Pre-mediation notices to group members foreshadowing class closure applications – implications of the High Court’s decision in Lendlease Corporation Limited & Anor v Pallas [2025] HCA 19.
Many representative proceedings (or “class actions”) are commenced without any party to the proceeding knowing the number of group members caught by the action. Any person (including, often, corporate entities) who meets the pleaded definition of “group member” will be included in the class. Subject to certain statutory provisions, those group members – unless they take steps to opt out of the class action – will be bound by the outcome of the action, including any settlement.
The practical outcome of this is that, in the lead up to settlement discussions or mediation, the parties to a class action may not yet be in a position to know, at all or with any accuracy, the number of group members affected by a potential settlement. Knowledge of the number of group members in the lead up to mediation serves several purposes. It allows both the representative plaintiff and the defendant to estimate the quantum of any potential liability of the defendant, and to negotiate an amount that may be considered a suitable settlement sum once distributed between the group members. It also facilitates the Court’s approval of any settlement as fair and reasonable, and allows for practical orders to be made in relation to the distribution of the settlement sum.
In addition, for the defendant, knowing the number of group members who will be bound by any settlement (as opposed to those who have opted out of the proceeding and may separately bring an action against the defendant) allows for some certainty as to future risk and the potential quantum of any ongoing liability.
In earlier class actions, parties have sought to overcome the practical difficulties arising from an unknown class size by seeking that notices be published to group members prior to mediation, notifying group members that they should register their interest in receiving any outcome of the settlement. Such notices may seek to incentivise group members to register their interest by notifying group members that if they do not opt out and they fail to register their interest by a certain date, they will be bound by the outcome of a court-approved settlement, but may be unable to receive any payment or benefit of the settlement except by leave of the court. Under the statutory regimes in the Federal Court and the Supreme Courts of various states (including Queensland) which govern class actions, the Court is required to approve notices of certain matters that are to be sent to group members.
Until the recent decision of the High Court in Lendlease Corporation Limited & Anor v Pallas [2025] HCA 19, there was a divergence in authority between the New South Wales Court of Appeal[1] and the Full Court of the Federal Court of Australia[2] as to whether provisions of State and Federal class actions statutory regimes conferred on those courts the power to issue certain pre-mediation notices. Such notices essentially notified group members that upon settlement, one or more parties intended to apply for an order with the effect that a group member who had not registered by a certain date, and had not opted out, would remain a group member for all purposes but would not, without leave, be permitted to seek any benefit from the settlement.
The New South Wales Court of Appeal, in Wigmans v AMP Ltd,[3]had determined that it was beyond the Supreme Court’s power to make orders pursuant to ss 175 and 176 of the Civil Procedure Act 2005 (NSW) (CP Act) to approve such a pre-mediation notice. However, the Full Court of the Federal Court, in Parkin v Boral Ltd,[4] held that Wigmans was “plainly wrong”, and the Federal Court had power pursuant to the materially identical provisions of the Federal Court of Australia Act 1976 (Cth) to approve such a notice to group members.
The High Court’s recent decision in Lendlease has confirmed that the Courts have power to issue such notices to group members. In this article, we examine the reasons for the High Court’s decision, and its implications.
The issues in Lendlease
In the primary proceeding in the Supreme Court of New South Wales, the representative plaintiffs commenced the proceeding on behalf of a group of persons (“the group members”) who acquired an “interest” in certain securities issued by Lendlease Corporation and the Lendlease Trust (together, Lendlease) during the period from 17 October 2017 to 8 November 2018.[5] The plaintiffs alleged that Lendlease engaged in misleading or deceptive conduct and breached its continuous disclosure obligations, and as a result, that group members suffered loss and damage.
The proceeding was an open class action. The size of the class was unknown by the parties but was potentially very large. The group members included not only those who were registered as the owner of securities, but also those who held an equitable interest in such securities.[6]
The defendants sought to resolve the uncertainty of group member numbers and facilitate settlement[7] by seeking an order pursuant to ss 175(1), (5) and 176 of the CP Act requiring that a certain notice be issued to group members. The proposed notice provided that members of the class had three options: register to participate in the class action, opt out of the proceeding, or “do nothing”. Relevantly, in relation to the “do nothing” option, the proposed notice provided:
If you do nothing the parties, alternatively, Lendlease, will seek an order, which, if made, has the effect that you will remain a group member in the class action, but you may, subject to any orders of the Court, not be entitled to receive any payment or other benefit from a future settlement of the class action. If a settlement occurs, then a further notice will be distributed, or advertised, advising of the settlement, and there may or may not be another opportunity to register (this will be a matter for the Court and there is no guarantee any further opportunity will arise).” [8]
At the request of the parties to the proceeding, a judge of the Supreme Court (Ball J) stated as a separate question for the Court of Appeal of the Supreme Court of New South Wales whether the Court had the power pursuant to ss 175(1), (5) and 176(1) of the CP Act or otherwise, to approve the giving of a notice of the type proposed by Lendlease.
In essence, the issue was whether the Court had power to approve a notice to group members which informed group members that the defendants intended, if the proceeding settled, to seek an order that any group member who had not opted out of the proceeding, but also had not registered for the class action, would remain a group member such that they would be bound by the settlement and their claims against the defendants be extinguished, but that they would not be permitted to seek any benefit of the settlement (without leave of the Court).
The relevant provisions
The key provisions at issue in the Lendlease decision were ss 175 and 176 of the CP Act. Section 175 has materially identical equivalents in s 33X of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and in the class action provisions introduced in 2017 in Queensland, namely s 103T of the Civil Proceedings Act 2011 (Qld).
Section 175 relevantly provides as follows:
175 Notice to be given of certain matters (cf s 33X FCA; s 103T CPA (Qld))
(1) Notice must be given to group members of the following matters in relation to representative proceedings—
(a) the commencement of the proceedings and the right of the group members to opt out of the proceedings before a specified date, being the date fixed under section 162 (1),
(b) an application by the defendant in the proceedings for the dismissal of the proceedings on the ground of want of prosecution,
(c) an application by a representative party seeking leave to withdraw under section 174 as representative party.
…
(5) The Court may, at any stage, order that notice of any matter be given to a group member or group members.
(6) Notice under this section must be given as soon as practicable after the happening of the event to which it relates.
Section 176(1) provides that the form and content of a notice given under s 175 must be approved by the Court, and is equivalent to FCA Act s 33Y(1) and CPA Act (Qld) s 103U(1)).
It is of note that the Victorian class actions provisions (not in issue in Lendlease) go further than the provisions in other State and Federal legislation, in that they expressly confer on the Supreme Court the power to make an order that a group member must take certain steps, including prior to judgment, in order to be entitled to any benefit arising from the proceeding.[9]
The High Court’s decision in Lendlease
In the Court of Appeal, Bell CJ, Ward P, Gleeson, Leeming and Stern JJA unanimously held that the Supreme Court doesnot have power to order that the proposed notice be given.[10] The High Court disagreed, unanimously allowing the appeal and resolving that the Court does have power to issue the proposed notice.
Gageler CJ, Gleeson and Jagot JJ delivered joint reasons for judgment, as did Gordon and Steward JJ (Edelman J agreeing, with further observations as to institutional rules of precedent and the Court of Appeal’s treatment of the High Court decision in Brewster[11]). Beech-Jones J delivered separate reasons for judgment.
In this article, we examine the reasons for the High Court’s determination by analysing three central issues – the issue of subverting the class actions statutory scheme by converting it into an “opt in” scheme; the issue of the notice leading the representative plaintiffs to inevitably contend with a conflict of interest; and a statutory construction issue regarding s 175(5) being qualified by the terms of s 175(6).
Subverting the “opt out” statutory scheme – conversion into an “opt in” scheme?
The Court of Appeal held that the “fundamental precept” of Pt 10 of the CP Act [the part of the Act specific to representative proceedings in the Supreme Court] is that it is an “opt out” statutory scheme,[12] and that the proposed notice would, “in practical terms at least”, have the effect of converting an “opt out” scheme into an “opt in” scheme by imposing a positive requirement on group members to opt in to the group prior to any settlement.[13] That is, the fundamental precept of Pt 10 that group members may do nothing prior to settlement and still reap its benefits, would be turned on its head.
In the High Court, Gageler CJ, Gleeson and Jagot JJ held, based on a number of considerations, that the proposed notice does not transform the “statutorily mandated opt out scheme into an impermissible opt in scheme”.[14] The proposed notice does not require a group member to opt out or register their participation. Rather, the notice is intended to inform group members that if they do neither of those things by a specified date and the proceeding settles as between the parties, then Lendlease (and potentially the representative plaintiffs) will seekan order from the Court to the effect that such group members will be bound by the settlement (thereby extinguishing their individual rights against Lendlease) but not be permitted without leave to benefit from the settlement.[15]
Their Honours also emphasised that the proceeding may notsettle and, even if it does, the Court is not bound to make the foreshadowed order, and will be sensitive to the potential for inconsistencies of interest between the representative plaintiffs and unregistered group members.[16]
Similarly, Justices Gordon and Steward (Edelman J agreeing) emphasised that the notice does not affect any legal right of a group member, and instead, is informative. There is no guarantee that the order that Lendlease foreshadows seeking will be made by the Court. Group members remain group members, there may be the possibility of further options to register (at the Court’s discretion) and unregistered group members will be able to seek leave from the Court that they be entitled to some part of the settlement amount.[17]
Gordon and Steward JJ also held that the New South Wales Court of Appeal made too much out of what it described as a “fundamental precept” of Pt 10 of the CP Act, and the observations of Gaudron, Gummow and Hayne JJ in Mobil[18] which “were not intended to establish a categorical principle of legislative presupposition that group members are always entitled to do nothing before benefitting from a settlement or favourable judgment, or limit the Court’s powers to give notice of any matter which may be relevant to group members in the proceeding.”[19] Further, even an opt out model, especially in the case of an open class, will require group members at some point to provide information in order to share in the benefit of any settlement or judgment. While ordinarily that will take place after settlement, or a favourable judgment, there will be cases where it is in the interests of a “just, quick and cheap resolution of the real issues” for that information to be supplied at an earlier stage. The issue of when is a matter for the trial judge.[20]
Beech-Jones J similarly cautioned against there being any “fundamental precept” or “basic principle” which implies restrictions on the relevant powers under the CP Act.[21]
Conflict of interest issue
The Court of Appeal held that a representative plaintiff’s obligation in the “opt out” system of Australian class actions is to act in the interests of all group members, which includes both registered and unregistered group members. The Court of Appeal determined that the incentive to bargain away unregistered group members’ claims for the purpose of resolving the proceedings to the benefit of registered group members creates an insoluble conflict.[22]
In the High Court, Gageler CJ, Gleeson and Jagot JJ acknowledged the inconsistencies of interest for the representative plaintiffs identified by the Court of Appeal,[23] but did not consider them insoluble. Their Honours observed that if the notice achieves the purpose of maximising the number of group members who register to participate in the proceeding, the notice will have actually have reduced conflict to the extent it ensures a maximum number of group members can benefit from a settlement.[24] Further, the Court retains the power not to grant the order foreshadowed by the notice.[25] The Court is able to manage any legitimate concerns as to inconsistencies of interest in accordance with the relevant legislative provisions which recognise the existence of inherent inconsistencies of interest between group members, but take a “functional rather than reflexively preclusive” approach to their management.[26]
Similarly, Steward and Gordon JJ (Edelman J agreeing) emphasised that conflicts of this kind will often feature in a class action, are anticipated by the statute and aren’t insoluble as they are addressed by the representative plaintiff’s duty not to act contrary to the interests of group members and by the Court’s supervisory and protective role. That role includes powers to, if necessary, decline to approve a settlement, replace a representative plaintiff, and appoint a contradictor.[27] Their Honours also found that the concern about possible conflicts was premature, because the order Lendlease seeks has yet to be made and may never be made.[28]
Beech-Jones J resolved the issue on the narrower basis that the supposed conflict on the part of the representative plaintiffs was irrelevant to determining the scope of the power under s 175(5) of the CP Act because it was the appellants/defendants (the Lendlease parties) who sought the proposed notice, and they “…do not owe fiduciary obligations to group members, and thus no potential conflict arises from the appellants forming that intention or seeking the proposed order.”[29]
Statutory construction issue
The Court of Appeal held that s 175(6) of the CPA constrains s 175(5) in two respects: the notice must relate to an “event”, and that “event” must be one that has happened, rather than a future event.[30] The Court of Appeal held that the Court does not have power to issue the proposed notice, because it is a notice of a present intention on the part of Lendlease, and perhaps the representative plaintiff, to participate in settlement negotiations, rather than notice of an “event.”[31]
In overturning the Court of Appeal’s construction of s 175(5), Gageler CJ, Gleeson and Jagot JJ held that the presence and terms of s 175(6) “are an insufficient basis to construe the words “any matter” in s 175(5) as confined to only a matter constituting an event that has happened.”[32] While s 175(6) imposes a temporal obligation on the giving of notice where an event has occurred, this does not mean s 175(5) is confined to the giving of notice of such events. Rather, “…in circumstances where the purpose of s 175(5) is to ensure that group members are kept informed of “any matter” relevant to them in the representative proceeding, the power in s 175(5) should be construed as liberally as its expansive language permits.”[33]
Similarly, Steward and Gordon JJ (Edelman J agreeing) rejected the distinction drawn by Bell CJ in the Court of Appeal between the “happening of an event” and the “formulation of an intention”.[34] Steward and Gordon JJ held that, to the extent the word “event” in s 175(6) qualifies the Court’s power in s 175(5), it is easy to satisfy the word “event”, including by an intention to seek an order. Further, the particular purpose of s 175(5) is to arm the Court with the power to order any other notice [i.e. as distinct from the specific matters about which notice is given pursuant to ss 175(1)-(4)] relating to the conduct of a class action which is before it, and is “facultative, not restrictive.”[35]
Beech-Jones J similarly found that there is no textual or other reason to treat the power conferred by s 175(5) to order notice of any “matter” as confined by the concept of an “event” referred to in s 175(6).[36] It is the steps referred to in ss 175(1), (3) and (4) that are the “events” to which s 175(6) applies. Section 175(5) does not use the word “event” but instead a word of wider import, namely the word “matter”.[37] Given the function of the Supreme Court under Pt 10 of the CP Act, in ensuring the protection of the interests of group members, s 175(5) confers a broad power on the Court to order that notice of any “matter” relating to the proceedings is given to group members, including the intention of a party to seek an order that may affect group members’ rights and interests.[38]
Takeaways
We have identified six main takeaways from the High Court’s decision.
First, the uncertainty from directly inconsistent authorities of intermediate appellate courts has been resolved, such that parties to a class action can be confident the Courts have power to approve notices encouraging registration and foreshadowing class closure applications.
Secondly, such notices do not restrict the rights of unregistered members or otherwise impose a positive requirement for registration such that they could be said to transform what is conceptually an “opt out” regime into an “opt in” regime.
Thirdly, the decision is only authority for the proposition that the Courts have power to approve proposed notices of the nature sought under s 175(5) of the CP Act and its equivalent provisions under Federal and State legislation. Whether the Court should exercise the power to approve such notices will still clearly depend on the facts of a particular case.
Fourthly,in cases where such notices are issued, parties and legal representatives should have greater clarity as to the number and quantum of claims at mediation, which may increase the chances of an early settlement and improve settlement outcomes for all parties.
Fifthly, when orders excluding unregistered members are sought upon Court approval of settlement, representative plaintiffs will need to consider carefully their obligations to act in the interests of all members, not just registered members, and the possible ways to avoid conflict.
Finally, a decision by the Court to approve a notice of the kind considered in Lendlease by no means guarantees that the Court will subsequently make an order excluding unregistered members from any benefit or amount payable on approval of a settlement of the claim. In Lendlease, the highest the Court put it is that the notice may give the defendants “a forensic advantage by being able to argue, on any settlement approval, that unregistered group members should not be able to participate as they had been given ample opportunity to opt out or in and had not done so”.[39] However, Justices Gordon, Steward and Edelman doubted the quality of any such advantage, given the Court will be fully aware of the reason why the defendants sent the notice, and their intention to make this argument, which might justify the Court giving it less weight in any settlement approval.[40]
Further, even if such an order excluding unregistered group members is made, it is yet to be seen whether the Courts will, in certain circumstances, also make orders allowing group members another opportunity, following settlement, to register their interest before they are excluded. It is also yet to be seen in what circumstances the Courts will grant leave to unregistered group members who have been excluded to nevertheless take the benefit of settlement.
Accordingly, while Lendlease has confirmed the Courts have power to approve this type of notice, the Courts’ treatment of a group member’s failure to register has not yet been fully tested in the context of subsequent applications. We anticipate that applications both by defendants to close the class of group members eligible to benefit from settlement, and by unregistered group members seeking leave, will likely be the next source of jurisprudential development in this area.
[1] Wigmans v AMP Ltd (2020) 102 NSWLR 199; [2020] NSWCA 104.
[2] Parkin v Boral Ltd (2022) 291 FCR 116; [2022] FCAFC 47.
[3] (2020) 102 NSWLR 199; [2020] NSWCA 104.
[4] (2022) 291 FCR 116; [2022] FCAFC 47.
[5] Lendlease Corporation Limited v Pallas [2025] HCA 19 (HCA Judgment) at [50] per Gordon and Steward JJ.
[6] HCA Judgment at [51] per Gordon and Steward JJ.
[7] See HCA Judgment at [93] per Gordon and Steward JJ.
[8] HCA Judgment at [52] per Gordon and Steward JJ extracting relevant portions of the proposed notice.
[9]Supreme Court Act 1986 (Vic) s 33ZG.
[10] David William Pallas & Julie Ann Pallas as trustees for the Pallas Family Superannuation Fund v Lendlease Corporation Ltd [2024] NSWCA 83 (Court of Appeal Judgment).
[11] BMW Australia Ltd v Brewster (2019) 269 CLR 574.
[12] Court of Appeal Judgment at [97] – [101] per Bell CJ (Gleeson, Leeming and Stern JJA agreeing).
[13] Court of Appeal Judgment at [104] per Bell CJ (Gleeson, Leeming and Stern JJA agreeing).
[14] HCA Judgment at [47] per Gageler CJ, Gleeson and Jagot JJ.
[15] Ibid.
[16] Ibid.
[17] HCA Judgment at [81] – [82] per Gordon and Steward JJ (Edelman J agreeing).
[18] Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 32 [40] per Gaudron, Gummow and Hayne JJ.
[19] HCA Judgment at [95] per Gordon and Steward JJ (Edelman J agreeing).
[20] HCA Judgment at [97] per Gordon and Steward JJ (Edelman J agreeing).
[21] HCA Judgment at [139] – [143] per Beech-Jones J.
[22] Court of Appeal Judgment at [106] – [117] per Bell CJ (Gleeson, Leeming and Stern JJA agreeing); cf. [128] – [136] per Ward P: such conflicts would crystallize only upon application to the Court to exclude the unregistered group members.
[23] HCA Judgment at [44] per Gageler CJ, Gleeson and Jagot JJ.
[24] HCA Judgment at [45] per Gageler CJ, Gleeson and Jagot JJ.
[25] HCA Judgment at [45] per Gageler CJ, Gleeson and Jagot JJ.
[26] HCA Judgment at [46] per Gageler CJ, Gleeson and Jagot JJ.
[27] HCA Judgment at [98] per Gordon and Steward JJ (Edelman J agreeing).
[28] Ibid.
[29] HCA Judgment at [149] per Beech-Jones J.
[30] Court of Appeal Judgment at [32], [112], [118] – [119] per Bell CJ (Gleeson, Leeming and Stern JJA agreeing); cf. [137] per Ward P.
[31] Ibid.
[32] HCA Judgment at [41].
[33] Ibid.
[34] HCA Judgment at [87] per Gordon and Steward JJ.
[35] HCA Judgment at [91] per Gordon and Steward JJ.
[36] HCA Judgment at [133] per Beech-Jones J.
[37] HCA Judgment at [134] per Beech-Jones J.
[38] Ibid.
[39] HCA Judgment at [82] per Gordon and Steward JJ (Edelman J agreeing).
[40] Ibid.
