What is a class action?
A class action (also known as a “representative proceeding”) is a legal procedure that enables the similar claims of a number of persons (group members) against the same defendant(s) to be determined together. In a class action, a claim is brought by a representative plaintiff (or plaintiffs) on their own behalf as well as on behalf of group members, through consideration of a series of "common questions".
Role of the Court
Class actions have a number of specialised rules and procedures that differ from regular litigation. Plaintiffs can only commence class actions in higher Courts: the Federal Court of Australia and most (but not all) state Supreme Courts.
Because a class action can affect the rights of potential group members (many of whom may not be taking an active role in the case) the Court holds a special "protectorate" role. This includes supervision by the Court of requirements to give notice to potential group members of the existence of and key steps in the class action.
The representative plaintiff must define the class in their written claim filed with the Court. Anyone who meets that definition is then considered a group member, unless they advise the Court that they do not wish to be part of the class by submitting an opt-out notice to the Court. Group members who do not opt out are bound by any Court judgment or settlement.
The representative plaintiff instructs the lawyers and makes decisions about the running of the class action like a plaintiff would in any other litigation. On the other hand, group members do not usually play an active role in the proceedings.
Some class actions are backed by a litigation funder who provides financial support for the running of the case in return for a percentage fee of any outcome (in addition to recovery of the costs they have paid on behalf of the class).
In a class action trial, the parties lead facts and evidence relating to the representative plaintiff’s claim (rather than the class as a whole). The Court makes its determination on the basis of these facts and evidence, which will usually include answers to the common questions which the court has identified as relevant to the determination of the representative plaintiff's and the group members' claims.
The judgment binds the representative plaintiff as well as the group members in respect of the Court's answers to the common questions. However, it does not resolve each individual group member's claim. Rather, criteria for assessment is usually developed in light of the judgment and each group member's claim is then determined against those criteria, a process which may involve further Court hearings.
Settlement of a class action can only occur with approval of the Court, who must be satisfied that it is fair and reasonable. This is to protect the interests of the group members.
Settlement often involves a registration process to identify the number and identity of group members taking part. Even if group members do not register, they are still bound by an approved settlement (but will not be entitled to receive any benefit from it). They cannot commence their own separate action if they do not like the terms of a Court approved settlement.
If the Court approves the settlement, a Court-appointed administrator will generally oversee the distribution of settlement moneys in accordance with an agreed settlement scheme, which determines how group member claims will be assessed in order to calculate individual entitlements.
The unique nature of class actions means that it is also common for the parties to settle the proceedings through a settlement scheme after delivery of a judgment, to avoid the expense and inconvenience of determining individual group member claims through the Court.