Everything you need to know about class actions
When a lot of people have suffered similar losses or injuries, many won’t be able to afford to pursue a claim or take on the risks involved in pursuing a claim on their own. In some cases, large numbers of people affected may not even know that they have the right to make a claim.
A class action is a type of legal proceeding in which one person (the plaintiff or applicant) brings a claim on behalf of a wider group of people who have been affected in a similar way, or by the same conduct. By grouping claims together and pursuing them collectively, the overall value of the claim goes up, while the cost to each member goes down.
Why pursue a class action?
Often when a case is complex, a plaintiff’s expected compensation is low, or a defendant is well-resourced, lawyers will have to advise you that it’s not a good idea to make a claim. This is often because the costs and risks will greatly outweigh the benefits that might be gained if you win. When many people join together in a class action, though, the balance shifts. The downsides can be a lot less burdensome when there are dozens, hundreds or thousands of people fighting with you.
There are many different kinds of class action
Class actions don’t cover any one specific area of law in the way that areas like workers compensation or motor vehicle accident claims do, for example. They are simply a mechanism for organising large numbers of claims together for people who have been affected by similar circumstances - in many areas of the law.
There have been many successful class actions in Australia, covering a wide range of legal and factual areas.
Over the past 25 years, we have achieved compensation for claimants in a range of areas that very few law firms can match, including:
This includes claims that have been commenced on behalf of shareholders against various companies for misleading or deceptive conduct and/or breaches of requirements to disclose information to the ASX. Class actions can also be commenced on behalf of investors who have lost money due to the misconduct or negligence of companies acting as trustees or in other particular roles in relation to financial investments.
It’s possible for group-based claims to be pursued for financial and economic losses suffered as a result of breaches of consumer protection laws (which protect you from scams, unsafe products, and unfair treatment from businesses), as well as for personal injuries arising from contaminated or defective products.
Class actions of this nature include claims arising from defective breast implants, defective pacemaker batteries or arthritis medication.
Claims can be brought on behalf of consumers against banks or other financial institutions, or for consumers who have been persuaded, often by misrepresentations, to obtain financial products or services that were not as represented or advertised.
Home or business owners who are affected by environmental contamination or damage from natural disasters that should have been foreseen and avoided can claim compensation for their losses as part of a class action, such as claims arising from flooding, bushfires, biosecurity issues, land contamination, mining damage, and environmental contamination affecting food or livestock.
Class actions can be a vitally important tool in pursuing claims involving institutional abuse or breaches of other fundamental human rights by governments and corporations entrusted with the care and safety of vulnerable individuals.
Group-based claims can be brought for issues such as underpayment, employer conduct in obtaining workplace agreements, and other orders concerning industrial conduct.
How to start a class action
Formally, there are only a few requirements in the relevant legislation to be able to commence a class action:
- There must be seven or more persons with claims against the same defendant;
- The group's claims must all be in respect of, or arise out of, the same, similar or related circumstances; and
- The group's claims must give rise to a substantial common issue of law or fact.
Despite the apparent simplicity of these criteria, it’s important not to underestimate the complexity involved in constructing a class action correctly.
Who is the 'representative plaintiff'?
Class actions ordinarily involve a single plaintiff (known as the ‘representative’) pursuing a claim on behalf of a larger group that has been similarly affected. They are the only person assuming the risk and cost of the litigation, and they are running their claim in the interests of all affected parties within the group they define, meaning even people who don’t know about a class action can still benefit from them.
Every class action is different and proceeds in its own way, but in general they will be run using the representative plaintiff’s individual claim as a vehicle to allow a Court to resolve as many of the factual and legal issues that they have in common with the rest of the group as possible. This process allows those issues to be determined just once, in the representative plaintiff’s claim, and means that group members don’t need to establish those matters again in their own claims – the more common issues that can be resolved in this way, the fewer individual issues remain in each group member’s claim following that.
A representative plaintiff has the same obligations as any plaintiff in a typical piece of ‘individual’ litigation, however they also have a number of additional obligations that are specific to class actions.
Most importantly, they have obligations to the group members that they represent – they need to ensure that the claim they run serves the interests of the group members in the case, and that it is not pursued solely for their own personal benefit. The representative plaintiff is the party who provides instructions to their lawyers about the way that the claim is run, and they are the party who can make decisions when it comes to making settlement offers or negotiating to resolve a claim.
This process doesn’t expose any group member other than the representative plaintiff to financial cost or risk. Compared to the costs, time and risk involved in bringing large numbers of individual claims, the advantages of class actions are very significant.
Am I eligible to participate as a group member?
Every class action will have a group definition, which is a precise statement of the criteria that individuals need to satisfy in order to be a group member in it. This group definition will be set out in the court documents that are filed when a case is started, but it will generally also be detailed on the individual case details page here on our website.
At some stage during a case (whether this occurs before a settlement or after), there will usually be some requirement put in place for group members to register their participation in order to be able to receive compensation from the case. Ordinarily this will involve completing a form here on our website or in hard copy. The requirement will be set out in a notice ordered by the Court in advance.
What if there are unique aspects to my claim?
In some instances the class action process can resolve other group members’ claims completely. More commonly it will resolve some aspects of the other group members’ claims, while leaving other aspects to be determined on an individual basis. This will happen where the remaining aspects aren’t common to other group members – for example, the amounts of loss suffered by each individual group member. Sometimes these individual issues still need to be proved on a case-by-case basis, but more commonly they can be dealt with in the course of any settlement process that occurs as part of resolving a class action.
Are class actions 'opt-in' or 'opt-out'?
Class actions in Australia are run on what is known as an “opt-out” basis. This means that claims are commenced and initially pursued on behalf of a defined group, regardless of whether all of the members of the group know about the claim when it is commenced. This means that even people who are out of contact or who do not have ready access to lawyers will still have their rights protected by the claim.
Once the class action has reached a stage where the issues in dispute are well-defined, the Court will make orders requiring an “opt-out notice” to be publicised and brought to the attention of all group members, to the extent this is possible. This notice will provide group members with the ability to remove themselves from the claim if they do not want to be a part of it, by 'opting out'.
Group members who don’t do anything in response to the notice will continue to be represented in the class action, and will be bound by the outcome of the case. They will be able to take advantage of any favourable findings made in the class action when it comes time to consider their individual claim.
What happens if I 'opt out'?
If you 'opt out' of a class action, you remove yourself from a claim entirely. This means you won't be affected by the outcome of a class action at all, and will remain free to pursue your own individual claim for the same issues separately if you wish to.
However, by opting out, you will not be able to take advantage of any advantageous findings or decisions made in the course of the class action. If a class action settles or results in a payment to group members, a group member who has opted out will not be able to share in any part of that benefit.
Get advice before you opt out
The time limits that apply to group members who do not opt out are generally paused while a class action is running. However, group members who do opt out of a class action will continue to be affected by these time limits. This means you may miss out on your chance to claim for compensation.
Because of the significant legal effects of opting out, it is generally a good idea for anyone considering opting out to obtain legal advice about their decision before doing so.
How long does a class action take?
Generally, most class actions tend to take between one and three years to resolve, although this can vary depending on the circumstances of individual claims.
Each class action is different, and the time required for a claim depends on a variety of factors, such as the complexity of the issues involved, the amount of evidence to be considered, and the tactics adopted by the defendants in defending the claim.
What happens when a class action is successful?
In Australia, class action settlements require the approval of the Court before they can take effect. The representative plaintiff will make an application to the Court to approve a proposed settlement, in which they will need to provide the Court with a significant amount of information about the settlement, how it was reached, and what it will mean for group members.
The Court will generally be concerned with answering two main kinds of question about a settlement:
- Is it a fair and reasonable settlement considering the claims made on behalf of the group members?
- Has the settlement been reached in the interests of group members as well as the representative plaintiff, and not just in the interests of the representative and the defendant?
What if I disagree with the proposed settlement?
Usually when a Court is considering a proposed settlement, group members will be given an opportunity to object to it and make submissions about it if they disagree with it. All group members will be provided with a detailed notice in advance of this, approved by the Court, which sets out the details of the settlement and how it would work if approved.
Approval of settlement
If a Court is satisfied that a proposed settlement is appropriate, the settlement will be approved, and usually a ‘settlement distribution scheme’ will be put into effect. This scheme is a set of rules and processes by which a settlement amount will be divided up amongst the registered group members in a class action.
After any assessments of compensation entitlements have been completed, the group appointed by the Court to administer the settlement distribution scheme (which is often, but not always, the representative plaintiff’s lawyers), will arrange for payments to be made to all eligible registered group members.
The importance of expert representation
There are a number of arguments and tactics available to defendants to try to terminate class actions that have been commenced in too broad a fashion, or across too wide or diverse a range of issues or evidence. If defendants succeed in these arguments, they can make it very difficult for others to be able to continue other claims or pick up where a failed representative plaintiff left off.
For example, class action cases can run the risk of failing if:
- the claim attempts to cover too wide a range of facts and arguments, or;
- the representative plaintiff's claim contained too few 'common' elements to justify the claim continuing as a class action.
Experienced class action lawyers know how to navigate these potential pitfalls. We are best placed to provide considered advice about whether a claim is well-suited to being run as a class action, and if so, how it should be configured to give it the best chance of success.
We're one of Australia’s leading class action law firms and are well known for our experience in running some of Australia’s most complex and large-scale class actions. We've conducted and successfully resolved major complex litigation using group proceedings for more than two decades.