Soft class closure sought ahead of FX mediation

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This judgment concerned an interlocutory application brought by the respondents seeking orders with respect to opt out and registration (in the form of ‘soft class closure’) and a mediation in the proceeding. The underlying proceedings are complex but, broadly, concern claims for damages in respect of alleged cartel conduct including an alleged arrangement or understanding between the respondents to cooperate with each other in relation to trading in FX Instruments.

Having regard to the decision of the Full Federal Court in Parkin v Boral Ltd (2022) 291 FCR 116; [2022] FCAFC 47, Beach J indicated that the issue for the Court when asked to make registration orders of the kind sought is not whether it has the power to make them, but rather whether it is an appropriate exercise of its power under s 33X of the Federal Court of Australia Act 1976 (Cth). Further, his Honour was of the view that orders providing for ‘soft class closure’ do not in fact ‘transmogrify’ an open class action into a closed class action, but rather proposes a demarcation between registered and unregistered class members that only has effect if a settlement is later reached by the parties and approved by the Court.

His Honour set out a number of considerations relevant to the exercise of the discretion (each of which will vary with the circumstances of the case), the paramount factor being the extent to which a registration process is likely to improve the prospects of achieving a reasonable settlement. Other listed considerations included, inter alia, whether it is in the interests of class members as a whole to require registration before any prospective settlement is on the table, the point which the proceeding has reached, the attitude of the parties, the complexity and likely duration of the case, with protracted litigation and greater complexity increasing the interests of class members in avoiding litigation risk through achieving a settlement, whether class members have adequate notice of the change and reasonable time to decide whether to register, and whether an estimate of the size and number of claims can be made.

Ultimately, his Honour was persuaded that, on any view, it was appropriate that both opt out procedures and mediation should occur now. His Honour was likewise persuaded that any such mediation should be preceded by a registration process, and it was therefore appropriate to make the orders in the form sought by the respondents (and notwithstanding the opposition of the applicant). In arriving at this conclusion, his Honour was of the view that it is more efficient and effective to bring forward the inevitable process of registration with a view to exploring whether an early settlement can be reached now with the benefit of the information obtained through that process. In particular, his Honour had regard to the following factors:

• First, a mediation is significantly more likely to succeed when the parties can reasonably estimate the number of class members who will participate in any settlement, and the likely quantum of their claims. Here, the identity of a significant proportion of class members was not known or ascertainable by the parties and, absent that information, the risk of underestimating the number of class members who ultimately would seek to benefit from the settlement undermines confidence in any in-principle settlement that might be achieved.

• Second, consistent with the above, his Honour agreed with the respondents’ submission that there was a clear inability to estimate the number of class members who will participate in any settlement and the quantum of their claims without a registration process (including identifying those already compensated in related overseas proceedings). And, even if the total number of class members were identified, the parties still would not be able to reasonably estimate or agree on the number who will participate in any settlement and the quantum of their claims.

In respect of the applicant’s key submissions:

• His Honour was not persuaded that publicly available information could be used as a proxy for making an informed estimate of matters not known to the parties, notwithstanding (in the applicant’s submission) the respondents being demonstrably capable of estimating potential settlement parameters, including by utilising publicly available data, without the need for registration by class members having already settled overseas proceedings.

His Honour noted various limitations with this approach – described as having an ‘air of unreality’ and ‘suboptimal’ – and agreed with the respondents’ submission that limiting them to the public information would mean that the parties have an uncertain baseline of information by which to then apply analysis, which analysis will itself be the subject of differing methodologies and assumptions. It would also mean that the respondents will have no individualized trading information by which to inform an estimate of the potential net loss suffered by class members. His Honour concluded the likely result is that an absence of a registration process will be a significant impediment to any potential resolution.

• His Honour was likewise unpersuaded that registration should not be required in circumstances where it was not suggested that class members will not understand the notice or registration process and, rather, that some class members “will not want to register either because they wish to remain anonymous or because the effort to do so could not be guaranteed to yield compensation” (at [86]). His Honour was critical of such reasons, which in his view did not align with the objectives of class action proceedings.

• His Honour was also unpersuaded that class members' interests stand to be prejudiced by the proposed class closure orders, it having been submitted to the effect that prejudice comprised: (1) the potential exclusion from any eventual settlement of a proportion of class members, including institutions with potentially large claims; (2) the registration process yielding an unrealistically small claim pool; (3) if an in principle settlement were reached, the risk of diluting any compensation following a flurry of late registrations; (4) the class closure orders proposed will likely affect a significant number of qualifying class members who are not directly notified; and (5) to the extent that the respondents suggest that there is no real difference between registration now and registration following settlement, there is likely to be greater publicity and greater interest in registration following settlement.

In respect of the expiry date of the proposed orders, his Honour was not prepared to make the orders in the form proposed by the respondents, the relevant expiry date being ‘before final judgment’. Here, his Honour accepted the applicant’s position that such ‘open ended’ class closure orders would, in effect, cap the respondents' liability for the purpose of any settlement agreed in the proceeding and, further, disincentivise meaningful engagement in the mediation process in circumstances where the class remained closed whether or not a settlement was achieved at mediation.

No formal orders were made, his Honour having indicated that he had ‘largely acceded’ to the respondents’ application and gave the parties an opportunity to discuss further the detail of such orders in light of the reasons.

J Wisbey & Associates Pty Ltd v UBS AG (No 2) [2024] FCA 147

Federal Court of Australia, Beach J, 27 February 2024
Applicant’s Solicitors: Maurice Blackburn
Respondents’ Solicitors: Herbert Smith Freehills, Clayton Utz, Allens,
Allen & Overy, King & Wood Mallesons (for the first to fifth respondents respectively)
Applicant’s Funder: N/A

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