Plaintiff firm returns fire in class action stoush

Peter Godfrey
by |
The day after it announced its intention to pursue a class action against QBE Insurance, Maurice Blackburn has hit back at suggestions that Australia’s class action regime requires reform and tighter regulation.

Responding to claims made by King & Wood Mallesons in a recent Australasian Lawyer article that Australia’s current system, and particularly its dependence on third party litigators, was vulnerable to inappropriate and abusive use, Maurice Blackburn’s class action principal Jacob Varghese has come to its defence.

“I’ve worked with litigation funders on several class actions before and I have never seen any signs of abuse or conflicts of interest,” Varghese said.  “I don’t see anybody coming up with concrete evidence that we are doing something wrong.”

Varghese argued that the best way to resolve people’s concerns about the third party litigation funding, was not by increasing regulation, but by reducing it instead.
 
“Tighter regulation simply restricts the entry of new players to the market.  We need less regulation if we want to have a competitive, ethical and efficient system that meets all of our high standards,” Varghese told Australasian Lawyer

Varghese also raised the contentious issue of contingency fees, arguing that this would entirely extinguish concerns about litigation funding.

“I think Australia needs to have a think about the question of contingency fees altogether.   The strange thing about our system is that anyone in the world is allowed to fund a class action except for lawyers,” Varghese said. 

Varghese noted that Australia was the lone large English speaking country that did not allow firms to undertake litigation on a contingency fee basis, as Canada, the UK and the USA all permitted the practice. 

As a result Australia has since become the most appealing target for third party litigation funders. 

Opponents of contingency fees believe that allowing them would open the floodgates to a wave of class actions, as firms all attempt to cash in.

Varghese denied this, claiming that media attention on recent large payouts falsely created the impression that class actions were becoming more frequent. 
“There’s no evidence of ‘opening the floodgates,’” Varghese said. 

He also said that a US-style class certification stage suggested by KWM as a way of analysing the initial merits of a claim before actual proceedings commenced was not needed.

“At this stage I think it’s unnecessary.  If a larger firm brings up a class action it’s probably not going to be struck out,” he said. 

Maurice Blackburn yesterday announced that it was accepting registrations for a potential class action against QBE Insurance amidst suggestions the company had breached its continuous disclosure obligations. 

After calling a trading halt on 6 December 2013, QBE announced days later it was expecting to post a loss of $US250 million for FY2013, resulting in its share price nosediving. 

The class action is to be funded by the Singaporean funder, International Litigation Funding Partners.  

What do you think? Should contingency fees be allowed in Australia?  Or should third party litigation funding be regulated instead? Share your thoughts below.