Australians back capping the cut lawyers and litigation funders take in class actions

As Australia approaches a record year for class actions, scepticism about their effectiveness is rising and support growing for tighter laws to protect claimants.

Australians are growing increasingly sceptical about how much class actions really help mum and dad claimants, with three in four people fearing lawyers and their funders are the real big winners.

With class actions on track to hit a record high in 2024-25 with on average one suit filed every five days in the six months to December, there is overwhelming support to tighten current laws to ensure the victims behind claims are receiving the biggest benefit from legitimate claims.

Australians back caps on how much lawyers and litigation funders can take from class action payouts.

About 73 per cent of people back capping the cut litigation funders and lawyers can take from a class action lawsuit payouts, according to a Resolve survey of 1600 Australians commissioned by the Menzies Research Centre.

Only 25 per cent of people surveyed believed claimants are the main beneficiaries of claims, and just 19 per cent agree law firms charge “reasonable” fees.

The widespread scepticism around the so-called “business model” of litigation funders covering legal fees in exchange for a percentage of any successful payout award, with less than one in four Australians believing this is appropriate.

By comparison about 74 per cent of people supported a “no-win, no-fee” model, 43 per cent were in favour of crowd funding via campaigns and 31 per cent backed self-funding where possible.

Menzies Research Centre executive director David Hughes

It comes as 2024-25 is on track to become the biggest year for class actions in Australian history, with 35 new lawsuits launched so far against businesses including BHP, Rio Tinto, Jetstar, Harvey Norman, Sportsbet, Google, Coles, Johnson & Johnson, NRMA and Woolworths.

The current record for a full financial year was in 2020-21 when 65 suits were filed.

Menzies Research Centre executive director David Hughes said Australia’s class action system was designed to “deliver justice to people, not to funnel mega-profits to lawyers and litigation funders”.

“Far too often, claimants are forced to wait years for class actions to settle or be resolved in court, only to watch lawyers and funders walk away with half the payout,” he said.

“This is an old-fashioned rip-off.”

Mr Hughes said Australians wanted the class action system “fixed” so claimants could “get a fair go”.

“Our research shows overwhelming support for a capping payouts to big law firms and foreign litigation funders. It’s a no-brainer for the Albanese Government.”

In 2022 Labor scrapped oversight the litigation funding industry by the regulator, Australian Securities and Investments Commission, removed the requirement for funders to hold an Australian Financial Services Licence, and exempted funders from transparency and disclosure obligations applicable to other financial institutions.

These changes have been blamed for accelerating the growth of Australia’s litigation funding industry, which has quadrupled in size over the last decade to be worth about $200 million.

Originally published as Australians back capping the cut lawyers and litigation funders take in class actions