ALRC report: Integrity, Fairness and Efficiency – An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (ALRC Report 134)

The Australian Law Reform Commission (ALRC) has released its final report: Integrity, Fairness and Efficiency – An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (the Report). The Report reviews the integrity of third-party funded class actions and the efficacy of the class action system. In doing so, the report makes 24 recommendations for reform which aim to promote fairness and efficiency, protect litigants and assure the integrity of the civil justice system.

Key recommendations include:

  • to amend the Federal Court of Australia Act 1976 (Cth) (the FCA Act) to require all class actions to be initiated as open class
  • to amend the FCA Act to ensure that, wherever possible, there is a single class action in order to litigate a claim
  • a requirement for settlement administrators to provide a report to group members and the Federal Court outlining the distribution of settlement funds
  • improve the regulation of litigation funders by:
    • increasing the Court's oversight of the litigation funding agreement
    • a requirement that the funder indemnifies the lead plaintiff against an adverse costs order
    • to create a presumption in favour of security for costs
  • introduction of a limited percentage-based fee model for solicitor fees
  • a requirement for third-party litigation funders to report to ASIC to show compliance with the requirement to avoid or mitigate conflicts of interest
  • develop a voluntary accreditation program for solicitors who act in class action proceedings
  • to prohibit conflicts of interests between solicitors and third-party funders.

The acting Attorney-General, the Honourable Greg Hunt MP, has recognised that the Report mandates careful consideration by the Government. The Government will continue to engage with key stakeholders before development a response to the Report.

While the legislative reforms proposed obviously relate to Commonwealth legislation, namely the FCA Act and the Corporations Act, the reforms are likely to touch NSW Government agencies and local government bodies as class action defendants (and plaintiffs, as councils have been active in this area) including where there may be some trickle through to reform in NSW.

The report can be accessed here.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.