Federal court allows late opt-out in cladding class action

In a significant decision for parties involved in representative proceedings, the Federal Court has allowed a developer to opt out of a class action four years after the formal deadline had passed. The case reinforces the Court’s discretionary powers and highlights the importance of procedural flexibility in complex commercial litigation.

The Owners – Strata Plan 872321 v 3A Composites GmbH (No 9) [2025] FCA 1108

In a noteworthy decision for parties involved in representative proceedings, the Federal Court of Australia has granted a developer, Tiptell Pty Ltd, leave to opt out of a class action four years after the formal deadline had passed. The ruling, delivered by Justice Anderson, underscores the Court’s discretionary powers under section 33J(3) and/or section 33ZF of the Federal Court of Australia Act 1976 (Cth) and affirms the importance of procedural flexibility in complex commercial litigation.

Hamilton Locke acted for the successful developer in the proceedings.

Need to know:

• The decision reinforces the Court’s broad discretionary powers under sections 33J(3) or 33ZF to allow a late opt-out in a representative proceeding, even when evidence had closed and judgment was pending.
• The late application was accepted because it was made in good faith, with the delay adequately explained by the developer not being made aware of the dramatic increase in the plaintiff’s claim quantum and evidence until long after the opt-out date.
• The Court found the late opt-out was necessary to prevent prejudice to the developer, who faced a $15,000,000 claim and risked being unable to prosecute cross-claims and recover liability if forced to remain in the class action.

Background

The class action concerned alleged defects in cladding products supplied by 3A Composites GmbH and supplied by Halifax Vogel Group, used in various residential strata developments. Hamilton Locke’s client –- a developer and likely a group member as a result – sought to opt out of the proceedings to pursue a separate claim in the Supreme Court of New South Wales, citing contractual and factual circumstances, including the risk of different findings of facts and law in circumstances where the developer faced a claim relating for that cladding in the Supreme Court exceeding $15,000,000.

Of note, in addition to being four years after the opt-out period for the class action, at the time of the application to opt out, evidence had closed in the class action proceedings with judgement pending.

Legal basis for the application

Acting on behalf of the developer, it was submitted that:

1. The client had a bona fide interest in pursuing independent litigation;
2. The delay in opting out was due to the lateness which evidence had been served in the Supreme Court proceedings by the plaintiff that dramatically increased the quantum of its claim relating to the cladding, rather than because of any neglect or strategic delay; and
3. The extension of the opt-out period for Tiptell would not prejudice the respondent or disrupt the broader management of the class action.

This was a test case as to the operation of section 33ZF, which empowers the Court to make any order it thinks just in determining a matter in a representative proceeding – even in circumstances where evidence in a class action had closed pending judgement.

Court’s findings

Justice Anderson accepted the legal principle that “allowing late opt-outs is the exception rather than the rule” [56], citing Justice Matthews in Fuller v Allianz Australia Insurance Ltd [2025] VSC 160.

In considering whether Hamilton Locke’s case warranted an exercise of the Court’s discretion to allow a late opt-out, Justice Anderson accepted our submissions, finding that:

1. The developer’s application was made in good faith;
2. The developer “has explained adequately the reason why this application was made so late” [101], including that the extent of the plaintiff’s claim and evidence was not made known to the developer until long after the last date of opt-out;
3. The developer “may be prejudiced by the real prospect that it is unable to prosecute” [106] cross claims against it, resulting in exposure to liability that it was precluded from recovering from other defendants;
4. The opt-out would not adversely affect other group members or the respondent; and
5. Ultimately, that the circumstances justified the exercise of discretion under section 33J(3) or section 33ZF.

The Court granted the extension, allowing our client to formally exit the class action and proceed independently.

Implications for developers

This decision reinforces the principle that representative proceedings must remain adaptable to individual circumstances. It highlights the importance of early legal advice for entities drawn into class actions, particularly where their interests diverge from the broader group.

For developers and other commercial parties, the ruling confirms that:

• The Federal Court can allow late opt-outs where justified by fairness and good faith.
• Early and proactive legal advice is essential when facing potential exposure in class actions.
• Strategic litigation choices remain available even after proceedings have progressed significantly.

Hamilton Locke’s approach in seeking the opt-out was vindicated based on the timing evidence that had been served by the plaintiff in the Supreme Court proceeding.

What’s next?

A decision in the class action is imminent and will have ramifications for many developers and builders – including those impacted by the retrospective cladding ban. Tiptell, meanwhile, will pursue Halifax Vogel Group as part of its Supreme Court proceedings.

If you’re a developer or builder facing a claim relating to combustible cladding, please contact Veno Panicker, Partner at Hamilton Locke.