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What is a Class Action Lawsuit?

Diane Chapman

Written by:

Diane Chapman

Class actions, also known as representative proceedings, have become an increasingly important part of Australia’s legal landscape. These powerful legal tools allow groups of people who have suffered similar harm to join together and seek justice collectively. But what exactly is a class action, and how does it work in Australia?

This comprehensive guide will explore the ins and outs of class actions in Australia, providing valuable information for those who may be considering participating in or initiating a class action. From the basic definition to the complex legal procedures involved, we’ll cover everything you need to know about this important area of law.

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Definition: What is a class action?

A class action is a legal procedure where a small group of people, known as class representatives, represent a larger group, or ‘class’, in a lawsuit.

To initiate a class action in Australia, at least seven individuals must be involved. The claims must be related or arise from similar circumstances, and there must be a significant issue of law or fact. Instead of each person filing an individual lawsuit, the class action consolidates all claims into a single case.

In Australia, class actions are formally known as ‘representative proceedings’ and are governed by Part IVA of the Federal Court of Australia 1976 (Cth).

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Class action parties and their roles

Representative plaintiff

In a class action lawsuit, the plaintiff acts as the representative of a larger group, bringing the claim before the court and assuming the primary risk of the case. This individual, often referred to as the ‘lead plaintiff’ or ‘representative plaintiff,’ initiates the action on behalf of the group.

The plaintiff’s role involves ensuring that the legal proceedings benefit the entire class, rather than pursuing personal gain. While a class action typically features a single representative plaintiff, it is also possible for multiple plaintiffs to be involved.

Class members

The class refers to the group of individuals who have experienced harm or losses due to the defendant’s alleged misconduct. These individuals often share common traits or experiences, such as using a specific product, living in a certain area during a particular time, or working for the same organization. They are collectively known as ‘class members’ or simply ‘the class’ in the lawsuit.

Key features of Australian class actions

Australian class actions have several distinctive features:

  • No certification requirement: Unlike in some other countries (like Canada or the USA), Australian courts do not need to ‘certify’ a class action before it can proceed.
  • Opt-out system: Class members are automatically included in the action unless they choose to opt-out within a specified timeframe.
  • Open class: There is no requirement for class members to be named or identified at the outset of proceedings.
  • Common issues: The claims of class members must arise out of the same, similar or related circumstances and give rise to at least one substantial common issue of law or fact.
  • Representative party: One or more class members act as representative(s) for the entire class.
 

Opting in and out of class actions

In Australia, class actions follow an opt-out system. This means that once a class action lawsuit meets the necessary criteria, all individuals who fall within the defined group are automatically included unless they choose to opt-out. To exclude themselves, members must actively take steps, such as submitting an opt-out notice to the court.

The opt-out system aims to ensure comprehensive representation of all potential class members, which can strengthen the case and improve its outcomes. When a class action is filed, not all group members may be immediately aware of their inclusion. Once the class and the details of the action are established, the court will issue an ‘opt-out notice’ to inform individuals of their rights.

The opt-out notice will include:

  • Details of the claim: A summary of the nature of the dispute and the legal claims involved.
  • Opt-out deadline: The final date by which individuals must decide if they wish to exclude themselves from the class action.

Group members need to review this notice carefully and make an informed decision. Failing to opt-out means they will remain part of the class action and be bound by any judgment or settlement reached.

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The history and development of class actions in Australia

Origins of class actions

The concept of class actions originates from English common law, but the modern form of class actions in Australia was introduced more recently. The Federal Court of Australia Act 1976 was amended in 1992 to include Part IVA, which created the framework for representative proceedings in the Federal Court.

In 1991, a class action regime was introduced into the Federal Court of Australia Act 1976 (Cth) under Part IVA of the Act and in 1992, the very first class action was filed in Australia on behalf of a group of borrowers and guarantors against the relevant lenders.

Class actions are an American phenomenon and legal concept that has seen widespread expansion across the globe. The Part IVA regime adopted an American class action model. 

Since then, the Australian class action landscape has expanded rapidly. 

Evolution of class action laws

Since the establishment of this framework in 1992, Australian class action laws have evolved significantly.

Key changes include:

  • State-level adoption: The introduction of similar regimes in states like Victoria in 2000 and New South Wales in 2011 has expanded access to class actions across Australia. This has empowered individuals to pursue collective legal action against large corporations and institutions.
  • Litigation funding: The rules governing litigation funding have evolved, allowing for greater flexibility and innovation in financing class actions. This has made it easier for individuals to participate in these legal proceedings without bearing the full financial burden.
  • Case management: Courts have gained clearer authority to manage and settle class actions more efficiently. This is set out in the Federal Court of Australia’s Class Actions Practice Note (GPN-CA) issued in 2016 and revised in 2019. This has helped reduce the time and costs associated with these complex cases.

These developments have collectively strengthened the position of individuals in pursuing class actions against powerful entities.

Class actions across jurisdictions

Class action proceedings can be initiated in various courts across Australia:


  • Federal Court of Australia: As established, class actions have been possible here since 1992.
  • Supreme Court of Victoria: Authorised to hear class actions since 2000.
  • Supreme Court of New South Wales: Class actions have been permitted since 2011.
  • Supreme Court of Queensland: Began hearing class actions in 2016.
  • Supreme Court of Tasmania: Added to the list in 2019.
While state regimes are modelled on the federal system, there are some variations among jurisdictions.
 

Types of class actions

Class actions in Australia cover a broad spectrum of legal issues. Key types include:

These often address claims against companies for defective products, misleading conduct, or unfair contract terms. Examples include actions against banks for excessive fees or manufacturers for faulty goods.

Investors may pursue class actions against companies for breaches of disclosure obligations or misleading statements that impact share prices.

Communities affected by environmental disasters or pollution may initiate actions against the responsible parties.

Workers may come together to challenge unfair employment practices, wage underpayment, or workplace discrimination.

These involve large-scale injury cases, such as those related to defective medical devices (like the Philips CPAP Class Action) or harmful pharmaceuticals.

Common class action cases

Among the over 500 class actions filed in Australia over the past two decades, certain types are notably recurrent:

Medical negligence class actions

These can include cases of misdiagnosis, surgical errors, medication mistakes, or failures in providing appropriate treatment or follow-up care.

Product liability class actions

These involve individuals who have suffered harm from defective or dangerous products, uniting to file a lawsuit against the manufacturer, distributor, or vendor.

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The class action process in Australia

Understanding the process of a class action is crucial for anyone considering participation. Here’s an overview of the key stages.

1. Commencement of proceedings

A representative party (or parties) files a statement of claim in court on behalf of the class. This document outlines the nature of the claim and the common issues shared by class members.

2. Notification of potential class members

Once the action is filed, potential class members must be notified. This is typically done through media advertisements, direct mail, or other appropriate means.

3. Opt-out period

Class members are given a specified period to opt out of the proceedings if they don’t wish to be bound by the outcome.

4. Case management

The court actively manages the proceedings, setting timetables and making orders to ensure the efficient conduct of the case.

5. Discovery and evidence-gathering

Parties exchange relevant documents and gather evidence to support their positions.

6. Mediation or settlement negotiations

Many class actions are resolved through mediation or settlement negotiations before reaching trial.

7. Trial

If a settlement is not reached, the case proceeds to trial, where common issues are determined.

8. Judgement and appeals

The court delivers its judgement, which may be appealed by either party.

9. Distribution of compensation

If successful, a scheme for distributing any damages or compensation to class members is implemented.

 

Advantages of class actions

  • Access to justice: Class actions allow people to seek redress for relatively small individual claims that might not be economically viable to pursue individually.
  • Efficiency: By consolidating multiple similar claims, class actions reduce the duplication of effort and resources in the court system.
  • Deterrence: The potential for large-scale litigation can act as a deterrent against corporate misconduct.
  • Consistency: Class actions can help ensure consistent outcomes for similar claims, promoting fairness and equality before the law.

Recent trends and future directions in Australian class actions

The landscape of class actions in Australia continues to evolve. Some current trends and potential future developments include:

1. Increase in shareholder class actions
There has been a marked increase in shareholder class actions, driven by heightened scrutiny of corporate governance and financial reporting. This trend underscores a growing investor demand for accountability and transparency.

2. Potential for multi-defendant actions
There is a growing trend toward class actions involving multiple defendants. This approach helps address complex issues involving several parties and aims for more comprehensive resolutions. However, it adds a layer of complexity to the legal process, requiring careful coordination and detailed management to effectively handle the diverse interests and claims of all involved parties.

3. Cybersecurity and data breach class actions
With the rise in data breaches, class actions related to privacy and cybersecurity are expected to grow. This trend highlights the need for stronger legal protections against digital threats.

FAQs

Legally, you need at least seven class members, but most class actions involve significantly larger groups.

Yes, in most cases. Australian class actions typically use an opt-out system, meaning you’re automatically included unless you choose to opt-out.

No, you don’t have to pay to join a class action with GMP Law. We operate on a No Win, No Fee basis, which means you only pay if we win your case.

The importance of expert legal counsel

When considering a class action, especially in cases of personal injury, seeking the assistance of an experienced law firm can be invaluable. GMP Law specialises in navigating the complexities of class actions, offering expert guidance throughout the process.

Our team can:

  • Assess the viability of your claim and its potential as a class action
  • Handle the legal intricacies of initiating and managing a class action
  • Provide resources for investigation and evidence-gathering
  • Represent your interests in negotiations and court proceedings
  • Ensure fair distribution for any compensation awarded.

With GMP Law, you can focus on your recovery while we work tirelessly to secure justice for you and others affected by similar circumstances.

 
Diane Chapman

Author

Diane Chapman

Consultant Lawyer

Diane Chapman has been admitted as a solicitor in New South Wales since 2014 and the Federal and High Court since 2016, she was previously a qualified financial planner.

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Gerard Malouf & Partners
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Class Actions
Class Actions
At GMP Law, we have extensive experience in class action lawsuits, amplifying the voices of individuals who have experienced similar harms or losses.
Services
Services
Gerard Malouf & Partners manage cases for clients across all areas of Personal Injury Law, Inheritance Disputes and Superannuation Disputes.
About Us
Gerard Malouf & Partners have provided friendly, experienced legal advice to communities across Australia for over 35 years. Our Personal Injury Lawyers have taken on ten’s of thousands of cases and we are proud to have won billions of dollars for our clients.
Lawyers
Meet the diverse and dynamic team of compensation lawyers and supporting staff that have made this all happen below. Our multi-lingual team can discuss your claims in Arabic, Assyrian, Turkish, Greek, Italian, French, Serbian, Croatian, Armenian, Mandarin, Hindi, Punjabi or Malayalam.
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Meet the diverse and dynamic team of compensation lawyers and supporting staff that have made this all happen below. Our multi-lingual team can discuss your claims in Arabic, Assyrian, Turkish, Greek, Italian, French, Serbian, Croatian, Armenian, Mandarin, Hindi, Punjabi or Malayalam.

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