Pre-settlement class closure orders debated in Boral case

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In the Boral class action, two questions arose and were reserved for determination by the Full Court: 

• whether the Court has power pursuant to s 33ZF of the Federal Court of Australia Act 1976 (Cth) (FCAA) or otherwise to make an order which has the effect of providing that any class member who has not registered or opted out of the proceeding shall not, without leave of the Court, be permitted to seek any benefit pursuant to any settlement; and
  
  
• whether the Court has power to approve a notice to class members which states that upon settlement, the lead applicant will seek an order which has the effect that class members who have not registered or opted out will not be permitted to seek any benefit pursuant to any settlement.

A Full Court comprising Murphy, Beach and Lee JJ held that the answers to those questions were, respectively, as follows:

• This question is inappropriate to answer in the abstract, but in the present case, and given the availability of the specific power available under s 33X(5) of the FCAA to give a notice to class members in the form contemplated by Question 2, no power under s 33ZF is enlivened.
  
  
• Yes, pursuant to s 33X(5) of the FCAA.

Justices Murphy and Lee delivered the leading judgment, with which Beach J concurred.

The applicant had filed an interlocutory application seeking, inter alia, a ‘soft’ class closure order, being that any class member who fails to register or opt out prior to a Court deadline not be permitted to seek any benefit pursuant to any settlement before final judgment.

The respondent sought the same order as the applicant and, in the alternative, if the Court concluded that s 33ZF is not a source of power to make the order sought, an order that a notice be distributed which states that upon any settlement, the applicant will seek an order for class closure.

The evidence of the parties’ solicitors, Mr Schimmel and Mr Betts, was that a soft class closure order would advance the prospects of settlement as it would allow the parties to have a better understanding of the total quantum of class members’ claims.

In Section E of the judgment, their Honours set out the divergence in authority on the Court’s power to make soft class closure orders, including that:

• The previously prevailing authority was that s 33ZF conferred power upon the Court to make class closure orders: Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (2017) 252 FCR 1; [2017] FCAFC 98.
  
  
• In BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45 (Brewster), the plurality held that s 33ZF did not provide power for the Court to make a ‘common fund order’.
  
  
• Subsequently, the New South Wales Court of Appeal delivered two decisions which held that the obiter in Brewster made soft class closure orders ultra vires: Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia (2020) 101 NSWLR 890; [2020] NSWCA 66 (Haselhurst) and Wigmans v AMP Ltd (2020) 102 NSWLR 199; [2020] NSWCA 104 (Wigmans).
  
  
• Justice Beach then handed down the decision in Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Ltd [2021] FCA 475 (Wetdal) which held that soft class closure orders were within power and distinguished those orders from the orders the subject of consideration in both Haselhurst and Wigmans.

A Court-appointed contradictor embraced the conclusions of Haselhurst and Wigmans, submitting that a soft class closure order would operate to compel class members to take a positive step, prior to settlement or judgment, if they are to benefit in the outcome of the class action, and will cause a division between class members and a conflict of their interests.

The contradictor also submitted that a proper construction of s 33ZF of the FCAA does not empower the Court to make a soft class closure order because the Court could not be satisfied that such an order was appropriate or necessary to ensure that justice is done in the proceeding.

Concerning the question of notice, the contradictor submitted that the Court should be slow to exercise power under s 33X(5) of the FCAA to give notice to class members of a matter inconsistent with the ‘fundamental precept’ that class members are entitled to remain ‘totally passive’ until such time as a proceeding is settled or judgment is given.

Their Honours first considered whether Haselhurst and Wigmans were distinguishable, holding that Haselhurst was so, on the basis that class member claims were not barred or extinguished here by the exercise of power (c.f. Haselhurst) but that Wigmans could not be distinguished on the question of power to give notice.

Their Honours held that Wigmans was plainly wrong and declined to follow it, on a number of grounds. First, the breadth of the matters the Court is empowered to give notice of by s 33X(5) of the FCAA. Second, because the absolutism of the ‘fundamental precept’ is unhelpful in determining the question. Third, there are numerous decisions in which class members had been compelled by court order, prior to settlement or the first stage trial of the class action, to take a positive step in the proceeding. Fourth, any potential conflict as between the interests of class members which may arise is not insuperable.

However, having found that power existed pursuant to s 33X(5) of the FCAA to give notice of the proposed soft class closure order, the Court declined to answer the more fundamental question of whether power existed to make the order itself, on the basis that step quelled the immediate concern and therefore an exercise of power under s 33ZF was not required to ensure that justice is done in the proceeding.

Parkin v Boral Ltd (Class Closure) [2022] FCAFC 47

Federal Court of Australia, Murphy, Beach and Lee JJ,
28 March 2022

Applicant’s Solicitors: Maurice Blackburn;
Respondent’s Solicitors: Herbert Smith Freehills;
Applicant’s Funder: N/A

Austlii Link: Available here

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