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Client Update: New class action regime for NSW

10 August 2010

In brief: The NSW Attorney General has announced a proposal to introduce a new class action regime for NSW. Partner Ross Drinnan (view CV) and Senior Associate Jenny Campbell report on the proposal, which is likely to increase the number of class actions commenced in the Supreme Court of NSW.

Background

Although there is an existing procedure for the bringing of class actions in NSW, the NSW Attorney General has recognised that the existing rules 'do not provide clear guidelines as to who may commence a class action, in what circumstances, and other issues such as settlement of proceedings, costs, and appeals'.1 The Attorney General has also noted the possibility that the lack of clarity in the current NSW rules may be discouraging potential litigants from pursuing legitimate class actions and may also be increasing the court time and legal costs associated with pursuing a class action in NSW.

It is proposed that the new regime (which received in-principle approval from cabinet last week) will address these issues.

Key features of the proposal

The new regime will be modelled on the existing regime for class actions in the Supreme Court of Victoria and the Federal Court and will provide a comprehensive set of rules for each step of a class action. It may, however, also adopt some or all of the changes recommended by recent law reform reports.2

Those recommendations include:

  • in cases in which there are multiple defendants, removing the requirement that class members must have a claim against all defendants (this would be a reversal of the principle established by the Full Federal Court in Philip Morris v Nixon3);
  • expressly allowing class actions to be brought only on behalf of class members who have consented to the bringing of proceedings on their behalf by, for example, signing a litigation funding agreement and/or legal retainer agreement (this would give legislative effect to the principle established by the Full Federal Court in the Multiplex class action4 in respect of the Federal 'opt out' regime); and
  • the introduction of cy-pres remedies, under which the NSW Supreme Court would have the power, in certain cases, to order that unclaimed damages from a successful class action be distributed to a charity or other public interest beneficiary.

The Attorney-General has also indicated5 that consideration is being given to:

  • giving the court the power to make costs orders against third parties such as litigation funders (this would be a reversal of the position in Rickard Constructions6 where the High Court found that a costs order could not be made against a third-party funder under the NSW rules); and
  • requiring the disclosure of litigation funding arrangements (this would be consistent with the requirement in the Federal Court's new practice note for class actions7).

The NSW Government is expected to release a draft bill along with a discussion paper for public consultation later this year.

Implications

The vast majority of significant class actions in recent years have been run in either the Supreme Court of Victoria or the Federal Court. In our experience, this is because the procedures in those courts have been considered by claimants to be more amenable to their requirements than the procedure in NSW. By bringing the class action procedure for NSW in line with the Federal and Victorian procedures, the new regime will make NSW a viable jurisdiction for significant class actions in the future. As a result, we expect to see more class actions commenced in the Supreme Court of NSW once the new regime is introduced.

Footnotes
  1. Media Release from the Hon. John Hatzistergos MLC, 'NSW set to reform class action laws', 6 August 2010.
  2. In particular, the Victorian Law Reform Commission's 2008 Civil Justice Review and the Commonwealth Attorney-General's Department's 2009 Access to Justice Report.
  3. [2000] FCA 229.
  4. [2007] FCAFC 200.
  5. A Boxsell, J Eyers, 'NSW to attract more class actions', The Australian Financial Review, 6 August 2010, page 39.
  6. [2009] HCA 43.
  7. Practice Note CM 17: Representative Proceedings Commenced under Part IVA of the Federal Court of Australia Act 1976. See our Client Update on this topic.

For further information, please contact:

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