Class Actions and Social Value: Entrepreneurial Litigation or Litigation for the Greater Good?

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Class actions present an interesting social dichotomy. On one hand, participants in class actions and the law firms which represent such participants are often depicted as opportunistic, tactical, and even money-hungry litigants who are engaging in “entrepreneurial litigation[1]. On the other hand, class actions have the important social value of empowering victims who, on their own, have insufficient resources to fund an action against a corporate giant. Class actions also hold accountable corporations who act unlawfully and, ideally, deter other entities from acting in a similar manner.

In this blog post we delve into some of the issues producing discontent in relation to class actions and explore some of the key social benefits that class actions can provide.

Class Actions: a burden on business and the courts?

In the course of determining whether the Victorian class action regime was valid in Mobil Australia Pty Ltd v Victoria[2], Justice Callinan set out many of the common arguments opposing class action suits. He noted that such actions may be argued to be “oppressive to defendants”, “proliferate and prolong court proceedings” and can be “contrary to the public interest”.

Additionally, in 2014 the Attorney General, the Hon George Brandis, announced— though later put on hold— the establishment of an advisory panel on the issue of opportunistic class actions. This decision was based on the view that class actions had become so common that they had altered the risk environment for Australian businesses. Brandis stated, in relation to class action plaintiffs:

They are conceived by entrepreneurial lawyers who seek out shareholders and they do it for profit. They don’t do it to ­represent the interests of the ­client. They do it for profit and I think that creates profound ethical and moral problem.[3]

Class Actions: access to justice for all

As noted above, the social benefits of class actions stem primarily from the fact that class actions increase access to justice, hold businesses accountable for their actions and deter businesses from engaging in unlawful conduct which may result in a class action suit. On top of this, shareholder class actions in relation to corporate disclosure, while much aligned by the business community, play an important role in maintaining clear and frank disclosure by companies and a strong corporate governance standard in the Australian economy.

Pursuing justice through the court system is an expensive endeavour and often presents an insurmountable barrier to the average Australian. In 2007/08 the Attorney General’s Department estimated that the cost for completing a case in the Federal Court was approximately $110,000[4]. Such funds are out of reach to most Australians, leaving the average citizen with limited recourse to protest against damage suffered at the hands of powerful companies or government entities.

As noted by Maurice Blackburn in their publication Class Actions and Social Value (Ben Slade), one class action which has provided genuine social value and assistance to victims otherwise unable to fund such litigation on their own is that brought in relation to the 2009 Black Saturday bushfires[5]. The fires were started when power lines broke and struck the ground in February 2009. The ensuing bushfires resulted in 119 deaths and destroyed or damaged 1,772 homes. A suit was brought against the operator of the downed power line (Ausnet Electricity Pty Ltd), the maintenance contractor who inspected the power line, and Victorian State Government entities responsible for forest land management and emergency services. As noted by Maurice Blackburn, who acted for the plaintiffs, the $800 million received as a result of a settlement agreement provided valuable compensation to victims of the bushfires, many of whom had lost love ones, their homes and/or their ability to work. The sum also provided much-needed funds to rebuild devastated communities.

Access to justice is not merely limited by financial resources, as noted by Vince Morabito and Jarrah Ekstein in their paper Class actions filed for the benefit of vulnerable persons – An Australian Study[6]. Numerous other groups in society also benefit greatly from the class action system available to them. Such groups include individuals with intellectual disabilities who face distinctive barriers in many areas of life, such as employment. In a class action brought on behalf of a group of intellectually disabled people[7] in relation to unlawful employment discrimination, H Borenstein SC poignantly noted that cases such as these raise “significant matters of public policy” and “go to the validity of the assessment process which has been developed by the Commonwealth and applied by employers in respect of persons working in special employment situations”.

This paper continues to provide prolific examples of numerous areas where the class action regime provides access to justice to the most disadvantaged members of society who face the greatest barriers to justice. Such groups include Indigenous Australians, children subject to abuse, older citizens, and persons affected by unsafe medications or medical devices, medical negligence, or harmful products.

Conclusion

While many will argue that class actions provide an incentive for entrepreneurial litigation, it is beyond doubt that the Australian class action system provides a unique form of redress for at-risk citizens who, alone, are unable to act against corporate giants or government entities at whose hands they have suffered injustice. While undoubtedly flawed in certain ways, the class action system is an important element of the Australian legal system that has improved the lives of countless Australians.

 

 

[1] Mobil Australia Pty Ltd v Victoria [2002] HCA 27 at [172]

[2] [2002] HCA 27 at [172]

[3] Chris Merritt, ‘Crackdown on opportunistic class actions’, The Australian (Sydney), May 23 2014

[4] Unaffordable and out of reach: the problem of access to the Australian Legal System (Community Law Australia, July 2012), http://www.communitylawaustralia.org.au/wp-content/uploads/2012/07/CLA_Report_Final.pdf

[5] Matthews v AusNet Electricity Services Pty Ltd & Ors [2014] VSC 663 (23 December 2014); Rowe v AusNet Electricity Services Pty Ltd [2015] VSC 8.

[6] C.J.Q. 2016, 35(1), 61-88

[7] Nojin v Commonwealth of Australia

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