Allens

Class Actions

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Client Update: Why we need to do more to fix our class action regime

3 October 2017

In brief: The Victorian Law Reform Commission's inquiry into litigation funding and group proceedings provides an important and timely opportunity to reflect on the current operation of our class action regime. The regime recognises, and was designed to balance, competing interests. We believe more can be done to ensure an appropriate balance is achieved. The Allens Class Action Team reports.

The current class action landscape

The class action landscape has changed significantly since the regime commenced.

In our view, the defining trend has been class action entrepreneurialism. We are seeing an upward trend in the number of class actions filed, a rise in different types of claims commenced (including the prominence of shareholder class actions and financial services claims), a trend towards greater entrepreneurialism in the promotion of class actions by law firms and a change to the way in which class actions are funded.

These dynamics could not have been predicted at the regime's outset.

Our view

Consequently, we have made a submission in response to the Commission's consultation paper Access to Justice—Litigation Funding and Group Proceedings.

We recommended (among other things):

  • introducing mandatory disclosure requirements for litigation funders;
  • increasing regulation of the after the event insurance market;
  • developing clearer guidance for lawyers as to extent of their obligations to group members – in particular, regarding their obligations to multiple group members and group member communications;
  • developing regulation (including retaining the existing prohibition in certain circumstances) in the event that the ban on contingency fees is lifted. We also queried whether there is a real justification for abolishing the current prohibition;
  • requiring greater upfront scrutiny of the appropriateness of particular claims commenced as a class action;
  • introducing legislative reform to provide greater certainty for defendants faced with competing class actions; and
  • developing guidance to assist the court in the settlement approval process – in particular, regarding the appointment of third-party representation for unrepresented group members, and the factors impacting on the reasonableness of funding fees in the context of a settlement.

Consistency on a national level will provide greater certainty, which is of benefit to all class action stakeholders. We consider that any reform to the Victorian regime should be in consultation with the other state-based and federal jurisdictions.

What's next?

The Commission is currently considering submissions made in response to its consultation paper – it is due to produce its final report by 30 March 2018. We will continue to monitor closely the inquiry's progress and let you know our thoughts.

For further information, please contact:

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