Outline the organisation of your court system as it relates to collective or representative actions (class actions). In which courts may class actions be brought?
In Australia, a statutory regime exists in the Federal Court of Australia for representative proceedings. The regime is prescribed in Part IVA of the Federal Court of Australia Act 1976 (Cth) (representative proceedings). Identical provisions exist in one of the state courts, the Supreme Court of Victoria - Part 4A of the Supreme Court Act 1986 (Vic).
Since March 2011, the New South Wales (NSW) Supreme Court has had a separate class action procedure. It allows class actions to be brought where claims are based on negligence or for breaches of New South Wales statutes. There are several significant differences between the New South Wales class action procedure and the federal and Victorian court systems. In New South Wales class actions may be brought on behalf of a defined, limited group of identified individuals, not only an open, generally specified class. Further, class actions may be taken against several defendants, even if not all group members have a claim against all the defendants.
In November 2016, a class action procedure was enacted in Queensland. This development reflects, in part, concern that a class action arising from major infrastructure in Queensland had been commenced in NSW. It also reflects the ongoing efforts by each of the principal Australian jurisdictions to attract and secure major commercial litigation.
As the federal procedure has been in force for more than 20 years, the balance of these responses will refer to the provisions in the Federal Court of Australia Act (the Act).Frequency of class actions
How common are class actions in your jurisdiction? What has been the recent attitude of lawmakers and the judiciary to class actions?
Representative proceedings have been brought in many types of claims, including those involving financial services, investment schemes, shareholder litigation, failure of infrastructure, environmental contamination, real estate investments and marketing, consumer finance and immigration law, as well as product liability and anti-cartel proceedings.
It is difficult to estimate the total number of representative proceedings commenced in Australia in the past 16 years. However, there are currently about 30 class actions being commenced each year. On current trends, most class actions settle and less than 5 per cent of such cases go to trial to be heard and determined on the merits. More recently, the number of investor claims and shareholder representative proceedings brought in Australia has increased and reflects the trend away from claims concerning tangible consumer products towards claims concerning financial products or services. Most of these claims involve third-party litigation funding.
The attitude of lawmakers and the judiciary to class actions is variable. While all see the benefit in such proceedings as an important vehicle for access to justice, the increasing frequency with which they are commenced has been noted, and there are some concerns about the rise of entrepreneurial class actions where the eventual returns to claimants appear disproportionately low. The Australian Law Reform Commission (ALRC) conducted an inquiry into class action proceedings and third-party litigation funders. The ALRC’s report was tabled in January 2019.
The ALRC Report makes 24 recommendations directed at changes to the Federal class actions regime and the regulation and charging models of litigation funders and lawyers involved in bringing class actions. The Recommendations span:
- case management;
- settlement approval regulation of litigation funders;
- solicitors fees and conflicts of interest;
- regulatory redress; and
- a review of substantive law.
What is the legal basis for class actions? Is it derived from statute or case law?
Class actions are commenced under statutory provisions, which vary depending upon the court in which the lead applicant seeks to commence the action. In the Federal Court, the relevant legislation is Part IVA of the Federal Court of Australia Act 1976 (Cth), in the Supreme Court of Victoria it is Part 4A of the Supreme Court Act 1986 (Vic), and in the Supreme Court of New South Wales it is Part 10 of the Civil Procedure Act 2005 (NSW).
See question 1.Types of claims
What types of claims may be filed as class actions?
Representative proceedings are available in most areas of law where the Federal Court of Australia has jurisdiction. Representative proceedings may be commenced whether or not the relief sought is or includes equitable relief, or consists of or includes a claim for damages, even if the claim for damages would require individual assessment for modest amounts. Representative proceedings may also be commenced whether or not the proceedings concern separate contracts or transactions between the respondent in the proceedings and individual group members or involve separate acts or omissions of the respondent done or omitted to be done in relation to individual group members.Relief
What relief may be sought in class proceedings?
The court may order a wide variety of relief in representative proceedings. For example, it may determine an issue of law or fact, make a declaration of liability or grant any equitable relief and award damages (either by identifying specific amounts or methods of calculating a specific amount for individuals or particular classes of group members, or by determining an aggregate amount without specifying how much must be paid to individual group members).
Punitive (exemplary) damages are rarely awarded in Australia.Initiating a class action and timing
How is a class action initiated? What is the limitation period for bringing a class action? Can the time limit for bringing a class action be paused? How long do class actions typically take from filing to a final decision?
A class action is commenced by the lead applicant or applicants filing an originating application and statement of claim in court.
All that is required is that the threshold requirements set out in response to question 9 are met. That is, that there are seven or more persons, that their claims are based on the same, similar or related circumstances and that they give rise to a substantial common issue of law or fact. There is no certification requirement in Australia.
Time limits do exist under both the common law and statute. There are considerable variations between the limitation periods, depending on the cause of action. Upon commencement of a class action, the running of any limitation period is suspended and does not begin to run again until either the group member opts out of the proceedings or the proceedings are finally determined.
The time taken from commencement to a final decision in a class action depends on the particular case and the nature of the claim. It may take anywhere from six months to several years for a matter to be heard and determined. There are provisions for expedited hearings in appropriate circumstances, including the ill health of a litigant.
What are the standing requirements for a class action?
Representative proceedings are commenced by a single representative claimant, or sometimes several claimants. The proceedings are brought for and on behalf of the group or class members. While the claimants must describe the group in the originating process, there is no obligation to identify, name or even specify the number of group or class members.
There are federal legislative provisions that allow the Australian competition regulator, the Australian Competition and Consumer Commission (ACCC), to pursue private enforcement (including by way of representative proceedings) on behalf of persons who have suffered, or are likely to suffer, loss or damage by reason of conduct that contravenes those federal provisions.Participation
Do members of a class have to opt in or opt out of the action? Are class members notified that an action has been commenced on their behalf and, if so, how?
Part IVA currently prescribes an opt-out system for representative proceedings. At some pre-defined stage in the proceedings, the court will settle the precise terms of the notice or notices to be given and make specific orders as to the form and media for publication of that notice, and will fix a date by which class members may opt out of the proceedings. This is done by way of written notice to the court. If a claimant is within the class as defined but does not opt out before the fixed date, then they will be bound by any judgment of the court.
The form of notice will depend on the case. Notice is sometimes given by way of press advertisements in national newspapers. However, it may also be given by radio or television broadcast. It is likely that publication through online and social media vehicles (ie, through new media apps) will become more commonplace. In appropriate cases, direct notification is regarded as sufficient.
The Federal Court has also permitted classes to be defined in such a way that only persons who had signed up with a particular litigation funder (and their lawyers) could be a class member - in effect, a form of gatekeeping or informal opt-in system.Certification requirements
What are the requirements for a case to be filed as a class action?
To commence a representative proceeding in Australia, the claims must satisfy three threshold requirements:
- at least seven persons must have claims against the same person or persons;
- the claims of all these persons must arise out of the same, similar or related circumstances; and
- the claims of all these persons must give rise to at least one substantial common issue of law or fact.
In the absence of a certification procedure, there is no other requirement as to numerosity. A representative proceeding can have as many class members as satisfy the class definition and elect not to opt out. The courts have generally been asked to consider the problems associated with mixed or disparate classes rather than classes that are too small or too large.
There is no requirement that the common issues between class members predominate over the individual issues. Rather, there is merely a requirement that there be at least one substantial common issue of law or fact. In this sense, Australia’s highest court has described ‘substantial’ as meaning of substance rather than denoting a certain size. In effect, this means that, although mandatory, the requirements described above are not particularly onerous.
Once an Australian representative proceeding has been commenced, it will continue until resolved or the court determines that the proceeding should not continue as a representative proceeding. The principal basis for that determination is either that the action does not satisfy the mandatory criteria or that it is not otherwise in the interests of justice.
How does a court determine whether the case qualifies for a class action?
As noted in question 8, there is no threshold requirement that the proceedings be judicially certified as appropriate to be brought as a representative proceeding. There is an assumption that the claim is validly brought unless the respondent brings an action seeking to strike out the claim for failure to meet the threshold requirements set out above.Consolidation
Is there a process for consolidating multiple class action filings?
There is no formal process for consolidating multiple class action filings although there are several matters currently before the court where this issue is being refined.
Where different lead applicants commence proceedings against the same respondents in relation to the same facts and circumstances, the court will use its broad power to make any order it thinks necessary to manage the proceedings. Respondents may use this provision to seek to have one or more of the claims struck out, but the court has also ordered the formation of a litigation committee (comprised of group members) to oversee the management of all proceedings and ensure that the widest range of interests can be accounted for.
Where separate class actions are commenced against different respondents that relate to substantially similar facts and circumstances (eg, manufacturers of different drugs in a particular drug class, where the allegations against the manufacturers are substantially similar), the proceedings are often listed (at least initially) before the same docket judge, who will make orders for the efficient management of the proceedings.
How does discovery work in class actions?
In Australia, there are no depositions, so the discovery process is primarily via detailed document discovery. The cost and time associated with documentary discovery is well recognised as a significant impediment to the rapid determination of civil litigation, especially in large group proceedings. As a consequence, Australian courts, including the Federal Court, have significantly modified their approach to discovery. Where discovery was once available as a right, it is now subject to the leave of the court and only where it has been demonstrated as being necessary to the determination of issues that are genuinely in dispute. Intense case management of discovery is now commonplace, with a focus on a party making reasonable efforts to give discovery and the increasing use of electronic solutions.
Where ordered, a party is obliged to discover - that is, to identify and allow the other parties to access - all documents in its possession, custody or power that are relevant to a matter in issue in the proceedings. Discovery occurs at the pretrial stage so that discoverable documents relevant to the case are disclosed by the parties before the hearing commences.
Broadly speaking, documents that are relevant to a case include those documents on which the party relies, documents that adversely affect the party’s own case, documents that adversely affect another party’s case, documents that support another party’s case and documents that the party is required by a relevant practice direction to disclose.
All discovered documents must be listed, and the parties’ lists sworn and exchanged. Parties are entitled to inspect each other’s documents and, if desired, copy them, except for those in relation to which a claim for privilege has been advanced. Much of this process now occurs via electronic protocols and will therefore also deal with document-specific metadata.
Preliminary discovery before the substantive proceedings assists parties in identifying prospective defendants, to determine whether they have a claim or to gain information from third parties where any party to a proceeding reasonably believes that a particular party holds a document that relates to any question in the proceeding.
The obligation to discover all relevant documents continues throughout the proceedings. This means that any document created or found after providing initial discovery must also be discovered.Privilege and confidentiality
What rules and standards govern non-disclosure of documents on the grounds of professional privilege, litigation privilege or other confidentiality considerations?
In broad terms, the uniform Evidence Acts govern privilege issues when evidence is adduced at trial, while the common law governs questions concerning privilege that arise before trial.
At common law, there are three elements necessary to establish legal professional privilege:
- the communication must pass between the client and the client’s legal adviser;
- the communication must be made for the dominant purpose of enabling a client to obtain legal advice or for the purpose of actual or contemplated litigation; and
- the communication must be confidential.
The uniform Evidence Acts create a privilege for confidential communications made or prepared for the dominant purpose of a lawyer providing:
- legal advice; or
- professional legal services relating to an Australian or overseas proceedings or anticipated proceedings in which the client is or may be a party.
Class actions sometimes involve the disclosure of commercially sensitive documents. While confidentiality or commercial sensitivity is not a basis for resisting production, parties will often enter into non-disclosure agreements to manage the exchange of such documents. If a case proceeds to hearing and confidential documents are put into evidence or otherwise disclosed in court, the parties may apply to the court for suppression or non-publication orders.Testimony
What rules apply to submission of factual and expert witness testimony? In what circumstances will the court order witness-examination?
Generally, expert and fact witnesses provide written statements of their evidence in the form of affidavits, statutory declarations or witness statements before the hearing. These documents are usually signed under oath or affirmed. These documents are then ‘read’ onto the record in court and serve as evidence in chief for that witness. Witnesses are then usually cross examined and re-examined in court by counsel.
What mechanisms and strategies are available to class-action defendants?
The manner in which class actions are defended and the strategies deployed will depend on the individual facts and issues between the parties. Some class actions require interlocutory management, some are resolved at an early stage and some go to trial.Joint defence agreements
What rules and standards govern joint defence agreements? Are they discoverable? What are the advantages and disadvantages of these agreements?
There are no specific rules or standards governing joint defence agreements. Given the threshold requirements for filing and commencing a class action (the claims must arise out of the same, similar or related circumstances and must give rise to a substantial common issue of law or fact) it is not common for there to be multiple defendants that are not related parties.
SettlementApproval of settlements
Describe the process and requirements for approval of a class-action settlement.
Representative proceedings may not be settled or discontinued without the approval of the court. The approval process means that the settlement is therefore neither private nor confidential. In fact, group members will usually be notified of the proposed settlement by court-ordered and settlement notices.
In approving a settlement and determining whether it is a fair and reasonable outcome of the litigation for all group members, the court must form a view as to whether to approve a settlement on the material presented and the advice provided by counsel as to the prospects of success and risk of loss considered to apply in the particular case. It must take an active role, as the approval of the court is a protective mechanism safeguarding the interests and rights of group members. The court will scrutinise whether any settlement or discontinuance of representative proceedings has been undertaken in the interests of the group members as a whole and is not solely beneficial to the class applicant and respondent. The court may well reject a privately negotiated settlement if it is not satisfied that the outcome is in the interests of group members as a whole.Objections to settlement
May class members object to a settlement? How?
As part of the approval of the settlement by the court, group members will be given notice of the settlement as well as the opportunity to object to the settlement by filing a notice of objection in court.
The court will consider all of the notices of objection filed in court when determining whether to approve a settlement, and group members who have filed a notice may appear before the court during settlement approval and make submissions (with separate legal representation if they wish).
The court considers an absence of objections to be a factor in favour of determining that the proposed settlement is fair and reasonable.Separate settlements
How are separate class action settlements handled?
See questions 17 and 18.
Judgment and appealPreclusive effect
What is the preclusive effect of a final judgment in a class action?
The Act requires that a judgment in a representative proceeding must describe or otherwise identify the group members who will be affected by it, and binds all such persons so described other than any person who has opted out of the proceeding.Appeals
What type of appellate review is available with respect to class-action decisions?
In virtually all jurisdictions in Australia there is a right of appeal against the judgment of a trial judge. The procedure varies depending on the jurisdiction in which the original trial was conducted. Leave to appeal is usually necessary when the appeal is from an interlocutory judgment. Even though appeals generally turn on questions of law, it is not uncommon for parts of the evidence used at trial to be reviewed during the course of an appeal.
A party dissatisfied with the decision of a state or territory court of appeal or the full federal court may seek leave to appeal to the High Court of Australia, the country’s ultimate appellate court. Appeals to the High Court are essentially restricted to questions of law. The High Court will grant leave to appeal only if it is convinced that there is a significant question to be determined.
What role do regulators play in connection with class actions?
Federal legislative provisions expressly provide for the institution of proceedings by the ACCC on behalf of those who have suffered or are likely to suffer loss as a result of contraventions of federal statutes for consumer protection and product safety provisions. Under these provisions the ACCC requires the prior written consent of the persons on whose behalf the application is being made.
The ACCC may bring a representative proceeding for breaches of the federal anticompetitive statutory provisions on behalf of one or more persons who have suffered, or are likely to suffer, loss or damage. The ACCC can pursue a representative proceeding only on behalf of a group who have been identified and who have consented in writing to the action. It is, however, prevented from pursuing a representative action for personal injury or death under the unfair practice provisions relating to misleading and deceptive conduct.
Aside from the express power granted to the ACCC to bring proceedings under Part IVA as a class applicant, the representative body must have a claim and a sufficient interest on its own behalf to commence proceedings.
Relief available to the ACCC is wide and includes injunctive and compensatory relief. It is not necessary for the class applicant and group members to seek the same relief, thus it is possible for the group members to claim compensation against the respondents while the ACCC makes a claim for injunctive relief.Private enforcement
Describe any incentives the civil or criminal systems provide to facilitate follow-on actions.
Follow-on class actions are becoming increasingly common after regulatory enforcement proceedings by the securities and financial services, competition, and consumer protection authorities.
Alternative dispute resolutionArbitration and ADR
What role do arbitration and other forms of alternative dispute resolution play in class actions? Can arbitration clauses lawfully contain class-action waivers?
To date, arbitration has not played a role in the determination of class actions, as arbitrations are conducted in private. However, other forms of alternative dispute resolution, such as mediation, are a standard feature in class actions, and are commonly ordered by the court.Court-ordered mediation
Do courts order pretrial mediation in class actions? Does the appointment of a mediator make it more likely that the court will approve a settlement?
Court-ordered mediation is becoming a standard feature in class actions. The appointment of a mediator will not influence the court approval processes where a settlement has been reached.
Fees, costs and fundingContingency fees
What are the rules regarding contingency fee agreements for plaintiffs’ lawyers in a class action?
The rules prohibiting lawyers from entering into contingency fee arrangements were relaxed a number of years ago and a variety of arrangements are now sanctioned. These new arrangements allow a lawyer and client to enter into an agreement that provides for the normal fee, or a fee calculated by reference to some predetermined criteria, such as the amount of time expended by a lawyer, to be increased by an agreed percentage. The relevant rules generally impose a cap on the percentage by which such fees can be increased. Some jurisdictions allow lawyers to enter into an agreement to be paid an uplift fee where an additional fee may be levied, calculable by reference to the initial fees. All jurisdictions continue to prohibit contingency fee arrangements where the lawyer’s fee is calculated by reference to a percentage of the client’s verdict.Cost burden
What are the rules regarding a losing party’s obligation to pay the prevailing party’s attorneys’ fees and litigation costs in a class action?
The loser-pays rule applies in representative proceedings - the unsuccessful party is usually ordered to pay the costs of the successful party. These costs include not only court filing fees, copying charges and other out-of-pocket expenses, but also the lawyer’s professional fees. In this context, a reference to costs is not a reference to the total or actual costs incurred by the successful party. Recoverable costs are generally calculated by reference to a court scale, which invariably limits the amounts a successful party can claim for disbursements and services performed by their lawyers.
In a representative proceeding, only the lead applicant is liable to pay costs and is entitled to recover costs. In addition, if the court has made an award of damages in a representative proceeding, the lead applicant may apply to the court for reimbursement of costs that exceed the amount recoverable from the other party. If the court is satisfied that these additional costs have been reasonably incurred, it may order the excess paid out of the damages awarded.Calculation
How are costs calculated? What costs are typically recovered? Does cost calculation differ in the litigation and settlement contexts?
Costs are either agreed or assessed. This will usually occur at the end of the proceedings. The quantum of any costs recovered and the calculation of those costs will vary considerably depending upon the nature of the class action and the issues that were litigated.Third-party funding
Is third-party funding of class actions permitted?
Third-party funding of claims is permitted in Australia, subject to the rules set out in question 26.Public funding
Is legal aid or other public funding available for class actions?
Public funding is technically available. However, legal aid services rigorously apply means and merits tests to determine eligibility for aid. As a general rule, very limited funding is available to assist claimants to bring civil actions, including class actions.Insurance
Are adverse costs, adverse litigation judgment or after-the-event insurance available?
Insurance products are available. However, they are privately negotiated and vary considerably, depending upon individual facts and circumstances.Transfer of claims
Can plaintiffs sell their claim to another party?
The general rule is that the right to litigate (ie, the right to recover damages in tort) is not assignable. However, the courts are demonstrating a trend towards relaxing the application of this rule. While not expressly on point, the High Court has stated (in relation to litigation funding) that while the assignment of a right simply to commence litigation is impermissible, assignment of the proceeds of litigation (ie, a success fee charged by a litigation funder that is expressed as a percentage of any compensation awarded) is not.Distributing compensation
If distribution of compensation to class members is problematic, what happens to the award?
This has not yet occurred in Australia, and is unlikely to do so in the future for a number of reasons.
Where compensation is awarded as part of a settlement, it must be approved by the court. In practice, this means that the settlement must prescribe the manner in which the compensation will be distributed to individual group members in express terms.
Where compensation is awarded as part of a final judgment, there are provisions in the Act that allow for individual damages to be determined. Commonly, the final judgment will determine the compensation amount for the lead applicants, with damages for group members determined on an individual basis in line with the reasoning set out in the judgment by way of small individual hearings held subsequently.
Update and trendsLegal and regulatory developments
What legislative, regulatory or judicial developments related to class actions are on the horizon?Legal and regulatory developments34 What legislative, regulatory or judicial developments related to class actions are on the horizon?
The federal court has now completed the process of reforming its management of cases through a national court framework. A further revised practice note for the management of federal class actions is expected to be published. There are currently two matters before the appellate courts that have important implications for the management of class actions in Australia. The outcome in these cases will result in clarification of the courts’ power to manage class actions and in particular the proper exercise of judicial power when making common fund orders.