05 March 2020
The Australian class actions landscape is likely to see significant change in 2020, driven by the High Court’s recent ruling that courts do not have power to make ‘common fund orders’ at an interlocutory stage of a proceeding and the likely introduction of legislation in Victoria allowing solicitors to charge contingency fees.
Corrs’ class actions team has identified the ten developments it expects to see this year.
1. Expect to see funders focus more on book building and less on racing to court. While the High Court’s decision in December 2019 confirmed that courts do not have power to make a common fund order (CFO) at an interlocutory stage of a proceeding, there is residual uncertainty as to whether courts can make a CFO at the settlement/judgment stage of a proceeding. While the Federal Court has indicated it is open to making a CFO in an appropriate case, the position in other jurisdictions is unclear. Until that uncertainty is resolved, we predict that funders will be less inclined to race to court with new cases, preferring instead to build a sufficiently strong book before launching. This means some cases will not be commenced as quickly as we have seen in the last two years in particular.
2. Diminished competition. Book building is expensive and not all funders have the capacity to do it. As a result, we’ll see less competition in the market for certain cases. The result may be lower returns for group members.
3. Few multiplicity disputes. Since the Full Court of the Federal Court’s decision in GetSwift (which confirmed that courts have the power to permanently stay a competing and substantially overlapping class action), we’ve seen fewer competing class actions. This trend will continue as funders prioritise a decent book over speed to the court, and seek to avoid the uncertainties of the GetSwift ‘winner takes all’ scenario, or consolidation orders.
4. Fewer low value consumer class actions. Book building is typically challenging in low value consumer class actions, so funders are likely to now think twice about these (at least outside of Victoria).
5. Lawyers will be permitted to charge US-style contingency fees in Victorian class actions. We predict that the Victorian Parliament will pass the Bill presently under consideration. Plaintiff law firms will be able to obtain court approval for US-style contingency fee arrangements in class actions filed in the Victorian Supreme Court, where the Court is satisfied that it is appropriate to ensure justice is done. We predict this will catalyse two further developments in class actions (points 6 and 7 below).
6. Funders will become financiers. Since most plaintiff law firms will not have the capacity or inclination to provide, out of their own resources, security for costs on class actions, they will be looking to secure financing facilities. Sophisticated funders have been providing those facilities for years in other jurisdictions. The stars are aligning here.
7. Spike in the number of cases in Victoria but overall numbers are unlikely to change. There will be a spike, at least in the short term, in the number of class action cases filed in the Supreme Court of Victoria. Indeed, we wonder whether some cases have been held back as plaintiff law firms wait for the Victorian Government to pass the Bill. We also wonder whether the Supreme Court of Victoria will become the natural forum for cases that are difficult to book build, such as shareholder claims (particularly when framed as an open class and/or where there is competition) and mass low value consumer claims. Although we will see a spike in the number of cases filed in Victoria, we are unlikely to see a significant change in the total number of filings per year.
8. The role of the contradictor. Contradictors will become more prevalent, particularly if the Victorian legislation is introduced. Given defendants typically agree not to oppose settlement approval applications, the contradictor becomes the natural party to make any challenge to the validity of a CFO at the settlement/judgment stage of a proceeding in light of the High Court’s decision.
9. The appellate courts will consider a number of important procedural and substantive class action issues. Expect to see appellate consideration of the validity of registration/class closure orders, market-based causation, third party security for costs orders in no cost jurisdictions, and litigation funding in Queensland.
10. Financial products, employment, climate – areas to watch. Some tea leaves to think about:
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.