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Australia has had an active class action regime for 25 years and it is now one of the most likely jurisdictions where a company will face significant class action litigation. Over the last 25 years there have been significant developments in Australia's class action law, with many lessons learnt that may be of assistance for other jurisdictions which are beginning to see increased levels of collective redress actions.
The Australian class action system is plaintiff friendly. It is of note that some class actions have been commenced in Australia that were not certified in the United States.
The kinds of actions that are pursued in Australia as class actions traverse a wide variety of subject matters. Class actions in Australia have involved financial services and products, investment schemes, shareholder litigation, failure of infrastructure, environmental contamination, real estate investments/marketing, consumer finance, immigration law, consumer product safety and alleged unlawful cartel activity.
There are three main drivers of class action litigation in Australia:
- Litigation funding: Australia has an active third party litigation funding market which is becoming increasingly active and competitive. Class actions that are funded have historically been focussed upon shareholder litigation and the financial services sector, however that focus is now shifting to other areas.
- Specialist plaintiff law firms: Australia has a number of plaintiff law firms that are now focused on class actions. Class action litigation has developed into a subject matter specialty, with practitioners focusing on class action litigation as a discreet legal discipline.
- Regulatory action: The Australian regulators for anti-trust, anti-cartel and consumer product safety (the Australian Competition and Consumer Commission) and corporate compliance (Australian Securities and Investments Commission) are becoming increasingly active. Investigations and regulatory action by these regulators is also likely to drive class action activity in these areas.
- General features
A collective action, more commonly referred to as a "class action" or in Australia a "representative proceeding", may be brought by a group of seven or more people, who share claims against the same person (whether an individual or corporation). The claims of all individuals in the class must arise from the same or a similar set of circumstances and must be concerned at least one substantive common issue of law or fact.
Australian representative proceedings can proceed as an "opt out" proceedings. This means that a person who meets the relevant group definition is a group member unless and until they proactively opt out of the action. However, representative proceedings can also be pursued as an opt-in proceedings - where the case is only pursued on behalf of those persons specifically identified.
Generally, a judge (rather than a jury) will hear representative proceedings.
The Australian Federal Court class action regime was introduced in 1992. The state Supreme Courts of Victoria, New South Wales and Queensland also have class action regimes which largely mirror the Australian Federal Court regime.
Bringing a Class Action
All that is required for commencing and filing a class action is that there are:
- seven or more persons that have a claim against the same person
- the claims of all persons are in respect of, or arise out of, the same, similar or related circumstances, and
- the claims of all those persons give rise to a substantial common issue of law or fact.
Once proceedings have commenced, it is then up to the respondent to persuade the court that "it is in the interests of justice" that they no longer continue.
The Court may order a wide variety of relief in representative proceedings. For example, it make determine an issue of law or fact, make a declaration of liability, grant any equitable relief and award damages (either by identifying specific amounts or methods of calculating a specific amount for individuals or particular classes of group members, or by determining an aggregate amount without specifying how much must be paid to individual group members).
Punitive (called exemplary) damages are rarely awarded in Australia.
Most class actions in Australia are managed via an individual docket system as the basis for its listing and case management. Each case commenced in the Court is allocated to a judge, who is then responsible for managing the case until final disposition. While all the usual procedural rules apply, they are often modified by the docket judge who will generally adopt a "bespoke" approach when it comes to case management directions.
Procedures that are commonly used in representative proceedings include the following:
- Concurrent expert evidence, where experts in the same field given evidence at the same time.
- Hearing and determining the lead applicant's claim in its entirety (including the assessment of damages), but leaving the question of causation and/or damages to be determined for individual group members separately.
- The Court must approve settlements in Australian class action. Settlement approval may sometimes include "common fund" applications. While common fund applications have been brought before settlement, so far no such applications have been successful.
- Types of collective redress
Representative proceedings are commenced by a single lead claimant, or sometimes several claimants. The proceedings are brought for and on behalf of group or class members. While the claimant must describe the group with precision there is no obligation to identify, name or even specify the number of group or class members.
There have been many class actions commenced in various types of claims including financial services, investment schemes, shareholder litigation, failure of infrastructure, environmental contamination, real estate investments/marketing, consumer finance, immigration law, product liability and anti-cartel proceedings.
Federal legislative provisions expressly provide for the institution of proceedings by the Australian Regulators, the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission, to pursue private enforcement on behalf of persons who have suffered, or are likely to suffer, loss or damage by reason of conduct which contravenes those Federal provisions.
- Funding and costs
Representative proceedings are commonly funded by litigation funders, who are third parties who fund the proceeding in exchange for reimbursement of those costs and a percentage of any settlement or damages paid in the event that the claim is successful or settles. Law firms may also chose to run an action on a "no win, no fee" basis, where they run the action but are not paid their costs unless they are successful or the action settles.
Lawyers in Australia are subject to strict legal obligations, and there are prohibitions on some forms of fee arrangements (for example, contingency fees). Litigation funders are subject to minimal regulatory oversight and have much greater flexibility in terms of the commercial arrangements they can enter into to fund a class action.
In the last five years, a large number of class actions were supported by litigation funders. The litigation funding market in Australia includes publicly listed funders such as Bentham IMF Ltd and Hillcrest Litigation Services Ltd. Recently, overseas based funders such as Comprehensive Legal Funding LLC (USA) and International Litigation Funding Partners Pte Ltd (Singapore) have also entered the Australian market.
Lawyers are not permitted to charge contingency fees in Australia. However, litigation funders generally work on this model, and seek to retain a percentage of any settlement or award in their funding agreements.
In Australian class actions, generally the "costs follow the event" - that is, the unsuccessful party must pay the costs of the successful party. Costs orders can be made when judgment is delivered in the main trial, as well as at various interlocutory stages before trial.
In class actions, the general rule is that only the named applicants in the proceeding (referred to as the "lead applicants" or "representatives") may be subject to a cost order in the proceeding. There are some exceptions where issues that are only relevant to a sub-group of individual group member are determined in the course of the proceeding.
- Recent developments, trends and predictions
There are no current proposals to amend the class action legislation in Australia. Rather, the Courts have been grappling with the complexity of class actions within the existing legislative framework. For example, recent cases in Australia have considered the role played by litigation funders in class actions. The Courts have considered applications for security for costs, the amount of commissions payable to litigation funders under settlements, and "common fund" applications (where all group members pay a funding commission whether or not they have signed a funding agreement).
The trend is that the number of class actions will continue to increase in Australia, particularly in the areas of financial services, shareholder litigation, anti-trust and consumer product liability.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.