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Justice Legislation Misc Amendments Bill – in support of contingency funding

Jun 18, 2020 | Parliament

Mr BARTON (Eastern Metropolitan) (11:52): I rise today to speak on the Justice Legislation Miscellaneous Amendments Bill 2019. My position is somewhat unique, in that I am one of the relatively few people who have been through the process of bringing a class action for a group of people who have been wronged. I have led the charge on behalf of my constituents to seek a way to pursue justice for my taxi and hire car industry colleagues that have had their livelihoods trashed unfairly by big business. The Transport Matters Party evolved out of what I increasingly saw throughout my time in that industry to ensure that individuals and small business owners do not get trampled on by powerful entities out to damage their livelihoods and wellbeing.

Transport Matters was born out of a belief that everybody, regardless of your wealth, position or power, should have proper representation of their rights and their issues in society, including politics. That is what led me to this Parliament and that is a value that informs my views on what I consider to be a very important piece of legislation that is before us. Along with around 7000 other affected people, I am a participant in a class action to pursue the type of justice that I think we deserve for what we have suffered as a result of misconduct by a corporate interest. Specifically, the class action claim developed and brought forward by my colleagues and me relates to the loss of income and loss of licence values for participants in the taxi and hire car, limousine and charter vehicle industries during the period in which Uber and their driver partners traded without proper regulatory approvals, permissions or licensing.

 

 

The idea which now forms the basis of the class action was formed a long time before there was even a proposal of a claim getting filed and getting to court. The reality for individuals who pursue this type of justice is a long hard journey just to get to the starting line. If you are fortunate enough to find good, helpful advice, as I was, there are many thresholds and hurdles that even a potentially strong class action must overcome so that even the best firms can get the case off the ground. This is partly because the cases are large, expensive, hard to run and hard to win—and if you lose, unlike in the USA, we here in Australia have a loser pays model, where those that bring class actions are on the hook, not only for the millions of dollars of their own costs that they have to plough into the case just to keep up with the well-resourced defendants, but they are also on the hook for the costs of the opposing side. Furthermore, it is the lead plaintiff who must bear that burden alone.

Due to cases being so expensive to run and so laden with risk, many only get off the ground with the financial support of a litigation funder. These litigation funders enable cases to see the light of day, but it comes at a price. For indemnifying the lead plaintiff and paying all or most of the case costs along the way, these funders understandably expect a return on their money in the event of a successful outcome down the track.

That commission is typically around 30 per cent or more or what is often a settlement amount in successful cases. In addition to that commission, the lawyers who actually run the case have to get paid for their work. Together the two compulsory fees often come to around 50 per cent of the total resolution—that is, 50 per cent of any settlement goes straight out the door before any money can be given back to the people who need it most: the individuals that have been wronged.

While the proportion of the overall settlement that is ultimately received in compensation is not ideal, this outcome is a lot better than what happened in many cases that have merit but may not stack up in being financially viable. They do not ever get a chance to see the light of day. These people who feel they have been wronged and wish to pursue justice are left with no real avenue to mount their case; the financial burden and risk is simply prohibitive. This bill is a critical step in the right direction for the people of Victoria as it will ensure that this Parliament can proudly say it has made one of the single biggest contributions to all Victorians in ensuring that they have the best opportunity to have their voices heard and their rights protected when large powerful organisations cause them wrong.

Why is that? It is because this bill will introduce a way to ensure more people can access their rights through the courts, making the pursuit of legal rights more affordable to the everyday person, the type of people I represent—good, decent, hardworking people who drive politicians, our friends and families around this great state but who too often get locked out of aspects of our society such as accessing their legal rights when they encounter a problem. The laws we make in here are for everybody; they are not just for the wealthy and the powerful.

This bill takes a big step forward and says to the people in our state that this Parliament cares about every single person and that we will do what we can to make sure every Victorian gets every chance they deserve to access legal recourse when they need it by introducing the option for lawyers in class actions—and I emphasise that point: this is only for class actions which, by their nature, affect huge groups of people that have suffered damage—to simplify how clients are charged and bill on a contingency-fee basis. This Parliament can know it is taking the single biggest step possible in driving down the cost of accessing legal help for Victorians statewide. Not only will it improve access to justice for all but it will be this Parliament that can rest proud in the knowledge it has ensured that when people access this legal help more of the recovery than ever will go back into their own pockets.

For the class action I am part of I can say with absolute certainty that the group members in this matter whilst hugely appreciative that a class action specialist law firm and a litigation funder believed in us and our struggle and the strength of our case enough to pull everything together that was needed to pursue it, it would have been a whole lot simpler and it would have been a whole lot cheaper for us if this bill had been in place and had allowed a simple contingency fee split between the lawyer and the client as opposed to the complicated arrangement we have had to use just to get this case off the ground. Many of my constituents and many members of the action have limited language skills—English is not their first language—and have limited education, so imagine the difficulty they have had in wading through the dense funding agreements with endless clauses and complicated funding arrangements that shift depending on a wide range of factors. Instead we could have had a simple split that everyone understood where the lawyers that run the case are entitled to, say, 20 per cent or 25 per cent for their work and we knew that we would be getting 75 or 80 per cent of whatever the return is upon success. That is clearly a simpler equation for people and it would leave us much better off financially.

The bill also ensures the interests of group members of the class action and the interests of the lawyers are more aligned than ever. For starters, this bill would mean that lawyers are better incentivised than they are now to go and get better results faster, rather than potentially just billing more, and that is a boon on a number of fronts. It promotes a more efficient resolution. It could see more money going back faster to those who have suffered. The more money that can be recovered the better it is for the clients, and the difference in how much better off the group members are just grows and grows. The point I mentioned about greater efficiency, which was the key reason, flows to other things, such as dispelling this notion being peddled by some opposed to the bill, such as the Australian Industry Group, that there is a legitimate concern about clogging the resources of the courts.

Business interrupted pursuant to sessional orders.

Mr BARTON (Eastern Metropolitan) (14:29): President, congratulations.

One of the primary reasons we have a properly functioning class action mechanism is because it helps resolve large disputes in a more efficient manner. Can you imagine what a drain on the courts it would be if there were 7000 individual claims to manage instead of one class action? As things stand, there are only a handful of class actions run in Victoria in any given year—in fact I believe it was only five last year—and even if this was to rise as a result of more people being able to have worthy cases heard, the number of cases will still be extremely low. This bill is a response to the independent research showing that, if anything, the Victorian regime is underutilised at the moment, meaning too many people are locked out of the justice system when they need it.

Everyone in this place knows that I have had issues with this government’s approach in a number of different areas that have come before us. I did vote against the CFA bill and against Transurban matters, but on this bill the government has got it right. But my support and endorsement are merely a sensible recognition of the many independent and expert views already formed by multiple reviews into this area of law, all of which drew the same conclusion that this was a sensible, prudent reform and one that should be enacted. People want their government to take action, and there can be no criticism of the process here.

The government is simply delivering on a recommendation given to it to improve how we offer justice services here in Victoria. For those unfamiliar, removing the ban on contingency fee billing has been strongly endorsed and recommended by no less than three independent peak bodies that have looked into this matter since 2014. First, there was the Productivity Commission, which in its 2014 Access to Justice Arrangements report looked at the economics of how justice could be served better and served via class actions, and it made a clear statement on lifting the ban on contingency fee billing in Australia. In chapter 18 of that report the recommendation was this:

The Australian, State and Territory Governments should remove restrictions on damages-based billing (contingency fees).

The Productivity Commission had examined the evidence and found that a contingency fee model would lower the cost to consumers, increase returns to consumers and ultimately facilitate better access to justice as a result.

Then came the review undertaken by the Victorian Law Reform Commission (VLRC) tabled in Parliament in June 2018. The Access to Justice—Litigation Funding and Group Proceedings report recommended changes to increase access to justice for class actions. This, the report said, could be achieved by regulating litigation funding at a national level, lifting the ban on contingency fees and increasing the Victorian Supreme Court’s role in managing class actions. At point 33 of the executive summary the report notes:

As a matter of principle, the Commission considers that lawyers should be able to charge contingency fees, as it provides another avenue of funding for clients who may be otherwise unable to pursue proceedings due to the cost.

Cost should be no barrier to people of all means being able to access justice. Justice and the law should not be just for the wealthy and the powerful; justice is for all.

Most recently was the federal review into the same issues around class actions—how they work and how they can work better. The Australian Law Reform Commission, headed by Justice Sarah Derrington, who was appointed by George Brandis, also found that on evidence contingency fee billing would improve conditions for class action clients compared to the current situation. In chapter 7 of the ALRC report, ‘Solicitors’ fees and conflicts of interest’, recommendation 17 clearly says:

Confined to solicitors acting for the representative plaintiff in representative proceedings, statutes regulating the legal profession should permit solicitors to enter into ‘percentage-based fee agreements’.

Now, to understand why three major reports into the issues have all come back independently making the same evidence-based findings saying contingency fees are a better way to go you need to ask: better than what? What is the issue that has caused three major independent review organisations to have cause to undertake such intensive reviews? Well, for the uninitiated, to those opposing the bill who have teamed up with corporate lobbyists to come into this place and peddle disinformation in a bid to block this important justice reform, this bill is not about lax regulation of powerful corporate interests and it is not about trying to help major corporations and organisations evade scrutiny when they trample over the rights and dignity of everyday people; it is about ensuring the little people, everyday individuals and small business owners—people like the taxi and hire car drivers I represent—get an equal opportunity to stand up for what is right and in the best possible terms.

Given that this point about court resources is a peripheral argument that has been pushed by corporate lobbyists the Australian Industry Group in their bid to derail this important reform, let me say this about the matter before I move on: the AIG did not make a submission to the Productivity Commission, the Victorian Law Reform Commission or the Australian Law Reform Commission during the multiple reviews into this issue, so their last-minute interest in opposing the bill seems a little disingenuous.

How much of this opposition comes because the AIG had worked out that class actions might be used to recover underpayment of wages? Does anyone believe that the Australian Industry Group or the Australian Institute of Company Directors or those aligned to the American chamber of commerce Institute for Legal Reform have the best interests of wronged individuals at heart, when they lobby relentlessly against this bill and the accountability it will bring to the powerful?

This bill is about protecting people, not protecting bad business. This bill will go a long way to unlocking access to justice for more Victorians. It will be better for the people trying to protect their rights and it will do more to address the behaviour of bad businesses and organisations.

Aside from the very, very clear benefit that this simple legislative change will enable, delivering on the recommendations made by the VLRC to the government, the bill ensures there are very important safeguards at play to ensure the courts have appropriate controls and oversight of class actions and the contingency fee arrangements. So as to avoid some of the supposed consequences those opposed appear to be fearful of, let me help allay some of those fears with the use of facts.

Safeguard 1: contingency fees will only be permitted in class actions. This is not a widespread introduction of contingency fees but specifically limited to the area of legal practice where they will provide the most benefit and will be subject to the most control.

Safeguard 2: contingency fees will only be permitted if approved by the Supreme Court. Under the bill the Supreme Court has the ultimate powers to decide if there should be a contingency fee and to set it at an appropriate level. The Supreme Court already has extensive power over the conduct of class actions and exercises it regularly and appropriately; having that powerful check and balance is crucial.

Safeguard 3: contingency fees will only be permitted where the lawyer has agreed to pay the defendant’s costs if the class action loses. A plaintiff’s lawyer’s interest in careful merit investigation and case selection is even stronger in the context of a contingency fee arrangement because the lawyer would not want to be unremunerated for the work if the case fails but also faces the prospect of paying an adverse cost order, a risk that runs into the millions of dollars.

Finally, because I feel so strongly that this is such an important and logical bill to pass and deliver to the people of Victoria, and what three expert reports have recommended should happen, I must address some of the misinformation that has been peddled about by those opposed to it, with vested interests in lowering the bar of accountability on big business. It is clear from what I have read in the media and in recent times and what I have heard in the information briefings from lobbyists opposed to this bill that these lobbyists and the Liberal opposition are in lockstep about why they do not want this bill. The only problem is that when one of them peddles misinformation, the rest follow. That same script reveals themselves to simply be making the same mistakes and when you pull it apart armed with the facts the opposition to this bill does not stack up.

Mr O’Donohue made a strident argument in the pages of the Australian newspaper on Friday, 28 February, where he outlined what he saw as the issues with the bill. Now, I will not pick apart every part of the argument, because a lot of it is opinion that I think he misled the public on, but I will focus on a few as a favour to help impart some of the knowledge. I found it astounding that early in the article Mr O’Donohue blamed the existence of many class actions on the emergence of large litigation funders, which he claimed were limiting the financial exposure of lawyers acting in these cases and therefore lessening the risk. Then moments later in the same column Mr O’Donohue found it convenient to suggest that the role of litigation funders was crucial as a check and balance in the regime. My friend and colleague seems to be having a bet each way.

It should surprise no-one of an objective mind that the solution to both the issues that Mr O’Donohue has tried unsuccessfully to exploit here lies in the recommendations of the Productivity Commission, the VLRC and the ALRC and is exactly what this important bill proposes. Lifting the ban on contingency fees would overcome both issues. It exposes lawyers running class actions to greater financial risk and only enhances the mitigating effects of questionable case selection and prosecution. How then does he not support the bill?

A common argument put by those opposed and again by Mr O’Donohue and their lobbyists is that class actions will hurt investment and business. To that I would say this: the class action regime has been around for 28 years, and in that time the only businesses that have suffered from it have been those that have broken the law or inflicted mass harm on people by selling dodgy products or providing deceptive investment advice and those complicit in their negligent behaviour, leading to devastating floods and fires, among other things. This bill will be bad for businesses that rip off consumers and businesses who sell faulty products that maim, injure and worse, but it will actually be good for all those businesses who do the right thing, who want to treat their customers and suppliers fairly and who take their safety obligations seriously.

By helping hold wrongdoers to account, this bill will help good businesses. That is my strong view. Importantly it is also the view of one of the world’s leading authorities in this area. Eminent US judge Jed Rakoff, who in 2015 spoke to Fairfax Media while he was out in Australia talking about corporate conduct issues, said:

Class actions and suits brought by regulators help the economy because the public’s trust in the honesty and fairness of financial markets is one of the “greatest assets” a nation can have …

Finally, on that point about the impact on businesses, it is worth knowing this: the facts show that less than half of 1 per cent of ASX-listed companies have faced shareholder class actions in any given year. The alternative is to allow unscrupulous corporate conduct to flourish unchecked. There are now countless examples from the financial services royal commission which show just how dangerous this would be. So to all of the taxi and hire car drivers seeking justice today and to all the people who have been or will in the future be stung by dodgy products or deceptive investment advice or who have suffered loss or tragedy through flood, fire and disasters caused by human folly, this bill will make things better for you. This bill is about people, it is about justice and it is about doing what we can to ensure a level playing field is available through the legal system for everyday Victorians, like those blokes who drive taxi and hire cars, when things go wrong. I commend this bill to the house.

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