AUSTRALIA: An Introduction to Dispute Resolution: Class Action (Plaintiff)

Introduction 

The class actions landscape in Australia continues to be dynamic. Recent shifts from traditional third-party litigation funding to more US-style contingency arrangements are driving much of that change. We anticipate no change in the short term of courts being required to resolve competing claims brought by different plaintiffs with different law firms and funders.

Litigation Funding 

Groupc costs orders 

Group costs orders (GCOs) permit solicitors acting for plaintiffs in class actions to recover legal costs as a percentage of the amount of any award or settlement recovered in a class action. Currently, Victoria is the only jurisdiction where solicitors can recover costs on a contingency basis. The courts have approved GCO rates to date in a range from 14% to 40%. Since the advent of GCOs in Victoria in June 2020, an increasing volume of class actions have been commenced in the Supreme Court of Victoria.

Recently in Bogan v The Estate of Peter John Smedley (Deceased) [2023] VSCA 256, the Victorian Court of Appeal held that if an order for a GCO has been made in a Victorian proceedings, this would potentially be relevant to any application to transfer the proceedings to another jurisdiction as the GCO regime was unique to Victoria and no other jurisdictions had a legal regime in place for such a funding arrangement. In 2022, the High Court dismissed an application by the respondents in the same case, when they sought to transfer the proceedings to the High Court for the determination of the transfer application to New South Wales. There is now presently a further application before the High Court, after the Court of Appeal’s decision to reject the respondent’s transfer application.

Common fund orders 

The decrease in Federal Court filings can also be explained by recent uncertainty as to whether courts have the power to make common fund orders (CFOs) at the settlement stage. CFOs are orders made in favour of a litigation funder, typically at the beginning or end of proceedings, which result in a funding commission being paid by all class members, regardless of whether they have signed funding agreements.

In October 2023, the Full Court of the Federal Court delivered its decision of Elliott-Carde v McDonalds’ Australia Limited [2023] FCAFC 162 which confirmed that the Federal Court has power to make settlement CFOs if the court is satisfied that it is just to do so. Subject to any potential High Court appeal, the Full Court’s decision may lead to a return to the Federal Court as the preferred court for the filing of class actions.

Solicitors’ common fund orders 

The prospect of the Federal Court allowing for a GCO-like regime has been raised in recent class actions, where it is suggested that the Federal Court may have power pursuant to Section 33V(2) of the Federal Act to make a “solicitors’ common fund order”, which would permit solicitors to receive a just distribution out of any approved settlement for the risks of funding the litigation and securing the creation of the settlement fund for the benefit of group members.

The Full Federal Court will hear in May 2024 the issue by way of a reference pursuant to Section 25(6) of the Federal Court of Australia Act 1976 (Cth), in R&B Investments Pty Ltd (Trustee) v Blue Sky Alternative Investments Limited (Administrators Appointed) (in liq) in the context of the applicants seeking Court approval of an opt-out notice.

Competing Class Actions 

As the volume of class action filings has increased, there has also been an increase in the number of competing class actions. Where competing class actions are filed, the court will resolve carriage disputes by applying a multifactorial analysis by reference to considerations such as the nature and scope of the causes of action advanced in each class action, the size of the respective classes, the extent of any book-build, and the experience of the legal practitioners. In practice, however, carriage disputes are typically centred on the competing funding proposals advanced by each class action and the relative pricing of those proposals in relation to the net benefit to group members.

As the Supreme Court of Victoria experiences an increase in filings of class actions, there is an increased prospect that competing class actions will be filed in different courts. In these circumstances, a joint protocol between the Federal Court and Victorian Supreme Court provides that a joint case management hearing can be convened before judges from both courts to determine how the class actions will proceed. This already occurred in respect of competing class actions commenced against Downer EDI Ltd (where three class actions were filed in the Federal Court and the fourth in Victoria, with a consolidation of two actions going ahead in the Supreme Court of Victoria): Lidgett v Downer EDI Ltd [2023] VSC 574.

In R&B Investments Pty Ltd (Trustee) v Blue Sky Alternative Investments Limited (Administrators Appointed) (in liq) (Carriage Application No 2)[2023] FCA 142 at [20], the Court noted “a concern that one often has about Pt IVA proceedings, namely that solicitors and funders are focussed so intently on their own position that they forget that it is their duty to advance the claims of the applicant and group members towards a swift resolution of the substantive matter.” What will be of primary importance for the Court is that the best interests of the clients are in the foreground, informed by which proposal has the most favourable pricing for the class.

Class Action Waiver Clauses 

The High Court of Australia upheld an appeal in the Ruby Princess class action and found a class action waiver clause contained in cruise tickets purchased by US customers was unenforceable under the Australia Consumer Law. In a judgment by newly appointed Chief Justice Gageler and four other justices of the High Court, Karpik v Carnival plc [2023] HCA 39, the Court preferred the approach of Federal Court Justice Stewart over the decision of the majority Full Court.

US class members will now be able to participate in any award. More broadly, this puts to bed the notion that recent developments in the USA in favour of class action waiver clauses may find a positive reception in Australia. Global businesses operating in Australia will be held to the standards of Australian consumer law.