Call to tighten class-action certification process

THE debate about class actions needs to examine the issue of whether Australia had made it too easy to run this form of litigation.

Supplied Editorial Michael Shepherd, partner Allen & Overy

MICHAEL Shepherd, who is a partner at Allen & Overy, said the debate about class actions and litigation funders needed to examine the issue of whether Australia had made it too easy to run this form of litigation.

He said many of the lessons from 20 years of class-action experience in Australia could be dealt with by “a much firmer, US-style certification regime”.

The certification process in the US aims to weed out flawed class actions before respondents incur large legal bills.

Mr Shepherd, who has worked as a litigator in New York, said certification of class actions had the potential to save legal costs and should be seriously considered.

“If you compare how a class action is run in the southern district of New York with how a class action is run here, in the US pretty early on in the proceedings lead plaintiffs need to satisfy broad criteria.”

The certification process meant US courts were considering at a very early stage whether the right plaintiff was bringing the case and sometimes whether the right law firm was involved.

Plaintiffs had the onus of showing why class actions should proceed. But in Australia, he said the class-action system was “more reactive”.

The intention of not having a certification process had been to avoid additional costs by leaving it up to respondents to bring formal motions to strike out flawed proceedings.

“What we have learned is that the better way to do things is to probably start thinking about turning over and maybe adopting something more like what we have in the US,” said Mr Shepherd.

“We have a pretty sophisticated class-action system in Australia that is broadly working. The system is not in ruins.

“But I do think we could do it better — and this would help,” he said.

He believed those seeking reform of class actions would be disappointed if their efforts were confined to increasing the oversight of litigation funding companies.

“There needs to be more,” Mr Shepherd said.

“The existence of sophisticated litigation funders has led to more litigation and better run litigation.

“When I look at the issues we are facing, I don’t see all the answers in the regulation of litigation funders,” Mr Shepherd said.