Parkins vs. Boral Limited (Class Closure) [2022] FCAFC
In brief
Background – Class Closure Orders
“Class closure orders”, which require group members to either register their claims in order to participate in any settlement, or to opt out so as to not be bound by any settlement (a Class Closure Order) have been made by various courts in various jurisdictions over the years, underpinned by the rationale that such orders facilitate settlement by allowing all parties to obtain a better understanding of the total quantum of possible claims. There has, however, been a strong difference of opinion between the Full Federal Court of Australia (the Full Court) and the NSW Court of Appeal (NSWCA), since 2020, as to whether the similar legislative schemes which apply to representative (class) actions in the Federal Court and NSW Supreme Court empower a court to make a Class Closure Order, with the Full Court holding they do and the NSWCA holding they do not.
On 28 March 2022, the Full Court in Parkins v Boral Limited (Class Closure) [2022] FCAFC (Parkins) determined that the NSWCA’s conclusion, in 2020, that there was no power to approve the giving of a notice to group members warning of the applicant’s intention to apply for a Class Closure Order in the event of a settlement, was “plainly wrong”, while also making it clear that it did not accept that it could never be appropriate, or necessary, to make a Class Closure Order to ensure justice is done in a proceeding (for example, for the purposes of a mediation). This necessarily assumes the power to do so exists
Key takeaways
The four key takeaways from Parkins are that:
- whether a Class Closure Order will be available in the Federal Court will turn, at least in part, on the terms of the order sought;
- any Class Closure Order being sought should be drafted to avoid “barring” unregistered group members’ claims ahead of any settlement approval process;
- the Full Court has rejected the proposition that there is any universal or fundamental rule which means that group members are entitled to remain passive until settlement or judgment, which has relevance Class Closure Orders, including with respect to applications by respondents seeking discovery, particulars or other information from group members at an earlier stage in the class action (such as whether they received separate advice which may provide a basis for proportionate liability defences and/or cross-claims for contribution); and
- pending clarification by the High Court and/or legislative change to introduce an express power equivalent to s 33ZG of the Supreme Court Act 1986 (Vic) (the Victorian Act), the divergent conclusions of the Full Court and the NSWCA on the power to make Class Closure Orders and related issues will be yet another factor to be taken into account by applicants and their lawyers in determining where representative proceedings ought be commenced, along with other variables such as the availability of Group Costs Orders in Victoria which enable applicants’ solicitors to conduct proceedings on a contingency basis and the court’s and individual judge’s willingness to permit, and the approach to be taken to, “beauty parades” between competing class actions.
Victoria
In Victoria, s 33ZF of the Victorian Act empowers the Victorian Supreme Court to make any orders which the Court thinks necessary to ensure justice is done in the proceeding (a General Justice Power). Importantly, from the perspective of Class Closure Orders, s 33ZG of the Victorian Act also expressly provides that an order made under s 33ZF of the Victorian Act may set out a step that group members must take in order to be entitled to any payment out of a Court-approved settlement fund or any other benefit out of the proceedings. Such a step may include registering in order to participate in a settlement or opting out to avoid being bound by a judgment.[1]
Federal Court and New South Wales – divergent views
By contrast, the legislative regimes for class actions in both the Federal Court and the NSW Supreme Court include a General Justice Power in equivalent terms to s 33ZF of the Victorian Act[2], but no express equivalent to s 33ZG of the Victorian Act.
This has led to a serious divergence of position between the Federal Court and the NSW Supreme Court as to the proper interpretation of what are similar legislative regimes (including as to the purpose and scope of that General Justice Power), where:
- in 2017, in Melbourne City Investments v Treasury Wines Estates[3] , the Full Court held that the General Justice Power in s 33ZF of the Federal Court of Australia Act 1976 (Cth) (the FCA) permitted a Class Closure Order if it operated to facilitate the “desirable end of settlement”; but
- subsequently, in 2020, in Haselhurst v Toyota[4] (Haselhurst) and Wigmans v AMP Ltd[5] (Wigmans), the NSWCA held that the NSW Supreme Court did not have the power to make a Class Closure Order and, even if it did, such an order should not be made, because:
- the legislative framework of the Civil Procedure Act 2005 (NSW) (CPA) permits people to be made group members without consent and without requiring them to take affirmative steps unless it is to opt out; o this was “strongly against the implication” that there must be a power to make a Class Closure Order which extinguishes the rights of an unregistered group member “in advance of any settlement being achieved (or even attempted) in order to facilitate settlement of the claims of Group Members who choose to register their claims”; and
- this was “strongly against the implication” that there must be a power to make a Class Closure Order which extinguishes the rights of an unregistered group member “in advance of any settlement being achieved (or even attempted) in order to facilitate settlement of the claims of Group Members who choose to register their claims”; and
- the General Justice Power provided no basis for a Class Closure Order, with Bell P (as he then was) stating, in Wigmans, that:
“[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’.”[6]
Parkins FCA – 28 March 2022
In Parkins, the Full Court[7] was asked to determine two issues:[8]
- First, whether the Federal Court has power to make a Class Closure Order which provides that any group member who has either not registered by the date by which group members are required to opt out or register or who has not opted out of the proceeding (an Unregistered Group Member) shall remain a group member for all purposes of the proceeding but not be permitted, without further leave, to seek any benefit under any court-approved settlement which occurs before final judgment?[9]
- Secondly, whether the Federal Court has power to approve a notice being given to group members notifying them that, upon any settlement of the proceeding, the applicant will seek an order, which, if made, would have that same effect on Unregistered Group Members (a Class Closure Warning Notice).
The “essential difference” between these two issues is that a Class Closure Warning Notice foreshadows an application for class closure which an applicant may subsequently make in a settlement approval application under s 33V of the FCA[10], while the first issue concerns the power to make a Class Closure Order at the opt-out stage of the class action.
Key legislative provisions
Both the applicant and respondent (c.f. the appointed Contradictor) contended that the Federal Court was empowered to make a Class Closure Order under the General Justice Power (s 33ZF of the FCA), “as an exercise of power incidental to the power in s 33V”[11] and that the Federal Court was empowered to approve a Class Closure Warning Notice under s 33X(5) of the FCA.[12]
| Section 33ZF of the Act | 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. |
| Section 33V of the Act | Settlement and discontinuance—representative proceeding (1) A representative proceeding may not be settled or discontinued without the approval of the Court. (2) If the Court gives such an approval, it may make such orders as are just with respect to the distribution of any money paid under a settlement or paid into the Court. |
| Section 33X(5) of the Act | Notice to be given of certain matters … (5) The Court may, at any stage, order that notice of any matter be given to a group member or group members. … |
Full Court findings
The Full Court held that:
- the Court has power, under s 33X(5) of the Act, to make an order with respect to the giving of a Class Closure Warning Notice in the terms of the order sought;[13] and
- in the circumstances of the present case, however, the General Justice Power (s 33ZF of the FCA) did not provide the Court with power to make a Class Closure Order because giving a Class Action Warning Notice would “facilitate settlement and allow greater finality of litigation”, being the “justice” in the proceeding which the parties seek, such that the “supplementary” or “gap-filling” power of s 33ZF of the FCA was not enlivened.[14]
Comity considerations in relation to Wigmans and Haselhurst
In reaching those conclusions, it was necessary for the Full Court in Parkins to consider both Wigmans and Haselhurst in detail, where, specifically:
- in Wigmans, the NSWCA had held that it was beyond the power of the NSW Supreme Court to make an order approving a Class Closure Warning Notice in similar terms to the notice proposed in Parkins; and
- in Haselhurst, the NSWCA had held that it was beyond power for the NSW Supreme Court to make a Class Closure Order in terms which were similar (but, importantly, not identical) to the type of Class Closure Order proposed in Parkins.
In doing so, the Full Court noted that:
- it “is trite, but necessary, to stress that if we consider that the decisions in Haselhurst and Wigmans are not distinguishable from the present case, we should not depart from those decisions unless we consider them to be plainly wrong”[15]; and
- given that the legislative frameworks and General Justice Powers in both the FCA and CPA “are in all but identical terms”[16], comity considerations “assume importance” so that they “should be slow to conclude that a considered judgment of another intermediate court is ‘plainly wrong’…”.[17]
Class Closure Warning Notice
Nevertheless, on the question of whether the Federal Court had the power to approve the proposed Class Order Warning Notice, the Full Court held that it was “compelled” to the conclusion that the decision in Wigmans was plainly wrong[18], and that the Federal Court did have the power to make an order, in the terms sought, for the issue of a Class Closure Warning Notice, including because:
- first, the power conferred by s 33X(5) of the FCA, which “expressly empowers” the making of an order “at any stage” that notice be given the group members “of any matter”, is “broad and unqualified” and should not be read down;[19]
- secondly, the Full Court disagreed with the NSWCA’s finding, in Wigmans, that the proposed Class Closure Warning Notice was “beyond power” because it communicated a present intention to extinguish the claims of Group members who neither opted out nor registered and would have that “practical effect” on the decision of a group member to be made in light of the notice, observing that:
“If, as they do, the words of s 33X(5) permit the issuance of a notice of “any matter” at “any stage”, and the Court is satisfied that the proposed notice is to contain material or information which may be relevant to a group member including any decision whether or not to opt out, then the Court has power to issue the notice. Of course, there may be discretionary considerations as to why such a notice should not be provided to group members, but these considerations do not go to power”;[20]
- thirdly, there was no “absolute rule” or “fundamental precept” that group members are entitled to adopt a passive role prior to settlement or judgment;[21]
- fourthly, whilst group members should generally permitted to remain passive, there have been many cases where group members have been required to take steps in proceedings prior to settlement or judgment (including to give discovery and provide particulars);[22]
- fifthly, in any event, determining whether s 33X(5) of the FCA is a source of power for the Court to make an order approving the giving of a Class Closure Warning Notice, involves consideration of:
“the text and purpose of the section in the context of Pt IVA as a whole….[and it]…does not involve ascertaining (or purporting to ascertain) a “fundamental precept” of the Act, at least to the extent that the phrase is intended to identify something other than a conclusion reached as to the operation of a statutory provision by reference to well-established rules of statutory interpretation”;[23]
- finally, any conflict of interest between “registered” and “unregistered” group members, which was raised in Wigmans, was irrelevant to the question of whether the Court was empowered, under s 33X(5) of the FCA, to make the orders sought, because any issues of conflict that may arise between those two sets of group members at the time of any settlement approval would be subject to the protective mechanism provided for by s 33V in the Act.[24]
Class Closure Order
The Full Court also held that the terms of the Class Closure Orders considered in both Haselhurst and Wigmans were distinguishable from the terms of the Class Closure Order sought in Parkins.
The Full Court noted that, unlike the Class Closure Order sought in Haselhurst, the Parkins Class Closure Order was “premised on the exercise of power at the s 33V [settlement approval] stage”. [25]
Furthermore, the Parkins Class Closure Order:
- did not (by its terms) have the purported effect of “barring” group members’ claims by operation of the Class Closure Order itself and that “result would only flow… [in Parkins] … if a settlement is later reached and the Court later made an order to approve the settlement pursuant to s 33V”;[26] and
- did not “extinguish group members’ claims, contingently or otherwise”, because extinguishment in Parkins:
“could occur only if, and when, the Court, in the exercise of judicial power, makes two orders: (a) a settlement approval order under s 33V, which follows group members being given notice of, and afforded an opportunity to be heard in relation to, the settlement approval application, including to object to the proposed settlement on the basis that they are to be precluded from obtaining any benefit under the settlement; and (b) an order being made under s 33ZB, binding the group members to the approval and any consequential orders such as a dismissal of the proceedings”.[27]
As noted above, while ultimately holding that the particular circumstances of Parkins[28] meant that the “supplementary” or “gap-filling” General Justice Power provided by s 33ZF of the FCA was not necessary to “facilitate settlement and allow greater finality of litigation” (that being the “justice” upon which the parties relied to enliven the power to make a Class Closure order at this time), the members of the Full Court made clear their view that the Court is empowered to do so if circumstances justify it.
[1] See, for example, Matthews v SPI Electricity Pty Ltd (No 13) (2013) 39 VR 255; Melbourne City Investments v Treasury Wines Estates (2017) 252 FCR 1 at [74]
[2] Section 33ZF of the Federal Court of Australia Act 1976 (Cth) and s 183 of the Civil Procedure Act 2005 (NSW) respectively
[3] (2017) 252 FCR 1
[4] [2020] NSWCA 66; 101 NSWLR 890
[5] [2020] NSWCA 104; 102 NSWLR 199
[6] Ibid at [12]
[7] per Murphy and Lee JJ (with Beach J agreeing)
[8] Parkins at [1] – [5]
[9] The Full Court noted that the Class Closure Order as sought was “a version of what has become known as a ‘soft closure order’ ” as opposed to a “hard closure” order which would have the effect of “forever” extinguishing a group member’s rights to share in the fruits of a subsequent judgment (c.f. a settlement) unless the group member takes steps to register in the proceeding: Parkins at [8] and [37]
[10] Parkins at [10]
[11] Parkins at [16]
[12] Ibid
[13] Parkins at [135]
[14] Parkins at [136] and [137]
[15] Parkins at [97]
[16] Parkins at [109] citing BMW Australia Ltd v Brewster [2019] HCA 45; 269 CLR 574 (Brewster)
[17] Parkins at [109]
[18] Parkins at [110]
[19] Parkins at [111]
[20] Parkins at [114]
[21] Parkins at [115] – [125]
[22] Ibid
[23] Parkins at [118]
[24] Parkins at [126] – [134]
[25] Parkins at [103]
[26] Parkins at [101]
[27] Parkins at [102]
[28] However, the Full Court did “not accept that the availability of power under s 33X(5) will necessarily, or always, mean that there is no power under s 33ZF to make an order at the opt out stage in the terms of” the Class Closure Order: Parkins at [138]
