Inquiry into Class Action Proceedings Final Report

On January 24 2019, the Attorney-General for Australia tabled in Parliament the Australian Law Reform Commission (ALRC) report, Integrity, Fairness and Efficiency—An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (Report 134, 2018).

The Terms of Reference for this Inquiry asked the ALRC to consider whether, and to what extent class action proceedings and third-party litigation funders should be subject to Commonwealth regulation, and whether there is adequate regulation of: conflicts of interest between third-party litigation funders, lawyers and class members; prudential requirements and character requirements of funders;  and the proportion of settlement available to be retained by lawyers and litigation funders in class action proceedings. In short, the terms of reference required the ALRC to consider two overarching issues of the class action regime: the integrity of third-party funded class actions and the efficacy of the class action system.

The ALRC conducted over 60 consultations with stakeholders and received over 75 submissions to advance Report 134 and its 24 recommendations for reform. The recommendations aim to promote fairness and efficiency in class action proceedings; protect litigants from disproportionate costs; and assure the integrity of the civil justice system, and include recommendations to:

  • provide mechanisms in statute and legal frameworks for the Federal Court to deal effectively with competing class actions;
  • provide mechanisms by which the Federal Court can appoint an independent costs referee to establish the reasonableness of legal costs in class action matters, and by which the Court can tender for settlement administration services;
  • increase transparency and open justice for class action settlements;
  • decrease the risk of ligation funders’ failing to meet their obligations or exercising improper influence through a statutory presumption in favour of securities for cost, and greater Court oversight of funding agreements which must indemnify the lead plaintiff against an adverse costs order;
  • enhance access to justice and decrease costs to litigants through the introduction of a limited percentage-based fee model for solicitors; and
  • introduce a voluntary accreditation scheme for solicitors acting in class action proceedings.

The ALRC recommends a Government review of statutory enforcement regimes for regulators so to facilitate effective and consistent statutory redress schemes—to fill gaps and create an alternative to some class action proceedings.

The ALRC also recommends a Government review of the legal and economic impact of the operation, enforcement and effect of federal statutory continuous disclosure obligations and those relating to misleading and deceptive conduct. This recommendation recognises that further investigation of the interaction between the substantive law that supports shareholder class actions and the class action regime is warranted.

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