Class closure orders prior to settlement rejected

Justice White finds that the court does not have the power to make class closure orders prior to settlement or judgement.

This is another decision concerning the court’s power to make pre-settlement class closure orders in representative proceedings. The applicants sought orders under s 33ZF of the Federal Court of Australia Act 1976 (Cth) (FCAA) to the effect that, subject to any further order of the Court, any class member who did not opt out or register by the class deadline (Unregistered Class Member) would remain a class member but would not be entitled to receive a distribution from any settlement of the proceeding reached before the trial of common issues. The applicants also sought orders under s 33X(1) of the FCAA for the distribution of notices detailing, among other things, the potential consequences of failing to register or opt out.

The applicants and the respondent both argued (in separate submissions) that the Court had power to make the proposed orders, notwithstanding recent decisions of the Federal Court and the New South Wales Court of Appeal in which it was held that pre-settlement class closure orders are beyond power (see Haselhurst v Toyota Motor Corporation Australia Ltd (2020) 101 NSWLR 890; [2020] NSWCA 66 (Haselhurst); The Owners – Strata Plan No 87231 v 3A Composites GmbH (No 3) [2020] FCA 748 (3A Composites); and Wigmans v AMP Ltd (2020) NSWLR 199; [2020] NSWCA 104 (Wigmans)).

Justice White rejected the parties’ submissions and held that the Court did not have power to make the proposed orders under s 33ZF of the FCAA. In doing so, his Honour:

  • Rejected the respondent’s reliance on Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (2017) 252 FCR 1; [2017] FCAFC 98 (Treasury Wine), in which the Full Court of the Federal Court made orders that were relatively indistinguishable from the proposed orders. His Honour observed that Treasury Wine was dicta only, appears inconsistent with the High Court’s subsequent decision in BMW Australia Ltd v Brewster (2019) 374 ALR 627; [2019] HCA 45 (Brewster) and the New South Wales Court of Appeal’s decisions in Haselhurst and Wigmans, and was influenced by Matthews v SPI Electricity Pty Ltd (No 13) (2013) 39 VR 255; [2013] VSC 17, which relied on a provision in the Victorian legislation for which there is no counterpart in the FCAA.
  • Rejected the parties’ submission that the proposed orders could be distinguished from those at issue in Haselhurst, 3A Composites and Wigmans because they were qualified by the words “subject to any further order of the Court” and gave class members the ability to challenge or seek to vary the orders. His Honour said that the effect of the proposed orders would be to establish a ‘presumptive position’ whereby Unregistered Class Members would not be entitled to participate in any pre-trial settlement, subject only to the contingency that the Court may allow them to do so. His Honour said that this was inconsistent with the opt out nature of Part IVA of the FCAA and, in reality, not materially different from the orders considered in Haselhurst.
  • Said that a fundamental problem with the proposed orders was that they would involve the Court making orders at a relatively early stage of the proceeding concerning the identity of class members who may participate in the distribution of a settlement, which is a subject matter which the scheme in Part IVA of the FCAA contemplates being addressed only following settlement.
  • Rejected the applicants’ reliance on similar orders made recently by Perram J in the Coles underpayment class action, because: (i) Perram J made the orders by consent; and (ii) his Honour’s attention does not appear to have been drawn to Haselhurst, Wigmans and 3A Composites.

It is worth noting, however, that White J identified an alternative method of encouraging registration that may be within the Court’s power. His Honour said (at [69]):

If it was really contemplated that the entitlement of unregistered group members to participate in the distribution of a settlement would be considered post-settlement, there would be no need for the orders to establish a presumptive position. Group members could, for example, be told that the entitlements to participate in a settlement would be considered post-settlement and that the Court may take into account at that time whether those who had not registered should be permitted to participate.

Case details

Furnell v Shahin Enterprises Pty Ltd [2021] FCA 73

Federal Court of Australia, White J;
05 February 2021;
Plaintiff’s Solicitors: Adero Law;
Defendant’s Solicitors: Piper Alderman;
Plaintiffs’ Funder: N/A;
Austlii link: Accessible here

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