class actions

In March 1992, Part IVA of the Federal Court of Australia Act 1976 (Cth), introduced a federal class action regime.

“The new procedure will enhance access to justice, reduce the costs of proceedings and promote efficiency in the use of court resources.... Such a procedure is needed for two purposes. The first is to provide a real remedy where, although many people are affected and the total amount at issue is significant, each person’s loss is small and not economically viable to recover in individual actions. It will thus give access to the courts to those in the community who have been effectively denied justice because of the high cost of taking action....

The second purpose of the Bill is to deal with the situation where the damages sought by each claimant are large enough to justify individual actions and a large number of persons wish to sue the respondent. The new procedure will mean that groups of persons, whether they be shareholders or investors, or people pursuing consumer claims, will be able to obtain redress and so more cheaply and efficiently than would be the case with individual actions."

Honorable Michael J. Duffy.

Almost 30 years later, there is no doubt that class actions are an entrenched element of class action proceedings, and that the class action sector is growing and diversifying. 

WHAT IS A CLASS ACTION?

Legal proceeding in which one person (Lead Applicant) brings a claim on behalf of a wider group of people who have been affected in a similar way or by the same conduct.  

 

The "group member definition" is a precise statement of the criteria that individuals need to satisfy in order to participate in the action. 

CLASS ACTIONS PROVIDE ACCESS TO JUSTICE WHERE THERE IS:

 

  1. A group of people with small claims whose number may be such as to make the total amount at issue significant

  2. To deal efficiently with similar individual claims that are large enough to justify individual actions. 

From a consumer and small business perspective, there are significant advantages in collective redress both in terms of availability, costs and speed of obtaining a remedy when compared to private litigation.

 

Further, the current enforcement settings in Australia have been shown to be deficient. The Banking Royal Commission has highlighted the need for systemic reform of law enforcement in the financial sector. There is no doubt that business as usual is not an option.

ENTER LITIGATION FUNDERS....

LITIGATION FUNDING FOR CLASS ACTIONS - INVESTMENT WITH A POSITIVE SOCIAL IMPACT

 

From a consumer and small business perspective, there are significant advantages in collective redress both in terms of availability, costs and speed of obtaining a remedy when compared to private litigation.

Moreover, the current enforcement settings in Australia have been shown to be deficient. The Banking Royal Commission has highlighted the need for systemic reform of law enforcement in the financial sector. There is no doubt that business as usual is not an option. 

LITIGATION FUNDERS HAVE SKIN IN THE GAME

Litigation funders undertake extensive due diligence before deciding to fund a case and only back winners i.e. litigation with good prospects of success. Funders risk millions of dollars on the outcome of proceedings as they only recover their costs if the action succeeds. 

LITIGATION FUNDING INDUSTRY STATS:

Growth forecast at an annualised 7.8% over the five years through to 2022-2023. 

2013 – 2016: funded actions were 49 % of all filed class actions. 
 

2016 – 2018: Funded class actions were 63.9% of all filed class actions.

Funded actions in 2018 period constitute 77.7% of all filed class actions. 

Number of domestic and international funders operating in the Australian market has grown steadily with approximately 25 funders active in the Australian market. 

REGULATION OF LITIGATION FUNDERS 

 

Corporations Regulation stipulates that that terms of the are consistent with Division 2 of the Corporations Regulation.

  1. If funders do not wish to comply with Division 2 of the Corporation Regulation, they must hold an Australian Financial Services Licence (“AFSL”). 

  2. ASIC has supplemented the Corporations Regulations with a regulatory guide to the processes that a litigation funder must implement in order to prevent conflicts of interest (this​​ is why you will receive a Conflicts Disclosure Statement as part of your pack of funding documents).

  3. Proceedings must not disproportionately benefit the funder and solicitors, rather than the litigants. 

 

In determining the appropriateness of the funding commission rate, courts consider the following:

  1. The funding agreement acceptance rate of group members and the proportionate acceptance by sophisticated investors;

  2. A comparison of the funding commission rate as against other rates in both Australian and foreign markets;

  3. How the rate under the common fund order compared to the rate recoverable under the funding agreement;

  4. The litigation risks of providing funding in the proceeding and the stage of the proceedings at which those risks were assumed;

  5. The legal costs expended by the funder: 1.​ the proportionality of the commission to be received by the litigation funder as against the amount received by the group members; and 2. whether group members had ample and fair opportunity to opt-out of the proceeding, or to notify their objections to the common fund application and proposed funding arrangements.

  6. There is a great deal of complexity involved in determining an appropriate funding rate and it will vary on a case-by-case basis. 

 

The funder must establish that the proposed return represents a fair and reasonable return given the risks assumed by the funder.

Level 3, 162 Goulburn Street, Sydney 2010

02 8267 9499

contact@classpr.com.au

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