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

June 30, 2022

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].

Commercial

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Commercial Special Features

How AI-Powered Screening and Monitoring Reduce Duration Risk

By Ankita Mehta |

Written by Ankita Mehta, founder of Lexity.ai - a platform that helps litigation funds automate deal execution and prove ROI.

In litigation finance, you can win the case and still lose money.

This is often due to duration risk – the silent, persistent killer of a fund’s IRR. It’s a primary threat to projected returns, tying up capital for months (or years) longer than planned. In a market where every delay erodes value, monitoring becomes a critical, high-stakes function.

For years, that monitoring process has relied on analysts manually scanning dockets and then logging events in a static spreadsheet. But let’s be clear: this is no longer a sustainable process. It’s a liability.

The true failure of the manual model is twofold. First, the initial diligence (often taking weeks) is too slow and key for preventing loss of deals, and second – when a new development is spotted, analysts have no way to measure its downstream financial impact. By the time a human calculates the damage of a delay, the damage is already done.

This article provides a pragmatic framework for shifting from this reactive, "dead data" model to a proactive, AI-driven workflow.

Early warning signs your team is likely missing

Your expert team is your greatest asset, but they are buried in the grunt work of diligence and shallow monitoring. Ironically, the highest-value insights are lost in this process.

Here’s what that looks like in practice:

  1. A "minor" discovery motion is spotted by an analyst. They note it in an Excel file. What they can't do is instantly model its domino effect on the summary judgment and trial dates, or see that this exact motion by this opposing counsel has historically added 90 more days.
  2. A late expert report is received, which is logged as a single missed deadline. The team lacks a system to immediately see how this one event threatens the entire return profile by breaking a chain of dependencies.

An analyst’s “gut feel” about a jurisdiction is helpful. But a workflow that quantifies that gut-feel by comparing a new case against historical jurisdictional data is infinitely better.

The solution? An AI-powered analytical workflow

No, this isn’t me writing about a "magic" AI tool. This is more about having a disciplined AI-powered workflow that gives your team the right analysis at the right time by pulling out the relevant data for accurate decision making. Here, the value isn't in just finding a new event, but in understanding its impact instantly.

A carefully thought out workflow delivers value on three distinct levels:

  1. Automated diligence and baseline modeling: The system first ingests the initial case documents, automatically extracting critical milestones and deadlines. This alone cuts initial review and diligence time by over 70% and creates an accurate, "live" baseline model of the case before a single dollar is deployed.
  2. Proactive impact analysis: This is the crucial step. When an analyst spots a new development (from a docket or a counsel call) and inputs it, the platform instantly analyzes its impact. It connects that "minor" motion to the entire case timeline and budget, flagging the precise IRR and duration risk. This shifts the team from a "data entry" to a "proactive risk management" role.
  3. Portfolio-level pattern recognition: The system links procedural changes to their impact on case valuation and portfolio returns, flagging delay-patterns that a human analyst under heavy load could otherwise miss.

The ROI of proactive mitigation for your business

Here’s the business case for moving beyond outdated manual processes:

Benefit #1: Protect your projected IRR

Instead of reacting to delays or logging events in a void, you can now start measuring their impact the moment they happen. A modern workflow gives you the foresight to have critical conversations or adjust reserves before a slight delay can escalate into a crisis.

Benefit #2: Save your team the “grunt work”

The experts don’t need to spend a disproportionate amount of time to do data entry or check dockets. Think of it like cutting with a blade: the work will get done eventually, but without a sharp blade it takes far more time and effort. 

Here, having the right AI-powered workflow can sharpen that blade so routine monitoring happens instantly and your team can focus on the actual analysis that drives returns. 

Benefit #3: Create a defensible, data-driven risk model

Move your risk assessment from a subjective “gut feel” to an objective, consistent data-backed model based on facts and verification that your investment committee can rely on every time.

The impact of this shift is tangible. According to our firm’s benchmarks, a $500M litigation fund we work with cut diligence time by 70% while tripling its case throughput.

A pragmatic framework for your first AI workflow

For a non-technical leader, “adopting AI” can sound like a complex, six-month IT project. But it needn’t be this way. Allow me to share with you a clear three-step framework for a successful, low-risk adoption.

Step 1: Identify the grunt work

Start by asking “What repetitive, low-value tasks steal time from real analysis and what would be the value to the firm if we could automate these tasks using technology? Here, the goal isn’t to replace your experts’ judgment, but to empower them to take on more cases while keeping their judgement intact.

Step 2: Start from a single high-value problem

Don’t try to boil the ocean. The goal is not to merely “implement AI” and tick a box. You are doing this because you want to solve one specific business problem (e.g. preliminary case assessment). For many funds, this alone could become a 2-3 day manual bottleneck. With the right workflow, it’s possible to complete this in under half a day. Solve that one piece of the puzzle, prove the ROI, then scale up.

Step 3: Focus on your process and not the tech

When evaluating any solution ask: “How does this fit into our existing workflow?” If it requires your team to abandon current processes and learn from scratch, the adoption rate won’t exactly be high. The right solution should enhance your process – and not just add pile more tech on top of it.

Conclusion

These days, duration risk has shifted from being an unavoidable reality of doing business to yet another variable we can control. Keeping the old approach of manual monitoring could put your value, and your capital at risk. Conversely, by embracing AI in specific processes, you get a pragmatic and provable way of shielding your capital and your IRR, all while empowering your team to do what they do best. Implementing AI the right way will give you a definite boost in efficiency and returns, just depends on implementing it the right way.

But how do you build a business case for this shift? The next step is moving from the operational benefit to assessing ROI. More on this in another article.

Commercial

Insurance Industry Groups Push for Federal Court Rule Requiring Litigation Funding Disclosure

By John Freund |

A coalition of business and insurance organizations is calling on the federal judiciary to adopt a uniform rule requiring disclosure of third-party litigation funding arrangements in civil cases, arguing that the current patchwork of approaches across federal courts undermines fairness and transparency.

As reported by Insurance Journal, the Lawyers for Civil Justice and the U.S. Chamber of Commerce Institute for Legal Reform submitted a joint letter to the Advisory Committee on Civil Rules urging the creation of a disclosure requirement. The American Property Casualty Insurance Association has also thrown its support behind the effort, with executive vice president and chief legal officer Stef Zielezienski stating that "transparency about who has a financial stake in litigation is essential to fairness, accountability, and the effective administration of justice."

The push comes amid growing evidence that the absence of a federal standard has created inconsistent outcomes. A recent study cited in the letter found that federal district judges granted only 40% of motions seeking some form of TPLF disclosure, leaving litigants and courts without clear guidance.

The financial stakes are significant. Research from EY, presented at APCIA's annual meeting, found that average commercial claim costs have risen 10% to 11% annually since 2017. The analysis projects that third-party litigation funding could cost the insurance industry up to $50 billion in direct and indirect expenses over the next five years.

The groups are recommending that current disclosure rules be expanded beyond insurance contracts to include any entity or individual providing funding or holding a financial interest in the outcome of litigation. The Advisory Committee is expected to consider the proposal at its upcoming April meeting.

Commercial Special Features

Smarter Intake for Litigation Finance Firms

By Eric Schurke |

The following piece was contributed by Eric Schurke, CEO, North America at Moneypenny.

From the very first interaction, litigation finance firms and legal teams should be capturing structured, decision-ready information that enables early case assessment, risk evaluation, and efficient routing. 

This typically includes:

• Who the potential claimant or referrer is and their preferred method of communication
• The context of the matter, including jurisdiction and type of claim
• The stage, urgency, and timeline of the case
• Key parties involved and any relevant documentation
• How the opportunity originated

When captured consistently, this information allows for faster triage, more effective screening, and quicker progression from initial enquiry to investment decision. 

What are the most common mistakes organizations make when handling inbound investment or M&A inquiries?

In litigation finance, the most common mistakes are operational but they have direct commercial and reputational consequences:

1. Slow response times
Prospective clients often contact multiple firms at once. Delays can signal lack of availability or interest.

2. Unstructured information capture
Inquiries can come in over the phone, through email, website forms and LinkedIn, resulting in fragmented or incomplete information.

3. Over-automation or under-humanization
Generic automated responses can feel impersonal, while entirely manual processes create inconsistency and delays.

4. Poor routing and follow-up
Without clear ownership, communications can sit in inboxes or be passed between teams meaning opportunities can stall or be lost internally.

Ultimately, the biggest mistake is treating first contact as administrative rather than strategic, when, in reality, it is the starting point of deal quality.

The most effective approach is a hybrid one - using technology for speed, structure, and consistency and people for judgement and relationship-building.

Technology can:
• Capture and structure case data
• Provide immediate acknowledgement
• Ensure questions are routed quickly and consistently
• Create a clear audit trail

People can:
• Understand nuance and context
• Build rapport and trust
• Ask the right follow-up questions
• Represent the funder’s brand and values

At the start of any case or investment journey, relationships matter. Technology should enhance that experience, not replace it.

What measurable impact can better first contact have on pipeline strength, relationships, and deal outcomes?

Stronger first contact directly improves:

  • Pipeline quality: better intake leads to more qualified, investment-ready opportunities
  • Conversion rates: fast, more professional responses increase engagement and exclusivity, as well as the likelihood of securing instructions
  • Investor confidence: structured early-stage data improves decision-making
  • Operational efficiency: less time chasing incomplete information and faster conflict checks
  • Deal velocity: quicker progression from enquiry to evaluation and funding decision.

Small improvements at the top of the funnel compound across the entire investment lifecycle.

If firms could make just one or two changes today to improve their approach to inquiries, what would you recommend?

1. Create a standardized intake framework
Define the essential data needed for case screening and risk assessment, and ensure it is captured consistently across every channel.

2. Treat first contact as a strategic touchpoint
Ensure every enquiry receives a prompt, professional and human response that reflects the firm’s brand and client-care standards.

In litigation finance, early impressions don’t just shape relationships, they shape deal outcomes. These two changes alone can significantly improve conversion, efficiency and client relationships.

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Eric Schurke is CEO, North America at Moneypenny, the world’s customer conversation experts. He works with legal firms, litigation funders, and professional services to transform how they manage and qualify inbound opportunities. Eric is passionate about helping organisations strengthen deal flow, improve first impressions, and deliver exceptional client experiences from the very first interaction.