Reflections on class closure

What you need to know

• The High Court recently confirmed that courts have the power to make class "soft" class closure orders. That is done by issuing notices to group members foreshadowing that orders will be sought at the time of settlement to extinguish the claims of group members who neither opt out nor register to participate in the class action by a particular date (usually before the mediation). See our update here.
• This was an important and welcome development - class closure gives parties (and particularly respondents) more certainty heading into mediation about the size of the potential exposure – which can lead to a more productive mediation.
• While this resolved an important debate about whether soft class closure orders can be made, it left open when they will be made – particularly if both parties don't agree to them.
• Whether class closure orders will be made in any given case is a matter of discretion. In many cases the parties will seek them jointly and the court will make orders at a case management hearing without a written judgment. Where it is not agreed (particularly by the applicant), the Federal Court's more recent approach suggests the orders will not be made lightly, although it has acknowledged that soft class closure can be revisited as the parties continue to engage in the mediation process.

Background: soft class closure orders

A "soft" class closure order requires group members to register by a particular date (usually before mediation) in order to share in any settlement.

If the matter settles at mediation, the parties then seek orders extinguishing the claims of group members who neither registered nor opted out. If there is no settlement, the class "re-opens" and the case proceeds as normal.

Such orders are helpful for the parties to have a clear picture as to the value of claims that are being pursued in the class action, and helps provide a firm foundation for settlement discussions.

What considerations do the courts take into account?

When it comes to whether soft class closure orders will be made, the relevant considerations vary from case to case. In Preece v Aristocrat Leisure, the Court said they can include:

• whether it is in the interest of group members as a whole to require registration before any prospective settlement is on the table;
• the point at which the proceeding has reached;
• the attitude of the parties;
• the complexity and likely duration of the case;
• whether group members have adequate notice and a reasonable time to decide whether to register;
• whether an estimate of the size and number of claims can be made; and
• the extent to which a registration process is likely to improve the prospects of achieving a reasonable settlement.

Is uncertainty of liability enough of itself to order class closure?

Class closure is an important tool to assist parties understand the real quantum of the case and negotiate a settlement with greater confidence. While the upper band of group members (or potential group members) may be known to a respondent, the number of group members who ultimately come forward to participate in a claim is often a fraction of that amount (typically less than 25%), and the value of those claims is often unknown.

Even under Australia's opt-out model, group members are more often than not required, at some point, to provide information in order to share in the benefit of any settlement or judgment. There will be cases where that information should be supplied at an earlier stage.

However, in a recent case, the Federal Court held that uncertainty about the quantum in class actions is a common feature and does not mean that the parties cannot achieve a resolution at mediation (Preece v Aristocrat Leisure [2025] FCA 742). In that case though, the respondents could reasonably estimate from their records the aggregate value of group members' claims for the purpose of participating in a productive mediation – at least as a starting point for negotiations.

The Federal Court also gave minimal weight to an assertion that soft closure orders would improve the prospects of achieving a reasonable settlement or that, in the absence of registration, the matter was unlikely to be capable of settlement. Those assertions were viewed against the respondents' self-interest in minimising group member participation.

In particular though (and against the background above), in that case the court also considered the proposed registration process would have been complex and unreliable (as it involved a subset of group members answering questions that the court considered would require self-diagnosis), and would involve substantial costs (related to processing registration forms and dealing with group member enquiries) that were unwarranted when assessing the likely assistance to settlement.

Other factors that may weigh against making class closure orders

Each application for class closure orders will turn on its own facts, but a court may be less inclined to make an order in certain circumstances including where:

• there are likely to be low levels of registration (that is particularly as registration levels are often higher once a settlement has actually been reached);
• there is a clear liability to pay all group members in the class as payment is not dependant on group members establishing any individual matters;
• the class does not need to register (at any point) to be paid their share of any settlement or judgment (for example, where a respondent holds the bank details of group members such that payment could be made without group members providing any data);
• the respondent's records are sufficient to allow them to understand the claims to be able to participate in the mediation (as explored above);
• there are concerns about the adequacy of the proposed notice distribution and a risk that group members would not be sufficiently notified of their ability to register and the implications of not registering;
• there is a heightened cost and complexity of the particular notice that is unwarranted in the circumstances.

Is the applicant's opposition a significant factor?

As a practical matter, if both parties agree to notices facilitating soft class closure orders, then courts may make them in a case management hearing without delivering reasons.

But where the position is not agreed, there is a question whether the fact of the applicant's non-agreement is itself a reason for the court to not make orders.

In Preece v Aristocrat Leisure, the applicants submitted that soft closure orders are generally made on the joint application of parties and that courts have recognised that "real caution" is required where an application is opposed in light of the applicant's obligations to represent group members' interests and the fact that respondents' interests are "inimical" to those interests. The court did not address these submissions.

The issue might also be revisited if discussions are unproductive

Even if soft class closure orders are not made before the commencement of mediation, the Federal Court has expressly acknowledged that mediation is a "process" and the question of soft class closure may be revisited following engagement in that process (in Williams v NAB [2024] FCA 1031).

While the circumstances in which this may occur have not been fully articulated, there may be an opportunity to revisit class closure if the parties have genuinely engaged in mediation before an experienced mediator to come up with a sufficiently reliable calculation of quantum and proxy for group member participation, but have not been able to do so in the absence of class closure.

What next?

Soft class closure orders are a useful tool for parties to ascertain the size of the class and value of exposure to enter into meaningful settlement negotiations. But that alone may not be enough to warrant soft class closure orders if the parties do not agree to that course.

Notwithstanding the High Court's clarity on the power to make orders, whether a court will make the orders in any given case will depend upon the facts. Further guidance from the courts on when soft class closure orders are appropriate will no doubt be given as this area develops.

Absent class closure, parties will need to consider other tools when mediating and structuring settlements to address uncertainties around class participation and quantum. But if respondents are not prepared to settle without class closure, then applicants may be more motivated to agree to a process.

Other author: Jake Carr, Graduate.