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Federal Court of Australia approves its power to make future orders for class closure

Federal Court of Australia approves its power to make future orders for class closure

The following piece was contributed by Lillian Rizio and Max Hensen of Australian law firm, Piper Alderman The Full Federal Courts’ decision in Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 (Parkin) confirms the courts’ power to issue pre-mediation (and settlement) soft class closure notices to group members. The decision hints at the (positive) appetite of the Federal Court in making future orders for class closure that facilitate a just outcome,[1] simplifies the assessment of quantum prior to settlement, and reduces an element of risk in funded litigation. Opt-Out Nature of Class Actions   The Australian position on class closure orders is set out in Part IVA of the Federal Court of Australia Act 1976 (Cth) (Act). It serves as a guide for commencing Class Actions in the Federal Court of Australia, and is the reason why they are run on an ‘opt out,’ and ‘open’ basis. By virtue of the Act, class actions are commenced by a representative applicant on behalf of ‘group members.’ Group members are not required to register their interest, provide their consent, or even have knowledge of the proceedings on foot. Whilst the Act provides that a group member might ‘opt-out’ of the proceedings,[2] it does not compel one to submit information prior to settlement or judgment in order to participate. Ultimately, an ‘opt-out’ proceeding means that the size and composition of a class is difficult to quantify in pre-settlement discussions. Uncertainty as to the potential quantum of a claim complicates settlement negotiations. Background The parties in Parkin sought clarification from the Federal Court on its statutory power to issue notices to class members following two 2020 judgments handed down in the Court of Appeal of New South Wales. Both judgements considered the court’s powers pursuant to the Civil Procedure Act 2005 (NSW), in sections that mirrored the powers conferred by the Act on the Federal Court. In Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia,[3] the court found that its statutory powers did no extend to authorise it to make orders relating to class closure before settlement. It rationalised that, a class closure order extinguishes the cause of action of a group member. Therefore, that ordering the issuance of one was beyond the scope of its statutory ‘gap-filling’ power in facilitating a just outcome. In Wigmans v AMP Ltd[4] the court found that making an order to issue a notice for soft closure was contrary to the ‘fundamental precept’ of the class action regime.[5] Here, it rationalised that a group member was entitled to not act prior to settlement, or judgement. Questions In seeking clarity on the courts’ statutory powers, the parties in Parkin filed applications which put two questions to the Court. Namely, whether:
  1. section 33ZF of the Act permitted the Court to make orders to notify group members that, if they failed to register their interest, or opt out by a given date, they would remain a group member, but not be entitled to benefit from settlement (subject to Court approval) (Question One); and
  2. section 33X(5) permitted the court to order that group members be notified that in the event of a settlement, the Applicant would seek an order which (if made) would prevent a group member that had failed to register their interest, or opt out by a given date, from being entitled to benefit from settlement (Question Two).
Findings and Discussion Ultimately, the court found that, whilst no power under s 33ZF of the act was ‘enlivened,’[6] the specific power available under s 33X(5) permitted the court to issue the orders sought by the Applicant in Question Two. As to the precedential decisions from the Court of Appeal in New South Wales, the court in Parkin found that:
  1. the decision in Wigmans[7] was ‘plainly wrong.’ Here, the court affirmed that s 33X(5) conferred a power that was ‘broad and unqualified’[8] with respect to making an order that a notice be issued to group members at ‘any stage’ and of ‘any matter’[9]; and
  2. contrary to Wigmans[10] assertion on ‘fundamental precept,’ the court held that whilst group members may take a passive role in proceedings, they can also be required to act prior to settlement, and that the court may exercise its statutory powers to motivate them to do so.
In its discussion relevant to Question One, the court found that the power conferred by s 33ZF was discretionary and ‘gap filling.’[11] On the facts, the court did not consider that a ‘gap’ applied, given the relevance of s 33X(5) in providing a resolution to the issue at hand. Interestingly, however, the court hinted at its sentiment towards potential future application of s 33ZF in the following comment: ‘one could not foreclose the possibility, depending upon the circumstances of the case, that such an order could advance the effective resolution of proceedings.’[12] Conclusion – What does it Mean The decision of the Full Federal Court, means that parties can expect to be awarded notices that identify the intention of ascertaining future class closure orders in proceedings. This has resulted in the ratification of a strategy in which parties can agree to obligate group members to affirm their interest, or opt-out prior to mediation (for settlement purposes). As for the future of class-closure, the court comments on the potential of the issuance of class closure orders enlivened by s 33ZF in instances where they effect the effective resolution of proceedings. Going forward, competing interpretations of the statutory powers conferred upon the courts leaves room for the High Court to interpret the matter, or perhaps, call for statutory reform.  Given the positive findings as to the ability for pre-mediation notices to be issued, the Federal Court will likely be the preferred jurisdiction for class actions commenced on an open class basis. About the Authors Lillian Rizio, Partner Lillian is a commercial litigator with over 14 years’ experience in high stakes, high value litigation. Lillian specialises in class action, funded and commercial litigation, with expertise across a broad range of sectors including financial services, energy & resources, insurance and corporate disputes. Max Hensen, Lawyer Max is a litigation and dispute resolution lawyer at Piper Alderman with a primary focus on corporate and commercial disputes. Max is involved in a number of large, complex matters in jurisdictions across Australia. For queries or comments in relation to this article please contact Lillian Rizio, Partner | T: +61 7 3220 7715 | E:  lrizio@piperalderman.com.au — [1] Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 at [144]. [2] Part IVA Section 33J Federal Court of Australia Act 1976 (Cth). [3] (2020) 101 NSWLR 890. [4] (2020) 102 NSWLR 199. [5] Wigmans v Amp Ptd (2020) 102 NSWLR 199 at [89]. [6] Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 at [1]. [7] Wigmans v AMP Ltd (2020) 102 NSWLR 199. [8] Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 at [111]. [9] Ibid. [10] Wigmans v AMP Ltd (2020) 102 NSWLR 199. [11] Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 at [13]. [12] Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 at [144].

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KPMG Appoints First U.S. Legal Services Chief as Arizona Alternative Business Structure Faces Scrutiny

By John Freund |

KPMG LLP has named Christian Athanasoulas as the inaugural head of KPMG US Legal Services, a newly created position aimed at expanding the Big Four firm's legal offerings in the United States. Athanasoulas, a Boston-based M&A tax practice leader with more than 25 years at the firm, will oversee efforts to integrate legal services with KPMG's broader corporate advisory platform.

As reported by Bloomberg Law, the appointment comes one year after KPMG gained regulatory approval to operate as an alternative business structure in Arizona — making it the first Big Four firm permitted to run a U.S. law firm. The division focuses on work traditionally handled by in-house legal teams, including post-merger contract cleanup, entity dissolution, and vendor consolidation.

The expansion, however, faces growing regulatory pushback. Arizona's Committee on Alternative Business Structures has recommended rule changes that would require ABS firms to serve Arizona clients and provide direct legal services rather than operate as national referral networks. The Arizona State Bar has warned that some entities may be exploiting the framework without meaningfully benefiting Arizona residents.

The development is significant for the legal industry's evolving competitive landscape. KPMG operates globally with more than 3,000 licensed attorneys and has already expanded legal services in the UK and Australia. Traditional law firms view the firm's entry with caution, recognizing that its established corporate client base, substantial resources, and technology investments present a formidable competitive challenge to conventional legal service delivery models.

U.S. Government Sides with Argentina in Discovery Dispute Over $18 Billion YPF Judgment

By John Freund |

The U.S. government has intervened in the long-running battle over an $18 billion judgment against Argentina, urging a federal judge not to hold the country in contempt for allegedly failing to produce official communications. The filing adds a significant layer to one of the largest litigation finance-backed disputes in history.

As reported by Bloomberg Law, former shareholders of YPF SA — Argentina's state-owned oil company — are seeking discovery of text messages and emails from Argentine government officials. The shareholders, backed by litigation funder Burford Capital, obtained the landmark judgment in 2023 after a court found that Argentina violated their rights through the 2012 nationalization of YPF.

The discovery effort is central to the shareholders' collection strategy. Plaintiffs argue that the communications could demonstrate that Argentina's state-owned banks and national airline function as "alter egos" of the government — a legal theory that, if successful, would allow them to pierce corporate structures and pursue assets held by those entities to satisfy the judgment.

The U.S. government's decision to back Argentina in the discovery fight underscores the diplomatic sensitivities at play. Sovereign discovery disputes of this scale raise complex questions about foreign government immunity and international comity. For the litigation finance industry, the case remains a closely watched test of whether third-party-funded enforcement actions against sovereign nations can ultimately yield meaningful recoveries on judgments of this magnitude.

UPC Court of Appeal Rules Litigation Insurance Can Replace Multimillion-Euro Security Deposits

By John Freund |

The Unified Patent Court's Court of Appeal has issued a landmark ruling that could reshape how patent disputes are funded across Europe. In a decision overturning four million Euros in security for costs orders, the court held that properly structured litigation insurance policies can fully satisfy a defendant's right to costs recovery — eliminating the need for cash deposits or bank guarantees.

As reported by McDermott Will & Schulte, the ruling arose from the case of Syntorr v. Arthrex. McDermott partners Hon.-Prof. Dr. Henrik Holzapfel and Dr. Laura Woll represented Syntorr in the appeal, successfully arguing that the plaintiff's litigation insurance policy contained sufficient protections to address the court's concerns.

The court identified several features that satisfied its requirements for adequate security, including non-voidability provisions, direct rights for the defendant to claim against the insurer, straightforward payment triggers, and placement with an EU-authorized Solvency II insurer. Together, these anti-avoidance endorsements provided the court with confidence that the defendant's interests were adequately protected.

The decision carries significant implications for the litigation finance industry. By establishing that well-structured insurance products can substitute for cash security, the ruling creates a clearer pathway for patent holders — particularly smaller innovators — to pursue claims in the UPC without immobilizing substantial capital. The court's framework effectively balances defendant protection with access to justice, signaling that the UPC is open to modern funding mechanisms in patent enforcement proceedings.