What you need to know
- The Victorian Law Reform Commission (VLRC) has published a report recommending new powers for the Court to control class actions and funding fees, and further changes to better manage competing class actions, settlements and costs.
- The VLRC has recognised the need for a national approach to regulate litigation funding, which is currently being considered by the Australian Law Reform Commission (ALRC) (see our recent update).
- The Report recommends clearer and stronger powers for the Supreme Court to manage class actions and review legal and funding costs
- The Report recommends that Victoria work with other States to introduce contingency fees in class actions which are subject to approval by the Court, whereby plaintiffs' lawyers are able to charge fees based on a percentage of the amount recovered.
What you need to do
- Submissions in response to the ALRC's discussion paper, which deals with many of the same issues, are due by 30 July 2018.
What does the report say?
In October 2016 the Victorian Attorney General publicly criticised the outcome produced by the litigation funding and class actions system in the Huon Corporation case, where an insurer settled a class action on behalf of 336 former employees for more than $5 million, but the class members received nothing: Fitzgerald v CLBL Insurance [2014] VSC 493.
Consequently, the Attorney-General asked the Victorian Law Reform Commission to review the powers of the Court to supervise litigation funders, whether law firms should be allowed to charge contingency fees and whether class actions should be further regulated by introducing a certification requirement or statutory criteria for Court approval of settlements.
The VLRC has now published its Report, which makes 31 recommendations to the Victorian Government and the Supreme Court of Victoria, summarised in the table below.
| VLRC Recommendations |
| Aim for national consistency |
Amend the Supreme Court Act and the Class Actions Practice Note with the aim of advancing national consistency |
| Increased regulation and supervision of litigation funding |
Advocate for stronger national regulation and supervision of litigation funding through Council of Australian Governments
Require disclosure of litigation funding agreements to the Court and other parties in class actions, as in the Federal Court
Require disclosure of litigation funding agreements where litigants are represented by an intermediary
Plaintiff's lawyers to notify class members of funding charges
Plaintiff's lawyers to file simplified Funding Information Summary Statement
|
| Introduction of contingency fees for class actions |
Propose model legislation to Council of Australian Governments for legal practitioners to charge contingency fees, subject to exceptions and regulation |
| New legislative powers to regulate class actions |
Empower Court to order a common fund for litigation services, to be sought at the start of a class action
Do not require certification of class actions
Empower Court to order of its own motion that a proceeding no longer continue as a class action
Empower Court of its own motion to substitute another class member as representative plaintiff
Prescribe the principles governing approval of settlements
Empower the Court to deal with money remaining after settlement distribution
Empower the Court to approve common fund orders
Prohibit security for costs orders against class members
Empower the Court to take into account access to justice, novelty and public interest when making cost orders and ordering security for costs
|
| Amendments to Supreme Court class actions practice note |
Create guidance for managing competing class actions
Give guidance on the appointment of contradictors to assess proposed settlements, representing class members
Require key information be given to the Court before settlements are approved
Require regular reporting to the Court by settlement scheme administrators
Require use of standard opt-out and settlement notices
Require plaintiff's lawyers to provide a Summary Statement for the Court's website
Provide guidance on appointment of independent expert to help assess legal costs and funding fees
Require plaintiff's lawyers to provide a cost estimate to the Court at the first case management conference
|
| Propose cross-vesting judicial panel |
Judicial panel to decide on cross-vesting of class actions where class actions relating to the same subject matter are filed in different jurisdictions |
| Propose guidelines for class action lawyers |
Seek agreement with other states on guidelines for lawyers' duties to all class members |
| Increase resources |
Update the Court's website with information on class actions
Create Plain English standard opt-out and settlement notices
Expand the experience on the Court's class action user group
Employ qualified staff in the Court to implement these changes
|
Will Victoria lead the way?
A major theme of the report is the need for reform of class actions, litigation funding and contingency fees to take national implications into account.
The report's recommendation that litigation funding be regulated nationally was anticipated by the Commonwealth Attorney-General's reference to the ALRC in December 2017.
Likewise, the VLRC has accepted the importance of consistent class actions regimes throughout Australia, to provide greater certainty, reduce forum shopping and encourage a national jurisprudence. It remains to be seen whether the Victorian government will seek amendments to the Supreme Court Act before reaching agreement with other jurisdictions, however this seems unlikely pending the outcome of the ALRC's inquiry.
The VLRC has recommended that Victoria propose the introduction of contingency fees to the Council of Attorneys-General. Contingency fees are seen as an attractive alternative to third-party funding in some areas of litigation, but divided opinions on the topic will make intergovernmental agreement challenging.
Accordingly, while a number of practical recommendations may be independently adopted by the Supreme Court of Victoria, the most significant potential changes will depend on the extent to which they are accepted by the ALRC.
Authors: John Pavlakis, Partner; Andrew Westcott, Senior Expertise Lawyer; and Stephanie Stacey, Lawyer.
