Federal Court of Australia

Furnell v Shahin Enterprises Pty Ltd [2021] FCA 73

ORDERS

THE COURT ORDERS THAT:

1.    The oral application of the Applicants for orders to be made in the terms of the revised minutes provided by them on 17 December 2020 is refused.

2.    The Court will hear from the parties as to the further orders which are appropriate in the light of its reasons.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

WHITE J:

1    This judgment concerns two principal questions. Does the Court have power in the Opt Out and Registration Orders in a class action brought under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) to order that any group member who has not opted out of the proceeding or registered their claim will not, subject to any further order of the Court, be entitled to receive a distribution from any future settlement reached before the trial of the common issues commences? If so, should the Court make an order to that effect?

2    For the reasons which follow, I consider that both questions should be answered in the negative.

The underlying action

3    The applicants’ proceeding was commenced by Adero Law on behalf of five former employees of Shahin Enterprises Pty Ltd (Shahin), which conducts fuel and retail outlets in South Australia. They claim payment of industrial entitlements said to have been underpaid by Shahin, interest and the imposition of pecuniary penalties. The applicants bring their claim on their own behalf and on behalf of persons who were employed by Shahin at any time within the period of six years ending on 13 May 2020 under the industrial instruments in force from time to time and who claim to have been subject to particular practices and/or directions of Shahin. The class comprises persons in five subgroups. It is not necessary for present purposes to identify the composition of each subgroup.

4    The pleadings closed on 30 October 2020. No orders with respect to the hearing and determination of common issues has yet been made. The parties contemplate a mediation by 30 July 2021.

The proposed opt-out and registration orders

5    On 15 December 2020 and in anticipation of the case management hearing to be held on the following day, the applicants provided minutes of proposed orders concerning opt out and the registration of claims, notices to group members, mediation and case management issues. Following an initial discussion concerning the minutes on 16 December 2020, the applicants provided revised minutes on 17 December 2020. The proposed opt out and registration orders are as follows:

Opt out and Registration

2.    Pursuant to s 33J and s 33ZF of the Federal Court of Australia Act 1976 (Cth) (FCA Act), and subject to any further order of the Court, any claimed Group Member (Group Member) who wishes to:

(a)    opt out of this proceeding must do so by filing with the Court the required notice in the form at Schedule A to Annexure A to these orders (Opt Out Notice) before 4:00pm on 30 March 2021 (Deadline); or

(b)    participate in any distribution of any amount agreed in a settlement of this proceeding reached before the trial of the common issues commences must register for this proceeding in accordance with Order 3 before the Deadline.

3.    Pursuant to s 33ZF of the FCA Act, any Group Member who wishes to participate in any distribution of any amount agreed in a settlement of this proceeding reached before the trial of the common issues commences is obliged to register their claim before the Deadline by:

(a)    if that Group Member signed a retainer agreement with Adero, providing to Adero the information set out below at Order 4 to the extent that information has not already been provided;

(b)    if that Group Member has not signed a retainer agreement with Adero, completing or taking reasonable steps to complete either:

(i)    an online form which is substantially in the form of Schedule B to Annexure A to these orders, and made available at web address https://www.aderolaw.com.au/class-actions/on-the-run/; or

(ii)    a hard-copy form in the form of Schedule B to Annexure A to these orders and returning that hard-copy form to Adero.

4.    In order to register for the purpose of Order 3(a), a Group Member shall provide or take reasonable steps to provide:

(a)    the Group Member’s name, post or email address and contact phone number; and

(b)    accurate details of the Group Member’s employment with the Respondent, including the date the Group Member’s employment commenced, the positions held during the course of their employment with the Respondent, the stores at which they worked for the Respondent and hours that the Group Member alleges they were required or directed to, and did, work, and the date the Group Member’s employment with the Respondent ended.

5.    Pursuant to s 33ZF of the FCA Act, any Group Member who has not by the Deadline opted out in accordance with Order 2 or registered in accordance with Order 3:

(a)    remains a Group Member for all purposes, including for the purpose of being bound by any judgment in this proceeding and being entitled to participate in any award by the Court if this proceeding does not settle; but

(b)    subject to any further order of the Court, will not be entitled to receive a distribution from any settlement of this proceeding in the event a settlement is reached before the trial of the common issues commences.

6.    Any Group Member wishing to challenge or seek a variation of these orders must file and serve any application and supporting affidavit material on the solicitors for the Applicants and Respondent by the Deadline.

(Bold emphasis in the original and other emphasis added)

6    The notice proposed to be issued pursuant to s 33X(1) of the FCA Act contemplates that group members will be told that they have four options. It gives details concerning, and the potential consequences of, the exercise of each. The four options are:

(1)    registering for the class action by 31 March 2021 (if the group member had not already signed a retainer with Adero Law);

(2)    opting out;

(3)    doing nothing; and

(4)    applying to challenge or vary the registration and opt-out orders.

7    The proposed notice informs group members that, unless they have opted out of the proceeding, they will be bound by a judgment following a trial or a settlement at any time which is approved by the Court, at [6]; that a settlement is likely to extinguish all rights to compensation which a group member may have against Shahin, at [6(a)]; and that a settlement may include releases of Shahin in respect of all claims made by group members in the class action, at [6(a)].

8    In relation to the option of registration, the proposed notice informs group members, amongst other things, that in the event of a settlement agreement being approved by the Court, a registered group member will be entitled to participate in that settlement, at [25].

9    The proposed notice informs group members that those who opt out of the class action will no longer be a group member and will, if they wish to bring their own claim, need to do so separately and at their own cost, at [26].

10    In relation to the option of doing nothing (neither registering nor opting out), the proposed notice informs group members (relevantly):

[27(a)]    You will be bound by any judgment or settlement of the Class Action but, subject to the further order of the Court, will not be entitled to receive any benefit or monetary compensation from any settlement of the Class Action agreed at the Mediation or before the commencement of the trial on common issues. Being bound by any settlement means that you may be bound by any releases provided to [Shahin] in the settlement agreement, which may include the releases described in paragraph 6. Any settlement will be subject to approval by the Court.

(Emphasis added)

11    In relation to the option of applying to challenge or vary the registration and opt out orders, the proposed notice states:

[28]    For group members who apply to challenge or vary the Registration and Opt Out Orders, you will need to make an application to the Federal Court of Australia and explain why you think the registration and opt out process should be changed.

(Emphasis in the original)

12    Each of these options is elaborated in Section 2 of the proposed notice under the heading “Your Options”. In relation to registration, [34] states:

You do not have to register to remain a group member. However, subject to further order of the Court, if you wish to receive a share of any benefit or monetary compensation resulting from any settlement agreed at the Mediation or before the trial of the common issues commences, you must register. Any settlement will be subject to approval by the Court.

(Emphasis added)

13    In relation to the option of doing nothing, [46] states:

If the parties agree to settle the Class Action at the Mediation or before the trial of the common issues commences and the settlement agreement is approved by the Court, then, subject to any further order of the Court, you will not be entitled to make a claim for part of any benefit or monetary compensation in connection with the settlement of the Class Action without the leave of the Court. You will be bound by the terms of any settlement, which may include the releases of [Shahin]. Any settlement will be subject to approval by the Court.

(Emphasis added)

14    In relation to option (4), the proposed notice states:

[48]    If you wish to apply to the Federal Court of Australia to challenge or vary the Registration and Opt Out Orders, you must send a written notice to the Court setting out the challenge or variation you wish to make and the reasons for that challenge or variation. You may then be required to attend the South Australian District Registry of the Federal Court of Australia at a later date to have your application to challenge or vary the Registration and Opt Out Orders heard. Depending on the outcome of that application, you may be given a further opportunity to register to participate in a settlement of the Class Action or opt out of the proceeding.

(Emphasis added)

15    As is apparent, the applicants propose the Court ordering that any group member who has not by 31 March 2021 opted out or registered his or her claim in accordance with the preceding orders will not, subject to any further order of the Court, be entitled to receive a distribution from a settlement reached before the trial of the common issues commences. In the absence of such a settlement, all group members, including those who have not opted out and who have not registered, will continue as group members for all purposes of the proceedings.

16    The written submissions of the applicants which accompanied the minutes provided on 15 December 2020 stated that the orders and form of notice proposed were based on those made by Perram J on 24 November 2020 in Action NSD542/2020, a similar but unrelated action by employees against Coles Supermarkets Australia Pty Ltd.

17    Both parties submit that the “soft closure” of the applicants’ claim by the proposed order would facilitate settlement of the action at the proposed mediation, citing Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; (2017) 252 FCR 1 (Treasury Wine Estates) at [74]-[75].

18    In view of the authorities bearing on the Court’s power and exercise of discretion to make the orders at this stage of the proceedings, I asked the parties to provide written submissions concerning those issues, and both have done so. Both parties contend that the Court may, and should, make the orders sought by the applicants.

Statutory provisions

19    It is not necessary to set out extensively relevant provisions in Pt IVA. Section 33ZF, on which the parties principally rely, provides:

33ZF 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.

The authorities concerning the Court’s power

Treasury Wine Estates

20    In Treasury Wine Estates, the Full Court (Jagot, Yates and Murphy JJ) considered an order which was not materially different in effect from that sought by the parties presently, namely:

Pursuant to s 33ZF of the Act, any group member who does not opt out and who is not a Registered Group Member:

(a)    Remain a group member for all purposes, including for the purposes of being bound by any judgment in this proceeding and being entitled to participate in any award of damages by the Court if this proceeding does not settle; but

(b)    Subject to any further order of the Court, will not be entitled to receive a distribution from any settlement of this proceeding.

21    Unlike the orders proposed in this case, the order in Treasury Wine Estates did not impose any limitation on the time at which settlement of the proceeding may be reached.

22    Although the appellant in Treasury Wine Estates had initially put in issue the Court’s power and exercise of discretion to have made an order in those terms, it conceded during the appeal that the Court did have the power under s 33ZF to make the order, and that the order had been appropriately made, at [47]. The Full Court regarded that concession as appropriate, saying that it was “plain” that the primary judge had the power to make the order and that it had been appropriate for him to do so, at [48]. Although the appellants’ concession made it unnecessary for the Full Court to do so, it did (having regard to some divergence in judicial practice) set out its views. These included:

[74]    Having said this, 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 of the Act. The courts have accepted on numerous occasions that, in order to facilitate settlement, it is appropriate to make orders to require class members to come forward and register in order to indicate a willingness to participate in a future settlement, and to make orders that class members be bound into the settlement but barred from sharing in its proceeds unless they register: see for example, Matthews v SPI Electricity & SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 13) (2013) 39 VR 255; [2013] VSC 17 at [22]-[80] (Matthews v SPI No 13) (J Forrest J) and the authorities there referred to; Farey v National Australia Bank [2014] FCA 1242 at [11]-[16] (Jacobson J); Inabu Pty Ltd v Leighton Holdings Pty Ltd [2014] FCA 622 at [17]-[22] (Jacobson J); Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194 at [67]-[68] (Beach J). An important aspect of the utility of a class proceeding is that they may achieve finality not only for class members but also for the respondent.

[75]    The rationale behind such class closure orders is that a requirement for class members to register their claims will facilitate settlement, because it allows both sides to have a better understanding of the total quantum of class members’ claims, permits the settlement amount to be capped by reference to the number of class members, and assists in achieving finality (to the extent the Part IVA regime permits) … A class closure order that precludes class members, who neither opt out nor register, from sharing in a subsequent settlement may facilitate settlement, and therefore be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding.

[76]    However, we 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.

[77]    Caution should also be exercised in relation to the stage at which a class closure order is made. In our view, the Court should usually not exercise the discretion to make a class closure order based merely on a respondent's assertion that it is unwilling to discuss settlement unless such an order is made. It is a common if not inevitable feature of opt out class actions that the defendant will be faced with uncertainty regarding the quantum of class members’ claims …

[78]    We respectfully agree with the approach taken by Bromberg J in Winterford v Pfizer Pty Ltd [2012] FCA 1199 at [9] where his Honour declined to make a class closure order in circumstances where the pleadings were not closed, common questions had not been settled, opt out notices had not been sent out, no settlement discussions had been undertaken, and no settlement discussions were proposed unless the Court made a class closure order. As his Honour said, to make a class closure order at that stage “would turn on its head the very nature of the opt-out model chosen by the legislature.” See also Camping Warehouse Australia Pty Ltd (formerly Mountain Buggy Australia Pty Ltd) v Downer EDI Ltd [2015] VSC 122 at [16] (Sifris J).

(Citations omitted and emphasis added)

23    If Treasury Wine Estates was able to be considered by itself, it would be a very persuasive (but not binding) authority supporting s 33ZF as the source of the Court’s power to make the orders proposed by the present parties.

BMW Australia v Brewster

24    Section 33ZF of the FCA Act and its counterpart in the Civil Procedure Act 2005 (NSW) (CP Act), s 183, were considered by the High Court in BMW Australia Ltd v Brewster [2019] HCA 45; (2019) 374 ALR 627. The Court held by majority that, while the powers conferred by ss 33ZF and 183 respectively are broad, they did not permit the Court to make common fund orders, at [3] (Kiefel CJ, Bell and Gageler JJ). A number of aspects of their Honours’ reasons are pertinent presently and bear upon the status of Treasury Wine Estates as an authority. The first was the view by the plurality that the words “appropriate or necessary to ensure that justice is done in the proceedings” in s 33ZF are words of limitation. Orders will be authorised by s 33ZF only if they satisfy that criterion. The common fund orders in question could not be regarded as within the limitation because they were directed to the issue of whether the action could proceed at all, as distinct from how the action could be “brought fairly and effectively to a just outcome”, at [47], [49]-[51].

25    Secondly, the plurality said that s 33ZF should be understood as “a supplementary source of power”, with consequence that it was not to be supposed that it did the same work as other provisions in Pt IVA, or that it was intended to meet the exigencies of litigation not adverted to at all by the other provisions in Pt IVA, at [60]. This understanding was repeated at [70] when the plurality referred to s 33ZF as a “supplementary or gap-filling provision” which cannot be relied upon as a source of power to do work beyond that done by the specific provisions which the text and structure of the legislation show it was intended to supplement.

26    The plurality accepted that the provisions of Pt IVA envisaged the identification of group members so far as that is possible, and that identification would facilitate the distribution of any proceeds of the proceedings, whether from a settlement or favourable judgment, at [72]. Their Honours regarded the opt out model in Pt IVA as being important in this respect as well as the provisions indicating that the occasion for identification of group members arose when distribution was being considered following the successful completion of the proceedings:

[73]    Under s 33J of the FCA, the court must fix a date before which a group member may opt out of a representative proceeding. Because that date will usually fall before the outcome of the action is known, the problem of "free riding" by group members who would seek to opt in to the proceeding only after a favourable outcome is achieved is addressed. 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; and group members "are under no obligation to identify themselves". 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 ss 33V, 33X(3)-(4), 33Z and 33ZA 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.

(Emphasis added and citations omitted)

27    Nettle J, at [124], described s 33ZF(1) as being in the nature of a supplementary power to do what is necessary or incidental to achieve the objectives to which the other more detailed and specific provisions in Pt IVA were directed. His Honour also referred to the provisions indicating the time at which orders distributing judgment or settlement proceeds were to be made:

[125]    … The power conferred by s 33ZF is to make orders the purpose of which is to ensure justice is done in a representative proceeding. The limits of what may properly be described as the demands of justice in a particular case, and so the court's power under s 33ZF, must be determined by the text of the Act read as a whole, taking into account the relevant context and purpose … As the plurality observe, the provisions of Pt IVA, in which s 33ZF sits, make specific provision for the entities in respect of whom, and the point in time at which, orders distributing cost burdens and judgment or settlement proceeds may be made. None of those provisions expressly or impliedly contemplates the kind of CFOs sought in these matters nor the issues to which they were addressed …

(Citations omitted and emphasis added)

28    Gordon J held:

[147]    Considered in the context of Pt IVA as a whole and ss 33C, 33J, 33M, 33N, 33V, 33Z, 33ZA and 33ZB in particular, s 33ZF(1) as a supplementary or gap-filling power is a power to do what is appropriate or necessary to advance the objective of Pt IVA – to provide a procedure for representative proceedings. As has been seen, none of the provisions mentioned envisages a Court being engaged in making a common fund order.

Haselhurst v Toyota Motor Corporation

29    The application of s 183 of the CP Act to a class closure order was considered by the Court of Appeal in New South Wales comprised of five judges (Bell P, Macfarlan, Leeming and Payne JJ, Emmett AJA) in Haselhurst v Toyota Motor Corporation Australia Ltd [2020] NSWCA 66; (2020) 101 NSWLR 890 (although the Court abjured use of the term “class closure order”). The order then under consideration was in the following terms:

Class closure orders

16    Pursuant to s 183 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. 

(Emphasis added)

30    It is to be noted that Order 16 considered in Haselhurst differs from the order proposed in the present case in that it expressly barred, without limitation, an unopted out and unregistered group member from making any claim against the defendant and from participating in any form of compensation or otherwise benefiting from any relief which may be ordered or agreed. However, apart from the prospect of a contrary court order (and, at least theoretically, the terms of the settlement) the practical effect of the present applicants’ proposed orders would be similar.

31    All members of the Court agreed with the reasons of Payne JA (although Bell P and Emmett AJA added reasons of their own) in holding that s 183 of the CP Act did not empower the Supreme Court to make Order 16 and that, even if it did, the order should not as a matter of discretion be made.

32    The reasons of Payne JA contained a detailed review of the authorities, to which it is not necessary for present purposes to refer. His Honour noted a number of features of Order 16. These included:

(a)    the order would extinguish the rights of both unopted out and unregistered group members, even though they had taken no active part in the proceedings and their rights against a defendant had benefited from s 182 of the CP Act (FCA Act s 33ZE) suspending time for the purposes of limitation defences, at [47];

(b)    the settlement on which the extinguishment was contingent would not be a settlement of the claims of all group members, but only of those who had registered, at [48];

(c)    in specifying that all group members are “bound by the terms of the settlement agreement”, the order would go beyond the terms of s 179(b) of the CP Act (FCA Act s 33ZB), at [49]-[51];

(d)    the order would operate adversely against group members even though Pt 10 of the CP Act (FCA Act Pt IVA) contemplated only two circumstances in which a court order may bind group members who were not otherwise parties to the proceedings, at [52]-[55]; and

(e)    the fact that Order 16 was interlocutory and could be rescinded or varied did not address its vice, namely, that its clear purpose was to effect a contingent extinguishment of group members’ rights of action against the respondents, at [57]-[59];

33    Having noted these and other matters, the reasons of Payne JA for concluding that s 183 of the CP Act did not empower the Court to make Order 16 included:

(a)    the legislative framework, including the opt out provisions and the absence of any requirement that a class be closed before settlement, tended strongly against there being a power to make an order extinguishing the rights of an unregistered group member in advance of any settlement being achieved, in order to facilitate settlement of the claims of group members who had chosen to register their claims, at [66];

(b)    Order 16 does more than would be achieved by an amendment of the class narrowing it to those who had registered, retained the applicants’ solicitors or entered into a funding agreement with the funder, and, in fact, would have the contrary effect to an order limiting the class, at [67]-[75];

(c)    applying Brewster, the specific powers in ss 173 and 177 of the CP Act (FCA Act ss 33V and 33Z) are enlivened only after a settlement and s 183 (FCA Act s 33ZF) “does not provide a licence to rewrite the legislative prescriptions of the exercise of those powers”, at [87]. That is to say, Pt 10 of the CP Act contemplates that the time for the court to make orders in relation to the distribution of the proceeds of the action is at its successful completion and s 183 could not be applied so as to alter that position, at [107];

(d)    the decision in Matthews v SPI Electricity Pty Ltd (No 13) [2013] VSC 17; (2013) 39 VR 255 on which the respondents relied was to be distinguished because the Supreme Court Act 1986 (Vic) (SC Act (Vic)) considered in that case contained a specific provision (s 33ZG) authorising the court to order steps to be taken by group members by a specified date in order to be entitled to obtain benefits arising out of the proceedings. J Forrest J had specifically relied upon the existence of that power, at [15]. In contrast, the CP Act (and for that matter Pt IVA of the FCA Act), do not contain any equivalent provision, at [93], [95]-[96];

(e)    the decision of this Court in Treasury Wine Estates should not be followed because:

(i)    the relevant passages were dicta, as the issues of power and discretion had been conceded by the appellant, at [95];

(ii)    the principal authority on which the Full Court had relied (Matthews), was based on s 33ZG of the SC Act (Vic) and, as just noted, there was no counterpart in the CP Act for that provision, at [96]; and

(iii)    the construction of Pt 10 of the CP Act preferred by the majority in Brewster is inconsistent with the acceptance of the approach in Treasury Wine Estates, at [99]-[112];

(f)    the making of Order 16 had not been shown, as a matter of fact, to be necessary to facilitate settlement of the class action and, indeed, because it would make it in the interests of unregistered group members for the matter not to settle, it would then create insoluble conflict of interest for the appellants and their legal advisors, at [117]-[121].

34    The particular inconsistencies between the approach in Treasury Wine Estates and Brewster which Payne JA identified, were these. First, as the barring of claims by group members was addressed in s 173 (s 33V) in the case of settlement and s 177 (s 33Z) in the case of judgment (supplemented in each case by s 179 (s 33ZB), could not be regarded as appropriate to read into s 183 (s 33ZF) a power to the same effect, at [105],

35    Secondly, the provisions just listed indicated that the power to bar a claim by a group member was one which arose at the conclusion of the representative proceeding, at [105], [107]-[108].

36    Thirdly, the power in s 183 (s 33ZF), being supplementary, could not have been intended to provide a power of contingently extinguishing group members’ claims so as to facilitate settlement discussions taking place, at [114].

37    The overarching conclusion of Payne J was that Order 16 would “[strike] at the heart of the Part 10 regime, by setting up an alternative regime of extinguishing group members’ rights of action for the purpose of encouraging the parties towards pre-trial settlement”, at [122]. As indicated, his Honour regarded the scheme of Pt 10 as being inconsistent with a construction of s 183 so as to empower the Court to make orders for pre-settlement claims closure, at [119].

38    In his separate reasons, Bell P referred to the analysis of s 33ZF by Beach J in Earglow Pty Ltd v Newcrest Mining Ltd [2015] FCA 328; (2015) 230 FCR 469 at [33]:

[A]lthough the words “thinks appropriate” have a lower threshold than “thinks necessary”, nevertheless the relevant element of necessity in another guise is enshrined in the coupling of the words “to ensure that”. In summary, the question becomes whether I think it is appropriate, to ensure that justice is done in the proceeding, to make the orders sought by Newcrest. It is not whether I think it to be merely convenient or useful per se. Section 33ZF(1) is not a licence for me to impose my own expansive case management philosophy. Rather, I must be satisfied that any order that is made satisfies the statutory test …

(Emphasis in the original)

39    Bell P then continued:

[12]    [I]t is difficult to conceive of how 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 of the outcome or consequences of their failure to register, is an order that could be thought to be “necessary to ensure that justice is done in the proceedings”. To ask whether such an order could be thought to be “appropriate … to ensure that justice is done in the proceedings” is, for the reasons explained by Beach J in Earglow, to ask essentially the same question.

[13]    Whilst a mediation of the proceedings may well be desirable and no doubt should be explored and encouraged, it is not an end in itself and is not, in my opinion, 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 (an assertion which must underpin the respondents’ position and which I consider dubious), 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”.

…

[16]    This is not of course to say that mediation is not valuable and that settlement should not be encouraged. Moreover, there is no reason why, in my opinion, there could not be mediation in the current case without an order of the kind under challenge being required …

[17]    Alternatively, if registration was sought as a condition of mediation (without the fatal consequences of non-registration which order 16 mandates), it could be sought with a view to amending the class definition so that any settlement only applied to those members who had registered. This would avoid the risk of the respondents “overpaying” in any settlement, if that risk represents their genuine concern. Settlement of the claims of those consumers who had manifested their concern by taking an active step of registration could at least be achieved, without those who had neither opted out nor registered losing their causes of action.

(Emphasis added)

40    Each of Macfarlan, Leeming and Payne JJA agreed with the additional reasons of Bell P.

3A Composites

41    The decision of Wigney J in Owners – Strata Plan No 87231 v 3A Composites GmbH (No 3) [2020] FCA 748 was delivered on 1 June 2020, a little over two months after the decision in Haselhurst. His Honour considered the power of the Court to make the following proposed orders:

[153]    Pursuant to s 33ZF of the FCA [Act], any Group Member who wishes to participate in any recovery in the proceeding, whether by settlement or judgment, must register its claim by completing the Group Member Registration Form, in the form of Schedule 2 to the Registration and Opt Out Notice, and returning it to the Applicant’s solicitors before the Class Deadline.

…

[155]    Pursuant to s 33ZF of the FCA [Act], any Group Member who fails to register in accordance with Order 6 by the Class Deadline, shall not be entitled to receive any distribution from any settlement of, or judgment in, the proceeding, but (provided in the case of a settlement that the settlement is ultimately approved by the Court) shall be bound by the terms of the settlement agreement or the judgment and barred from making any claim against the Respondents in respect of or relating to the subject matter of this proceeding.

42    In substance, proposed Order 7 seems to have been intended to have the same effect as Order 16 considered in Haselhurst. The applicants contended that the Court did not have the power to make Order 7.

43    After referring to the decisions in Brewster and in Haselhurst in some detail, Wigney J concluded that the Court did not have power to make the order, saying:

[203]    Applying the reasoning of the majority in Brewster to the order in question in this case, it is difficult, if not impossible, to see how a provision which is said to provide a supplementary or gap-filling power could empower the Court, at this very early stage of the proceeding, to make an order which would have the effect of barring group members who do not register by a particular date from making any claim against the respondents “in respect of or relating to the subject matter of this proceeding” and yet disentitle them from receiving any distribution from any future settlement of, or judgment in, the proceeding. Such a drastic and far-reaching order would appear to be fundamentally at odds with the opt out nature of representative proceedings under Pt IVA and go well beyond the scope of the specific provisions in the statutory scheme which it is intended to supplement; in particular, those provisions concerning the distribution of money paid under a settlement approved by the Court (s 33V of the FCA Act), the orders that may be made in determining a matter in a representative proceeding (s 33Z of the FCA Act), and the effect of a judgment given in a representative proceeding (s 33ZB of the FCA Act).

…

[206]    [E]ven even if it was appropriate to put the decision in Brewster to one side, as was effectively submitted by 3A, the issue was essentially put beyond doubt, at least for a single judge of this Court, by the decision in Haselhurst. While that decision may not strictly bind this Court, a single judge of this Court should not depart from a considered decision of an intermediate appellate court of a State, particularly in relation to the interpretation of effectively uniform legislation, unless convinced that the interpretation or decision is plainly wrong …

[207]    Consideration must also, of course, be given to the fact that some of the reasoning in Haselhurst conflicts with the dicta in the Full Court decisions of Money Max and Treasury Wine. Critically, however, both Money Max and Treasury Wine were decided before Brewster and must accordingly be approached with some caution. That is particularly the case given that some of the reasoning in Money Max and Treasury Wine concerning the breadth and scope of s 33ZF is somewhat inconsistent with the reasoning of the majority in Brewster. While it may be, as 3A suggested, that the Full Court may at some stage have to consider for itself whether the reasoning in Treasury Wine is inconsistent with the reasoning of the majority in Brewster, the issue, so far as it is relevant to this case, cannot be deferred until it comes again before the Full Court.

[208]    The decision in Haselhurst is not relevantly distinguishable from this matter as was suggested by 3A …

Wigmans v AMP Ltd

44    The decision in 3A Composites was followed three days later by the judgment of the Court of Appeal in New South Wales in Wigmans v AMP Ltd [2020] NSWCA 104; (2020) 102 NSWLR 199. On that appeal, the principal question was whether the Court had power to make an order requiring group members to register their claims by lodging a registration form containing prescribed details when the order included a note to the effect that, in the event of a settlement within a specified period, the parties would apply to the Court for an order that any unopted out and unregistered group member would not receive any benefit pursuant to that settlement. The opt out and registration notice approved by the Court as part of these orders told group members that they had three options: register to participate as a group member; opt out; or do nothing. In relation to the registration option, the notice commenced:

[1]    The Plaintiffs and AMP intend to seek an order that any Group Member who does not register for the AMP Shareholder Class Action by 4pm (AEDT) on 4 September 2020 should be excluded from receiving a benefit from any settlement that may be agreed to either at the forthcoming mediation to be held by 19 February 2021 … or within six months of the commencement of that mediation. The Court will then decide whether to approve the settlement on that basis …

45    In relation to the “Do Nothing” option, the notice stated:

[8]    Group Members who do nothing … before the deadline … will remain as Group Members in the AMP Shareholder Class Action for all purposes, but may not be entitled to receive a distribution payment from any settlement that may be agreed to at the mediation … if the Plaintiffs and AMP are successful in obtaining an order that only those Group Members who have registered can obtain compensation received through the settlement. However, Group Members who do nothing may still be entitled to receive a distribution payment from any settlement that may be agreed to after that time, or from any favourable judgment, in the AMP Shareholder Class Action.

46    Although it was said that the impugned orders were founded in s 175 of the CP Act (s 33X in the FCA Act), the Court of Appeal (Macfarlan, Leeming and White JJA) held that the orders were not authorised by that Act.

47    The Court noted aspects of the scheme of Pt 10 of the CP Act, namely, that group members need not consent to be members; that group members may be entirely unaware of their status as members of a widely drawn class; that a person falling within the class selected by the representative plaintiff is a group member until he, she or it opts out; that the CP Act insists that group members be notified of their ability to opt out; that group members are, at least generally speaking, not exposed to risk of an adverse costs order, that all group members are bound by judgments and settlements (which require the Court’s approval); and that neither may occur in advance of group members having been given the opportunity to opt out, at [76]. In relation to the ability to opt out, the Court referred to a passage in the judgment of Gaudron, Gummow and Hayne JJ in Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27 at [39]-[40]; (2002) 211 CLR 1:

[39]    … There is, therefore, a real possibility that some group members would remain "perfectly ignorant of the proceedings, and of what is really going on". That is, some of those who would benefit from success in the proceeding (but thereby lose the opportunity to pursue their individual claim in some way, or to some effect, different from the group proceeding) may have their rights affected without their knowing or consenting to that being done.

[40]    So much follows from the fact that Pt 4A 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)

48    As the Court in Wigmans noted, Kiefel CJ, Bell and Keane JJ had cited this passage in Brewster at [73] and had noted that both Pt IVA of the FCA Act and Pt 10 the CP Act meant that group members “are under no obligation to identify themselves”, citing P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176 at [31].

49    The Court in Wigmans regarded the orders then under consideration as being inconsistent with these fundamental aspects of Pt 10 of the CP Act, saying:

[79]    What is proposed by Komlotex and AMP is prima facie contrary to a fundamental precept of Pt 10, as confirmed by the joint judgments in Mobil Oil and BMW Australia v Brewster, and inherent in the legislative choice of an opt out regime. 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.

50    The Court accepted that orders and notices concerning an opt out date and providing for registration of claims (including the exhortation of registration) would have been within power, but continued:

[86]    … If there is a vice in the orders and notices, it lies in the joint present and communicated intention to apply for orders extinguishing the claims of group members who do not register if a settlement takes place. That is no small thing. The present intention has a large practical effect on the content of the notice and the decision to be made by group members, and it is apt to shape the negotiations at the mediation.

…

[94]    [T]he essence of the proposal is that it is in AMP’s interest to resolve the claims of all members of this very large class. It is also in Komlotex’s interest that there be a resolution for all members of this class, especially if Komlotex can obtain the benefit of a larger settlement for its own benefit as the price AMP is willing to pay to be free of the claims of all group members.

[95]    A settlement whereby Komlotex and registered members receive payment, but group members who have not registered receive nothing and whose rights against AMP are extinguished, is contrary to the essence of the opt out regime. This prima facie falls squarely within what was held in Haselhurst.

51    The Court also considered that the orders in question brought an insoluble conflict of interest into existence, being the conflict between the interests of the registered and unregistered members of the class, saying:

[119]    With the utmost respect to those who take a different view, we consider that what occurred on applications to approve a settlement in such cases well illustrates the conflicts to which Mr Gleeson pointed:

“What has happened, and is proposed under these orders, and this is the conflict of interest that was referred to in Haselhurst, is that Komlotex goes into the proposed settlement negotiations, effectively bargaining away the claims of the non-registrants for the purpose of being able to give AMP the security that it will not have to worry about those people’s claims, doing so for the benefit of the registrants. That’s what’s wrong practically and legally with this type of procedure.”

[120]    The interests of the representative plaintiff (and all other registered group members) are served by promoting the settlement. So too are the interests of the defendant. But the representative plaintiff is – at the same time it asks for the settlement to be approved – meant to be representing unregistered group members, who, by reason of the very settlement which the representative plaintiff is propounding, will receive nothing and whose rights will be extinguished. The conflict is real, immediate and direct. The interests of the representative plaintiff are diametrically opposed to those of group members who have not registered.

52    The Court concluded:

[131]    We are conscious that the Act proceeds on the basis that there may be an open class, including a class with hundreds of thousands of members such as that defined in Komlotex’s Commercial List Summons. But the facts that (a) the legislation permits that to occur, and (b) Komlotex has availed itself of acting for a very large number of group members, in no way justify making orders which will subvert two fundamental aspects of the regime, which is that Komlotex acts for all group members, and that group members may do nothing prior to a settlement and still reap its benefits.

[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 lest they lose rights to participate in a settlement, and have any rights they might have against AMP 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, 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 Komlotex’s lawyers or opt out.

(Emphasis in the original)

Decisions in this Court

53    In addition to 3A Composites, the effect of Haselhurst has been considered in other first instance decisions in this Court: Inabu Pty Ltd as trustee for the Alidas Superannuation Fund v CIMIC Group Ltd [2020] FCA 510 (Jagot J); Fisher (trustee for the Tramik Super Fund Trust) v Vocus Group Ltd (No 2) [2020] FCA 579 (Moshinsky J); Cantor v Audi Australia Pty Ltd (No 5) [2020] FCA 637 (Foster J); Uren v RMBL Investments Ltd (No 2) [2020] FCA 647 (Murphy J); Webster (Trustee) v Murray Goulbourn Co-Operative Co Ltd (No 4) [2020] FCA 1053 (Murphy J); and Court v Spotless Group Holdings Ltd [2020] FCA 1730 (Murphy J). Each of these cases has distinguished Haselhurst in relation to the issue of power, principally because Haselhurst was concerned with a pre-trial class closure order and s 183 of the CP Act (s 33ZF of the FCA Act), whereas the Court was then concerned with the approval of a settlement pursuant to the powers vested in the Court by ss 33V and 33ZB of the FCA Act: Vocus Group at [61]; Webster at [24]; Cantor at [236]-[237]; Inabu at [8]. The relevant class closure orders had been made before the decision in Haselhurst and Wigmans were delivered and the Court noted in several of the decisions that the validity of those orders had not been challenged by any party or class members and, further, that as orders of a superior court of record they remained valid until set aside. The Court has also noted that it was the class closure orders which provide that unregistered group members were not permitted to share in any distribution of the settlement sum, rather than that circumstance arising directly from the settlement deed: Spotless Group at [34]; Webster at [23].

54    As is apparent, the issue as to the Court’s power in this case arises at the time the Court is asked to make the class closure orders.

The applicants’ submissions

55    The applicants emphasised several matters. The first is proposed Order 6 which gives group members the ability to challenge or to seek a variation of the orders. As noted, proposed Order 6 would require any group member wishing to challenge or to seek a variation of the orders to file and serve an application and supporting affidavit on the solicitors for the applicants and the respondents by the deadline. Notice of the ability to do so is set out in [48] of the Opt Out and Registration Notice which included:

Depending on the outcome of that application, you may be given a further opportunity to register to participate in a settlement of the Class Action or opt out of the proceeding.

56    Next, the applicants emphasised the qualification “subject to any further order of the Court” in proposed Order 5(b).

57    The applicants submitted that the effect is that “both the need for and significance of any extinguishment of rights of “do nothing” group members will fall to be considered on a “final basis” when the Court’s approval of any settlement is sought, and submitted that this was consistent with Haselhurst at [94], [97], Inabu at [8], Vocus Group at [61], and 3A Composites at [175]. They also noted that the “do nothing” group members would then have the further opportunity to register to participate in a settlement, as was contemplated, they submitted, by Wigmans at [128]. These matters were sufficient, the applicants submitted, for Haselhurst and Wigmans to be distinguished. It also meant that the Court would not be making orders which extinguished the rights of the group prior to settlement or without payment and would not involve the Court making orders “contrary to the essence of the opt out regime” (Wigmans at [95]).

58    The applicants submitted that Haselhurst, Wigmans and 3A Composites could be distinguished because the orders then considered were not made subject to further order of the Court, and the proposed notice informed the group members that the “leave” of the Court could be sought at a later stage, if they did nothing.

Shahin’s submissions

59    Shahin submitted that the Court does have the power to make the proposed orders because:

(a)    they are “relevantly indistinguishable from those in Treasury Wine Estate, which remains binding on single judges of the Court”;

(b)    the decisions in Haselhurst and Wigmans are distinguishable in important respects:

(i)    the orders are subject to further order of the Court and, in Order 6, expressly provides for group members to challenge or vary the registration and opt out regime, which is also addressed in the notice to group members;

(ii)    the orders do not provide for any release or extinguishment of group members’ causes of action independently of the terms of any settlement agreement or order as to the terms of settlement;

(iii)    unlike in [3A Composites], the orders do not exclude unregistered group members from the benefit of any settlement or judgment. The orders preserve the opt out nature of the class action, in that unregistered group members remain group members who will be bound by a settlement or judgment. It is only their right to participate in a distribution from a settlement at mediation that is affected on an interlocutory basis;

(iv)    the orders do not otherwise lead to an eventual outcome which is beyond the Court’s express powers. There is no issue as to the existence of power under s 33V to order the distribution of the settlement proceeds among only registered group members (if that is ultimately a term of settlement approved by the Court).

(Emphasis in the original)

(c)    notwithstanding that the orders create an incentive to register (and a potential consequence of a failure to register), that is only a question of timing. At some point, if there is fund to distribute, group members will need to come forward. If group members later identify some prejudice or injustice from “doing nothing” by the Deadline, that is a matter that can be addressed at settlement approval (or some other stage). The orders expressly contemplate that, by further order, unregistered group members’ entitlement to receive a distribution from any settlement fund may change;

(d)    the orders are properly characterised as “supplementing” the Court’s powers under s 33V and do not “re-write Part IVA … in order pursue other objectives in different ways” (Brewster at [82]).

Consideration

60    Contrary to the respondent’s submission, I do not regard the decision of Treasury Wine Estates concerning the power of the Court to be binding on single judges of the Court. That is because the reasoning of the Full Court in Treasury Wine Estates on the present issue was dicta only.

61    Naturally, it is dicta which would ordinarily be very persuasive, but it is not binding. However, three matters indicate that Treasury Wine Estates does not have the persuasive effect which would be usual and that, as Wigney J noted in 3A Composites at [199] and [207], should be applied with caution.

62    The first is that the understanding of s 33ZF seems inconsistent with its effect as explained in Brewster. The reasons of Payne JA in Haselhurst explains why that is so. Neither party submitted that Haselhurst was wrong in this respect.

63    The second is the contrary judgments in Haselhurst and Wigmans. Those decisions, while not binding on the Court, warrant considerable respect.

64    The third is that Treasury Wine Estates appears to have been influenced at least in part by the decision in Matthews which, as noted earlier, relied on a provision in the Victorian legislation for which there is no counterpart in Pt IVA.

65    A fundamental problem with the applicants’ proposed orders is that they involve the Court making orders at this relatively early stage of the proceeding concerning the identity of those who may participate in the distribution from a settlement, this being a subject matter which the scheme in Pt IVA contemplates being addressed only following the settlement. I note again in this respect Brewster at [73] in which the plurality said that “the legislative scheme contemplates that the occasion for the making of orders in relation to the distribution of the proceeds of the action is its successful completion”. See also Brewster at [66]. This is not, as Shahin submitted, “only a question of timing”. It is more than that because 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. It does not follow that, because the power may be exercised at a later time, it may also be exercised at an antecedent time.

66    A second fundamental difficulty is that the proposed orders would establish the presumptive position that, in order to participate in the distribution from a settlement, group members would have to register by providing all the details, including personal information, contemplated by Orders 3 and 4. This is inconsistent with the opt out nature of the scheme in Pt IVA which has the effect that group members need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring: Mobil Oil at [40]; Brewster at [73]; Wigmans at [76].

67    I have described the proposed orders as establishing a “presumptive position”. This is the effect of Order 5(b) which makes the entitlement of an unregistered group member contingent upon a later contrary order of the Court. It is reinforced by the emphasised passages in proposed Orders 2 and 3 set out earlier in these reasons, and in the emphasised passages in the proposed Opt Out and Registration Notice. They would put the unregistered group members who wished to participate in a pre-trial settlement of having to take action to retrieve their position. The applicants’ submissions seemed to recognise that this was so by their reference to the notice informing group members that the “leave” of the Court can be sought at a later stage if they did nothing. See also [46] in the proposed notice which tells group members that a “do nothing” member will not be able to claim any part of a pre-trial settlement “without the leave of the Court”. The parties contemplate, in effect, that it will be the unregistered group members who wish to participate in a settlement who will have to displace the position established by the orders. The impression that the orders establish a presumptive position is reinforced by Order 6 and the content of the notice concerning it. Group members are thereby told that they will have to take the significant step of applying to this Court if they wish to have the position established by the orders changed.

68    To my mind, the fact that the words “subject to any further order of the Court” convey that the Court may have another “look” at the issue or that there may be an opportunity for the position to be reviewed later is not material. The fact is that proposed Order 5 (read in conjunction with the other orders) tells readers that the Court has determined on a position, subject only to the possibility of some later change. It is not readily to be supposed that s 33ZF empowers the Court to establish a presumptive or provisional position at this stage when it does not permit the Court to do so in a more substantive way.

69    Further, the proposed order would extinguish the entitlement which unregistered group members would have to participate in the distribution of a pre-trial settlement, subject only to the contingency that the Court may take another view. I note again that in Haselhurst, Payne JA did not regard the circumstance that Order 16 was interlocutory as overcoming its effect as a contingent extinguishment of the group members’ rights of action. If it was really contemplated that the entitlement of unregistered group members to participate in the distribution of a settlement would be considered post-settlement, there would be no need for the orders to establish a presumptive position. Group members could, for example, be told that the entitlements to participate in a settlement would be considered post-settlement and that the Court may take into account at that time whether those who had not registered should be permitted to participate. In reality, the position under the proposed orders is not materially different from Order 16 considered in Haselhurst because that Order, being interlocutory, could not have precluded the Court from later making a contrary order.

70    By reason that the proposed orders establish a presumptive position, they also give rise to a conflict of interest of the kind referred to in Haselhurst and Wigmans.

71    Shahin’s submission that the proposed orders do not provide for any release or extinguishment of group members’ causes of action independently of the terms of any settlement agreement or order as to the terms of settlement does not advance the matter. Paragraph [6] in the Proposed Opt Out and Registration Notice makes it plain that the parties contemplate that a settlement will extinguish all rights to compensation of group members and that a settlement may include releases of Shahin in respect of all claims made by group members. See also [27(a)] in the proposed notice.

72    Earlier, I noted the applicants’ submission that the proposed orders and forms of notice were based on those made by Perram J in Action NSD542/2020, being an action by employees against Coles Supermarkets Australia Pty Ltd. That is material but for two reasons not a matter to which much weight can be attached presently. First, Perram J made the orders by consent at a case management hearing. Secondly, his Honour’s attention does not appear to have been drawn to the authorities referred to above.

73    Finally, I respectfully doubt that the proposed orders can reasonably be characterised as “appropriate or necessary to ensure that justice is done in the proceeding”. I refer in this respect to the reasons of Bell P in Haselhurst and to the potential for an order narrowing the class. It is, however, unnecessary to express a concluded view about this issue.

Conclusion on power

74    I am satisfied that the Court does not have power to make the proposed orders.

Discretion

75    Given my view that the Court lacks the power to make the proposed orders, I will state my views with respect to the exercise of the discretion briefly.

76    I accept that there will be practical advantages for the applicants and Shahin in having group members register.

77    Nevertheless, even if the Court did have the power to make the orders, I would not have thought it appropriate to make them. My reasons are similar to those given by Bromberg J in Winterford v Pfizer Australia Pty Ltd [2012] FCA 1199 at [9] and by Payne JA in Haselhurst. I am also concerned that the Court should not by its orders create the impression in the minds of group members that it has decided, prima facie, that it is appropriate for unregistered group members to be excluded from participating in the distribution of the proceeds of a settlement, when that is not the case.

Conclusion

78    For the reasons stated above, I decline to make the orders in the terms of the minutes provided by the applicants on 15 December 2020 and as revised on 17 December 2020.

79    I will hear from the parties further as to the orders which are appropriate.

Associate:

Dated:    5 February 2021

SCHEDULE OF PARTIES