On 28 March 2022, the Full Court of the Federal Court delivered judgment in Parkin v Boral Limited (Class Closure)  FCAFC 47 which was generally in favour of class closing for the purposes of a mediation – or, at least, generally in favour of a certain form of class closing – and has distinguished or disapproved two decisions of the NSW Court of Appeal to the contrary (being the decision in Haselhurst1, which was distinguished, and Wigmans2, which was disapproved).
In this article we discuss the type of class closing approved by the Full Court in Boral and the implications of Boral on class action claims generally.
Class closure orders approved in Boral
The type of class closing favoured by the Full Court in Boral is one that effectively would be created by an order of the Court that a notice be sent to group members at an interlocutory stage of proceedings (and for the purposes of mediation). The notice would state that, upon settlement of the representative proceeding, the representative applicant will seek an order of the Court (presumably, in a settlement approval application) providing that any group member who by a specified pre-mediation date:
(i) has not registered pursuant to Court order (i.e. registered for the purpose of participating in any prospective settlement that might be negotiated at a proposed mediation); or
(ii) has not opted out of the proceeding (and therefore has the right to bring a separate proceeding outside the representative proceeding),
will remain a group member for all purposes of the proceeding but shall not, without leave of the Court, be permitted to seek any benefit pursuant to any settlement of the proceeding (subject to Court approval).
The Full Court in Boral found that the Federal Court was empowered to make the type of class closing order outlined above, pursuant to s 33X(5) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) (although not under s 33ZF of the Federal Court Act, because such a head of power was unnecessary given the clear power under s 33X(5)).
The type of class closing approved by the Full Court in Boral might be regarded as a form of ‘soft closing’ for the purposes of a mediation, and may be contrasted with the form of ‘hard closing’ disapproved by the NSW Court of Appeal in Haselhurst. In Haselhurst, the pre-mediation class closing order was one whereby a group member’s failure to register would ‘bar’ the member from participating in a prospective settlement, thereby extinguishing the group member’s rights should they fail to register for mediation purposes and should the matter settle. The Full Court found the type of class closing order considered in Haselhurst was distinguishable from that before it for determination.
It is unclear whether the Full Court in Boral would have disagreed with the actual decision in Haselhurst, although the Full Court did depart from the reasoning in Haselhurst in relation to power to make such orders. That is, it is unclear whether the Full Court of the Federal Court would have permitted a ‘hard closing’ order of the type considered in Haselhurst had such been sought. Possibly, as a matter of discretion, it would not (although it may be that the Full Court would have found a ‘hard closing’ order to be within power). We say this because the Full Court in Boral was clearly influenced by the fact that the class closing order in Haselhurst sought to bar group members’ claims, whereas that sought in Boral did not do so. Instead, under the soft closing regime sought in Boral, any group member who did not register could seek to be heard on any settlement approval application, and could at that point argue for inclusion in the group entitled to participate in the settlement. The Full Court appeared to consider this an important safeguard to group members who fail to register for a mediation, as it gave them the subsequent right to argue for inclusion in the benefits derived from a settlement.
However, the Full Court in Boral found that the type of class closing considered by the NSW Court of Appeal in Wigmans, at least to the extent that it was based on the equivalent of s 33X(5) of the Federal Court Act , was relevantly indistinguishable from that sought in Boral3. That is, in Wigmans the NSW Court of Appeal found that there was no power to make a ‘soft closing’ order for the purposes of a class action mediation, similar to the type of ‘soft closing’ order sought in Boral. In this regard, the Full Court in Boral found that the decision of the NSW Court of Appeal in Wigmans was ‘plainly wrong’, and should not be followed by the Federal Court.
The head of power relied on in Boral to validate the ‘soft closing’ order sought in that matter (s 33X of the Federal Court Act) is a ‘notice’ power. In particular, s 33X(5) expressly empowers the Court to make an order ‘at any stage’ of a representative proceeding that notice be given to group members ‘of any matter’. The NSW equivalent is s 175(5) of the Civil Procedure Act, and in Wigmans the Court of Appeal found this provision did not empower a Court to make ‘soft closing’ orders for the purposes of a mediation.
In essence, the Full Court in Boral held that:
- S 33X(5) provides broad and unqualified legislative power, and the words of the section should be approached on the basis that ‘Parliament meant what it said and said what it meant’. A court should not construe such legislation ‘by making implications or imposing limitations not found in the express words’;
- S 33X(5) empowers the Federal Court to make an order for the giving of a notice to group members ‘at any stage’ and ‘of any matter’. The Full Court found this would clearly include the giving of a ‘soft closing’ notice to group members for the purpose of a mediation at an interlocutory stage of proceedings;
- In Wigmans, the NSW Court of Appeal wrongly considered a ‘soft closing’ notice had the ‘practical effect’ of extinguishing the claims of group members at an interlocutory stage, and this was beyond power. However, the Full Court disagreed that the practical effect of a soft closing order or notice was to extinguish claims of group members who did not register (or opt-out); and
- In Wigmans, the NSW Court of Appeal wrongly considered a ‘soft closing’ notice 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’, and that such a fundamental precept was confirmed by the decisions of the High Court in Mobil Oil4 and Brewster.5
In relation to the alleged ‘fundamental precept’ the Full Court found there was no such thing, and nor had the High Court confirmed its existence.6 Instead, the Full Court in Boral held that the NSW Court of Appeal had been ‘plainly wrong’ in interpreting the NSW equivalent of s 33X(5) on the basis of such a ‘fundamental precept’.
Impact on class actions generally
As there is now a clear divergence of appellate authority in Australia in relation to class closing orders at an interlocutory or mediation stage of representative proceedings, there must be a reasonable likelihood that the issue will need to be resolved by the High Court. However, it is unclear whether there will be any special leave application in Boral, because the class closing application was supported by both applicant and respondent. Given this, the Federal Court appointed a Contradictor (funded by the parties) to argue against the proposed class closing regime. However, we would consider it highly unlikely that the parties in Boral would wish to fund a Contradictor to run an application for special leave to appeal to the High Court.
It is likely that many applicants and respondents in class action claims in Australia would be supportive of a mediation class closing regime. For both sides of a representative proceeding, class closing prior to mediation enables each to know how many group members will likely participate in a settlement, and therefore how to frame and assess settlement offers. If a ‘soft closing’ order is made, this will likely significantly enhance settlement prospects (because the parties will have a much better understanding of the participating group members).
In our view it is likely that soft closing orders will continue to be considered on a case by case basis. However, there seems to be a likelihood that, where possible, and until the divergence of judicial opinion on class closing orders is resolved by the High Court, applicants may favour class action proceedings in the Federal Court of Australia over the Supreme Court of NSW, in order to obtain the benefit of the ‘soft class closing’ procedure endorsed in Boral.
1. Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia (2020) 101 NSWLR 890
2. Wigmans v AMP Ltd (2020) 102 NSWLR 199
3. Section 175 of the Civil Procedure Act 2005 (NSW)
4. Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1
5. Westpac Banking Corporation v Lenthall (2019) 94 ALJR 51
6. The NSW Court of Appeal in Wigmans referred specifically to the High Court decisions in Mobil Oil and Brewster. Mobil Oil did not consider the topic of class closure orders. It concerned a product liability class action regarding allegedly contaminated aviation fuel manufactured in Victoria. The manufacturer argued a class action commenced against it in the Supreme Court of Victoria was invalid to the extent it sought to include as group members persons affected by the fuel in other Australian States and Territories. The High Court found the class action was not invalid. Brewster related primarily to the issue of the making of a ‘Common Fund Order’ (CFO), where the majority of the High Court held that the Federal Court of Australia and the NSW Supreme Court were not empowered to make a CFO under s33ZF of the Federal Court Act or section 183 of the Civil Procedure Act (NSW). Further, neither Mobil Oil nor Brewster specifically considered s33X(5) of the Federal Court Act.
7. The Full Court in Boral found that the ‘fundamental precept’ relied upon by the NSW Court of Appeal in Haselhurst and Wigmans was not to be found in the relevant class action legislation, nor in the High Court authorities of Mobil Oil and Brewster. The Full Court considered the NSW Court of Appeal was wrong when it (a) observed that, because the statutory class action scheme was an opt-out scheme, it implied a ‘fundamental precept’ against class closure at an interlocutory stage, and against the imposition on group members of the need to take any step prior to settlement as a pre-condition of participation in such settlement; and (b) used that generalised ‘fundamental precept’ as a controlling concept to identify what may or may not be consistent with an opt-out scheme. Whilst it was true that the statutory class action scheme is an opt-out scheme, this does not permit a search for the meaning of s33X(5) by reference to an extra-statutory expression said to comprise the ‘fundamental precept’, rather than by reference to the text, context and purpose of the legislation itself. Further, the fact that the class action scheme created by the Federal Court Act is an opt-out scheme does not mean that the Court has no power to require group members to take a step prior to settlement or judgment, including a step relevant to a ‘soft closure’ notice.
This article is intended to provide a general summary only and does not purport to be comprehensive. It is not, and not intended to be, legal advice.
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