Australian Class Action Settlements Declined Due To Substantial Detriment To Class Members

Key Points

• The Federal Court of Australia refused to approve class action settlements in Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323 due to the settlement imposing a "significant detriment" on some class members by extinguishing their individual claims or defences, without any benefit in exchange and without adequate notice.
• The decision further highlighted the uncertainty in Australian class actions around the finality of a class action settlement by adding to the debate on whether a settlement bound class members in relation to all of their claims, or only claims that formed part of the common issues.
• The judgment drew attention to conflicts of interest that potentially arise in class actions, including conflicts between registered and non-participating class members' interests and between lawyers' interests in receiving legal fees and class members' interests in minimising those legal costs.