Consultation on class action reform a welcome first step

Friday, 01 June 2018

The AICD welcomes the Australian Law Reform Commission (ALRC) discussion paper on reforms to Australia’s class action regime, including regulation of litigation funders.

While class actions can be a valuable mechanism for shareholder or customer redress, an overhaul of the current framework is overdue.

“Australia’s class action regime should operate so that disputes are resolved justly, efficiently and quickly. Currently, a great deal of time and money is spent on opportunistic cases, where the interests of class holders may not be the dominant driver,” said AICD Managing Director & CEO, Angus Armour.

“Fixing this is in the interests of all stakeholders, including shareholders, companies and customers. The ALRC’s paper is an important step towards sensible reform.”

The AICD welcomes the ALRC’s proposal to license litigation funders. The AICD has argued that the current light touch regulation offers inadequate protection for defendants as well as class members. Licensing and prudential supervision of funders would improve the Australian environment.

However, the AICD is cautious about the proposal to ease the long-standing ban on lawyers charging contingency fees. Mr Armour said, “The prohibition exists for good reason. The potential for a conflict of interest where a law firm both commercially funds and represents a client is great.”

The AICD acknowledges the ALRC’s proposal for a federal collective redress scheme - drawing on the UK experience – as an alternative to class actions.

“This proposal merits consideration. The growth in class action settlements is unsustainable, so all options should be on the table,” Mr Armour said.

Research from King & Wood Mallesons, released in April 2018, shows that the quantum of class action settlements has increased more than ten-fold over the last decade. However, cases are not being tested in court, with not a single shareholder class action proceeding to final judgment.

The AICD looks forward to contributing to the consultation process.

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