What you need to know
- A class action can only commence when the group is defined and passes through the "gateway" provisions in the statutory regime, which among other things require that the class must have seven or more members.
- But what happens if you identify a mistake in the group definition with the result that the class has no members? This issue was considered by the Federal Court of Australia in the Dollarama class action.
- If a proceeding has not satisfied the "gateway" requirements, the group member definition can later be amended to redefine the group and become a representative proceeding.
- But that is just moving forward: the court can't backdate the class to the original filing date to avoid limitations consequences for group members.
Background to Cannan v Dollarama Australia Pty Limited [2026] FCAFC 41
The Dollarama class action claims that store managers were underpaid.
The original pleadings defined the class with reference to managers to whom the General Retail Industry Award applied. However, it was determined that the Award did not apply to any managers: an Enterprise Agreement did. The result was an empty class; the original group member definition did not capture anybody.
The applicant sought to file amended pleadings redefining the class with reference to the Enterprise Agreement, with effect from the original filing date. The time at which the amendments took effect was key, as it impacted whether claims were barred by limitation periods.
If the threshold isn't crossed, then there is no class action in the first place
Section 33C of the Federal Court of Australia Act sets out the requirements to commence a class action. In broad terms, these include that there be seven or more persons with claims against the same person which arise out of similar or related circumstances and give rise to a substantial common issue.
The Full Court in this judgment said that if those conditions are not satisfied, then the class action provisions in Part IVA do not apply, and a class action proceeding has not been commenced.
That was the case here. There was not simply an inadequacy of the formulation of pleadings, there was no class action.
Proceedings that don't start as a class action can be "transmogrified" into one
The Court first considered whether it was within their power to allow for an amendment to pleadings in a class action where Pt IVA was not satisfied. Lee J found at [66] that 'the Court possesses a wide procedural discretion to permit amendments to originating process and pleadings where it is appropriate to do so in the interests of justice.' This remains so even if statutory requirements for constituting a class action were not satisfied.
The Full Court did not accept an argument that proceedings need to originate as a "Pt IVA proceeding" (i.e. a class action) and were unable to be converted into one. The Court found that the ordinary amendment powers allowed a statement of claim to be amended to then satisfy the "gateway" requirements of Pt IVA. But it is only when the amended pleadings which satisfy the statutory requirements are filed that the proceeding becomes a class action.
But that does not result in a backdated class action
The applicant sought for the amended pleadings to take effect from the original commencement of the proceeding rather than when the amended pleadings were filed.
The consensus across the court was that this was not possible in circumstances where no class action had been effectively commenced when the proceeding first began. It was found that it was only when the amended pleadings were filed - and the requirements of Pt IVA satisfied - that the Court had before it a class action proceeding, and so the only proper date for the amendment to take effect from was the date of amendment when the 33C requirement was satisfied and the class effectively constituted.
The limitation period for any class action claim tolls from the date of filing a validly constituted class action. In Dollarama, because there was an "empty" class in the original proceeding, the limitation period was only suspended when the class action commenced.
Changing the group member definition where a class action had been validly commenced
Had the class action been validly commenced when the proceeding was first filed, there would have been discretionary power to "relate back" the effective date of the amendments. Lee J provided guidance as to the usual factors that guide that discretionary power. That determination requires an assessment of the nature of the changes sought to be made, the position of the opposing party, the significance of the delay, whether other parties otherwise had fair notice of the claims later sought to be pursued and whether there is any demonstrated injustice from a refusal to relate back those amendments.
However, there have been a number of cases to the effect that changes to the group member definition (i.e. to add new group members) only take effect from the date the changes were made including in a medical devices class action, an automotive defects class action, an Aboriginal land rights class action, a taxi and hire car class action and, most recently, in a shareholder class action.
Defining the class – group membership based on a legal or factual issue in contest
While not a central issue in this case, Lee J went on to emphasise that group membership definition based on a contested legal or factual criterion can create avoidable difficulties. His Honour said that a better course is to define group members by objective factual criteria, although did not appear to be saying that defining group members by reference to a legally contestable issue collapses the representative group definition (so long as the requirements in s 33C are satisfied at the time of commencement).
A common example is where an element of the definition is that group members suffered loss as a result of certain conduct. Defined in this way, the true membership of the class cannot be known until judgment because a group member who is found not to have suffered loss would not be a group member who brought a claim.
His Honour considered it better for a class to be defined by reference to people who allege they suffered loss or damage by the impugned conduct.
It will be interesting to see how applicants respond to His Honour's guidance. In particular, there can be a concern that a requirement in the definition that group members "allege" they suffered loss gives rise to a question of whether that requires them to take a positive step of making an allegation, and if so whether that had to be done at the time the pleading is filed.
Relevance for companies
- The Full Federal Court decision in Cannan v Dollarama has clarified the implications where a class action's group member definition has no members.
- The problem can be fixed by later amendment of the group definition.
- Limitation periods will continue to run until a class action is validly constituted, and claims may therefore be statute barred until a class action is constituted by a group definition that meets the gateway requirements.
- Any questions concerning the group member definition should be resolved at the earliest opportunity, and importantly before settlement.
Authors: Ian Bolster, Partner; Andrea Sneddon, Counsel and Rosa Hood, Lawyer.
