Declassing class actions: Reflections following the Waller Legal class action

What you need to know

• Class actions can be declassed (ie not continue as a class action) even where the threshold requirements for commencing a class action are satisfied.
• In broad terms, declassing can be ordered where doing so is in the interests of justice because of certain factors. Those factors (broadly) involve comparing the class action with other available proceedings in relation to cost, efficiency, relief available and other factors.
• While successful declassing applications have been few and far between, the Supreme Court of Victoria recently declassed an action where the group member claims required individual assessment, and the common legal issues were not in dispute.
• This may prompt other declassing applications, particularly as class actions develop into areas that involve more individual variation between group member claims.

Context for applying to declass a class action

The threshold requirements for commencing a class action are straight forward, and generally not hard to satisfy. (We discuss them further in our Guide.) However, just because the requirements to commence are satisfied, does not mean the proceeding can necessarily continue.

The Federal Court Act (and its state equivalents) have three sections relevant to declassing.

The first two are rarely deployed. Section 33L operates where it appears there are fewer than 7 group members, and section 33M operates in respect of claims for relief involving payments to group members, where the cost of identifying group members and distributing would be excessive.

The third (section 33N) gives the court discretion to declass where doing so would be in the interest of justice because of one or more of four factors. Those factors are:

• where the costs in a class action would likely exceed the costs of separate individual proceedings;
• where all relief can be obtained by a different proceeding (although this will almost always be the case – so this alone is unlikely to be sufficient);
• where the class action will not provide an efficient and effective means of dealing with group member claims;
• it is otherwise inappropriate for the claims to be pursued in a class action.

It is generally recognised as a multi-stage enquiry. First, at least one of those four factors must be made out to enliven the court's power. Second, the court must decide whether because of that factor (or those factors), it is in the interests of justice to declass.

The assessment of those factors is generally approached on the basis of a comparison with other (hypothetical proceedings), although there is some debate as to whether that is strictly the correct approach for the third and fourth factor.

There have been very few successful declassing applications

While those powers have long existed, very few declassing orders have been made. Some have been made after the determination of a legal issue as part of a separate question (with the answer on the separate question essentially making the class action untenable), or where the orders sought did not require a class action – and so the declassing order was arguably of less strategic significance.

However, the Supreme Court of Victoria recently declassed proceedings on the basis that there was no serious common legal issue, and the factual matters required individual assessment for each group member: Jane Jones (a pseudonym) v Waller Legal Pty Ltd [2025] VSC 42.

The Waller Legal class action

The case involves a class action against law firm Waller Legal. The group members were clients who had retained the firm in sexual abuse claims against various different institutions. There were approximately 700 group members.

The essence of the claim is that Waller Legal did not adequately advise the group members in respect of, or adequately pursue, claims for damages for loss of earning capacity, and settled claims informally without maximising prospects of the highest possible settlement by commencing or threatening to commence proceedings. The plaintiff argued that Waller Legal had a consistent and erroneous practice in advising clients on these claims, which would have affected all group members similarly.

Waller Legal had admitted the key legal questions, ie that it owed a duty of care to its clients, and that it represented that it would apply specialist skill and expertise in the provision of legal services.

Having admitted those legal issues, Waller Legal argued that there were therefore no common issues. It argued that it provided advice as to the options available and considered, on a case by case basis, how best to present its clients' claims in light of each particular client's circumstances and instructions. Each group member gave Waller Legal instructions separately and at different times and was given advice by Waller Legal separately and at different times.

Further, for each group member, consideration had to be given to the particular circumstances in which the alleged abuse took place and relationship between the particular alleged abuser and the particular institution and any knowledge the institution had at the relevant time that the abuser did or might abuse minors, and the legal framework as it existed at the time the allegedly negligent advice was given.

Declassing was ordered

Justice Gorton ordered the case no longer proceed as a group proceeding. His Honour held:

The claim of each group member for damages from Waller Legal is distinct and will depend on a detailed assessment of the actual advice that each group member was given assessed in the legal context in existence at that time, the merits of that group member’s underlying claim to damages against the relevant institutional defendant including an assessment of that group member’s prospects of proving the abuse and establishing liability for that abuse on the part of an institution (not the abuser), and, importantly, on what that particular group member would have done in response to what is said to be the correct advice, and what, in those circumstances, that group member’s claim (if properly prosecuted) was worth.

It was important that the claims were of a particularly personal nature. In addition, there were changes to the legal landscape through the period sought to be covered by the proceeding.

His Honour went on to say:

The hearing and determination of the proposed common questions would involve significant time and expense but would not, in my judgment, appreciably shorten the process of evaluating each group member’s claim or lead to savings of any real significance in that process. Accordingly, this group proceeding will not provide an efficient and effective means of dealing with the claims of group members and it is in the interests of justice that it no longer continue as a group proceeding.

Looking forward

The Waller Legal decision is a rare example of the Court granting a declassing application, and a timely reminder of the court's power as the maturing class actions and litigation funding landscape in Australia sees more and more class actions pushing into areas that involve more variation of the individual circumstances of group members.

For plaintiff firms, this decision also highlights the challenges of pursuing class actions in cases involving varied factual circumstances and individual legal assessments.

Given those factors, it will be interesting to see if the judgment is appealed. Watch this space.

Want to know more?

• Class actions in Australia (21 August 2024) 
• Class actions in Australia one page guide (21 August 2024)
• Class actions: key developments in 2024 and what to look out for in 2025 (16 January 2025)
• Initial steps for responding to a class action in Australia (4 December 2024) 
• Does a remediation program reduce consumer class action risk? (29 October 2024)