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Opt-out Class Actions

Opt-out class actions

Over the past few years there has been a number of opt-out class actions commenced in the Supreme Court of Victoria or the Federal Court of Australia, by investors against financial services providers (“FSPs”).  These actions have been a consequence of the global financial crisis.

In an opt-out class action, the class taking action may include members who have not consented expressly to joining the action.  This is in contrast to the position in other Australian courts where class members must give their express consent to join a class action.

In opt-out class actions the court will require the representative plaintiff to send an opt-out notice to all known class members who have the same interest in the class action.  The class members must inform the court if they do not wish to be part of the opt-out class action by returning the opt-out notice to the court by a date set by the court.

If class members do not return the opt-out notice by the set date, they are deemed to be members of the class action, even if they did not receive a copy of the opt-out notice and were unaware of the existence of the class action.
 

FOS’s concern

Paragraph 5.2 a) of our Terms of Reference allows us to refuse to consider a dispute if there is a more appropriate place to deal with the dispute.1

We may decide that it is more appropriate for the court hearing a class action, rather than FOS, to deal with a dispute if the dispute and the class action:

  • are both against the same FSP; and
  • both relate to the same facts and circumstances.

We are concerned about the possibility of a dispute being excluded from our jurisdiction under paragraph 5.2a) where the applicant:

  • is included in a class action due to failure to opt out; and
  • did not receive an opt-out notice. 

In the situation described above, the applicant might not be aware, at crucial times, of the class action and/or how it could affect their ability to access external dispute resolution through FOS. 

In a case where a dispute lodged with FOS relates to the same facts and circumstances as an opt-out class action, FOS may not be aware of the class action.  In these cases, we will depend primarily on the FSPs to inform us of the existence of any relevant opt-out class actions and request FSPs and applicants to provide information as explained below.
 

Request to provide information

FSPs

FOS requests an FSP to provide information to FOS where:

  • the FSP becomes aware of an opt-out class action commenced against them; and
  • a dispute against the FSP relating to the same facts and circumstances as the class action (a dispute “relevant to” the class action) has been lodged with FOS. 

When this situation arises, the FSP should:

  • immediately inform FOS of the class action; and
  • as soon as practicable, provide FOS with the Application, the Statement of Claim and a list identifying all disputes lodged with FOS that are relevant to the class action.

On an ongoing basis, the FSP should:

  • keep FOS informed about the class action;
  • identify to FOS any dispute relevant to the class action lodged after the action commenced; and
  • give FOS any information that the FSP receives about whether applicants in relevant disputes have opted out of the class action.

To keep FOS informed of the class action, the FSP should, as promptly as possible:

  • notify FOS of any direction or order of the court for the plaintiff to send opt-out notices to potential class members; and
  • provide FOS with a copy of –
    •  the court’s direction or order
    • the opt out notice and
    • any orders relating to the finalisation of the class action.

The FSP need not provide FOS with copies of all of the court documents and orders that relate to the class action.

Applicants

FOS requests an applicant who receives an opt-out notice for a class action relevant to their dispute to:

  • provide a copy of the notice to FOS; and
  • inform FOS of whether they have opted out of the class action. 

FOS may provide information about class actions obtained from FSPs to applicants in relevant disputes.  When it provides this information, FOS may suggest that the applicants seek independent legal advice on:

  • whether they could be members of the class taking action; and
  • if so, whether they should join the class action or opt out of it and continue with external dispute resolution through FOS. 

An applicant can decide whether to opt out of a class action up until the opt-out date.  An applicant may also be able to opt out after that date with leave of the court. 

Where FOS provides information about an opt-out class action to an applicant, FOS may request information from the applicant.  FOS may ask the applicant to inform FOS of whether they:

  • opt out of the class action;
  • join the class action; or
  • form the view that they are not a member of the class taking action (and if so, the basis of that view). 
     

Disputes involving several claims

Where the dispute raises claims other than those to be determined by the class action, FOS will not exclude the dispute from its jurisdiction but may:

  • decide not to investigate the claim that is subject to the class action; and
  • continue to investigate and determine the other claims raised by the applicant against the FSP.

 

Footnotes

1. Paragraphs 5.1 m) and 5.2 e) of the Terms of Reference would not apply unless the applicant “commenced” the class action. To “commence” a class action, the applicant must be the representative plaintiff.