Plaintiff v Defendant

For the Defendant in proceeding no. S ECI 2023 02581 and the First Defendant in proceeding no. S ECI 2024 05243

For the Second Defendant in proceeding no. S ECI 2024 05243

1 Jaiden Petrucci, as representative plaintiff, brings proceeding number S ECI 2023 02581 (the 'Flex Proceeding') against Toyota Finance Australia Limited ('TFA'). The proceeding is brought by Mr Petrucci on behalf of all persons who entered into a finance agreement with TFA obtained through a dealer for the purposes of acquiring an automobile, in which a flex commission was paid to the dealer, and where the discussions concerning finance and/or the execution of the car loan took place during the period commencing 1 January 2010 and ending 31 October 2018. Flex commissions are payments made by TFA to the dealer, of an amount that represents the difference between a base interest rate set by TFA on car loans provided by dealers to customers during the relevant period, and a higher contract rate as set out in the car loan arranged by the dealer with the customer. Mr Petrucci alleges breaches of the National Consumer Credit Protection Act 2009 (Cth), the Corporations Act 2001 (Cth), and the Australian Securities and Investments Commission Act 2001 (Cth), and claims an entitlement to restitution on the basis of alleged unjust enrichment, equivalent to the difference between the base rate and the contract rate.

2 Glenda Walker brings proceeding number S ECI 2024 05243 (the 'Insurance Proceeding') as a representative plaintiff on behalf of persons who, between 1 January 2010 and 5 October 2011, entered into a finance agreement with TFA for the acquisition of an automobile, which was obtained through a dealer, and were issued one or more insurance products, including those underwritten by Aioi Nissay Dowa Insurance Company Australia Pty Ltd ('ADICA'), being Finance Protection Insurance and Payment Protection Insurance, Finance Gap Insurance and/or Extended Warranty Insurance (together, the add‑on insurance products). The add‑on insurance products were issued by TFA and underwritten by ADICA from 1 January 2014 until 5 October 2021.

3 Ms Walker alleges that TFA and ADICA engaged in misleading or deceptive conduct, unconscionable conduct, unfair conduct, unjust transactions, and the provision of inappropriate personal advice in connection with the sale of add‑on insurance to consumers through car dealerships.

4 The Insurance Proceeding and the Flex Proceeding are being case managed together. TFA in both proceedings, and ADICA in the Insurance Proceeding, apply for orders for distribution of notices to group members for both opt‑out and registration, which provide that, in the event of any future pre-trial settlement, only group members who have registered may benefit from the settlement ('soft class closure orders'). The soft class closure orders proposed would require group members to register within 12 weeks of the date of such orders (the registration deadline), failing which any unregistered group members would miss out on participating in any settlement achieved before trial.

5 The plaintiff in the respective proceedings oppose the soft class closure orders and submits instead that the notices should only address group members' right to opt out of the proceedings.

6 The defendants invoke the Court's power under ss 33ZF and 33ZG of the Supreme Court Act 1986 (Vic) ('the Act') to make such orders. Both submit that the orders are 'appropriate or necessary to ensure that justice is done in the proceedings'.

7 The Court's powers to make orders of the kind sought are now well‑established, as are the principles governing the exercise of the Court's power and the practical utility of making such orders.[1] The defendants relied upon affidavits sworn by their respective instructing solicitors: TFA's solicitor, Ross David McInnes, sworn 11 March 2026, and ADICA's solicitor, Natalie Caton, affirmed 11 March 2026. The plaintiff in each proceeding relied upon an affidavit affirmed by the plaintiff's solicitor, Andrew Paull, on 18 March 2026. Each filed helpful written outlines of argument in advance of the hearing.

8 Each of the solicitors have considerable experience. Mr Paull specifically deposes to his extensive background in class actions and group litigation, including his involvement in the conduct of a number of consumer class actions said to be similar to the present Flex Proceeding and the Insurance Proceeding.

9 The applications are made against the background of communications between the parties concerning a proposed mediation of the Flex Proceeding and the Insurance Proceeding.

10 Both proceedings have been brought on an 'open class basis', meaning that all persons falling within the defined class are automatically included unless they opt out, rather than being required to take active steps to opt in. The effect of the soft closure orders sought, if made, will be to limit the class of group members who benefit from any settlement achieved in the proceedings to those who take a positive step to 'register their claims by a specified deadline'.

11 The plaintiff's proposed orders provide for the distribution of notices to group members informing them of the matters required by s 33X(1)(a) of the Act, namely the commencement of the proceeding and the right to opt out. If a settlement is reached, notices will be distributed to group members informing them of the settlement and their rights to object, as well as inviting them to register to participate in the settlement.

12 There is broad agreement between the parties as to the likely class size. In his affidavit sworn 11 March 2026, Mr McInnes estimates that, based on data held by TFA, the class size is:

(a) 519,900 primary borrowers in the Flex Proceeding;

(b) 163,890 primary borrowers in the Insurance Proceeding; and

(c) approximately 130,000 who are members of both the Flex Proceeding and the Insurance Proceeding.

13 There is no substantive dispute between the parties as to the principles to be applied. The plaintiffs' written outline articulated an argument that the phrase 'appropriate or necessary' should be construed as if it were read 'appropriate and necessary' but their oral submissions did not press this argument in any material way. TFA's argument that such an interpretation is at odds with the words of the section and its evident purpose has much to commend it, and I propose to adopt that interpretation for the purpose of resolving this application.

14 The essence of the difference in approach is that TFA and ADICA both contend that the making of soft class closure orders is critical for the purposes of negotiating a potential settlement as it will clarify the participation rate of the members of each class, including the overlapping group members, and that such information will enable the defendants to more accurately assess their potential exposure.

15 The plaintiffs take a very different view. They contend that a consequence of making soft class closure orders is that the participation rate (that is, the percentage of group members who register to participate in any potential settlement) will be artificially low and will not provide a meaningful reflection of the participation rate that would likely be achieved if group members had the opportunity to register at a later stage, particularly after a settlement is reached. In those circumstances, Mr Paull has deposed that class closure would impede the proper discharge of his duties to the plaintiffs and group members as a whole, as it would require advising on a potential settlement based on an artificially low participation rate, and that this would undermine the likely utility of the orders, since the prospects of achieving a settlement by the plaintiffs in those circumstances would be much reduced.

16 TFA notes that, given the large numbers of group members (approximately 519,900 in the Flex Proceeding and approximately 163,890 in the Insurance Proceeding), absent soft class closure orders, the parties will be placed in a position where they will have to estimate the likely registration rates. Given the large class sizes, small differences between the parties' opinions as to appropriate registration rates will result in marked differences in assessment of the potential quantum of claims and, as a result, potential settlement figures. This difficulty is further exacerbated by the large number of historical claims dating back to as early as 1 January 2010, in respect of which significant discounts will need to be applied in the absence of reliable registration data concerning those claims. The same difficulty results from the overlap between group membership in the two proceedings and the loss claimed by them. Notably, many of the Insurance Proceeding group members will have received premium refunds, policy payouts, and remediation payments. These matters give rise to difficulties and complications in accurately estimating the quantum of potential liability. TFA's Mr McInnes says that the parties' work on this task will be assisted by a clear and shared understanding of the number of participating group members and key data.

17 Secondly, TFA notes that the making of such orders will avoid the time and complexity of seeking to negotiate a registration process as part of any potential settlement discussions at mediation and will avoid the duplicative time and expense of providing the registration notice at a later stage of the proceedings (for example, following mediation), separately from the opt‑out notice.

18 Thirdly, TFA emphasises Mr McInnes's evidence that contact information is held for 99 per cent of group members. It submits that concerns present in other cases, where soft class closure orders have not been made due to a lack of contact information being available for the majority of group members and the absence of a detailed proposal providing a clear plan for effectively giving notice to group members, are not present in this case.

19 ADICA's submissions did not depart in any material way from those advanced by TFA. Particular to the Insurance Proceeding, ADICA emphasises that the relevant class comprises multiple cohorts of group members who are differentiated by the type of add‑on insurance product purchased, the premium amounts paid, whether claims were made under the relevant insurance policies, whether remediation has been paid, the date of purchase and whether some or all of the claims of a particular group members fall within or outside the six‑year limitation period. As such, they submit that the claims of individual group members are not uniform and the quantum of such claims may vary markedly.

20 ADICA's solicitor, Ms Caton, has deposed that in her experience, insurers are unable to engage meaningfully in settlement discussions without understanding the extent of their exposure. ADICA emphasises that without the soft class closure orders, there will be uncertainty as to that exposure and this will create a significant obstacle to any settlement being achieved.

21 The plaintiffs emphasise the following matters in particular. First, they submit the proceeding is at a comparatively early stage. The participation rate is likely to be artificially low, given the early stage of the proceeding and the fact that no settlement has yet been achieved and will not provide a meaningful reflection of the participation rate that would likely be achieved if group members had the opportunity to register at a later stage, after a settlement is reached. Closing the class now would exclude group members who would wish to participate in an actual settlement once it is reached and publicised. In those circumstances, they emphasise Mr Paull's evidence of an apprehension of an inconsistency between his duties to the plaintiffs and the group members as a whole to advise the plaintiffs to enter into any settlement on the basis of an artificially low participation rate.[2]

22 Secondly, even if a settlement is to be reached at mediation (which they submit would be unlikely if the proposed orders are made), there will remain serious doubts as to whether the interest of group members inter se (that is, between group members) can be adequately met. This follows from the fact that any such settlement would likely have the effect of extinguishing the rights of a substantial number of group members who have failed to register and whose claims may be more meritorious and valuable than those who have registered but whose claims will, nevertheless, be bound by the outcome without any entitlement to participate in the settlement.

23 Thirdly, if, as is likely, late registrants will be permitted to participate in the settlement by a further court order made after the settlement is reached,[3] those participants will dilute the value of returns to registered group members, giving rise to a further conflict between those who are late registrants and those that are previously registered. This undermines any purported certainty achieved through class closure orders and also can create unfairness and conflict between those group members registered within time and those registered late.

24 Fourthly, the costs associated with conducting a registration process are likely to be substantial and will be deducted from any settlement sum. Mr Paull's affidavit deposes to the comparative costs of a comprehensive registration process versus an opt‑out regime alone, by estimating the costs of the former as between $1.85 million and $2.47 million, and the latter as between $109,000 and $203,000. Absent any compelling need or certainty as to a sufficient return for group members, it is not in the interest of group members for that process to take place at this stage.

25 Finally, the plaintiffs do not accept that class closure and registration are necessary for the mediation to proceed with a clear understanding of the number of potential group members who intend to pursue claims in the proceedings, or the likely quantum of those claims. The plaintiffs note that the defendants have provided, or are shortly to provide, group member data to the plaintiffs which will enable the parties to prepare meaningful estimates in relation to the outer limits of the quantum. Mr Paull has deposed to the fact that practitioners are able to make reasonable estimates of participation rates, and that cases are frequently settled in the absence of prior registration, including those to which Mr Paull has been party. The plaintiffs emphasise that sophisticated parties such as the litigants in these proceedings are able to make educated informed estimates about likely class composition and participation rates without the need for class closure orders.

26 The relevant considerations in determining whether to exercise the power to make a soft class closure order pursuant to the Act include:

(a) whether it is in the interests of group members as a whole to require registration before any prospective settlement is on the table;

(b) the point at which the proceeding has reached;

(c) the attitude of the parties;

(d) the complexity and likely duration of the cases, with protracted litigation and greater complexity increasing the interests of group members in avoiding litigation risk through achieving settlements;

(e) whether group members have adequate notice and reasonable time to decide whether to register;

(f) whether an estimate of the size and number of claims can be made; and

(g) the extent to which a registration process is likely to improve the prospects of achieving a reasonable settlement.[4]

27 Ultimately, the question is one of balance and judicial intuition. This is to be assessed in light of the attitude of the parties and the particular facts and circumstances of the case.[5] The significance of decisions in other cases has to be understood accordingly in that context.[6]

28 I am not satisfied that it is appropriate to make the orders sought by the defendants for a combined registration and opt‑out notice producing a soft class closure.

29 First, I am not satisfied that class closure at this stage is in the interest of group members as a whole. The proceedings are structured as 'open class actions'. Such a model contemplates group members opting out rather than requiring their active consent. The rationale behind adopting an open class model was to protect vulnerable groups who may be less likely to take active steps to join a class action because they are unaware of the class action or face barriers to providing active consent.[7]

30 The Court administering the class action plays a protective role in relation to group members.

31 In exercising the discretion under ss 33ZF and 33ZG as to whether to require group members to take 'steps in order to be entitled to participate in a settlement', the Court must take into account the interests of the class as a whole.[8] Relatedly, the lawyers acting for a lead plaintiff have a duty to conduct representative proceedings on behalf of the lead plaintiff in a manner that is 'consistent with the interest of group members including those who are not clients'.[9] That duty requires the lead plaintiff's lawyers to recommend a settlement to their client for approval by the Court only where it is considered to be in the best interests of group members as a whole.

32 For the reasons deposed to by Mr Paull in his affidavit, I accept that the combination of the early stage of these proceedings, the likely lack of awareness of the proceedings to date, and the general tendency of group members to be disinterested in legal notices that they receive unless they perceive that they may benefit financially in view of a tangible settlement figure, is such that the imposition of any registration regime at this stage may well result in an artificially low participation rate. I am also concerned that, in those circumstances, recommending a settlement in that context may be problematic for the plaintiff's solicitors for the reasons explained by Mr Paull. Notably, courts recognise that real caution is appropriate where an application for soft class closure is opposed by a lead plaintiff, in light of the plaintiff's obligation to represent group members' interests and the fact that the defendants' interests are inimical to those interests.[10]

33 In the majority of cases in which class closure orders have been made and have culminated in a successful resolution at mediation, the orders were either made by consent of the parties or were unopposed.

34 Secondly, these proceedings are at a comparatively early stage. Pleadings have not yet closed. The exchange of discovery is yet to be finalised. No lay or expert evidence has been filed or timetabled, and there is no trial date. By contrast, in those proceedings where class closure orders were granted, at the time of making of those orders the proceedings had generally reached an advanced stage, with pleadings closed, discovery made and evidence filed or shortly due at the time the orders were made.[11] In such cases, the chances of an artificially low participation rate are lessened because of the greater opportunity to ensure awareness on behalf of the class as a whole.

35 Thirdly, the costs associated with conducting a registration process are very significant. They will have to be deducted from any settlement sum. This will reduce the size of the settlement sum available for distribution to group members. The plaintiffs have not in the present case applied for, and do not intend to apply for, a group costs order. In circumstances where there is no settlement offer on the table, it is not possible to assume that the costs of the registration process alone will be insignificant in the context of the overall settlement. What can be said with certainty is that it will involve a significant expenditure of time and resources on the part of the plaintiffs at an early stage with no clarity as to the magnitude of any settlement offer, if any.

36 Fourthly, even if a settlement is reached, a further notice will need to be sent to group members informing them of the settlement and their right to object to it. Thus, it is likely there will need to be some form of notification of unregistered group members in any event, even if the combined opt‑out and registration orders are made. Further, if the class closure orders, as made, have effect until the end of trial, as proposed by the defendants, the class would need to reopen after settlement had been reached, with notification of the settlement being given to all group members who had not opted out.

37 I also accept that, it is possible that actual registration may not be required before group members can be paid their share of any settlement or judgment, if a settlement is reached. TFA may well possess bank details for many of the group members which can be used for distribution of any settlement funds directly to their accounts without requiring those members to take the additional step of registering.

38 Whilst I accept that there is uncertainty, involved in estimating group members' losses in the present proceedings, as asserted to by the defendants, uncertainty about quantum in class actions is not uncommon. There is much that is known. The numbers of each class are known. The dates on which they entered into the relevant loan agreements are known. The prima facie loss for each individual member of the class in the Flex Proceeding is relatively uncomplicated, comprising the difference between the base rate and the contract rate, which information is readily available. Whilst the necessary calculations will likely need to discount historical claims, and the issues relating to the calculation of the add‑on insurance claims add complexity, sophisticated practitioners should each be able to make reasonable estimates.

39 In making that observation, I am in no way gainsaying the evidence of Mr McInnes and Ms Caton. No doubt, the registration regime and soft closure orders for which their clients advocate would reduce some of the uncertainty and, at least from the defendants' perspective, provide greater clarity as to the extent of any potential exposure.

40 However, this benefit carries with it an inherent advantage to the defendants in minimising group member participation.[12] A court exercising a protective role in relation to proceedings of this nature must be alive to this, and will balance this against the evidence of the plaintiff's solicitors and the difficulties that will attend to the proper discharge of their duties, which are owed both to their clients and to the group members generally.

41 Whilst I accept that Mr McInnes and Ms Caton both consider that the prospects of settlement would be enhanced if the registration orders were made, I am not satisfied that a meaningful mediation cannot take place in its absence. Notably, the defendants had already agreed to attend a mediation in May 2026 without any registration regime being agreed, and draft consent orders providing for this had been exchanged.

42 Having regard to the above matters, I am not satisfied that the making of the orders sought by the defendants is appropriate or necessary to ensure that justice is done in these proceedings.

43 I propose to make orders to the effect proposed by the plaintiffs, which address only group members' right to opt out of the proceedings. The parties are directed to confer as to the form of the orders including as to costs in light of these reasons with a view to submitting orders in agreed form within seven days or, failing agreement, the proposed form of order sought by each.

[1] Bogan v Estate of Smedley (decd) [2025] VSC 434 (Matthews J); Clarke v JB Hi-Fi Group Pty Ltd [2025] VSC 664, [16], [20]-[24] (Delany J).

[2] Paull affidavit dated 18 March 2026 at [39]-[50]. (And this in turn undermines the likely utility of the proposed class closure orders since the prospects of settlement will be reduced.)

[4] J Wisbey & Associates Pty Ltd v UBS AG (No 2) [2024] FCA 147 (Beach J, [69]-[70]; cited with approval by Delany J in Clarke v JB Hi-Fi Group Pty Ltd [2025] VSC 664, [21]).

[5] J Wisbey & Associates Pty Ltd v UBS AG (No 2) [2024] FCA 147, [53].

[6] Fox v Westpac; O'Brien v ANZ; Nathan v Macquarie [2023] VSC 414, [17] (Nichols J).

[7] Australian Law Reform Commission Report 'Grouped Proceedings in the Federal Court' (No 46, 1988), [107].

[8] Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [2017] FCAFC 98; (2017) 252 FCR 1, [79].

[9] Bolitho v Banksia Securities (No 18) (remitter) [2021] VSC 666, [1356]-[1366].

[11] Fox v Westpac [2023] VSC 414, 61.

[12] Preece v Aristocrat Leisure Limited [2025] FCA 742, [79], [82] (Anderson J), and J Wisbey & Associates Pty Ltd v UBS AG (No 2) [2024] FCA 147, [55].