The inquiry’s first witness, 25-year old James Mathias, chief of staff at MRC, spoke of a “scourge” of class actions being launched for the “super profits” of litigation funders.

Labor Senator Deborah O’Neill attacked the credibility of Mathias and MRC’s submissions, which called for radical reforms to the class action regimes, including moving to an opt in regime, saying the submissions cited “completely unsubstantiated data” and misquoted and misrepresented the position of Federal Court Justice Michael Lee.

The mystery of the missing manuscript

MRC’s submissions backed calls for class action reform by citing data found in a Herbert Smith Freehills presentation that group members only received an average of 39 per cent of the total settlement or judgment amount.

The Menzies submission was cited by AMP chief executive Francesco De Ferrari in his recent attack on class actions when speaking before a House committee hearing.

O’Neill noted that none of the other 92 submissions sent to the inquiry had cited this figure and that the source of the statistic and the underlying data were nowhere to be found.

“Did Freehills authorise you to use that 39 per cent figure in your submission? Did you discuss it with them at all?” O’Neill said.

“It’s a public document, Senator,” Mathias replied.

“Are you confident that that’s the case because we have not been able to access it so far,” the senator continued.

“Well the way that I found it, Senator, was not calling them up and asking them for it. I just had the document there,” Mathias said.

Litigation funder Omni Bridgeway, which also questioned HSF on the figure, was advised by the law firm that the figure was drawn from incomplete public information for settlement approvals by courts in 2016 and 2019 and was presented solely for the purposes of a continuing legal education session and was not authorised for use outside the CLE session.

A HSF spokesperson said the figure was not prepared for the inquiry and was not included in the firm’s submission.

“The information was an overview for the purpose of a continuing legal education session rather than an empirical analysis. It was drawn only from public information, which in some cases can be incomplete. It was not prepared for the purposes of the Parliamentary Committee’s Inquiry and was not part of HSF’s submission to the Committee,” the spokesperson said.

Omni Bridgeway said the average rate of return to group members in matters it has funded was 60 per cent.

‘A pretty serious thing to misrepresent a judge’

O’Neill also took Mathias to task about misquoting Justice Lee in MRC’s submissions, which begin with a block quote attributed to Justice Lee which is actually a partial quote from the judge that appeared in a Lawyerly article on the judge’s ex tempore reasons given during the settlement approval hearing in the PFAS class action.

“The phrase ‘access to justice’ is often misused by litigation funders to justify what at bottom is a commercial endeavour to make money out of the conduct of litigation,” MRC’s submissions quote Justice Lee as saying.

However, during the hearing Justice Lee expressed the view that litigation funding had led to a better outcome in the landmark proceedings.

“The reality of these cases, however, is that without litigation funding, the claims of group members would not have been litigated in an adversarial way, but rather the group members would likely have been placed in a situation of being supplicants requesting compensation in circumstances where they would have been the subject of a significant inequality of arms,” the judge said.

“It seems to be a testament to the practical benefits of litigation funding that these claims have been able to be litigated in an efficient and effective way and have produced a settlement,” Justice Lee said.

O’Neill scolded Mathias for misrepresenting Justice Lee’s position.

“So the Menzies Research Centre begins its submissions to a parliamentary inquiry by misquoting a judge of the Federal Court and worse you have taken a misquote from an article that makes it absolutely clear that in Justice Lee’s view, litigation funding led to good outcomes for class members in the PFAS class action matter,” O’Neill said.

“By misquoting and taking Justice Lee completely out of context, Mr Mathias, you have sought to convey the false impression that Justice Lee is opposed to litigation funding. Now that’s a pretty serious thing to misrepresent a judge.”

Mathias “fundamentally rejected” the premise of these statements, saying that Justice Lee had also raised concerns about litigation funding in a keynote speech given at a class action conference hosted by Omni Bridgeway.

“It is rightly a scandal for there to be a situation where group members in a proceedings where there has not been a massive change in prospects are receiving very small returns for the claim in circumstances where legal costs have become extraordinarily large and funding commissions on top of that means that they are recovering very little,” Mathias quoted Justice Lee as saying.

According to a transcript of the conference, Justice Lee immediately followed that remark up with: “Now one hopes that you have practitioners who owe duties to the court that make sure that that doesn’t happen or seek to minimise the prospect of that happening. And I’m sure the court would expect that certainly senior practitioners involved in those sort of cases would be saying they’re not putting things up for approval unless things change… It’s also a very intensely fact dependent and context dependent analysis”.

The inquiry into litigation funding and the regulation of the class action industry, first announced by Attorney-General Christian Porter in early March, is the fourth recent review of class actions in Australia, following inquiries by the Productivity Commission, the Victorian Law Reform Commission and the Australian Law Reform Commission.

The Parliamentary Joint Committee on Corporations and Financial Services has broad terms of reference, which include the impact of class actions on businesses amid the coronavirus pandemic, as well as what Porter said were the “enormous profits” of the litigation funding industry.

Ninety-three submissions have been made to the committee, which plans to hold three more public hearings this month before drafting recommendations for reform, expected in December.