Litigation Funding and the Regulation of the Class Action Industry Report

Parliamentary Joint Committee on Corporations and Financial Services Litigation funding and the regulation of the class action industry December 2020 © Commonwealth of Australia ISBN 978-1-76093-169-8 This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License. The details of this licence are available on the Creative Commons website: https://creativecommons.org/licenses/by-nc-nd/4.0/. Printed by the Senate Printing Unit, Parliament House, Canberra. Committee membership Chair Senator James Paterson LP, VIC Deputy Chair Mr Steve Georganas MP ALP, SA Members Senator Andrew Bragg LP, NSW Mr Jason Falinski MP LP, NSW Mr Patrick Gorman MP ALP, WA Ms Celia Hammond MP LP, WA Senator Deborah O'Neill ALP, NSW Senator Louise Pratt ALP, WA Mr Bert van Manen MP LP, QLD Senator Nick McKim AG, TAS (from 6 October 2020) Former Members Senator Peter Whish-Wilson AG, TAS (until 6 October 2020) Secretariat Dr Patrick Hodder, Committee Secretary Dr Jon Bell, Principal Research Officer Ms Emily Treeby, Senior Research Officer Ms Eleonora Fionga, Administrative Officer Suite SG.64 Telephone: +61 2 6277 3583 PO Box 6100 Fax: +61 2 6277 5719 Parliament House Email: [email protected] Canberra ACT 2600 Website: www.aph.gov.au/joint_corporations iii Contents Committee membership ...................................................................................................................iii Abbreviations .................................................................................................................................... xi Executive Summary .........................................................................................................................xiii List of Recommendations .............................................................................................................xxiii Chapter 1—Introduction and report structure ............................................................................... 1 Duties of the Committee ..................................................................................................................... 1 Scope and structure of the report ...................................................................................................... 4 PART 1—BACKGROUND, DATA, KEY ISSUES AND COMMITTEE'S APPROACH....... 7 Chapter 2—Origins of Australia's class action regime and litigation funding industry ..... 9 Introduction .......................................................................................................................................... 9 Rationale for a class action regime .................................................................................................... 9 Origins of a class action regime in Australia .................................................................................. 10 Establishment of federal class action regime ................................................................................. 11 State and territory class action regimes in Australia .................................................................... 12 Litigation funding in Australia ........................................................................................................ 14 Milestone events ................................................................................................................................. 17 Chapter 3—The class action process .............................................................................................. 19 Introduction ........................................................................................................................................ 19 Open class actions and the 'opt-out' approach .............................................................................. 19 Closed class actions ........................................................................................................................... 20 Federal Court class action procedure .............................................................................................. 21 Chapter 4—Data and trends in class actions and litigation funding ..................................... 27 Introduction ........................................................................................................................................ 27 Jurisdictional distribution of class actions ...................................................................................... 27 Types and prevalence of class actions ............................................................................................. 28 Size, value and cost of the class action industry ............................................................................ 33 Litigation funding in class actions ................................................................................................... 34 Returns to class members in class actions ...................................................................................... 36 v Chapter 5—Key issues and the need for reform ......................................................................... 37 Introduction ........................................................................................................................................ 37 Key issues ............................................................................................................................................ 38 PART 2—REASONABLE, PROPORTIONATE AND FAIR CLASS ACTION PROCEDURE .......................................................................................................................... 45 Chapter 6—Commencing a class action ........................................................................................ 47 Introduction ........................................................................................................................................ 47 Concerns about the low bar to commence a class action ............................................................ 47 Certification of class actions ............................................................................................................ 52 Committee view ................................................................................................................................. 56 Concerns about identification of common claims ....................................................................... 58 Committee view ................................................................................................................................ 62 Chapter 7—Resolution of competing class actions .................................................................... 65 Introduction ....................................................................................................................................... 65 Prevalence of competing class actions ............................................................................................ 65 Purpose of class actions undermined ............................................................................................. 67 Adverse impacts of competing class actions ................................................................................. 67 Benefits of competing class actions ................................................................................................ 70 Current approach to resolving competing class actions .............................................................. 71 Options for reform ............................................................................................................................ 73 Committee view ................................................................................................................................ 80 Chapter 8—Class closure orders .................................................................................................... 85 Introduction ....................................................................................................................................... 85 Class closure orders .......................................................................................................................... 85 Benefits and drawbacks of 'closing the class' ................................................................................. 86 The Federal Court's power to order interlocutory class closure ................................................ 88 Proposed reforms .............................................................................................................................. 91 Committee view ................................................................................................................................ 93 Chapter 9—Common fund orders .................................................................................................. 95 Introduction ....................................................................................................................................... 95 What is a common fund order? ........................................................................................................ 95 vi Availability of common fund orders .............................................................................................. 97 Impacts of common fund orders ................................................................................................... 103 Arguments for the availability of common fund orders ..........................................................

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