The ups and downs of class action settlements

Last updated on July 10th, 2025

Class action settlements aren’t just about the eye-popping dollar figures you see in the headlines - they’re a powerful way for individuals to join forces and seek justice together.

Even when settlements aren’t in the multi-million-dollar range, they can still deliver meaningful change and hold companies accountable.

There are class actions that are unsuccessful, or where the parties to that action walk away with a tiny percentage of the final payout. In most cases though, you need to register or you risk missing out entirely.

If you’re part of legal proceedings, it is important that you have some understanding of class actions, as well as how class action settlements work.

Deciding class action settlements

Settlements can happen at any time after a class action has begun but must be made with the approval of the relevant court.

Those involved in the class action – the representative plaintiff or lead plaintiff and the defendant and their respective lawyers – are encouraged to try to resolve the claim through negotiation. This helps reduce the cost, as well as the waiting time for all parties.

 

 

The court may even order the legal representatives to mediation with an independent mediator. This usually happens after all evidence has been presented and parties to the claim can evaluate the strength or weakness of the case. If settlement cannot be reached at this stage, the class action will go to trial.

Any settlement must be agreed by all parties. If the class action is backed by a litigation funder, as is often the case due to the cost of running the proceedings, the funder also has a right to say whether they believe the settlement is appropriate.

If you are a group member of a class action, you will not have a say in these discussions, but you will be notified about the settlement. The court-approved notice will outline the terms of the settlement, how it will affect group members and give details about how, and when, to lodge an objection or make a submission.

After the deadline to lodge objections has passed, the court will hold a hearing to decide whether to approve the proposed settlement. Whether the class action settlement is reached before the case goes to trial or after, it is the court that decides whether the amount is fair and reasonable for all parties. The court also determines any deductions from the settlement fund, such as legal fees and payments to the litigation funder.

How class action settlements work

If a class action settlement is unsuccessful, you will not receive anything. The court can order the representative plaintiff to pay costs but as this is generally underwritten by the law firm on a “no-win, no-fee" basis, or a litigation funder. This means that the representative plaintiff will not be out of pocket.

If a class action goes to trial, it can take many months to complete as the cases are often complex and a lot of evidence may need to be examined. The trial will provide answers to the common questions that apply to all group members, building a picture for a settlement amount.

Class actions in Australia are generally “opt out”. This means that when a class action is commenced, everyone who meets the definition of the class is automatically included in the class action, unless they choose to opt out by a date set by the Court. If you have not elected to “opt out”, as required in class actions in Australia, you will be bound by any decision.

If a settlement is unsuccessful, it can be appealed. However, the litigation funder involved may decide it is not worth the risk. The legal firm could find another funder if they still believe there is a strong chance of success on appeal.

 

 

Class action payouts

If settlement is reached, either by a court-approved settlement or judgement, it may still be some time before you see any money. The defendant can appeal the decision, or the amount awarded in damages. Similarly, the plaintiff and their legal advisers and/or litigation funders may decide to appeal the settlement amount.

In the case of the marathon Ford PowerShift class action, the legal proceedings have dragged on since 2016, with Ford Australia lodging multiple appeals after the original Federal Court judge found in favour of the lead plaintiff. Damages have now been awarded to the plaintiff, with the legal team asking all Ford owners with certain model cars to register their interest in the class action.

According to King & Wood Mallesons’ annual review of class actions in Australia, more class actions proceeded to judgement and/or appeal in the year to 30 June 2024 than in previous years.

The court will generally appoint an administrator for class action settlement distribution, which could be the legal team or an independent third party such as an accounting firm with appropriate experience in class actions. They will pay any fees as outlined by the court first before dividing the rest among the group members.

There have been many successful class action settlements since they were introduced in Australia more than 30 years ago. The Mallesons’ review found there were at least 20 settlements in the year to 30 June 2024, with $600 million in settlement funds and another $1 billion in class action settlements waiting court approval.

 

 

That sounds like a lot of money, but you only get a percentage of what is left after legal costs have been deducted, and the rest is not divided evenly. If you are the lead plaintiff or representative party, you could receive a substantial payout. This is generally an acknowledgement of the time and energy of taking a leading role in proceedings. If you are a group member, on the other hand, the amounts can be small as it depends on the final settlement amount and how many other people have been impacted.

How we can help

Consumer class actions have been the leading category for class actions in Australia for the past five years, with everything from financial products – such as the extended warranties, or “junk insurance”, that Handle My Complaint CEO Jo Ucukalo has long been raising awareness about – to defective goods coming before the courts.

If you are experiencing an issue that could be affecting other Australians, make a complaint with us. Our system enables us to track common complaints and identify patterns that could help build a strong case for a class action. We’re always here to help.