One of the principal aims of a class action regime is to resolve a large number of claims in a single, consolidated action, thereby avoiding a multiplicity of individual actions and enabling savings to be made through economies of scale.  The finality of class action proceedings with respect to group member claims has, however, recently been called into question by the unanimous decision of the High Court of Australia in Timbercorp Finance Pty Ltd (in liquidation) v Collins; Timbercorp Finance Pty Lty (in liquidation) v Tomes [2016] HCA 44.

French CJ and Kiefel, Keane and Nettle JJ at [53] of their joint judgment (Gordon J gave separate reasons) held that:

The provisions of Pt 4A therefore confirm that a plaintiff in group proceedings represents group members only with respect to the claim the subject of that proceeding, but not with respect to their individual claims.  The lead plaintiff is not a privy in interest with respect to the [group members individual] claims. This is so regardless of whether they should have been raised in the group proceeding.”

The ramifications of the decision are wide ranging.  It means that group members of a failed class action, while bound by the court’s findings in respect of the common questions of law or fact raised in that proceeding, can bring fresh proceedings against the defendant (or raise new issues of fact or law in defence of a later proceeding) if their individual claims or issues were not determined in the course of the class action proceeding.

Group members who don’t opt-out of the class may therefore hedge their bets and take a second bite of the litigation cherry, without giving rise to an “Anshun estoppel” or an abuse of process.  This may dis-incentivise group members from participating in the opt-out procedure to preserve their individual claims.

In a legal system that seeks to resolve disputes in a cost effective and expeditious manner, the lack of finality of class action proceedings consequent on the Timbercorp decision may be of concern to defendants, particularly when the costs of defending a class action (time, money, reputation) are considered, and not all of those costs are recoverable.

In practice, however, there are a number of mechanisms available to parties to a class action to achieve a degree of finality in litigation by limiting the scope and extent of claims that may survive the determination of a class action proceeding.

  • The common questions determine the extent to which the lead plaintiff is the privy of the group members of the proceeding, and will in turn determine the extent of any individual claims that may survive the court’s determination of the proceeding.  Parties, and the court, should take care in framing the common questions to ensure they cover-off all questions of law and fact common to group members and sub-group members.
  • The framing of the common questions should be carefully revisited at the time of each revision of the originating process.
  • Opt-out notices should be drafted in plain English and clearly state that group members who do not opt-out of the class will be precluded from later raising related cases or defences.
  • If settlement of the class action is achieved, defendants should ensure that the settlement agreement includes terms precluding the lead plaintiff and any group members from raising related individual claims or defences.  Settlement is of course subject to the scrutiny of the court and remains “conditional” pending the court’s approval.

Given the High Court’s robust stance in Timbercorp, it is likely that, in practice, the framing of the common questions will become even more critical in achieving greater finality in class action litigation.