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Class actions are available where seven or more plaintiffs have a claim against the same person or corporate entity, and those claims share substantial common issues of law or fact.
Australia’s class action regime:
- often involves similar claims litigated abroad, usually involving the same parties (see case study); and
- adopts the common features in most Australian litigation, including the ‘loser pays’ costs regime.
Class actions can be brought in the Federal Court or the state supreme courts in respect of almost any civil cause of action. These proceedings typically adopt an ‘opt-out’ model. This enables the proceeding to be brought on behalf of a class without them taking positive steps to be included. Those who opt-out can bring their own separate proceedings. Those who do not opt-out are bound by any judgment or settlement.
The options for funding a class action include:
- litigation funding agreements, where the funder takes a percentage of any damages awarded or settlement sum (known as a common fund order or CFO);
- group costs order or GCO, which enables the lawyers bringing the claim to be paid a percentage of any award of damages or settlement sum. A GCO is only available in the State of Victoria, making it a popular jurisdiction. The funding arrangement must be approved by the court and disclosed to class members; or
- litigation funders or lawyers may also seek to be paid their actual costs out of any award of damages or settlement sum.
Any settlement of a class action must be approved by the court, which facilitates a process for objections by class members. The court will scrutinise the settlement proposal, including the proposed scheme of distribution (which accounts for a deduction of legal costs and the litigation funder’s commission if there is a CFO in place).
In deciding whether a settlement is reasonable, the courts will consider a number of factors, including: the value of the claims; risks in the proceeding; the benefits of certainty from settlement rather than litigating through to judgment; the complexity and duration of litigation; and the class’ position on the settlement.
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