New Federal Court Practice Note on Class Actions

On 25 October 2016, the Federal Court issued 26 new national practice notes. We set out the most notable features of the Practice Note concerning Class Actions.¹

Disclosure of Costs Agreements and Litigation Funding Agreements to the Court 

Subject to any objection by the applicant’s lawyers, prior to the first case management hearing, the applicant’s lawyers shall, on a confidential basis, email an example of the standard form of both:

1. the costs agreement; and

2. the litigation funding agreement

3. to the associate of the judge presiding over the first case management hearing.²

The applicant’s lawyers may object to the above disclosure requirements (in whole or in part) or propose a sensible redaction process where legal professional privilege, prejudice or other significant detriment arises.³ The objection must be raised together with concise reasons with the Court and the other parties no later than 7 days prior to the first case management hearing.⁴

Disclosure of Litigation Funding Agreements to Other Parties 

Subject to any objection by the applicants’ lawyers in a similar manner, no later than 7 days prior to the first case management hearing, the applicant’s lawyers shall file and serve a notice in accordance with the “Notice of Disclosure-Litigation Funding Agreements” together with a copy of an example of the standard form of the litigation funding agreement that may be redacted to conceal any information which might reasonably be expected to confer a tactical advantage on another party.⁵ Such information may include:

1. information as to the budget or estimate of costs for the litigation or the funds available to the applicants; and

2. information which might reasonably be expected to indicate an assessment of the risks or merits of the proceeding or any aspect of the proceeding.⁶

Disclosure regarding Costs Agreements and Litigation Funding Agreements to Class Members

The applicants’ lawyers now owe an obligation to, as soon as practicable, notify class members (who are clients or potential clients) in clear terms of:

1. any applicable legal costs and disbursements;⁷ and

2. any litigation funder’s commission fees, and other charges (including those estimated) to be charged to class members (“litigation funding charges”).⁸ 

Failure to comply with the above obligations may be taken into account by the Court in relation to settlement approval.⁹

Case Management

For every class action, the Court will allocate, at an appropriate time soon after filing, a Docket Judge who is to preside over the trial of the proceedings, deal with pre-trial issues and where a Case Management Judge is not assigned, to case manage the proceedings and hear all interlocutory applications therein.¹⁰ 

A Case Management Judge may also be assigned, in addition to the Docket Judge.¹¹ A Case Management Judge is to conduct the case management hearings and hear certain applications which may be more appropriate heard by a judge not hearing the trial, for example certain legal professional privilege disputes. 

In appropriate cases, a registrar of the Court may also be assigned to assist the judge and the parties.¹² 

The first case management hearing will ordinarily be fixed for a date within 8 weeks of filing.13 

Mediation and ADR

The Practice Note requires the parties to, at an early stage, take steps to establish the methods by which relevant information might be gathered and exchanged which would assist the parties to have settlement discussions. The Court will make such directions as it considers appropriate in relation to information sharing for the purposes of settlement discussions.¹⁴

Opt Out Notice

There is now a requirement that the opt out notice alerts class members to the fact and consequences of any costs agreement or litigation funding agreement made or intended for the proceedings.¹⁵ [This may need to now consider ramifications of any proposed common fund orders in light of the recent decision of the Full Court in Money Max Int Pty Ltd (Trustee) –v- QBE Insurance Group Limited [2016] FCAFC 14].

Where the class members identifiable from a respondent’s records, subject to any objections, the respondent must cooperate with respect to the applicant using the respondent’s records as the basis for a direct mail or email distribution of opt out notices.¹⁶

Settlement

Notice of the proposed settlement to class members should include, amongst other things as provided for in the previous practice note, information as to any “funding equalisation payment” which affects the ultimate settlement amount received by class members who have not entered into a funding agreement.¹⁷ [This may need to now consider ramifications of any proposed common fund orders in light of the recent decision of the Full Court in Money Max Int Pty Ltd (Trustee) –v- QBE Insurance Group Limited [2016] FCAFC 148].

As for the affidavits in support of settlement approval applications, the practice note now includes a requirement that the following information be included (in addition to the previous requirements under the superseded practice note):

1.  the time at which it is anticipated settlement funds will be received by class members;
2. the frequency of any post-approval report(s) to be provided to the Court regarding the distribution of settlement funds; and
3. the terms of any litigation funding agreement and its application if the settlement is approved.

The Court now also supervises the post settlement distribution in that the practice note requires the Court to be advised at regular intervals of the performance of the settlement the settlement distribution scheme) and the costs incurred in administering it.

Court Supervision of Deductions for Legal Costs or Litigation Funding Charges

On a settlement approval application that involves a proposal that payments to be made to class members will be applied toward reimbursement of the unrecovered legal costs, the Court will usually require evidence:

1. of reasonable steps that were taken to alert class members to the likelihood of such deductions as soon as practicable after they became apparent; and

2. that the amounts to be deducted have been calculated in accordance with the terms of the costs agreement and any litigation funding agreement¹⁸ 

The practice note indicates the type of evidence that will be sufficient.

Conflict of Interest

It is now a requirement that any costs agreement or litigation funding agreement include provisions for managing conflicts of interest, including “duty and interest” and “duty and duty” between any of the applicant(s), the class members, the applicant’s lawyers and any litigation funder.¹⁹ The applicant’s lawyers have a continuing obligation to recognise and properly manage any such conflicts throughout the proceeding.²⁰