Australia’s class action laws ‘tool of money making’ for lawyers and litigation investors say businesses
A surge in class actions against Australian companies has been condemned, with figures showing how little compensation the victims receive.
A surge in class actions against Australian companies has been condemned as a win only for the legal firms and investors raking in multimillion-dollar fees, while victims have been left with minimal compensation.
Thirteen of the 20 biggest publicly listed companies in Australia – including the big four banks, Coles, BHP and Rio Tinto – are currently subject of either a class action or investigation, with business leaders warning of a rise in “vexatious” claims and poorer outcomes for people with genuine grievances.
Analysis of recent settlements also shows litigation firms raking in huge sums in professional fees, while the average victim is due to receive only a few hundred dollars.
In a recent settlement against ANZ over consumer credit card and personal loan insurance, victims received $37 million out of a $47m settlement.
The class action was in respect of 117,398 insurance policies – meaning plaintiffs would receive as little as $317 in compensation.
Victims received $22.3m out of a $29m similar settlement against Westpac over consumer credit card and personal loan insurance, which would equate to about $391 per person if all of 57,000 eligible victims were compensated.
Ai Group chief Innes Willox said Australia had “very loose laws” around how class actions can be operated and funded, which he believed had paved the way for a surge in international investors backing litigation firms and making huge profits.
“Class actions have become not a tool of justice, it’s become a tool of money making,” he said.
Mr Willox called for the reintroduction of measures introduced under the former Coalition government in 2022, which he said had created a “clear balance” between the right of organisations to launch class actions with enough “guard rails to prevent almost vexatious claims”.
“That is the point that we need to get back to – making sure there’s some rigour around the class actions industry, which is a little bit like the wild west at the moment,” he said.
Maurice Blackburn Lawyer’ national head of class actions Rebecca Gilsenan said Australians deserved a “fair go when big businesses do the wrong thing”.
“Class actions are often the only way that everyday Australians can get access to justice against big business,” she said.
Ms Gilsenan said the firm wanted class actions to cost less so that people to get more of their compensation.
“In the most recent class action settlements, shareholders of G8 will receive 72.5 per cent of the settlement sum and junior doctors in NSW will receive 95 per cent of the settlement sum.”
But Coalition finance spokeswoman Jane Hume said overall the current system incentivised financial settlement over “actual justice,” which could mean people with a “genuine grievance and a strong case” ended up with less money.
“Access to justice is really important, but now the scales have tipped so far the system no longer delivers justice for those who deserve it, it delivers profits for those who whip up class actions,” she said.
“It’s a highly lucrative asset class for litigation funders and the lawyers that participate in class actions, but its all of us – as shareholders and super fund members – who ultimately pay the price.”
Originally published as Australia’s class action laws ‘tool of money making’ for lawyers and litigation investors say businesses
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