The High Court of Australia has handed down a significant decision in Lendlease Corporation Limited v Pallas [2025] HCA 19 (Lendlease Class Action), determining that the court has the power to make soft class closure orders.
The background
The Lendlease Class Action was commenced in the Supreme Court of New South Wales on behalf of group members who held shares in Lendlease during the period 17 October 2017 to 8 November 2018 (Relevant Period). It is alleged that, during the Relevant Period, Lendlease engaged in misleading or deceptive conduct and breached its continuous disclosure obligations, resulting in loss and damage suffered by the group members.
Lendlease has effectively sought a 'soft class closure order' from the court pursuant to sections 175(1) and (5), and section 171(1) of the Civil Procedure Act 2005 (NSW) (CPA). Soft class closure orders encourage group members to register their participation in a class action for the purpose of entering into settlement negotiations. If no settlement occurs, then the class reopens.
There has been a divergence in position regarding whether the courts have the power to issue a soft class closure order in decisions handed down in New South Wales, Victoria and the Federal Court. The issue came under scrutiny following the 2020 New South Wales decisions in Haselhurst v Toyota Motor Corporation Australia Ltd (Haselhurst)1 and Wigmans v AMP Ltd (AMP)2. In Haselhurst, the NSW Court of Appeal determined that the Supreme Court of New South Wales did not have power under section 183 of the CPA to make soft class closure orders in anticipation of settlement negotiations. While in AMP, the Court of Appeal determined that the Supreme Court of New South Wales did not have power to make soft class closure orders for settlement under section 175(5) of the CPA.
In Parkin v Boral Ltd (Boral)3, the Full Court of the Federal Court found that the decision in AMP was 'plainly wrong'4 and, in that case, determined that the court had the power to make soft class closure orders under section 33X(5) of the Federal Court of Australia Act 1976 (Cth) (FCA), being the equivalent of section 175 of the CPA.
Section 175(5) of the CPA and section 33X(5) FCA are in identical terms, providing that at any stage, the court may order that notice of any matter be given to a group member or group members. Therefore, up until now, there was a direct inconsistency in the approach taken by the New South Wales Court of Appeal and the Full Court of the Federal Court. Victoria, by contrast, is able to avoid this issue entirely, as section 33ZG of the Supreme Court Act 1986 (VIC) expressly provides the court the power to make a class closure order.
NSW Court of Appeal Decision
Last year, the Court of Appeal in the Lendlease Class Action was not persuaded by the reasonings in Boral, preferring to uphold the decision in AMP, namely that the Supreme Court of New South Wales did not have power to make soft class closure orders.
High Court Decision
The High Court has now determined, and put beyond doubt, that the NSW Courts have the power to make soft class closure orders, overturning the Court of Appeal’s decision. The High Court relevantly concluded that:
- The Court of Appeal 'too narrowly' construed the statutory powers in Part 10 of the CPA. The power in section 175(5) of the CPA in particular, should be 'construed as liberally as its expansive language permits'.5
- In response to the Court of Appeal’s concern that soft class closure would require group members to 'opt in' to a class action, the High Court considered that encouraging group members to register their participation in a class action for the purpose of facilitating effective settlement negotiations does not transform an ‘opt out’ scheme into an ‘opt in’ scheme. A soft class closure does not require group members to opt out or register their participation. Rather, it is intended to inform group members that if they do neither, Lendlease will likely seek an order to bind those group members by the settlement.
- In contrast to Haselhurst, a soft class closure order does not impermissibly usurp any part of the Supreme Court’s function under section 173 of the CPA. A soft class closure order does not prevent the Supreme Court from approving, or not approving, a settlement under section 173.
- In response to the Court of Appeal’s reasoning that soft class closure orders caused insoluble conflicts of interest, the High Court (in agreement with the decision in Boral), considered that a possible future conflict of interest does not preclude the Supreme Court from having the power to make soft class closure orders. Conflicts of this kind will often feature in a class action and that such concern, in any event, is premature.
Implications
Settlement
The High Court’s decision confirming that the court has power to make soft class closure orders will help parties participate in meaningful settlement negotiations at an earlier stage in proceedings, with the potential consequence of allowing the parties to avoid incurring (or at least containing) the significant legal costs and disbursements associated with protracted class action litigation.
For the plaintiffs and their representatives, soft class closure orders allow the plaintiffs to better estimate the number of group members and the quantum claimed with a reasonable degree of accuracy. This will improve the prospects of any settlement being approved by the court, and will assist the court in determining orders for the payment or distribution of the settlement amount.
Litigation funders will likely view the court’s decision favourably, as it will make it easier for settlement negotiations to be undertaken at an earlier opportunity than otherwise might be the case, and will increase the prospect of any settlement agreement reached being approved.
For defendants and their insurers, the High Court’s decision brings some certainty to an area which had been the topic of competing jurisprudence. Soft class closure orders will allow defendants to better estimate their total potential liability to group members, as well as any potential liability to those who opt out of the proceedings in order to preserve their own cause of action against the defendants. Being able to better understand the quantum claimed and settlement amounts will be critical for insurers to set accurate early reserves.
Whether the decision makes the NSW Courts a more attractive proposition for class action lawyers and litigation funders remains to be seen.
Jurisdictional Consistency
The High Court’s decision resolves the direct inconsistency between New South Wales and other jurisdictions where the class action regime exists. From 2020, there have been procedural delays in class actions proceedings due to the uncertainties as to whether the Supreme Court and the Federal Court had the ability to make soft class closure orders. Addressing such uncertainties will no doubt assist parties in advancing the class action proceedings more efficiently going forward.
1 Haselhurst v Toyota Motor Corporation Australia Ltd (2020) 101 NSWLR 890
2 Wigmans v AMP Ltd (2020) 102 NSWLR 199
3 Parkin v Boral Limited (Class Closure) [2022] FCAFC 47 (28 March 2022)
4 Pallas v Lendlease Corporation Ltd (2024) 114 NSWLR 81 at 107-113 [94]-[123], 113 [127], 116 [138], 116 [139], 116‑120 [141]-[159], 120 [160]
5 Lendlease Corporation Limited v Pallas [2025] HCA 19 at para 40
