Parkin v Boral Limited (Class Closure) [2022] FCAFC 47: Federal Court has power to order notices of future intention to seek soft class closure at settlement

Have we seen class action parties unite to find a way to get most group members to register or opt-out in the lead up to mediation without a soft class closure order? Could we see such soft class closure orders in the future if the circumstances are right? Interesting things have come out of a Full Federal Court decision we’d like to discuss.

Parkin v Boral (Class Closure) decision

In what may be considered a ‘win’ for both sides of class actions, on 28 March 2022, the Full Federal Court (FCAFC) unanimously held in Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 (Parkin) that the Court has the power pursuant to s33X(5) of the Federal Court of Australia Act 1976 (Cth) (Act) to allow pre-mediation notices be sent to groups members that flag a future intention to seek soft class closure if the proceeding settles at mediation.¹ If the majority of group members subsequently register their claims, as the Court expected in this case, the prospects of settlement must improve. Very interestingly, the FCAFC said it might also allow, under s33ZF of the Act, soft class closure orders prior to settlement in other circumstances. While the decision is unlikely to be challenged in this matter, we could see this ‘possibility’ put to the High Court in the near-ish future.

Pre-settlement class closure orders

Given the composition of the Full Court in Parkin, we could have seen this decision coming. It stands in contrast to the established position regarding pre-settlement class closure orders set by the NSW Court of Appeal decisions in Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2020] NSWCA 66 (Haselhurst) and Wigmans v AMP Ltd (2020) 102 NSWLR 199 (Wigmans). The NSWCA didn’t like making soft closure orders under s33ZF or the equivalent of s33X of the Act, even if the notice only foreshadowed an intention to seek a subsequent class closure order.² Such notices were contrary to a “fundamental precept” of the class action regime that group members are entitled to do nothing until either a settlement or judgment.³

However, cracks in this position appeared following Beach J’s rulings in Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Ltd [2021] FCA 475 (Wetdal), in which he disagreed with this “fundamental precept“⁴, and in Earglow Pty Ltd v Newcrest Mining Ltd [2015] FCA 238 (Earglow), where His Honour outlined several examples of when group members were compelled to take a positive step at an early stage of a class action (e.g. providing discovery or particulars of a claim).⁵ The FCAFC thought that made sense in BHP Group Ltd v Impiombato [2021] FCAFC 93.⁶ Lee J in Lenthall v Westpac Banking Corp (No 2) [2020] FCA 423 also took the view a s33X notice can address “any matter” and must include a group member’s decision whether to opt out.⁷ Notably, Justices Beach and Lee were two of the three justices on the bench in this case. 

Questions put to the Full Federal Court

The parties put two questions to the FCAFC regarding its power to order notices to group members prior to any settlement regarding ‘soft closure’ of the class:⁸

• Can the Court order under s33ZF that group members be notified that if they don’t register or opt-out by a certain date they will remain group members but not (without leave) benefit from any settlement that occurs before final judgment (subject to Court approval)? (First Question).
• Can the Court order under s33X(5) that group members be notified that upon any settlement the Applicant will seek an order that group members be notified that if they don’t register or opt-out by a certain date they will remain group members but not (without leave) benefit from any settlement that occurs before final judgment (subject to Court approval)? (Second Question).

Full Federal Court’s answers

The FCAFC answered the Second Question with “Yes, pursuant to s33X(5) of the Act“.⁹ Given this answer, the Court answered the First Question by stating that the availability of the power pursuant to s33X(5) to give a notice meant that “no power under s33ZF is enlivened.” The Court was also unwilling to answer the First Question “in the abstract“.¹⁰

Full Federal Court’s reasoning

To get to the answer it did with the Second Question, the FCAFC did two significant things. First, it found that Wigmans was plainly wrong.¹¹ Consistent with Justice Lee’s approach in Lenthall, the FCAFC said the s33X(5) power was “broad and unqualified” and should not be read down¹², and that the notice posed by the Second Question was “the very sort of matter” a group member should be informed of.¹³

Second, the FCAFC referred to the so-called “fundamental precept” as a distraction, citing Justice Beach in Wetdal in support.¹⁴ The Court accepted group members are generally permitted by Part IVA to adopt a passive role prior to settlement or judgment, given it is an opt out scheme.¹⁵ However, that “does not mean that group members may never be required to take a step prior to settlement or judgment“.¹⁶ The Court saw little substance in such an absolute rule of passivity after considering the numerous applications of the power to compel positive steps be taken by group members.¹⁷ The Second Question was also in substantially the same terms as put in Wetdal, no doubt an intentional move by the Respondent given Beach J residing.

Having regard to the positive answer to the Second Question, and that the s 33X(5) order was available, the FCAFC considered that s33ZF in this case did not provide power to make an order under the First Question.¹⁸ The Court felt that it was likely that if group members were sent the notice under s33X(5), it will “facilitate settlement and allow greater finality” as the “great bulk of group members who may ultimately wish to seek a benefit under the settlement will register their claims“.¹⁹ Consequently, there was no ‘gap’ for the s33ZF power to fill and as a “supplementary or gap-filling provision“, the interests of justice in the proceeding did not require its application.²⁰  

Nonetheless, their Honours explicitly stated that the availability of s33X(5) will not always negate the power under s33ZF, and the necessity of such an order must be considered on the facts of the individual case.²¹ The Court would not accept that when an effective mediation could “only occur” where unregistered group members lose their causes of action, an order to that effect would never be “appropriate or necessary” as per s33ZF of the Act.²²

Where to from here?

We can expect that parties will follow the ‘Justice Beach approach’ to soft class closure notices going forward. Parties can expect notices flagging future soft class closure applications to be allowed in the Federal Court. Those with the appetite for it, might want to see if their circumstances allow for s33ZF to be used to make a pre-settlement soft class closure order. We might then see the High Court (finally) address such orders in the near-ish future.

For now, class action parties have seemingly found a way to encourage most group members to register or opt-out in the lead up to mediation in an effort to give settlement a better chance.

This article was written by Jason Symons, Partner, and Matthew Kearins, Solicitor.

¹Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 at [134]-[135].
²Wigmans v AMP Ltd (2020) 102 NSWLR 199 at [86].
³Parkin at [79].
⁴Wetdal Pty Ltd as Trustee for the BlueCo Two Superannuation Fund v Estia Health Ltd [2021] FCA 475 at [90].
⁵Earglow Pty Ltd v Newcrest Mining Ltd [2015] FCA 238 at [47]-[52].
⁶BHP Group Ltd v Impiombato [2021] FCAFC 93 at [95].
⁷Lenthall v Westpac Banking Corp (No 2) [2020] FCA 423 at [23].
⁸Parkin at [2].
⁹Order of Murphy, Beach and Lee JJ in Parkin at [1].
¹⁰Order of Murphy, Beach and Lee JJ in Parkin at [1].
¹¹Parkin at [109]-[110].
¹²Parkin at [111].
¹³Parkin at [113].
¹⁴Parkin at [116].
¹⁵Parkin at [118].
¹⁶Parkin at [118].
¹⁷Parkin at [129].
¹⁸Parkin at [136].
¹⁹Parkin at [136]-[137].
²⁰Parkin at [137].
²¹Parkin at [138].
²²Parkin at [144].