By: Amanda Beattie, Jonathon Ferraro and Madeleine Wright

At a glance

• High Court Decision on GCOs: The High Court ruled that Group Costs Orders (GCOs) issued by the Supreme Court of Victoria (VSC) are not enforceable in other courts, influencing jurisdictional decisions in class actions.
• BlueSky Class Action Challenge: The Court is reviewing whether solicitors can take a commission from class action settlements beyond cost recovery, with potential impacts on class action funding.
• Lendlease Class Action Pending: A key decision is awaited on whether soft class closure orders can be validly made in NSW class actions, following conflicting rulings between state and federal courts.

Introduction

The High Court of Australia (HCA) has recently considered some key questions in the class action space.

In Bogan v The Estate of Peter John Smedley (Deceased) [2025] HCA 7 (Arrium class action) the Court determined that:

• the making of a Group Costs Order (GCO) is a relevant factor to the Supreme Court of Victoria (VSC) when exercising its discretion to transfer proceedings to another court,
• a GCO made by the VSC is incapable of enforcement in another court (but in particular, the Supreme Court of New South Wales (NSWSC)), and
• the Arrium class action should remain in the VSC.

The appeal from Kain v R&B Investments Pty Ltd as trustee for the R&B Pension Fund & Ors (BlueSky class action), was heard in early March in respect of whether the Court has the power to permit a solicitor to take a commission from the settlement proceeds of a class action beyond payments for costs and disbursements incurred.

The reserved decision in Lendlease Corporation Limited & Anor v. David William Pallas and Julie Ann Pallas as trustees for the Pallas Family Superannuation Fund & Anor (Lendlease class action) will clarify the position on soft class closure orders in the NSW Supreme Court.

Judgment in the Arrium class action

Background

The applicants commenced a class action in the Supreme Court of Victoria against four former directors of a formerly ASX-listed company and that company’s former auditor (KPMG). That proceeding involves allegations of contraventions of various Commonwealth laws.

The defendants in the Arrium class action made an application to transfer the proceeding from the VSC to the NSWSC. Given the importance of the issue, Dixon J reserved them for consideration by the Court of Appeal. The Court of Appeal decided that:

• the GCO would not remain in force in the Supreme Court of New South Wales in the event of the class action proceeding’s transfer,
• that this absence was a relevant factor to consider in the determination of the transfer application, and
• that the class action proceeding should not be transferred.

Before the making of orders in the Court of Appeal, the proceeding was removed from the Court of Appeal into the HCA. The issues before the HCA were:

• whether the provision of the of the Corporations Act concerning the transfer of proceedings (s.1337P(2)) would operate to give the GCO force and effect were the Arrium class action transferred to the NSWSC. That section provides that where a proceeding is transferred the Court must deal with it as if steps taken in the other Court had been taken in this Court – i.e. in this case, as if the GCO was made in the NSWSC, and
• should the proceedings be transferred from VSC to NSWSC having regard to the interests of justice?

Can GCOs travel?

The majority (constituted by Gageler CJ, Gordon, Gleeson, Jagot and Beech-Jones JJ)¹ held that GCOs cannot be treated as if they were orders made in the NSWSC.

In arriving at their conclusion, the majority held that:

• section 1337P(2) of the Corporations Act is not a conferral of power on the transferee court but a legislative direction as to how that court is to deal with the proceeding that has been transferred,²
• the legislative direction in section 1337P(2) operates through the creation of a statutory fiction suggested by the expression “as if”,³
• the fiction created by s 1337P(2), like any other statutory fiction, “cannot be taken to have a legal operation beyond that required to achieve the object of its enactment”,⁴
• the object of s 1337P(2) is to prevent the transferee court needing to retake steps which had already been taken and steps which the transferee court might have taken had the proceeding been instituted in the transferee court, and
• Adopting the so-called “plain meaning” interpretation would require the NSWSC to treat the GCO made in the Arrium class action as if it had been an order made by the NSWSC despite such an order being prohibited by section 181 of the Civil Procedure Act 2005 (NSW).

The majority went on to say that, on the proper construction of section 1337P(2), the “steps taken” are limited to orders of a nature that the transferee court has power to make.

The interests of justice

The majority upheld the Court of Appeal’s decision that the making of the GCO weighed decisively against the transfer being in the interests of justice,⁵

The majority held that:

• the provision dealing with the power to transfer proceedings⁶ confers a discretion on the transferor court,⁷
• the discretion requires the transferor court to engage in an assessment of whether the proposed transferee court is “more appropriate” having regard to the interests of justice and the mandatory considerations,⁸
• the requirement to “have regard” requires the court to consider the interests of justice and treat them as a fundamental element in the exercise of its discretion – that is to say, the requirement does not confine the considerations,⁹ and
• there is a “probability” that the Funder will not continue to fund the Arrium class action absent a GCO.

Dissent

Justice Steward agreed with the majority that the GCO would be incapable of enforcement in another court. However, his Honour otherwise respectfully disagreed that the proceeding should not be transferred to the NSWSC. In his reasons for concluding that it was in the interests of justice for the proceeding to be transferred from the VSC to the NSWSC, Steward J stated, among other things:

• the risk of stultification was a conclusion that favoured the interests of the representative plaintiffs only and should not have been reached,
• forum shopping is an evil – where a connecting factor is an advantage for one party which is offered in only one forum (and not the other), it would ordinarily be in the “interests of justice” that this factor be set aside from consideration – this is because what is an advantage to one party may well be an equivalent disadvantage to the other, and
• this is:
  • not a case where the plaintiffs cannot obtain justice in New South Wales,
  • not a case where there are any other factors in play that might tilt the balance in favour of Victoria,
  • not a case where any person has been physically injured, nor is it a case where the plaintiff is suffering from a terminal illness,
  • a class action which alleges misleading and deceptive conduct concerning a capital raising and the contents of financial statements – if the group members are successful, the solicitors will become entitled to 40% of the amount of any award or settlement that may be recovered, and
  • nothing less than an investment from which the solicitors and funder seek to profit – this vivid commercialisation of class actions should be steadily borne in mind when addressing the more noble issue of access to justice.

Judgments to watch for

Blue Sky class action

Earlier this month, the High Court heard oral arguments in relation to a challenge to a decision of the Full Federal Court that found the Court has the power to permit a solicitor to take a commission from the settlement proceeds of a class action beyond payments for costs and disbursements incurred, known as a Solicitors’ CFO.

In their oral arguments and written submissions, the Appellants, directors of Blue Sky Alternative Investments and auditor EY, argued before the High Court that the making of a Solicitors’ CFO is not compatible with the purpose and context of Part IVA of the Federal Court of Australia Act 1976 (the Act), being the provisions relating to class actions. Their arguments argued, broadly, that:

• The Legal Profession Uniform Law (NSW) prohibits an amount payable to a solicitor being calculated by reference to any award or settlement,
• Solicitors’ CFO’s compromise a solicitor’s professional independence and conflicts with their duty to the court, and
• The permitting of Solicitors’ CFO’s is a matter best addressed by the legislature.

The First and Second respondents argued that there exists no impediment to a court making a Solicitors’ CFOs and contended that:

• The basis for the making of a Solicitors’ CFO is supported by the text of ss 33V and 33Z of the Act, as well as the object and context of Part IVA, and that these sections should not be read down by provisions of State and Territory statutes that govern what solicitors can and cannot do, and
• Any potential conflicts that may arise as a result of a Solicitors’ CFO can be properly managed by, for example, obtaining fully informed consent. The possibility of conflicts does not preclude a Solicitors’ CFO from being a “just” order.

The Court reserved its judgment. The decision will clarify one of the key issues in the class action funding space and may have implications on the preferred forum for the filing of class action suits.

Lendlease class action

The HCA is also reserved in this matter, following the hearing in November 2024. The issue under consideration in this case is whether soft class closure orders can validly be made in class actions filed in the NSW Supreme Court. It followed the Court of Appeal decision in April 2024, which found that they were beyond the power of the Court, despite the Federal Court confirming its position to the contrary.¹⁰

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