Does the limitation clock tick on after an abandoned class action? The Federal Court has its say

Greg Williams, Will Atfield, Alex Corsaro and Annie Achie
12 May 2022 Time to read: 4 MIN

The judgment in Turner v TESA Mining (NSW) Pty Ltd (No 2) brings some certainty for defendants in class actions, who can be more confident that a discontinuation of a class action is likely to result in the resumption of the limitation clock for group members' claims which relate to the class action.

In providing final approval of the discontinuance of an underpayment class action that was abandoned by the lead applicant and the litigation funder, the Federal Court determined that the limitation period for group members' claims will resume and continue to "run". The decision provides a greater degree of certainty for defendants in a similar position, who would otherwise be exposed to the risk of group member claims indefinitely.

In Turner v TESA Mining (NSW) Pty Ltd (No 2), a class action was brought by casual employees of TESA Mining. It was alleged that, despite being termed as casual employees in their employment contracts, the group members were in fact non-casual employees who were entitled to the benefits of non-casual employees under the Fair Work Act 2009 (Cth) (FWA). However, sometime after commencing the proceeding, the lead applicant and the litigation funder formed the view that the class action did not have reasonable prospects of success, and the lead applicant sought to discontinue the proceeding.

Section 33V(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) provides that a class action cannot be settled or discontinued without Court approval. This reflects the Court's role in class actions to protect the interests of group members who are not represented by the lawyers who represent the lead applicant but whose interests are affected by the outcome of the class action.  The Court determined that the discontinuance of the class action would not be unfair, unreasonable or adverse to the interests of the group members. In granting the discontinuance, Justice Murphy also considered whether the suspension of the limitation periods applicable to group members' individual claims under section 33ZE of the FCA Act should continue to run after the discontinuance took effect.

The issue created by section 33ZE

When a class action is commenced, section 33ZE(1) automatically suspends the "running" of any limitation period that applies to the claim of a group member to which the class action relates. Under section 33ZE(2), that limitation period does not begin to "run" again unless (i) the group member opts out of the proceeding; or (ii) the proceeding (and any appeals arising from it) are "determined" without finally disposing of the group member's claim.  However, section 33ZE is silent as to whether the discontinuance of a class action is a "determination".

Justice Murphy acknowledged the long-running uncertainty as to whether the discontinuance of a class action is a "determination" for the purposes of section 33ZE(2). Citing numerous conflicting authorities, he explained that it was "high time that this uncertainty is put to bed".  Justice Murphy noted that a previous case had held that the settlement of a class action which involved the discontinuation of the underlying proceeding would amount to a "determination", however the issue in TESA Mining related to a discontinuation arising purely from a decision by the lead applicant to not pursue the class action any longer.

Justice Murphy held that the words of section 33ZE(2) should be properly understood as referring to a final judicial resolution of a group member's claim where the Court either upholds or dismisses the class action on its merits, but not necessarily where a proceeding is discontinued on a procedural basis. However, the Judge also noted that this means that section 33ZE(2) is capable of causing "real unfairness" to defendants to a class action which is abandoned, as the limitation period for group members would extend indefinitely. Justice Murphy considered that it was unlikely that Parliament intended this outcome, and so in this particular case determined that it was appropriate to address the risk to the Defendants by making an order that the limitation periods that apply to the group members' claims run again from 60 days after the lead applicant filed a notice of discontinuance.

Balancing interests

TESA Mining asked for the limitation periods to begin running from 30 days from the date of discontinuance. Justice Murphy instead ordered that the clock begin running again after 60 days, which he considered appropriately balanced the interests of group members and the Defendants because it balanced the risk to the Defendants and gave group members enough time to seek advice and commence their own proceedings (if they wished), before the limitation period expired.

Justice Murphy considered that such an order was appropriate under the Court's general case management powers because it was in the interests of justice that the Defendants not be exposed to the risk of group members' claims in perpetuity.

The Court further ordered that the group members be notified of the discontinuance, considering that it would be "plainly inappropriate" to grant leave to discontinue the proceedings without notice, given that many group members were aware of the proceedings. In noting that a principal purpose of a notice under the class actions regime in the Federal Court of Australia was to ensure that group members can make informed decisions concerning their rights or interests, Justice Murphy observed that notice to group members of the proposed discontinuance (and of the right to object to the proposed discontinuance) was particularly important because the limitation period suspension would be lifted and group members may in turn lose their rights to bring their own individual claims.

What this means for respondents to class actions

The judgment brings some certainty for defendants in class actions, who can be more confident that a discontinuation of a class action is likely to result in the resumption of the limitation clock for group members' claims which relate to the class action. Therefore, it is unlikely that a discontinued class action will result in indefinite exposure to potential group member claims.

However, defendants should be aware that group members are likely to be given notice of any proposed discontinuance and, if approved, a reasonable opportunity to consider whether they wish to pursue a claim before their limitation period continues running.

The judgment is also a reminder for defendants in a class action to ensure that when a resolution of a class action is reached (whether that be settlement or discontinuation, for example), attention is given to the limitation periods which may apply to any residual group member claims.  For example, it may be that even after a settlement is reached some group members theoretically have claims related to the class action that are not "determined" per se, and so orders are required from the Court at that stage clarifying the status of any applicable limitation period for such claims.

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Will Atfield

Melbourne
Senior Associate
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