CONSIDERATION REGARDING REGISTRATION AND CLASS CLOSURE
57 The respondents' application for registration and class closure orders has little or no merit.
58 First, the respondents' application faces the difficulty that it is strenuously opposed by the applicants, and on cogent grounds.
59 In Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 2) [2017] FCAFC 98; 252 FCR 1 at [72]-[75] (Jagot, Yates and Murphy) the Full Court said:
[72] The Commonwealth Parliament, in implementing a core recommendation of the Australian Law Reform Commission in its report Grouped Proceedings in the Federal Court, Report No 46 (Canberra, 1988) at [127], expressed a legislative intention to adopt an opt out rather than an opt in procedure: Second Reading Speech, Federal Court of Australia Amendment Bill 1991 (Cth), House of Representatives Parliamentary Debates, Hansard, 14 November 1991 p 3,175. It must be accepted that the requirement for class members to take active steps to "register" in order to share in a settlement of a class action undercuts to some extent the opt out rationale underpinning the Part IVA regime. In Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1; [2002] HCA 27 at [40] (Gaudron, Gummow and Hayne JJ) their Honours said:
Group members, however, need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring.
[73] Class proceedings are intended to require little or no active involvement by class members and class members participate principally for the limited purpose of taking the benefit or suffering the burden of the findings made on the common questions: P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176 at [16] (P Dawson No 2) (Finkelstein J). As J Forrest J said in Thomas v Powercor Australia Ltd (Ruling No 1) [2010] VSC 489 (Thomas v Powercor No 1) at [30], "one of the consequences of the opt out model, as was clearly intended by the legislature, is the ability of group members to "sit back" and watch the proceeding unfold". There must be a good reason to exercise the discretion to make a class closure order which may operate to deny the benefits of a settlement to class members who do not opt out and who do not take the active step of registering: P Dawson No 2 at [17].
[74] Having said this, if a class closure order operates to facilitate the desirable end of settlement, it may be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding and therefore appropriate under s 33ZF of the Act. The courts have accepted on numerous occasions that, in order to facilitate settlement, it is appropriate to make orders to require class members to come forward and register in order to indicate a willingness to participate in a future settlement, and to make orders that class members be bound into the settlement but barred from sharing in its proceeds unless they register: see for example, Matthews v SPI Electricity & SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 13) (2013) 39 VR 255; [2013] VSC 17 at [22]-[80] (Matthews v SPI No 13) (J Forrest J) and the authorities there referred to; Farey v National Australia Bank [2014] FCA 1242 at [11]-[16] (Jacobson J); Inabu Pty Ltd v Leighton Holdings Pty Ltd [2014] FCA 622 at [17]-[22] (Jacobson J); Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194 at [67]-[68] (Beach J). An important aspect of the utility of a class proceeding is that they may achieve finality not only for class members but also for the respondent.
[75] The rationale behind such class closure orders is that a requirement for class members to register their claims will facilitate settlement, because it allows both sides to have a better understanding of the total quantum of class members' claims, permits the settlement amount to be capped by reference to the number of class members, and assists in achieving finality (to the extent the Part IVA regime permits): see Grave D, Adams K and Betts J, Class Actions in Australia (2nd ed, Lawbook Co, 2012) at [14.410]. A class closure order that precludes class members, who neither opt out nor register, from sharing in a subsequent settlement may facilitate settlement, and therefore be reasonably adapted to the purpose of seeking or obtaining justice in the proceeding.
60 There, the Full Court recognised that in enacting Part IVA the legislature intended that class members be entitled to sit back and have little or no active involvement in the proceeding until after the initial trial on the common questions. Plainly, a requirement for group members to register, and for group members to be bound into a settlement but precluded from sharing the benefits of the settlement if they fail to register, cuts across that important aim.
61 As I said in Kuterba v Sirtex Medical Limited [2018] FCA 1467 at [12], class closure orders result in a reduced level of access to justice from that which Parliament intended by choice of an opt out regime. Empirical studies conducted in the United States demonstrate that implementation of an opt in requirement dramatically reduces the size of the class, as does the available empirical evidence in Australia: see Morabito V and Hatcher N, "Security for Costs in Unfunded Federal Class Actions: Back to the Future" (2017) 92 Australian Law Journal 105 at 114-115 and the references cited.
62 That does not mean that it is a "fundamental precept" of Part IVA that group members are entitled to do nothing prior to a settlement and still reap its benefits, nor that there is any absolute rule that group members can never be ordered to take a positive step (such as registration) in a proceeding: Parkin v Boral (Class Closure) [2022] FCAFC 47; 291 FCR 116 at [115]-[123] (Murphy and Lee JJ, with whom Beach J agreed), c.f. Pallas & Pallas (atf Pallas Family Superannuation Fund) v Lendlease Corp Ltd [2024] NSWCA 83. But it must be kept in mind that the effect of a soft class closure order is that, if group members do not register, they will be bound into any settlement that is able to be reached but precluded from sharing in the benefits of the settlement. The plain legislative intent of an opt out regime indicates that the Court should be cautious in making class closure orders and before doing so it must be satisfied that it is in the interests of group members as a whole. There must be a good reason to make such orders.
63 It is a common if not inevitable feature of class actions that the defendant will be faced with uncertainty regarding the quantum of potential class member claims: P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176 at [31] (Finkelstein J); Thomas v Powercor Australia Ltd (No 1) [2010] VSC 489 at [38] (J Forrest J); Winterford v Pfizer Australia Pty Ltd [2012] FCA 1199 at [7] (Bromberg J). Class closure orders and other orders such as discovery orders that require the applicant to provide the respondent with information about group members' claims are not usually made so that the respondents can achieve certainty in relation to the aggregate value of group members' claims. Rather, they are made to allow the respondent to obtain a better understanding of group members' claims including a general sense of aggregate claim value: e.g, Thomas at [54]-[58]. In this case I consider the respondents can obtain a sufficient understanding of group members' claims and their aggregate value from their own records. Indeed, the respondents' own records will be a better source of information in relation to group members claims than the information likely to be generated through the proposed registration regime.
64 In Treasury Wines at [79] the Full Court went on to say:
Whether it is appropriate to order class closure is a question of balance and judicial intuition. The Court must take into account the interests of the class as a whole in requiring class members to take steps to facilitate settlement, and consider the surrounding circumstances including the point the case has reached, the attitude of the parties, and the complexity and likely duration of the case: see Matthews v SPI Electricity Pty Ltd (No 13) [2013] VSC 17; 39 VR 255 at [75]-[79] (J Forrest J).
65 Thus, the Full Court recognised that the attitude of the parties is a material consideration in deciding whether to make a class closure order. In the great majority of cases in which class closure orders have been made, the orders were made by consent of the parties, or unopposed. One can readily understand why, in circumstances where parties with divergent interests request that class closure orders be made, the courts have regularly concluded that such an order is likely to facilitate settlement in the proceeding.
66 But here the position is that the respondents propose registration and class closure orders and the applicants strenuously oppose them. The applicants have fiduciary obligations to act in the interest of group members. The respondents are in a quite different position. They are engaged in high-stakes litigation against the applicant and group members and their interests are inimical to the group members' interests.
67 Ordinarily, the applicant (or perhaps more accurately, the applicant's lawyers) will be in the best position to know what is in group members' interests, and the respondent will have its own interests rather than group members' interests at the forefront of its thinking. Generally speaking it is appropriate to accord the applicant's views as to what is in group members' interests substantially greater weight than the views expressed by the respondent in that regard.
68 I agree with Justice Wigney's remarks in Bradgate (Trustee) v Ashley Services Group Ltd [2017] FCA 1591 at [38] where his Honour said:
The Court should generally exercise some caution before making a class closure order over the objection of the applicant… It is difficult to see how class closure orders could be seen to be conducive to settlement if they are vigorously opposed by the applicant.
I would put it a little more strongly. It is appropriate to exercise real caution in relation to an application for class closure orders brought by the respondent and opposed by the applicant.
69 Even so, the position taken by the parties or their practitioners in relation to the question cannot be determinative. Whether a class closure order is appropriate or necessary in the circumstances of the case is a matter for the Court to decide: Fox v Westpac Banking Corporation; O'Brien v Australia and New Zealand Banking Group Limited; Nathan v Macquarie Leasing Pty Ltd [2023] VSC 414 at [28] (Nichols J).
70 Second, I have no difficulty accepting Ms Tatasciore's evidence that the group definition is broad; that the relevant data is held on four product administration systems, two of which have been archived; that many of the Impugned Products were offered via employer superannuation plans and the employer provided the data which has not been verified by the respondents, and it has historic deficiencies; that not all group members have provided TFNs; that the older records may not be up-to-date because members have not updated their contact details; and that where people are no longer members of the relevant fund their contact details may not be current.
71 But her evidence does not establish that the respondents' records are insufficient to enable the respondents to compile a representative sample of group members' claims, and to use that to obtain a sufficient understanding of group members' claims to participate efficiently and effectively in the mediation. There are a number of problems with that evidence.
72 The first problem is that it tells me nothing about any steps taken by the respondents:
(a) to engage experts to bring the archived systems back into operation and to have the systems "talk" to each other to recover the necessary data for the purposes of the proceeding;
(b) to take steps to verify the data provided by employers for the purposes of the proceeding;
(c) to ascertain how many group members, or what percentage of them, have provided TFNs; or
(d) to ascertain the extent of the deficiencies in the records they hold; ie, what number or what percentage of the records are defective, out of date or unreliable.
73 The proceeding has been on foot since May 2019 and one hopes that the respondents began taking such steps some time ago. And if the respondents have not taken such steps I would not make registration and class closure orders on the basis that without such orders the respondents have insufficient information about group members' claims in order to participate efficiently and effectively in the mediation.
74 The second problem is that it reveals little about the scale of the missing information. Amongst other things, Ms Tatasciore does not state: (a) that the data on the four product administration systems is inaccessible; (b) what approximate percentage of the members' personal information that was provided by employers is deficient; (c) what percentage of group members have provided TFNs; or (d) what percentage of group members who held accounts in the ERF Product (one of the 21 Impugned Products) are no longer members of the relevant superannuation funds and whose contact details may be out of date. Order 12 of the proposed orders provides that the respondents shall use their best endeavours to compile a spreadsheet from their business records "which contains (to the extent such information is available) the names and best available email addresses of all persons who held an ASL Impugned Product as at [date in each year] during the period 1 July 2008 to 15 May 2020 and all persons who held an NMS Impugned Product as at [date in each year] during the period 30 March 2011 to 15 May 2020".
75 Until that work is undertaken, the asserted deficiencies in the group member information, or at least the extent of them, is just speculation.
76 The third problem is that the evidence fell a long way short of showing that it is appropriate or necessary to make the proposed orders to allow the respondents to compile a representative sample of group members' claims and to reach a sufficient understanding of their claims so that the respondents can participate efficiently and effectively in the mediation. There are approximately two million group members, each of whom is or was during the Relevant Periods a member of a superannuation fund operated by the respondents. It beggars belief that the respondents do not have the names, addresses, contact information, and product information for the great majority of the members of those funds, even if that information is out of date or otherwise unreliable to some degree. Having regard to the terms of the respondents' proposed Order 12, I infer that they will be able to extract from their records the names, email addresses and product information in relation to a great many group members.
77 I can accept that, even after making reasonable efforts to bring the archived systems back into operation and have the systems talk to each other, taking steps to verify employer provided data, and ascertaining the percentage of group members whose records are out of date or otherwise unreliable, the data held by the respondents may be quite incomplete. But even if, say, a third or a half of the respondents' records are incomplete or somehow unreliable, the respondents will still have a vast amount of information available to them within their own records regarding the particular products and investment options taken up by account-holders in the Impugned Products during the Relevant Periods.
78 I consider the respondents' records are likely to be a much better source from which to compile a representative sample of the particular products and investment options typically taken up by group members when compared to a registration regime which is likely to have a very low take-up rate. In the course of the hearing I pressed senior counsel for the respondents on that issue. Senior counsel was unable to explain how orders for a registration regime which is likely to result in a very low level of registration will mean that the respondents obtain a better representative sample of group members' claims than, for example, utilising the respondents' records to obtain group member information in relation to say, 20,000 - 50,000 account-holders in the Impugned Products during the Relevant Periods.
79 To my mind the evidence indicates that the respondents' real concern is not that the information in their records is insufficient to provide them with a strong representative sample in relation to group members' claims. Rather, it is that the respondents wish to draw the sample from those group members who show an interest in participating in the proceeding, through registration under the proposed regime.
80 But, because there is likely to be a very low level of registration, any such sample is unlikely to be representative of group members' claims. It is relevant too that the relationship between the respondents and the group members is that of trustee and beneficiary, and that the proceeding seeks orders for the respondents to make good the trust fund. It follows that unless the applicants lawyers are prepared to recommend a settlement on the basis that only those beneficiaries who register should be allowed to recover their losses (which it appears that they are not), and unless the Court is prepared to approve a settlement under which all beneficiaries are bound by the settlement but many beneficiaries are excluded from sharing in it, any such sample seems likely have limited value.
81 Third, I do not accept Ms Tatasciore's evidence that the proposed orders are intended to enable the parties to obtain sufficient details of the claims of particular group members to assist in compiling a representative sample of group members' claims and to further the prospects of settlement, and are not intended to confine the number of group members who are able to participate in any settlement. I say that because:
(a) it is not the case that "the parties" seek the orders. They are opposed by the applicants on grounds including that such orders will not facilitate settlement;
(b) the proposed orders include a class closure order. It would have been straightforward for the application to seek orders to notify group members they should register their claim without an associated class closure order, and they did not do so. Having said that, I note that during the course of oral submissions the respondents advanced a fallback proposal. They proposed that an opt out notice to be sent to group members, accompanied by a request for registration, without a class closure order. That was not, however, the respondents' primary position;
(c) the objective of enabling the respondents to obtain sufficient details of group members' claims does not require a registration regime. The evidence indicates that the respondents have sufficient information in their own records to compile a representative sample of group members claims and their own records are likely to more efficiently and effectively provide information about such claims; and
(d) Ms Tatasciore stated that "...without the information... provided through the proposed registration process: (a) it will not be possible for the parties to know the number of group members who might later make a claim against any settlement fund…". That is, the registration regime is intended to confine the class.
82 In my view the evidence shows that one of the purposes of the application is to confine the class so that only those group members who register are permitted to benefit from any settlement. At least in part, the registration process is a cloak to disguise the fact the respondents wish to so confine the class.
83 Fourth, the relationship between the respondents and the group members is that of trustee and beneficiary. The relief sought in the proceeding includes orders for the respondents to make good the trust funds reduced by their alleged breach of statutory and general law duties, so as to compensate group members. The fact that the respondents have fiduciary obligations to the group members points away from making a class closure order which will have the effect that some beneficiaries will not get the benefit of any settlement unless they take the positive step of registration, particularly when I accept that, typically, group members are disengaged from their superannuation, and many are unlikely to register.
84 Fifth, the evidence shows that this is not a case where registration must occur at some stage. In my view the great majority of the class will not need to register in order to be identified and paid their share of any settlement that may be reached or following judgment. The group members are almost all either current members of the superannuation funds administered by AMP, or past members to whom funds can be disbursed using the ATO TVP procedure. Ms Tatasciore is correct in identifying that a small part of the class comprises persons who were not superannuation fund members (those identified in paragraphs [3.3] to [3.6] of the FACSOC), but the number of those persons is likely to be insignificant in the context of the class as a whole. To the extent that those persons may need to register to participate in any settlement, the appropriate time for that to occur is after any settlement is reached. That is not a matter which could justify the making of orders requiring the class generally to register, at huge cost, in order to participate in any settlement at mediation.
85 Sixth, the overarching purpose in s 37M of the FCA Act requires that the orders facilitate the just resolution of disputes as quickly, inexpensively and efficiently as possible.
86 Here, Ms Gilsenan's evidence shows that if notice of the requirement to register is provided to 50% of group members by email and to the remaining 50% by ordinary post, the external costs of distributing notices to group members will be approximately $1.64 million, even without other channels of notification or reminder notices. To that must be added the substantial costs associated with setting up a registration platform, responding to group member enquiries by telephone and email, handling registration processes and managing the data of registered group members which, as Ms Gilsenan said, could easily exceed $750,000.
87 The respondents put on no evidence to contradict those estimates, but in submissions they suggested that the likely costs would more likely be around $1 million. As I have said it is unnecessary to reach a final view, and I proceed on the basis that the registration regime will require the applicants to spend in the order of $2 million. When the significant cost of the proposed registration regime is considered together with the fact that it is likely to result in a low level of registration, that is a strong reason to refuse the application.
88 It is also worth noting that the respondents balked at the idea of themselves paying for the proposed registration regime, notwithstanding that they were the only parties that wanted it.
89 Seventh, the respondents seek to rely upon three recent decisions in which soft class closure orders have been made in circumstances where the orders were opposed by the applicants: see Fox; J Wisbey & Associates Pty Ltd v UBS AG [2024] FCA 147 and Anderson-Vaughan. Each case must, however, turn on its own facts. The facts in those cases are different.
90 In relation to Fox and Anderson-Vaughan it should be kept in mind that not only were those decisions based in a different factual context, they were grounded in the express power in s 33ZG in Part 4A of the Supreme Court Act 1986 (Vic) which is not found in Part IVA. In Matthews v SPI Electricity Pty Ltd (No 13) [2013] VSC 17; 39 VR 255, J Forrest J said (at [15]) that it was of particular note that s 33ZG specifically enables a court to impose a requirement for group members to take a step prior to settlement or judgment on liability. More recently, Nichols J recognised in Fox (at [24]) that the emphasis given by the Full Court in Treasury Wine to Parliament's intention that group members not be required to take a positive step in the proceeding must be read in light of the fact that, unlike the Victorian legislative regime, Part IVA of the FCA Act does not contain the express power found in s 33ZG.
91 In Wisbey at [69]-[70] Beach J explained:
The issue for the Court when asked to make registration orders of this kind is thus not whether it has the power to make them, but rather whether it is an appropriate exercise of its power under s 33X. The relevant considerations in this context can include whether it is in the interests of group members as a whole to require registration before any prospective settlement is on the table, the point which the proceeding has reached, the attitude of the parties, the complexity and likely duration of the case, with protracted litigation and greater complexity increasing the interests of group members in avoiding litigation risk through achieving a settlement, whether group members have adequate notice of the change and reasonable time to decide whether to register, and whether an estimate of the size and number of claims can be made.
Whilst the significance of these considerations will vary with the circumstances of the case, a paramount factor is the extent to which a registration process is likely to improve the prospects of achieving a reasonable settlement.
92 I accept that the extent to which a registration process is likely to improve the prospects of achieving a reasonable settlement is an important consideration, although I would not describe it as "a paramount factor". But in the circumstances of this case nothing turns on that mild disagreement.
93 Here, I am not satisfied on the evidence that the proposed registration and class closure orders are likely to improve the prospects of achieving a reasonable settlement. The respondents did not establish that their records do not contain sufficient information in relation to group members' claims for them to compile a representative sample of their claims and participate efficiently and effectively in the mediation. In my view it is likely that the respondents can more efficiently and effectively compile a representative sample from their own records rather than through the proposed registration regime.
94 I see it as quite unlikely that the experienced solicitors and counsel acting for the applicants would be so bull-headed as to oppose the proposed registration regime if they thought it would increase the prospects of a reasonable settlement. It seems more likely that they do so because, in their view; (a) the rate of registration is likely to be very low and unlikely to provide a representative sample of group members' claims; (b) notwithstanding its likely ineffectiveness the proposed registration regime will cost the applicants in the order of $2 million and divert the applicant's legal team from preparing for the mediation and trial; (c) the information about group members' claims is already available to the respondents from their own records; and (d) if the proceeding is successful at trial the respondents are likely to be ordered to make good the trust fund, and there will be no requirement for the great majority of group members to register in order to recover their losses. Those features of the case mean I cannot accept either the respondents' primary proposal for registration and class closure orders, nor their fallback position seeking a registration process without class closure.