The International Legal Finance Association has slammed the Morrison government’s proposed class action reforms, saying Australians were “systematically being stripped of their ability” to obtain relief through class actions by a “wish list of procedural hurdles” that would make the lawsuits unviable.
In submissions published on Thursday, ILFA criticised the draft reforms, announced last week, which would cap the amount available to funders and lawyers at 30 per cent and could bar common fund orders from class actions.
“There is a clear and alarming trend in the recent approach to the regulation of the funding and prosecution of Australian class actions: barriers will be implemented by any means necessary to make it harder for everyday Australians to seek redress in court,” the association wrote.
Members of ILFA include Calunius Capital LLP, Woodsford Litigation Funding, Burford Capital, Harbour Litigation Funding, Longford Capital, D. E. Shaw & Co., Law Finance Group, Omni Bridgeway and Therium.
‘A wish list of procedural hurdles’
ILFA noted that none of the proposed reforms had been sought by Australian consumers behind class actions, and said the draft legislation was tailored to the needs of large corporations.
“The sheer scope of the proposed additional regulatory requirements in the draft bill reads like a wish list of procedural hurdles compiled by large institutions, and those who advocate for their interests, to cut off the funding of class actions and make class actions more costly and protracted.”
The proposed regulations would interfere with an individual’s right to form contracts with others, alter the jurisdiction of Australian courts, and “impose hurdles and significant costs” associated with running class actions as managed investment schemes, enforcing and varying funding agreements, and “creating confusion” around bookbuilding and common fund orders.
“[Major] corporate and insurance industry interests, led by interest groups (including foreign interest groups), have been lobbying relentlessly for more and more regulation that would only add delay and expense to the Australian legal system. In that light, there is no doubt that this proposed regulation — driven as it is by lobbying interests — is in fact not in the best interests of all Australians.”
‘Overboard’ regulations will make class actions unviable
The government’s reformshave been proposed absent evidence that they would benefit class action claimants, such as consumers, who had suffered harm but did not have the financial means to launch a lawsuit on their own, ILFA said.
“Those pushing for these overbroad regulations are well-aware that a cap will reduce both the number of Australian class actions that are filed; and the amounts that defendants need to pay to settle those that do proceed.
“By contrast, there has been extensive evidence submitted by stakeholders which demonstrates that the imposition of a 30 per cent cap on the legal fees and funding fees in class actions would actually have the opposite effect — that being of eliminating funding and making many types of class actions economically unviable.”
A report by PricewaterhouseCoopers in March this year found that imposing a statutory minimum on the return to group members would mean that 36 per cent of class actions which have already run would have been unviable and a further 91 per cent of cases would have been “adversely impacted”, the association said.
ILFA said that the reforms also intended to “ram through” a suite of other proposals which “have clearly never been properly considered and/or subject to any cost/benefit analysis” and would only create additional costs and delay for class action proceedings if passed.
“[The] current proposal is filled with ambiguities and contradictions that will only invite satellite litigation, delay, and increase the costs associated with bringing class actions within the Australian legal system.”
These submissions mirror those made by leading barristers Lachlan Armstrong QC and Dr Peter Cashman who criticised the “awkward” draft legislation and warned of the abandonment of open class actions.
No meaningful consultation with weeklong submission period, ILFA says
ILFA also slammed the one-week consultation period for submissions on the draft bill, saying the limited scope for responses confirmed the government’s agenda.
“The seven-day consultation period for this bill confirms that those who are pushing for these regulations do not want to engage in any meaningful consultation about, or provide evidence in support of, these proposed regulations and whether they will benefit the Australian legal system.
“That should tell Australians all they need to know about this proposal: the objective is to cut off funding of Australian class actions and create procedural hurdles, red tape and costs that make all class actions harder, longer, and costlier to run against large institutions.
“It would be unwise for Australians, whom the class action regime is supposed to protect, in their capacity as employees, consumers, shareholders and citizens, to think this proposal is in their best interests.”
ILFA called on the government to “hit pause” on the proposed legislation, saying it was not evidence-based, would not have its intended result, and was not in the best interests of everyday Australians.
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