In Australia, as in many other jurisdictions around the world,
the legal landscape provides a mechanism for you as an individual
to collectively pursue justice against a wrongdoer through a class
action lawsuit. A class action lawsuit is a legal proceeding in
which a group of people who have suffered similar harm or injury
join forces to bring a case against a common defendant. This legal
avenue empowers individuals who may not have the financial means to
pursue their claims, particularly against large, well-resourced
defendants, creating a more level playing field in seeking redress
for widespread grievances. This article will look at what a class
action is including their benefits and shortcomings.
What is the legal framework?
Class actions in Australia are primarily governed by the Federal
Court of Australia and are regulated by both federal and state
laws. The primary legislation that addresses class actions is the
Federal Court of Australia Act 1976
(Cth), particularly Part IVA, which was introduced in 1992.
Additionally, state and territory supreme courts also have their
own rules and procedures for managing class actions. In New South
Wales, the class action legislation is set out in Part 10 of the Civil Procedure Act 2005 (NSW) (as
amended). The New South Wales legislation applies to causes of
action accruing after 4 March 2011. In Victoria, the class action
legislation is set out in Part 4A of the Supreme Court Act1986 (Vic),
and Order 18A of the Supreme Court (General Civil Procedure)
Rules 2015. The Victorian legislation
applies to causes of action accruing after 1 January 2000. In
Queensland, the class action legislation is set out in Part 13A of
the Civil Proceeding Act 2011 (Qld) (as
amended), and applies to causes of action accruing after 1
March 2017.
Key features of class actions
i. Representative
proceedings
In a class action, one or more representative plaintiffs act on
behalf of the entire group, known as “the class”. These
representatives are typically chosen because their claims are
representative of the broader class and because they are often able
to most clearly demonstrate that they have a sufficient interest in
the outcome of the case.
ii. Common
issues
Class actions are suitable when there are common issues of fact
or law among the group members. This commonality is essential to
ensure that the case can be efficiently managed and adjudicated as
a single action, rather than requiring individual hearings for each
claim.
iii. Opt-out
mechanism
In Australia, class actions generally operate on an opt-out
basis. This means that all potential class members are
automatically included in the action unless they actively choose to
opt out. This mechanism streamlines the process, allowing the court
to resolve the claims of all class members in a single
proceeding.
iv. Funding
arrangements
Class actions can be financially complex, and many potential
class members may not have the resources to participate in
litigation. Litigation funding is a common practice in Australia,
where third-party funders finance the legal costs in exchange for a
share of any successful settlement or judgment. By their nature,
whether under the Federal Court or the state class action
legislation the litigation is expensive. The legal costs of
initiating and conducting such litigation are extensive. A
significant commercial factor in the prevalence, of class actions
is the availability to representatives and class members of
litigation funding.
v. Court
approval
Before a class action can proceed, the court must grant approval
for the case to be conducted as a class action. The court will
assess whether the action meets the criteria for certification,
including the presence of common issues of fact or law and whether
a class action is the most efficient way to resolve the claims.
What are the benefits of class
actions?
i. Access to
justice
Class actions provide a practical means for individuals with
similar claims to access justice. Without the ability to join
forces, many plaintiffs might be unable to afford the costs
associated with individual litigation.
ii. Efficiency and
judicial economy
Consolidating similar claims into a single action promotes
efficiency and judicial economy. It allows the court to address
common issues once, reducing the burden on the legal system and
avoiding duplicative proceedings.
iii.
Deterrence
Class actions can serve as a powerful deterrent against
corporate misconduct or other harmful practices. Knowing that a
single legal action can represent the interests of a large group of
affected individuals may encourage greater corporate
responsibility.
What are the challenges and
criticisms?
While class actions have proven to be an effective tool for
seeking justice, they are not without challenges and criticisms.
Some common concerns include:
i. Funding
costs
Critics have argued that the high costs associated with
litigation funding may result in a significant portion of the
settlement or judgment being diverted to funders rather than
compensating class members.
ii. Overarching
settlements
Some critics express concern that class actions may lead to
overarching settlements that may not adequately address the
individual circumstances of each class member.
iii. Impact on
business
Businesses may contend that class actions have the potential to
stifle economic growth by imposing significant financial burdens
and diverting resources from productive activities.
Class actions play a vital role in Australia’s legal
landscape, providing an avenue for individuals to collectively
pursue justice against wrongdoers. While there are challenges and
criticisms associated with this legal mechanism, the benefits in
terms of access to justice, efficiency, and deterrence cannot be
overlooked.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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