Due to Australia’s plaintiff favourable class action system, the number of class actions in Australian courts is at an all time high. Recently however headwinds appear to be developing as the US Chamber Institute for Legal Reform pushes for reform in the class action arena. Two reforms currently being considered by the Chamber concern introduction of a “threshold test” for plaintiffs to commence class actions in Australia and new regulatory control of litigation funding for class actions. Both these reforms would make it more difficult for plaintiffs, or plaintiff attorneys, to bring class actions in the Australian courts.
The introduction of a threshold test, along the lines of certification in the United States, would be a pivotal development for Australia’s plaintiff-friendly class action regime. A certification procedure will add an extra layer of threshold requirements to the class action rules, providing an opportunity for defendants to defeat some claims at an early stage. However, any such changes will probably still be some way off. Amongst other things, the successful introduction of a certification procedure in Australia would sensibly require agreement by both state and federal levels of government to minimise risk of forum shopping, where plaintiffs seek to bring claims in those states or territories that do not have a certification process.
The Chamber will also consider whether litigation funding for class actions in Australia should be regulated. The institute has in the past expressed concern that litigation funding undercuts claimant control over lawsuits. This is because litigation funders inherently want to protect their investment and therefore seek control over strategic decisions in the lawsuit. There is also concern that companies engaged in litigation funding are too closely connected with, or even owned by, law firms fishing for and running class action litigation. If litigation funding currently plays a role in the growing number of class actions commenced in Australian courts, regulating litigation funding may prevent baseless claims being brought at the expense of respondents and result in a decrease in class actions commenced in Australia.
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