Federal Court class actions: Part IVA explained

What Part IVA does

Part IVA of the Federal Court of Australia Act 1976 established the federal class-actions (representative-proceedings) regime. This regime provides a framework for group members to collectively pursue claims against a defendant. State Supreme Courts in Victoria, NSW and Queensland have similar, parallel regimes for state-based class actions.

The regime commenced in 1992 and allows for a single plaintiff to represent a group of people with similar grievances. To proceed, a class action must meet specific criteria.

Specifically, a class action can be started if 7 or more persons have claims arising out of the same, similar or related circumstances and at least one substantial common issue of law or fact arises.

Opt-out regime

Part IVA operates under an opt-out model. This means that individuals who may be affected by the claim are automatically included as class members. To exclude themselves from the class action, potential class members must take action to opt out by a deadline set by the court.

Any settlement or discontinuation of a class action must be approved by the court. This approval process ensures that the settlement is fair to all class members and adequately addresses the claims.

Group-member notification is a formal and carefully managed process overseen by the court. This structured approach aims to ensure class members are properly informed about the proceedings.

Common types of class action

Class actions frequently arise in the securities area, often concerning breaches of continuous disclosure obligations. These actions typically involve allegations of non-compliance with the ASX Listing Rule 3.1 and section 674 of the Corporations Act. Another common basis for securities class actions is misleading or deceptive conduct, as defined under section 18 of the Australian Consumer Law, or its equivalents in the financial services context (section 1041H Corporations Act, section 12DA ASIC Act). penalty estimator

Consumer class actions are also prevalent, addressing issues such as product liability, misleading or deceptive conduct, and breaches of unfair contract terms. These actions seek redress for consumers who have suffered similar losses.

Mass-tort and employment class actions are also seen, covering a range of grievances. Examples include claims for wage underpayment, sex discrimination, and damages resulting from natural disasters.

Litigation funders and contingency-style arrangements

Most class actions in Australia involve litigation funders. These funders provide financial support to cover legal costs, in exchange for a portion of any successful recovery obtained for the group members. This arrangement allows individuals who might otherwise be unable to pursue legal action to participate in a collective claim.

Reform of litigation funding has been a recurring focus of policy discussion. Specifically, the level of fees charged by funders and the implementation of common-fund orders have been subject to considerable legal scrutiny and legislative changes.

Practitioners and those promoting class actions must carefully consider both fairness requirements and the Federal Court’s Supervised Cost-Recovery rules when establishing an engagement with a litigation funder.