By: Amanda Beattie and Dylan O’Keefe

R&B Investments Pty Ltd (Trustee) v Blue Sky Alternative Investments Limited (Administrators Appointed) (in liq) (Reserved Question) [2023] FCA 1499

The Federal Court has this week reserved a question to be determined by the Full Court as to whether the Court has the power to grant a CFO in favour of a solicitor at the conclusion of a class action.

The reserved question is formulated as follows:

Is it a licit exercise of power, pursuant to statutory powers conferred within Pt IVA of the Federal Court of Australia Act 1976 (Cth), or otherwise, for the Court, upon the settlement or judgment of a representative proceeding, to make an order (being a “common fund order”, as that term is defined in Davaria Pty Ltd v 7-Eleven Stores Pty Ltd [2020] FCAFC 183; (2020) 281 FCR 501 at [19], [22]–[30]) which would provide for the distribution of funds or other property to a solicitor otherwise than as payment for costs and disbursements incurred in relation to the conduct of the proceeding?

The question arose in the context of proposed opt-out notices to group members in the Blue Sky class action, in which the funding mechanisms of the action are to be set out. In reserving the question, Lee J stated that “Group members are entitled to know as much as they can reasonably know as to the matters which may inform their decision to opt out of the proceeding. In this regard, clarity as to the amount which is proposed to be deducted from any settlement or judgment sum is obviously an important consideration.”

Justice Lee has directed the parties to the proceeding who wish to take an active role in relation to the reserved question to provide the Court with their availability in the May 2024 Full Court sitting period. Assuming the question is heard in May, we anticipate a decision would be delivered sometime in the second half of 2024.

This follows the recent decision of the Full Federal Court in the McDonald’s class action, again from a question reserved by Lee J, which unanimously confirmed that the Court has power under s 33V(2) of the Federal Court of Australia Act 1976 to grant settlement CFOs in favour of litigation funders (see our article here for more).

The decision will be closely watched by class action plaintiff firms and, although different, may provide some alternative to the Group Costs Order regime, which is presently exclusive to the Supreme Court of Victoria.