Class action stoush looms amid calls for reform

Peter Godfrey
by |
King & Wood Mallesons has taken aim at Maurice Blackburn and other plaintiff law firms as part of a push for wholesale reform of Australia’s class action regime, which the firm claims is vulnerable to inappropriate and abusive use.

In a damning report , KWM claims that complications have emerged from two decades of experience with current class action procedures and that an urgent review and targeted amendments are required.

Of particular concern, according to the firm, is the expanding business of third party litigation funding (TPLF), which was prohibited at the time when the class action regime was designed.

KWM believes the current system is unable to deal with new conflicts of interest, referring in its report to ‘novel approaches’ being taken in relation to managing and funding class actions. 

One such case occurred in January when Maurice Blackburn controversially attempted to have a related entity fund a class action in which it was acting for the applicant. Claims Funding Australia (CFA), established by principals of Maurice Blackburn, was seeking approval to co-fund an equine influenza class action against the Commonwealth Government, which was being run by Maurice Blackburn. CFA ultimately withdrew its proposal, which KWM described as an attempt to create a backdoor through which Maurice Blackburn could obtain prohibited contingency fees.
 
KWM has claimed there could potentially be a conflict between Maurice Blackburn’s pecuniary interest in this case and its duty to its clients.

Maurice Blackburn said it withdrew its application because changes to litigation funding proposed by the Commonwealth Attorney-General meant that even if the court had approved the co-funding arrangement model, it would likely be prohibited later on.   

Until more oversight is implemented, KWM has suggested funders and plaintiff law firms will continue to use 'creativity” to devise new structures that will allow them to circumvent contingency fee prohibitions.

KWM partner Moira Saville believes that US-style class certification may also be a way to improve Australia’s class action regime. By including a certification hearing in an early stage of proceedings, the strength of a particular case and its threshold requirements can be examined.
 
“We hope that less meritorious claims are exposed, and that ones with merit can be made more efficient,” Saville said.

As Australasian Lawyer reported in February, Australia is facing an unprecedented wave of class  action litigation in 2014, much of it with the assistance of third party funding.
 
There are six class action trials due to occur in 2014 and another five potential actions being promoted by major funders or plaintiffs’ firms.