to require group members to take a positive step in the proceeding. BMW did not so hold. Further, there is nothing in BMW evincing any intention that any just resolution (at [21]) be limited only to a judgment, so as to render beyond power an order which is directed to facilitating a mediation or the ultimate exercise of power under s 33V. Section 33ZF enables an order which is directed to ensuring that a mediation can proceed effectively, particularly if the ultimate goal is to facilitate an exercise of power under s 33V.
93. Fourth, nothing in BMW requires the conclusion that a notice cannot be issued stating that it is the intention of a party to move the Court for a particular order in the future, even if there is doubt as to whether the Court can or will make that order. Section 33X(5) permits a notice to be issued informing group members of “any matter”. That includes any matter relevant to their decision to opt out. I see no reason to read down s 33X(5) so as to prevent group members of being informed of such a thing. Section 33X(5) is facultative, not restrictive. Nothing in Pt IVA precludes the Court from directing that a notice be given to group members under s 33X(5) informing them, prior to determining whether they should exercise their right to opt out, of any relevant matter affecting such a choice that they need to consider including that:
(a) application may be made for a common fund order under s 33V(2) on settlement; or
(b) if they do not take a positive step of registering their interest before a mediation, this may have consequences for them when the Court comes to exercise any power under s 33V in considering what is fair and reasonable between group members inter-se.
94. Fifth, I have difficulty with Wigmans’ analysis of conflict of interest and its view as to the consequences of such a conflict existing. Even if the sending out of a notice did manifest that a conflict of interest may arise because of the intention held by the representative, that is not a reason to deprive group members of that information. In the event that a settlement was procured by a representative in a position of conflict, the question that would then arise is whether it should be approved under s 33V. The Court is there. Settlements require approval to guard against such conflicts causing unfair prejudice to group members in the settlement context. Indeed, the presence of an actual or potential conflict is a reason to send out a relevant notice to group members. It would enable group members to consider whether they wished to make an application under s 33T. More generally, the scheme of Part IVA confers authority on the representative who like any fiduciary must manage conflicts in accordance with established principle, subject to oversight of the Court and the right of other group members to seek to replace the representative.
55 Most recently, in BHP Group Limited v Impiombato [2021] FCAFC 93; 151 ACSR 634, the Full Court (at [95] per Middleton, McKerracher and Lee JJ) observed that “there is, with respect, much to be said for Beach J’s observations in Wetdal (at [81]–[95])”.
F THE CONTRADICTOR’S SUBMISSIONS
The first question
56 It is common ground that Pt IVA does not contain an express power permitting the Court to make an order to close a class prior to settlement. The proposed order in prayer 9 of Mr Parkin’s interlocutory application relies on s 33ZF as a “gap-filling” power to fill that lacuna. It is also common ground that the starting point in determining whether an order in the terms of prayer 9 is within the power conferred by s 33ZF is to understand the legal and practical effect of such an order.
57 The Contradictor noted that the terms of each proposed notice to go to group members pursuant to the order in terms of prayer 9 (being those in Annexures B and C to the orders sought in Mr Parkin’s interlocutory application (Notice)) identify three options for group members, being, “Register”; “Do nothing”; or “Opt out”. The Notice informs group members that unless they opt out they will be “bound” by the outcome in the class action, which may arise from judgment following trial or settlement at any time prior to final judgment: at [10]. The Notice explains “Options B - Do nothing” as follows (at [22]):
If you do nothing in response to this Notice and have not already registered your claim with Maurice Blackburn, you will remain a group member in the Boral Class Action but you will NOT be able to receive a share of any settlement monies resulting from the settlement reached between the parties in the Boral Class Action before final judgment.
58 The Notice explains that this is because the Court has made an order in the terms of prayer 9: at [22].
59 The Notice informs group members of the consequence of a settlement being reached and approved by the Court as follows (at [22(a)]):
If there is a Court-approved settlement reached at any stage of the Boral Class Action before final judgment, you will NOT be entitled to share in the benefit resulting from the settlement. Further, you will be bound by the terms of any settlement agreement, which is likely to extinguish all rights to compensation which a group member might have against Boral and may extinguish rights to compensation against its related entities, including its past and present officers, which arise in any way out of the events or transactions which are the subject-matter of the class action.
60 The Contradictor contended that an order in the terms of prayer 9 suffers from the same defects as the orders considered (and refused) in Haselhurst and Wigmans because it will operate to compel group members to take a positive step, prior to settlement or judgment, if they are to benefit in the outcome of the class action, and will cause a division between group members and a conflict of their interests.
Compulsion of group members
61 The Contradictor said that, while the order sought in prayer 9 does not use the language of “extinguishment” or “barring” of group members’ claims, the proposed prohibition on Unregistered Group Members seeking any benefit pursuant to any settlement that was reached is no different in substance to the preclusion considered (and refused) in Haselhurst.
62 Indeed it was said that, putting to one side the ability of an Unregistered Group Member to obtain leave of the Court so as to participate in a settlement, the preclusion effected by an order in terms of prayer 9 goes further than the order considered in (a) Haselhurst, as it would preclude an Unregistered Group Member from seeking any benefit, not just making a claim; and (b) Wigmans and Haselhurst, as it would operate in relation to any settlement reached before final judgment, whereas the order refused in Wigmans limited its operation to any settlement reached before the commencement of the trial or within six months after mediation, and the order in Haselhurst limited its operation to any settlement reached before the commencement of the trial on the common issues. In any event, the Contradictor contended that the absence of power to make such an order is not confined to orders that themselves “extinguish any rights of unregistered group members”: citing Wigmans (at [123]).
63 The Contradictor argued that an order in the terms of prayer 9 could not properly be characterised as merely anticipatory of an exercise of power that may subsequently occur under s 33V of the Act. That was said to be so because:
(a) an order in the terms of prayer 9 establishes what White J in Furnell (at [67]) called a “presumptive position” for Unregistered Group Members in that if they wish to participate in the settlement they “will have to displace the position established by the orders”, by obtaining the Court’s leave in order to seek a benefit in respect of their claim or by varying or revoking the order. It was said that an order in the terms of prayer 9 otherwise prohibits Unregistered Group Members, from the Class Deadline, from seeking any benefit in respect of their claim;
(b) the possibility that the Court may later grant leave to a group member to participate in the settlement, or may revoke or vary the order in terms of prayer 9, does not deny “that the Court has determined on a position, subject only to the possibility of some later change”, being that Unregistered Group Members ought not receive any benefit under a settlement: citing Furnell (at [68] per White J). It was said that this was clear enough from the explanation of the consequence of settlement set out in the Notice. And it was said that the proposed order cannot be brought within power “by the expedient of structuring it as a provisional or interlocutory order”: citing Brewster (at [54] per the plurality); and
(c) an order in the terms of prayer 9 will affect the choices made by group members when they receive the Notice. It was said that similarly to the position in Wigmans, group members will be prevailed upon to register lest they lose rights to participate in a settlement and have any rights they might have extinguished.
Conflict of interests
64 The Contradictor submitted that such an order, from the Class Deadline, will have an immediate legal and practical effect on the interests of group members. It will change the status quo in the following sense: before the Notice, group members could participate in any settlement without taking any step; but after the Notice, they can only participate if they register by the Class Deadline. Such an order will immediately establish a division in the interests between the applicant and Registered Group Members on the one hand, and Unregistered Group Members on the other.
65 There will be an immediate conflict of interest created because it will permit the applicant to “effectively bargain … away the claims of non-registrants for the purpose of being able to give [the respondent] the security that it will not have to worry about those people’s claims, doing so for the benefit of the registrants”: citing Wigmans (at [119]). The Contradictor also embraced the observations in Wigmans (at [42]) where their Honours said that, for respondents in class actions, “it is likely to be more valuable to settle the claims of all the group members in a widely drafted class other than those who opted out, rather than merely to settle the claims of those group members who have registered” (emphasis in original) and, all other things being equal, the applicant and Registered Group Members “may be able to achieve a more generous settlement … if the settlement frees [the respondent] from an exposure to the claims of all group members who had not opted out, as opposed to leaving in existence the possibility that group members who have not registered might subsequently bring a claim”. To similar effect their Honours said (at [79]) that “it is reasonable to expect that the extinction of passive or unregistered group members’ rights would be one of the drivers of any settlement”. The Contradictor submitted that the affidavits of Mr Betts and Mr Schimmel indicate that the same is true in the present case.
66 In Haselhurst the Court of Appeal refused to make the proposed order including because it concluded (at [120]) that it would have:
… the effect that the appellants and their legal advisors will necessarily face an insoluble conflict of interest in any mediation or settlement discussion. It is in the interest of all group members who are registered to achieve a favourable settlement. It is in the interests of group members who have not registered for the proceeding not to settle regardless of the terms offered. This is because [the order] has the effect that they will recover nothing should the matter settle but should the matter proceed to hearing they may be entitled to damages.
(Emphasis added).
67 The Contradictor also contended that the conflict of interest will not be ameliorated by deferring the question of what should happen to the claims of unregistered group members to the s 33V stage of the proceeding, when the Court must be satisfied that the proposed settlement and distribution is fair and reasonable in the interests of group members; nor is it ameliorated by the order expressly adverting to the possibility for leave to be given to modify the interlocutory arrangement effected by the order.
The proper construction of s 33ZF
68 The Contradictor submitted that, when properly construed, s 33ZF does not empower the Court to make an order in the terms of prayer 9, and emphasised three things about the text of that provision.
69 First, although the words “thinks appropriate” have a lower threshold than “thinks necessary”, nevertheless the relevant elements of necessity in another guise are enshrined in the coupling of the words “to ensure that”: citing Earglow Pty Ltd v Newcrest Mining Ltd [2015] FCA 328; 230 FCR 469 (at [33] per Beach J); Haselhurst (at [6] per Bell P).
70 Secondly, the “proceeding” in which justice is to be “done” pursuant to s 33ZF is a representative proceeding under Pt IVA. As the plurality in Brewster said (at [50]), “[t]he focus of the power conferred on the court by the text is upon ensuring, that is, making certain by the order, that justice is done in the proceeding as between the parties to it”. The Contradictor also relied on Blairgowrie Trading Ltd v Allco Finance Group Ltd (in liq) [2015] FCA 811; 325 ALR 539 (at [115]) where Wigney J said:
It is unlikely that an order would be appropriate or necessary to ensure that justice is done in a proceeding if the rights or interests of group members were not adequately protected, or were materially prejudice to adversely affected by, the order.
71 On the Contradictor’s argument, the Court could never be satisfied that it is “appropriate or necessary to ensure that justice is done in the proceeding” if the order will mean, in effect, that Unregistered Group Members would be shut out of any benefits of the proceeding in advance of settlement.
72 The Contradictor also embraced the remarks in Haselhurst (at [13]) where Bell P said:
… mediation … is not an end in itself and is not … something which is required to ensure that justice is done in the proceedings. If a mediation can only occur in circumstances where group members who do not register to participate in it will lose their causes of action … I do not consider that that outcome is something that can be described as either “appropriate or necessary” to “ensure that justice is done in the proceedings.”
73 Thirdly, the requirement that any order made under s 33ZF(1) be thought “appropriate or necessary to ensure that justice is done in the proceeding” are “words of limitation” which “should not be ignored”: citing Brewster (at [19], [21], [46] and [70] per the plurality). It was submitted that an order in the terms of prayer 9 is not capable of satisfying the “words of limitation” in s 33ZF(1) because such an order would operate to prejudice the interests of Unregistered Group Members by the compulsion described above, and create a division and a conflict of interest. It was also submitted that the fact that such an order may adversely affect only a subset of group members does not mean that the order is appropriate or necessary to ensure justice is done in the proceeding; citing Haselhurst (at [120]).
74 The Contradictor submitted that the legislative framework tends strongly against an implication that there must be a power to close a class “in order to facilitate settlement of the claims of group members who choose to register their claims”: Haselhurst (at [65]–[66] per Payne JA). He contended that while the power conferred by s 33ZF is broad, it is “essentially supplementary” or “gap-filling”: Brewster (at [46], [69] and [70] per the plurality and at [145]–[147] per Gordon J). It is not “a vehicle for rewriting” Pt IVA and “cannot be given a more expansive construction in a wider scope of operation than the other provisions of the scheme”: Brewster (at [69]–[70] per the plurality).
75 It was further submitted that the statutory context confirms the textual indicators in s 33ZF that an order in the terms of prayer 9 would be beyond the scope of the power conferred on the Court because such an order would be inconsistent with the opt out regime adopted by Pt IVA.
76 The Contradictor submitted that, subject to specific exceptions, the scheme of Pt IVA is that a person’s consent is not required to be a group member (s 33E(1)); the person need not be identified specifically in the originating application (s 33H(2)); and the person has the right to opt out (s 33J) and the scheme seeks to protect that right (s 33J(4) and 33X(1)). The opt out model is designed so that a representative proceeding may continue even if group members are unaware of it; and group members are “under no obligation to identify themselves”: Brewster (at [73] per the plurality).
77 It was also submitted that the scheme of Pt IVA is that group members who do not opt out are bound by any settlement or judgment through a s 33ZB order, and they are not required to take any anterior positive step. That submission was said to be founded on the following passage in Mobil Oil (at [40]) where the plurality (Gaudron, Gummow and Hayne JJ) said of the Victorian class action regime (which is analogous to Pt IVA) that:
…Pt4A provides for what is sometimes called an ‘opt out’ rather than an ‘opt in’, procedure. That is, persons who are group members may opt out of the proceeding and, if they do, they are taken never to have been a group member (unless the Court otherwise orders). Group members, however, need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring.
(Emphasis added and citations omitted).
78 In Brewster (at [73]) the plurality cited that passage with approval in stating:
As this Court has noted, the opt out model adopted by Pt IVA of the FCA and Pt 10 of the CPA is designed so that a representative proceeding may continue even if group members are unaware of it [Mobil Oil at [38]-[40]]; and group members “are under no obligation to identify themselves” [P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd [No 2] [2010] FCA 176 at [31] per Finkelstein J]. That said, both legislative schemes do allow identification of all group members (as far as is possible) in order to distribute any proceeds. That this is so is apparent from s 33V, 33X(3)-(4), 33Z and s33ZA of the FCA. Reference to the terms of these provisions confirms that the legislative scheme contemplates that the occasion for the making of orders in relation to distribution of the proceeds of the action is its successful completion.
79 Then in Haselhurst (at [53]–[54]) Payne JA cited the above passage from Mobil Oil with approval and said the plurality in that case found an “evident legislative intent” that group members need take “no positive step” in the prosecution of a representative proceeding to judgment to gain whatever benefit its prosecution may bring, whether that arises by a settlement or judgment. In Wigmans (at [77]–[79]) the Court also cited Mobil Oil with approval; and said (at [79]) that the proposed orders were:
… prima facie contrary to a fundamental precept of Pt 10, as confirmed by the joint judgments in Mobil Oil and Brewster, and inherent in the legislative choice of an opt-out regime. If what is contemplated by [the parties] comes to pass, group members who take no positive step will gain no benefit from any settlement and will have their rights extinguished.
80 On this argument, the scheme of Pt IVA is that group members who do not opt out “are to have the benefit (or indeed the burden) of any settlement or judgment”: Haselhurst (at [14] per Payne JA). The statutory scheme provides that “the claims in the proceeding are litigated on behalf of all of them, and orders in the proceeding bind all of them. Subject to the creation of sub-groups and the determination of individual questions, the statutory scheme treats them as one group”: Brewster (at [86] per the plurality (citations omitted)). Or as Gageler J put it in Brewster (at [108]) “they sink or swim together.”
81 The Contradictor contended that the ability for group members to sit back and do nothing up until the point of settlement or judgment is a “fundamental precept” of the scheme of Pt IVA. On this argument, an order in the terms of prayer 9 would be outside the power conferred by s 33ZF because it would compel group members to take the positive step of registering their claim prior to settlement or judgment in order to obtain any benefit. The Contradictor accepted that the Court has power under s 33ZF to make orders to require group members to take some positive step prior to settlement or judgment including, for example, to provide discovery on a limited basis or to provide security for costs, but said that that power does not extend to precluding group members from a right to participate in a settlement, at least prior to settlement occurring.
82 On the Contradictor’s argument, an order in the terms of prayer 9 would “subvert two fundamental aspects of the regime, which is that [the representative applicant] acts for all group members, and that group members may do nothing prior to settlement and still reap its benefits”: citing Wigmans (at [131] per Payne JA). Such an order would effectively permit the applicant and the respondent, for their own benefit and to the detriment of group members who fail to register, to convert Pt IVA’s opt out model into an opt in model.
83 It was submitted that the various decisions in which single judges and intermediate courts of appeal have held that there is power to compel group members to take a positive step prior to settlement or judgment are to be seen as exceptions, because unlike an order in the terms of prayer 9, the steps ordered to be taken in those decisions were not directed to “the fundamental substantive rights of group members”. The Contradictor did not argue that those decisions were wrong; rather it was said that the existence of such exceptions does not answer whether an order in the terms of prayer 9 is within power.
84 The Contradictor accepted that s 33ZF provides power to make an order to require group members to register their claims by a fixed deadline, provided there is no adverse consequence for their failure to do so: citing Wigmans (at [86]) and Furnell (at [69]). The Contradictor did not accept that an order made without any adverse consequence for non-compliance does not involve an exercise of judicial power. Further, he accepted that the orders sought in terms of prayers 5 to 8 in Mr Parkin’s interlocutory application are within the s 33ZF power.
85 The Contradictor denied that it is temporally incoherent to construe Pt IVA such that s 33ZF does not provide power to make an order in the terms of prayer 9 which would come into effect on settlement approval under s 33V, while accepting that in a settlement approval application under s 33V the Court has power to make such an order. He contended that Pt IVA contemplates that the subject matter of who may participate in the distribution from a settlement should be addressed only following the settlement and that the time at which the supplementary or gap-filling power in s 33ZF may be exercised in relation to ss 33V and 33Z has not yet arisen. He argued that it does not follow that, because a power may be exercised at a later time, it may also be exercised at an antecedent time: citing Furnell (at [65] per White J). He submitted that provisions such as s 33V and 33ZB are “engaged upon a different occasion and address materially different circumstances” to s 33ZF: citing Brewster (at [70] per the plurality).
86 Further, on the Contradictor’s submissions, the issue of conflict of interest between group members is not properly addressed on the basis that the Court has the role and ability to manage any conflicts of interest that arise from divisions between group members. It was submitted that the identified conflicts are generated by and inhere in the grant of an order in the terms of prayer 9, and that the general power in s 33ZF cannot be read as empowering the Court to put the applicant and/or group members in a representative proceeding in a position of conflict.
87 In relation to the purpose of s 33ZF the Contradictor relied on Brewster (at [82]) where the plurality explained that the objectives of Pt IVA are:
… first, to enhance access to justice for claimants by allowing for the collectivisation of claims that might not be economically viable as individual claims; and secondly, to increase the efficiency of the administration of justice by allowing a common binding decision to be made in one proceeding rather than multiple suits.
88 On the Contradictor’s argument, an order in the terms of prayer 9 would be inconsistent with each of the objects of Pt IVA as: (a) the preclusion of Unregistered Group Members from benefitting from any settlement is inconsistent with improving access to justice for such group members, whose numbers may be significant; (b) the object of access to justice would be subverted if the access of Registered Group Members comes at the cost of the rights of Unregistered Group Members; and (c) while such an order arguably facilitates settlement, it does not increase the efficiency of the administration of justice, as an order in the terms of prayer 9 would not facilitate a “common binding decision”. Instead it would facilitate a binding decision with uncommon outcomes, which outcomes would be determined by reference to the non-statutory concept of whether or not a group member has registered.
89 The Contradictor further submitted that s 33K of the Act empowers the Court, at any stage of a class action, on application by the applicant, to grant leave to amend the originating application to alter the class description. It was said that altering the class by an application under s 33K after the Class Deadline, so that the class includes only those group members who registered, would provide the certainty sought by the parties in relation to which group members would participate in any settlement and the value of their claims. On the Contradictor’s argument it would be incongruent to construe s 33ZF as including a power to close a class when other provisions of Pt IVA “make specific provision apt to accommodate that task”: see Brewster (at [59] per the plurality); Haselhurst (at [105] per Payne JA). The Contradictor also said that an order under s 33K would be preferable to an order in the terms of prayer 9 as group members that did not register would not have their claims extinguished upon settlement.
The second question
90 Section 33X(5) of the Act, rather than s 33ZF, is the asserted source of the power to make an order in terms of the second question. It provides that “[t]he Court may, at any stage, order that notice of any matter be given to a group member or group members”.
91 Before turning to the Contradictor’s submissions, we note that both in prayer 3 of its application and in submissions, Boral made it clear that it did not seek an order, at this stage, to preclude Unregistered Group Members from seeking any benefit under any settlement that may later be reached. It accepted that the Notice needed to be reframed so as to inform group members that, if an in-principle settlement was later reached, as part of the necessary settlement approval application under s 33V Mr Parkin intended to seek such an order.
92 The Contradictor accepted that his argument on the second question was more difficult than on the first question.
93 His argument principally relied on the reasoning in Wigmans, including at [79], [102] and [132] where it was said:
79. What is proposed by [the parties] is prima facie contrary to a fundamental precept of Pt 10, as confirmed by the joint judgments in Mobil Oil and Brewster, and inherent in the legislative choice of an opt-out regime. If what is contemplated by [the parties] comes to pass, group members who take no positive step will gain no benefit from any settlement and will have their rights extinguished.
…
102. Ms Wigmans recognised that s 183 was not relied on to sustain the orders the subject of the appeal. She nonetheless submitted that the power to issue notices must nonetheless conform with the basic precepts of the scheme established by Pt 10. That submission is sound. Section 175 and s 176 [being the cognates to ss 33X and 33Y] do not sustain orders which are contrary to the basic precepts of Pt 10.
…
132. We conclude that the main ground of appeal is made out. The orders are based on the idea that group members should be prevailed upon to register less they lose rights to participate in a settlement, and have any rights they might have against [the respondent] extinguished. This is contrary to a basic premise of Pt 10 and engenders an immediate conflict of interest. The fact that it occurs in a two-step process from, rather than in a single order, does not remove the inconsistency. The fact that it is contingent, in the sense that the threat is conditional upon an in principle settlement being achieved, does not make it hypothetical or premature, because group members who are entitled to take no active step are being threatened, in the next fortnight, with the sanction of possible extinguishment of their rights unless they take a positive step and register with [the applicant’s] lawyers or opt out.
(Emphasis added).
94 The Contradictor also embraced the reasoning in Wigmans (at [86], [104], [123] and [125]). He submitted that the Court of Appeal there addressed the “practical reality” that a notice such as that proposed by Boral would have the effect of prevailing upon group members to make a binding decision, at that point, as to whether to register, which was said to be earlier in the proceeding than the Pt IVA scheme allowed. Relevantly, their Honours said (at [86]) that the “present and communicated intention” in the proposed notice to group members was that, if a settlement was subsequently reached, the applicant would apply for orders to extinguish the claims of group members who do not register, which had a “practical effect” on group members. Similarly (at [103]–[104] and [123]), their Honours said that while it could be accepted that the orders did not themselves extinguish any rights of group members, that “is not the end of the analysis” and there remained the question as to whether “the practical effect of the orders conforms with the statute”. Their Honours said (at [123]) that “the present intention [of the parties] is just that and is contingent upon there being a settlement and orders being made in the future”, but that does not fully capture the problem. They also said (at [125]) that one of the matters which will be “at the forefront of the minds of those acting for [the parties in negotiating a settlement] will be a settlement which gives money to registered group members and extinguishes the rights of unregistered group members”, which is “adverse to the interests of the group members (who may easily number in the tens of thousands) who have not registered”.
95 As with the first question, the Contradictor submitted that a “fundamental precept” of the Pt IVA scheme is that group members are entitled to remain “totally passive” until such time as a court comes to distribute any settlement under ss 33V or grant damages or other relief under s 33Z. On this argument, the power in s 33X(5) to give notice to group members of “any matter” is limited to a power to give notice of matters which are consistent with that “fundamental precept”.
96 On the Contradictor’s submissions, the essential difficulty with the proposed notice under s 33X(5) is that it asks group members to make a choice pursuant to orders which proceed on the basis that their rights to participate in any settlement may be extinguished if they do not register. It is not premature to oppose such an order, it was said, because the difficulty that such a notice would create for group members “is not one that can be put off until that time (if ever) when an in-principle settlement is reached” and it “affects the decisions of group members in the immediate future”: citing Wigmans (at [126]).
G CONSIDERATION
97 It is trite, but necessary, to stress that if we consider that the decisions in Haselhurst and Wigmans are not distinguishable from the present case, we should not depart from those decisions unless we consider them to be plainly wrong: see e.g. CAL No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; 239 CLR 390 (at [49] per Gummow, Heydon and Crennan JJ, with whom French CJ agreed at [1] and Hayne J agreed at [63]); Hili v The Queen [2010] HCA 45; 242 CLR 520 (at [57] per French CJ, Gummow, Hayne, Crennan, Kiefel (as her Honour then was) and Bell JJ); Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153 (at [3]–[14] per Allsop CJ).
98 The Contradictor submitted that the decisions in Haselhurst and Wigmans are not “truly distinguishable” and that we should not (falsely) distinguish them so as to avoid dealing with whether they are plainly wrong: citing R v Falzon [2018] HCA 29; 264 CLR 361 (at [49] per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ). That may be accepted. The Contradictor further submitted that, even if this Court ultimately concluded that the reasoning in Haselhurst and Wigmans is wrong, any such disagreement could not rise to the threshold of “plainly wrong”.
Are the decisions in Haselhurst and Wigmans distinguishable?
99 It is common ground that the starting point in a case of this kind is to understand the legal and practical effect of the order which is the subject of the application. Until that is understood it is not possible to address the question of power. As noted above, it should not be assumed that observations and conclusions in another case as to the power to make what might broadly be described as a form of “class closure” order can necessarily be transposed to the present case.
100 The order considered by the Court of Appeal in Haselhurst is distinguishable from an order in the terms of prayer 9 of Mr Parkin’s interlocutory application (which is in the same terms as the orders approved of by Beach J in Wetdal). This is for two reasons.
101 First, unlike the order proposed in Haselhurst, prayer 9 does not use the language of “barring” a group member’s claim but is expressed in terms of non-participation; that is, an Unregistered Group Member will not “subject to further order” and “without leave” be “permitted to seek any benefit pursuant to any settlement (subject to court approval).” The proposed order in Haselhurst sought to bar group members’ claims (albeit contingently) by the operation of the order itself. The “claim” embraces the cause of action against the respondent, which exists independently of any process of settlement, and in the absence of a Court-approved settlement might be litigated to finality in contested proceedings. This is a different thing from the group members’ entitlement to seek to participate in a settlement. Accordingly, an order in the terms of prayer 9 does not purport to bar group members’ claims. That result would only flow if a settlement is later reached and the Court later made an order to approve the settlement pursuant to s 33V.
102 Secondly, the making of an order in terms of prayer 9 does not extinguish group members’ claims, contingently or otherwise: cf the proposed order in Haselhurst (at [47], [59], [61] per Payne JA). Any extinguishment could occur only if, and when, the Court, in the exercise of judicial power, makes two orders: (a) a settlement approval order under s 33V, which follows group members being given notice of, and afforded an opportunity to be heard in relation to, the settlement approval application, including to object to the proposed settlement on the basis that they are to be precluded from obtaining any benefit under the settlement; and (b) an order being made under s 33ZB, binding the group members to the approval and any consequential orders such as a dismissal of the proceedings. If and when such orders are made in the present case, it will be the consequence of the making of those two orders (not an order in terms of prayer 9), which will preclude the individual claims of group members who neither opted out nor registered from being able to be advanced.
103 Hence, unlike Haselhurst (but like Wetdal), the order proposed in prayer 9 is premised on the exercise of power at the s 33V stage, where the Court must consider whether it is fair and reasonable in the interests of group members including as between group members (s 33V(1)), and whether it is “just” (s 33V(2)), to distribute the settlement only to those group members who have manifested an interest by registering. As Mr Parkin correctly submitted, this is not just a formalistic distinction; a group member requires the assistance of the Court to benefit from a settlement – both where the applicant’s proposed settlement and distribution scheme which it brings before the Court for approval under s 33V proposes there be no distribution to that group member, and where it does.
104 Relatedly, unlike in Haselhurst, the order proposed in prayer 9 is expressly conditioned by the words “without leave of the Court”. As Beach J said in Wetdal (at [78]), those words “indicate that the question as to whether unregistered group members ought receive a distribution is a question that the Court will need to consider in [the] future. Of course, that would be at the time of the later s 33V application”. Prayer 9 can be understood as both anticipatory and facilitative of, as well as supplementary and subordinate to, the exercise of the statutory powers under both s 33V(1) and (2).
105 By identifying these points of distinction, we have sufficiently dealt with Haselhurst by distinguishing it in relation to the first question.
106 We also consider an order in the terms of prayer 9 to be distinguishable from the order sought in Wigmans. The order sought in prayer 9 is based on s 33ZF, whereas the order in Wigmans was based on the cognate to s 33X(5). The order in Wigmans required that a notice be sent to group members to inform them that, if a settlement was later reached, the applicant intended to apply to the Court at that time for an order which, if made, would provide that any group member who by the Class Deadline had neither opted out nor registered “will not receive any benefit pursuant to the settlement”: at [25]. An order in the terms of prayer 9 can be distinguished from the order sought in Wigmans both in terms of the source of power and because the order in Wigmans only required notification of the applicant’s intention to later seek an order.
107 As to the order sought in prayer 3 of Boral’s application, being the order contemplated by the second question, while there are some differences between that and the order sought in Wigmans, we are not persuaded that there is any material distinction between them. Thus we do not consider an order in the terms of the second question to be distinguishable from the order sought in Wigmans.
108 It is convenient to now consider whether the Court has power to make an order in the terms of prayer 3 of Boral’s application. The reasons as to why we are starting with the second question will become apparent.
The second question
109 As another intermediate appellate court within an integrated national legal system, we should be slow to conclude that a considered judgment of another intermediate court is “plainly wrong”, even in circumstances where we all consider the earlier, obiter observations made by the Full Court in Melbourne City Investments to be preferable, and we consider the observations made by Beach J in Wetdal to be correct. These comity considerations assume importance because although Pt IVA of the Act and Pt 10 of the CPA are not pieces of uniform national legislation, the relevant provisions “are in all but identical terms”: Brewster (at [5] per the plurality).
110 But we are compelled to this conclusion with regard to the decision in Wigmans.
111 First, that is so because s 33X(5) of the Act expressly empowers the Court to make an order “at any stage” that notice be given to group members “of any matter.” The power is broad and unqualified, and those words must be approached on the basis that Parliament said what it meant and meant what it said. Provisions granting powers to a court should not be read down “by making implications or imposing limitations which are not found in the express words”: Owners of the Ship ‘Shin Kobe Maru’ v Empire Shipping Co Inc [1994] HCA 54; 181 CLR 404 (at 420–421 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).
112 As Lee J said in Lenthall v Westpac Banking Corp (No 2) [2020] FCA 423 (at [23]), the expression “any matter” in s 33X(5) must include any matter relevant to a group member’s decision as to whether to opt out or not. There is no indication in the words of s 33X, much less a clear indication, that the power in s 33X(5) should be read down such that the Court does not have power to make an order at the opt out stage to notify group members that, if a settlement is later reached, the applicant intends to apply to the Court for an order that, if made, will mean that group members who have neither opted out nor registered will not be entitled to seek a benefit under the settlement.
113 Nor is there any other reason to construe s 33X(5) so as to prevent group members from being informed of such a thing. In our view, it is the very sort of matter about which group members should be informed when they are considering whether to opt out.
114 In Wigmans the Court of Appeal held that the proposed notice was beyond power because it communicated a present intention to extinguish the claims of group members who neither opted out nor registered (at [86], [123]–[126]), and the proposed notice would have a “practical effect” on the decision to be made by group members. We respectfully disagree. If, as they do, the words of s 33X(5) permit the issuance of a notice of “any matter” at “any stage”, and the Court is satisfied that the proposed notice is to contain material or information which may be relevant to a group member including any decision whether or not to opt out, then the Court has power to issue the notice. Of course, there may be discretionary considerations as to why such a notice should not be provided to group members, but these considerations do not go to power.
115 Secondly, the premise of the judgment in Wigmans is that the proposed order was inconsistent with a “fundamental precept” of the class action regime, being that “group members may do nothing prior to a settlement and still reap its benefits”: at [131]. That was said to be a precept “confirmed by the joint judgments in Mobil Oil and Brewster, and inherent in the legislative choice of an opt-out regime”: at [79].
116 We respectfully disagree. In its generality this observation is neither helpful nor wholly accurate. Moreover, Mobil Oil and Brewster were not about mining the detail of such an extra-textual generalisation. In our view, while group members are generally permitted by Pt IVA to adopt a passive role prior to settlement or judgment, it is distracting to speak in terms of a “fundamental precept” or absolute rule (if that is what is meant by that expression). We agree with Beach J’s remarks in Wetdal (at [89]–[90]).
117 Deciding whether s 33X(5) is a source of power for the Court to make an order in the terms of the second question involves consideration of the text and purpose of the section in the context of Pt IVA as a whole. It does not involve ascertaining (or purporting to ascertain) a “fundamental precept” of the Act, at least to the extent that the phrase is intended to identify something other than a conclusion reached as to the operation of a statutory provision by reference to well-established rules of statutory interpretation. The scope of the general power in s 33X(5) is not identified by: (a) observing that the statutory scheme is an opt out scheme; (b) identifying that as a “fundamental precept”; and then (c) using that generalised phrase as a controlling concept to identify what may or may not be consistent with such a scheme; that is, by searching for the meaning of s 33X(5) by reference to that extra-statutory expression, rather than by reference to text, context and purpose.
118 We have no difficulty in accepting that Pt IVA is an opt out scheme in the sense that it permits a representative proceeding to be commenced on behalf of a person without that person’s consent (or even knowledge) and provides the group members in the proceeding with a right to opt out. But that does not mean that group members may never be required to take a step prior to settlement or judgment. The question as to whether a group member can be required to take a positive step prior to settlement or judgment must be answered by reference to the text, context and purpose of Pt IVA, and there is nothing in the Part which provides or otherwise requires that group members can never be required to take any positive step prior to settlement or judgment.
119 Nor in our respectful view does the statement of the plurality in Mobil Oil (at [40]), endorsed in Brewster (at [73]), provide a basis for the “fundamental precept” asserted in Wigmans. In Mobil Oil, the plurality said that “[g]roup members … need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring.” But Mobil Oil did not involve any question as to the power in s 33X(5) to order that notice be given to group members of “any matter” at “any stage” and, understood in context, their Honours were not proposing the suggested “fundamental precept”.
120 We agree with the observations of the Victorian Court of Appeal in Regent Holdings Pty Ltd v State of Victoria [2012] VSCA 221; 37 VR 424 (at [10]–[12] per Nettle, Redlich and Osborn JJA). The Court of Appeal (at [10]–[11]) rejected the contention that to require group members to provide particulars and discovery prior to settlement or judgment “would confound the ethos of Part 4A proceedings that group members need not take any positive step in the prosecution of a representative party’s claim in order to gain whatever benefit its prosecution may bring”. In relation to the statement in Mobil Oil, their Honours explained (at [12]):
With respect, that statement does not mean that it is of the essence of a Part 4A proceeding that group members not be required to take any positive step before common questions of liability have been resolved. Read in context, and understood against the background of the case with which the High Court was concerned, it means no more than that there are some Part 4A [and Pt IVA] actions in which that is likely to be so.
(Emphasis added).
121 Their Honours also said (at [11]) that the proposition that an order to require group members to take a positive step prior to settlement or judgment would confound “the ethos of Pt 4A” appears to be based on a “misconception” of the statement in Mobil Oil.
122 It can be accepted that Regent Holdings involved a closed class, and that (at [13]–[14]) the Court of Appeal contrasted that case with an open class action like Mobil Oil, in which there may be group members who were neither aware of the proceeding, nor wished it to be brought, nor to thereby have their rights affected without their knowing or consenting to that. But what the reasoning in Regent Holdings shows is that the Court of Appeal did not consider that there is any “fundamental precept” that group members can never be required to take any positive step in a proceeding prior to settlement or judgment. Regrettably, it appears that in Wigmans the Court of Appeal was not taken to the judgment in Regent Holdings.
123 Nor is there anything in the decision in Brewster that states the asserted “fundamental precept” or requires the conclusion that s 33X(5) is not a source of power to order that group members be given notice that it is the intention of the applicant to move the Court for a particular order in the future, even if there is doubt as to whether the Court can or will make that order. Contrary to Wigmans (at [79]), Brewster dealt with a different question to that before us. In Brewster the majority considered whether s 33ZF was a source of power to make a common fund order at an early stage for a purpose that was said to be to ensure the economic viability of the proceeding and to put it on a stable foundation so that it could go ahead. Based upon that apparent purpose, the majority decided that it was not within power; but their Honours did not consider, and they said nothing about, whether s 33X(5) provides power to make an order at the opt out stage to notify group members that, if a settlement is later reached, the applicant intends to apply to the Court for an order that, if made, will mean that group members who have neither opted out nor registered will not be entitled to seek a benefit under the settlement. We agree with the observations of Beach J in Wetdal (at [93]).
124 Thirdly, as noted in Wetdal (at [90]), in Earglow (at [47]–[52]) Beach J cited numerous decisions in which group members had been compelled by court order, prior to settlement or the first stage trial of the class action to take a positive step in the proceeding. His Honour stated that such an order was made:
(a) to provide discovery in at least four cases;
(b) to provide particulars of group members’ claims in at least seven cases;
(c) to make a contribution towards security for costs in at least one case; and
(d) to provide particulars of group members’ identities in order to facilitate the service of subpoenas in at least one case.
Since Earglow there have been further contested applications in which courts have proceeded on the basis that the Court has power to order that group members take the step of identifying themselves and providing security for costs, at risk of the class action being stayed: see, e.g. Capic v Ford Motor Company (No 2) [2016] FCA 1178 (at [13]–[14] per Perram J); Abbott v Zoetis Australia Pty Ltd (No 2) [2019] FCA 462; 369 ALR 512 (at [3], [34] per Lee J); and dismissal of the application for leave to appeal in Zoetis Australia Pty Ltd v Abbott [2019] FCAFC 153 (Allsop CJ, Perram and Beach JJ).
125 The Contradictor did not contend that these judgments of single judges and intermediate courts of appeal going back over 20 years were wrongly decided. Rather, he argued that they should be seen as exceptions to the “fundamental precept” identified in Wigmans, as the steps ordered to be taken by group members were not directed to their “fundamental substantive rights”. We see little substance in the asserted “fundamental precept” when in numerous contested applications courts have (correctly) decided that Pt IVA and cognate State legislation provides power to compel group members to take a positive step prior to settlement or judgment.
126 Fourthly, in reliance on Wigmans the Contradictor submitted that the practical effect of the proposed order would be to create an “insoluble conflict” of interests. It can be accepted that, depending on the circumstances, a class closure order may give rise to a conflict of interest between Registered and Unregistered Group Members. But potential or actual conflicts of interest are an inevitable by-product of a regime where the self-appointed representative applicant’s individual claim is the vehicle through which the common questions are to be tried. Pt IVA contemplates that the conflicts will be addressed through the representative applicant’s duty not to act contrary to the interests of the group members and, critically, by the Court exercising its protective role in relation to group members’ interests. As Beach J explained in Wetdal (at [94]) “the scheme of Part IVA confers authority on the representative who like any fiduciary must manage conflicts in accordance with established principle, subject to oversight of the Court and the right of other group members to seek to replace the representative.”
127 It is fundamental to how Pt IVA works, and cardinal to a representative applicant’s role, to be able to deal with the “claims” of group members (to use that word in its specific, Pt IVA sense) by settling them, subject to the approval of the Court under s 33V, while the Court is exercising a supervisory and protective role (accompanied by an order being made by the Court pursuant to s 33ZB to bind the non-party group members to the Court-approved quelling of the dispute by way of settlement). It is a commonplace that an applicant can advance a settlement for approval which has the legal consequence of precluding group members from running their individual claims post-settlement. The representative is the privy in interest of the group members (who do not opt out) and represents their interests in respect of the subject matter of the proceeding, namely “a claim which gives rise to common questions of law or fact”: see Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; 259 CLR 212 (at [49] per French CJ, Kiefel (as her Honour then was), Keane and Nettle JJ).
128 As a consequence of this, the applicant necessarily has authority (again subject to his duties to group members as a whole and the supervision of the Court) to settle the class action in a way which provides for a particular distribution of the settlement proceeds, and in a way which may result in some group members receiving nothing. This may happen for a host of reasons, including, for example, when a particular cohort of claims is very weak, or uninsured (in circumstances where the settlement is paid by an insurer in respect of insured claims only). If the proposed distribution is embodied in a deed of settlement, it will require Court approval under s 33V(1), but if not, the Court is empowered under s 33V(2) to make such orders as are just with respect to that matter: see Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3) [2020] FCA 1885; 385 ALR 625 (at [17]–[21] per Lee J). Either way, there must be an exercise of power by the Court under s 33V, whether or not the settlement is one in which the applicant proposes that all group members receive a benefit, or one which the applicant proposes that a cohort of group members be precluded from receiving a benefit.
129 There is nothing novel about any of this. As Mr Parkin correctly pointed out, it was accepted in Wigmans (at [128]) that the Court has the power under the equivalent provisions to ss 33V and 33ZB, to approve a settlement under which unregistered group members will not participate in a settlement but will nevertheless be bound by the settlement. This is consistent with numerous first instance decisions of this Court post-Haselhurst: see Inabu Pty Ltd as Trustee for the Alidas Superannuation Fund v CIMIC Group Ltd [2020] FCA 510 (at [8] per Jagot J); Fisher (as Trustee for the Tramik Super Fund Trust) v Vocus Group Ltd (No 2) [2020] FCA 579 (at [57]–[63] per Moshinsky J); Cantor v Audi Australia Pty Ltd (No 5) [2020] FCA 637 (at [236]–[237] per Foster J); Uren v RMBL Investments Ltd (No 2) [2020] FCA 647 (at [26] per Murphy J); Webster (Trustee) v Murray Goulbourn Co-Operative Co. Ltd (No 4) [2020] FCA 1053 (at [24] per Murphy J); Court v Spotless Group Holdings Ltd [2020] FCA 1730 (at [22]–[38] per Murphy J).
130 If and when the Court is performing the function of considering a s 33V application, it will be focussed upon the determinative question as to whether the proposed settlement is “fair and reasonable having regard to the claims made on behalf of the class members who will be bound by the settlement” and “has been undertaken in the interests of class members, as well as those of the applicant, and not just in the interests of the applicant and the respondent(s)”: see Class Actions Practice Note (GPN-CA) (at [15.3]). As Murphy J said in Kelly v Willmott Forests (No 4) [2016] FCA 323; 335 ALR 439 (at [63]):
The Court should be alive to the possibility that a settlement may reflect conflicts of interest … It should be kept in mind that the Court assumes [this] onerous burden at a stage of the proceeding when the interests of the applicant and the respondent have merged in the settlement and neither side seeks to critique the settlement from the perspective of class members. Both sides have become “friends of the deal”.
131 In McKenzie v Cash Converters International Ltd (No 3) [2019] FCA 10 (at [24]), Lee J similarly observed that the Court will have the onerous burden requiring it to be “astute to recognise that the interests of the parties before it and those of the group as a whole (or as between some members of the group and other members) may not wholly coincide” and, connected to that, must “be alive to the possibility that a settlement may reflect conflicts of interest or conflicts of duty and interest between participants in the common enterprise which has conducted the representative proceedings”.
132 Any approach taken in any proposed settlement in the present case to differentiating between Registered Group Members and Unregistered Group Members would require the Court’s assessment having regard to such considerations. When this is appreciated, any dangers about conflicts at the present time can be seen in their proper context.
133 By deferring to the s 33V stage the question of what should happen to the claims of Unregistered Group Members, any suggested “insoluble conflict” must be considered in the context of a legislative scheme guarding against precisely such conflicts causing any unfair prejudice to Unregistered Group Members (and which conflicts must be considered at the time of any settlement approval application).
134 What this shows is that, to the extent that a conflict of interest may exist, it does not demonstrate that there is no power under s 33X(5) to make the proposed order. Indeed, it may be that the existence of a conflict of interest is a reason why the Court decides that it is appropriate to order that group members be given notice of the applicant’s intention to seek an order which, if made, may or will adversely affect Unregistered Group Members’ interests. That is, however, an issue of discretion, not one of power, and the question of discretion is not before us.
135 In summary, we consider the Court has power under s 33X(5) to make an order in the terms of the second question. Let us then turn to the first question.
The first question
136 Having regard to our answer to the second question and on the assumption that a s 33X(5) order is available, in the circumstances of the present case we consider that s 33ZF does not provide power to make an order in the terms of prayer 9. Essentially that is so because it is likely that, if the group members are informed by a notice under s 33X(5) both:
(a) that the Court has directed that if they do not opt out of the proceeding they must register their claims (without at that point ordering any consequence for those group members who fail to register); and
(b) that if an in-principle settlement is later reached, the applicant intends to apply to the Court as part of the settlement approval application for Court approval, for an order which, if made, will mean that group members who neither opted out nor registered will be bound by the settlement but will not be able to seek any benefit under the settlement,
the great bulk of group members who may ultimately wish to seek a benefit under the settlement will register their claims.
137 Thus, an order in the terms of the second question will facilitate settlement and allow greater finality of litigation which is the “justice” in the proceeding which the parties seek. In such circumstances there would be no lacuna for the supplementary or “gap-filling” power in s 33ZF to fill.
138 However, having regard to the fact that the first question was fully argued, we should explain that we do not accept that the availability of power under s 33X(5) will necessarily, or always, mean that there is no power under s 33ZF to make an order at the opt out stage in the terms of prayer 9. We will not speculate as to the circumstances, but whether there exists a lacuna such that an order in the terms of prayer 9 is appropriate or necessary to ensure that justice is done in the proceeding necessarily depends upon the circumstances of the case.
139 There are three aspects to soft closure orders: first, a requirement for group members to “register” their interest in participating in any settlement by a particular date and usually provide specified information; secondly, a consequence of non-registration, namely that the unregistered group member would not be able to seek a benefit under any settlement reached within the specified time frame but would otherwise remain a group member for all purposes; and thirdly, if there is no settlement within the specified time frame then unregistered group members will not be precluded from seeking a benefit under any later settlement or judgment.
140 Each of those aspects are reflected in the prayers for relief sought in Mr Parkin’s application. The Contradictor did not suggest before us that the first aspect, a regime allowing registration and the provision of information in advance of a mediation (prayers 5 to 8), is beyond an exercise of power pursuant to s 33ZF. The Contradictor took the position that the orders in prayers 5 to 8 were within power provided that there were “no consequences” for group members who failed to register, but outside power if they have the legal or practical effect that Unregistered Group Members will be precluded from seeking to obtain a benefit under any settlement.
141 It is unsurprising that the Contradictor accepted that, provided there is no consequence for a group member’s failure to do so, the Court has power to order group members to take the “positive” step of registration in contemplation of mediation. That there is power to require group members to take a positive step for the purposes of a mediation has been well established since the decision in Regent Holdings. Depending upon the circumstances of the case, such an order could advance the effective resolution of the issues or, to adapt the words of Kiefel CJ and Bell and Keane JJ in Brewster (at [47]), this aspect of the orders can assist in ensuring that, following a successful meditation and the making of settlement approval orders under s 33V, “the proceeding is brought fairly and effectively to a just outcome”.
142 It is the second aspect of the order which is controversial, namely, that if an order in terms of prayer 9 is made, Unregistered Group Members may be precluded from seeking a benefit under any settlement reached within the specified time frame but would otherwise remain a group member for all purposes. As is evident from its terms, the order sought by prayer 9 is expressly sought “pursuant to s 33ZF”.
143 We commence by noting that s 33ZF provides power to make an order only where the order is appropriate or necessary to ensure that justice is done in the proceeding. To state the obvious, the question as to whether the Court has power under s 33ZF to make an order in the terms of prayer 9 requires consideration of the circumstances of the case, and more particularly, what is appropriate or necessary to ensure justice is done in the particular case. We also note that in Brewster (at [46]) Kiefel CJ, Bell and Keane JJ observed that “[t]he power conferred by s 33ZF is broad, but it is essentially supplementary”. To similar effect their Honours noted (at [60]) that when dealing with contextual considerations the statutory context in which s 33ZF appears shows that it “is a supplementary source of power”, and (at [70]) that it would be an error to exalt the role of s 33ZF above that of a “supplementary or gap-filling provision”. Nettle J adopted the same characterisation of the power (at [124]) as did Gordon J (at [145] and [147]). Thus, the question as to whether the Court has power to make such an order also requires consideration of whether there is a lacuna for the “gap-filling” power in s 33ZF to fill.
144 First, it can be accepted the words “appropriate or necessary to ensure justice is done in the proceeding” in s 33ZF are words of limitation. But we do not accept that, if an effective mediation could only occur in circumstances where group members who do not register to participate in any settlement will lose their causes of action, that could never be “appropriate or necessary” to “ensure that justice is done in the proceeding.” In modern times, alternative dispute resolution methods have formed an important part of the mechanisms available to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. One could not foreclose the possibility, depending upon the circumstances of the case, that such an order could advance the effective resolution of the proceedings. Again, to adapt the words of the plurality in Brewster (at [47]), such an order may assist in ensuring that, following a successful meditation and the making of settlement approval orders under s 33V, “the proceeding is brought fairly and effectively to a just outcome”.
145 Secondly, we do not accept that an order in terms of prayer 9 would effect, or purport to effect, an extinguishment of group members’ claims, contingently or otherwise. We agree with the observations of Beach J in Wetdal (at [78] and [82]). As we have said, the proposed order in Haselhurst sought to bar group members’ claims (albeit contingently) by the operation of the order itself. Unlike the order in Haselhurst, prayer 9 does not use the language of “barring” or “extinguishment” of group members’ claims and is expressed in terms that an Unregistered Group Member will not , “subject to further order” and “without leave”, be “permitted to seek any benefit pursuant to any settlement (subject to court approval)”. Those words indicate that the question as to whether Unregistered Group Members are to receive any benefit under the proposed settlement is a question that the Court would need to consider at the time of the s 33V application. Further, the notion of a “contingent extinguishment” is elusive. If there is a contingency, nothing has been extinguished. And if that contingency is expressed in an interlocutory order which is always susceptible to variation, it cannot be said that Unregistered Group Members’ claims were extinguished when the contingency itself was subject to being redefined or removed by a later order under s 33V.
146 As we said earlier, the representative applicant has authority to settle the proceeding in a way that provides for a particular distribution of the settlement proceeds, including in a way which results in some group members receiving nothing. It was accepted by the Contradictor (and in Haselhurst (at [7] and [97]), and Wigmans (at [128])) that s 33V provides the Court with power, upon notice to group members, to make orders which have the effect of binding Unregistered Group Members into a settlement while precluding them from receiving any benefit under the settlement. The fact that Unregistered Group Members’ rights may merge in the settlement approval and consequent dismissal of the proceeding without receiving part of the settlement is no more than a consequence of the exercise of power under s 33V rather than any order sought by prayer 9.
147 Thirdly, as we have said, the decision in Brewster was directed to a different problem and an order such as that sought in prayer 9 falls into a different category than the common fund order made at an early stage considered in Brewster. The purpose of the proposed order is to determine how group members’ rights should be adjusted as between them in the event of a Court approved settlement. Unlike the dichotomy identified in Brewster (at [3]), an order in terms prayer 9 in an appropriate case is concerned with how the action should proceed in order to do justice rather than whether the action can proceed. It cannot be said to be extraneous to dealing with the substantive rights of group members in the proceeding.
148 Fourthly, as we have said, the Contradictor accepted, as did the Court of Appeal in Haselhurst and Wigmans, that the Court has power at the s 33V stage to approve a settlement which excludes the Unregistered Group Members from sharing in the proceeds of any settlement sum. We cannot discount the possibility that there might be circumstances where the exercise of power to make an order like prayer 9 could be made in contemplation of a later s 33V hearing.
149 Fifthly, as to a conflict between the interests of Registered and Unregistered Group Members, this is relevant to the question of discretion, rather than power. As noted above, potential or actual conflicts of interest are an inevitable by-product of the Pt IVA regime and those conflicts are addressed by the content of the duties to group members of both the representative applicant and the Court (including the necessity that any conflict of interest must be considered by the Court on any settlement approval hearing).
150 Sixthly, contrary to the Contradictor’s submission (and to the statements in Wigmans (at [42], [79] and [119])), it might be observed that, generally speaking, a representative applicant and funder are not interested in bargaining away the claims of Unregistered Group Members so as to give the respondent the security that it needs; rather, their interest is in maximising the number of group members who register their claims (subject to the necessity that there be enough certainty that settlement discussions are feasible).
151 It follows from the above, that the reasoning in The Owners – Strata Plan No 87321 and Furnell cannot be regarded as being soundly based, to the extent those decisions stand for the propositions that an order in terms of prayer 9 establishes some sort of “presumptive position”, or that an order in terms similar to prayer 9 can never be made.
152 But having said all of this, it is appropriate to reiterate that, in the circumstances of the present case, the existence of power to make an order under s 33X(5) to give notice as contemplated by the second question means that in the circumstances of this case there is no power under s 33ZF to make an order in the terms of the first question.
H ORDERS AND CONCLUSION
153 The questions reserved by the docket judge should be answered as indicated in the orders of today’s date. In the light of those answers, the parties’ interlocutory applications can now proceed to hearing and determination before the docket judge.
154 Finally, the Court expresses it appreciation to the Contradictor for his cogent and useful submissions. The Contradictor’s costs have been agreed to be paid by the parties.
155 As between the parties, there should be no order as to costs.
I certify that the preceding one hundred and fifty five (155) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Murphy and Lee. |
Associate:
REASONS FOR JUDGMENT
BEACH J:
156 I have had the considerable advantage of reading the reasons in draft form of Murphy and Lee JJ and agree with their reasons and concur in the answers to the questions.
I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Beach. |
Associate:
Dated: 28 March 2022
