Class action crack down looms
The Coalition wants to crack down on litigation funders who bankroll class action lawsuits.
Attorney-General Christian Porter says litigation funders sometimes take up to 30 per cent of any final legal settlement.
This leaves members of class actions to fight over whatever is left after legal fees and costs are paid.
“This industry is demonstrating outcomes that cannot be said to be consistent with the interests of justice of the litigants,” he told parliament this week.
A coalition-led parliamentary inquiry is being created to examine the impact of class actions on businesses hit by COVID-19.
It will investigate the relationship between litigation funders and lawyers acting for class action members, and review any impacts of a Victorian plan to allow lawyers to charge contingency fees.
Mr Porter says the number of class actions has tripled over the past decade, but points out that median returns to members are only 51 per cent when litigation funders are involved.
Without litigation funders, the median return is about 85 per cent.
Shadow Attorney-General Mark Dreyfus said the inquiry is an attempt by the government to protect its big business mates.
“The biggest source of new class action cases in 2019 came from consumer actions arising from the banking royal commission,” Mr Dreyfus told parliament.
“The same royal commission that the government voted against 26 times.”
He said class action suits are a vital path to justice for many Australians.
Mr Dreyfus also pointed to a 2018 Australian Law Reform Commission report on litigation funding, which the government has largely ignored.
“And why? Because that independent report ... didn't give the government the answers that it wanted,” he said.
Pharmaceutical giant Johnson & Johnson and two affiliated companies were ordered to pay $2.6 million in damages to three women at the centre of a class action on faulty pelvic mesh implants earlier this year.
The federal government has also been ordered to pay $212.5 million to settle three class actions over toxic firefighting contamination.
Victims of the government's robodebt scheme are now signing up to a class action, and there is speculation that the government’s newly-announced probe is an attempt to cut off this legal attack.
The Australian Industry Group has welcomed the new probe.
“The inquiry needs to investigate the outrageous levels of returns that litigation funders (many of which are overseas firms) are receiving,” chief executive Innes Willox said.