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Understanding class action lawsuits in Australia – a comprehensive guide

Understanding class action lawsuits in Australia – a comprehensive guide

Published on March 18, 2024 by Joshua DaleJoshua Dale

In Australia, as in many other jurisdictions around the world, the legal landscape provides a mechanism for you as an individual to collectively pursue justice against a wrongdoer through a class action lawsuit. A class action lawsuit is a legal proceeding in which a group of people who have suffered similar harm or injury join forces to bring a case against a common defendant. This legal avenue empowers individuals who may not have the financial means to pursue their claims, particularly against large, well-resourced defendants, creating a more level playing field in seeking redress for widespread grievances. This article will look at what a class action is including their benefits and shortcomings.

What is the legal framework?

Class actions in Australia are primarily governed by the Federal Court of Australia and are regulated by both federal and state laws. The primary legislation that addresses class actions is the Federal Court of Australia Act 1976 (Cth), particularly Part IVA, which was introduced in 1992.

Additionally, state and territory supreme courts also have their own rules and procedures for managing class actions. In New South Wales, the class action legislation is set out in Part 10 of the Civil Procedure Act 2005 (NSW) (as amended). The New South Wales legislation applies to causes of action accruing after 4 March 2011. In Victoria, the class action legislation is set out in Part 4A of the Supreme Court Act 1986 (Vic), and Order 18A of the Supreme Court (General Civil Procedure) Rules 2015. The Victorian legislation applies to causes of action accruing after 1 January 2000. In Queensland, the class action legislation is set out in Part 13A of the Civil Proceeding Act 2011 (Qld) (as amended), and applies to causes of action accruing after 1 March 2017.

Key features of class actions

i. Representative proceedings

In a class action, one or more representative plaintiffs act on behalf of the entire group, known as “the class”. These representatives are typically chosen because their claims are representative of the broader class and because they are often able to most clearly demonstrate that they have a sufficient interest in the outcome of the case.

ii. Common issues

Class actions are suitable when there are common issues of fact or law among the group members. This commonality is essential to ensure that the case can be efficiently managed and adjudicated as a single action, rather than requiring individual hearings for each claim.

iii. Opt-out mechanism

In Australia, class actions generally operate on an opt-out basis. This means that all potential class members are automatically included in the action unless they actively choose to opt out. This mechanism streamlines the process, allowing the court to resolve the claims of all class members in a single proceeding.

iv. Funding arrangements

Class actions can be financially complex, and many potential class members may not have the resources to participate in litigation. Litigation funding is a common practice in Australia, where third-party funders finance the legal costs in exchange for a share of any successful settlement or judgment. By their nature, whether under the Federal Court or the state class action legislation the litigation is expensive. The legal costs of initiating and conducting such litigation are extensive. A significant commercial factor in the prevalence, of class actions is the availability to representatives and class members of litigation funding.

v. Court approval

Before a class action can proceed, the court must grant approval for the case to be conducted as a class action. The court will assess whether the action meets the criteria for certification, including the presence of common issues of fact or law and whether a class action is the most efficient way to resolve the claims.

What are the benefits of class actions?

i. Access to justice

Class actions provide a practical means for individuals with similar claims to access justice. Without the ability to join forces, many plaintiffs might be unable to afford the costs associated with individual litigation.

ii. Efficiency and judicial economy

Consolidating similar claims into a single action promotes efficiency and judicial economy. It allows the court to address common issues once, reducing the burden on the legal system and avoiding duplicative proceedings.

iii. Deterrence

Class actions can serve as a powerful deterrent against corporate misconduct or other harmful practices. Knowing that a single legal action can represent the interests of a large group of affected individuals may encourage greater corporate responsibility.

What are the challenges and criticisms?

While class actions have proven to be an effective tool for seeking justice, they are not without challenges and criticisms. Some common concerns include:

i. Funding costs

Critics have argued that the high costs associated with litigation funding may result in a significant portion of the settlement or judgment being diverted to funders rather than compensating class members.

ii. Overarching settlements

Some critics express concern that class actions may lead to overarching settlements that may not adequately address the individual circumstances of each class member.

iii. Impact on business

Businesses may contend that class actions have the potential to stifle economic growth by imposing significant financial burdens and diverting resources from productive activities.

Class actions play a vital role in Australia’s legal landscape, providing an avenue for individuals to collectively pursue justice against wrongdoers. While there are challenges and criticisms associated with this legal mechanism, the benefits in terms of access to justice, efficiency, and deterrence cannot be overlooked.

Please note that this article does not constitute legal advice. If you are seeking professional advice on any legal matters, you can contact Carroll & O’Dea Lawyers on 1800 059 278 or via our Contact Page and one of our lawyers will be able to assist you.

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