Ms PATTEN (Northern Metropolitan) (14:58): I rise to speak relatively briefly on the Justice Legislation Miscellaneous Amendments Bill 2019. This bill does a variety of things of a fairly technical nature across the range of justice acts but most significantly, as we have been debating today, it amends the Supreme Court Act 1986 to provide for group cost orders or, in other words, allow contingency fees for law firms in class actions.
I think maybe at this point in the day it is worth reminding ourselves what a class action is. It is a legal proceeding in which one person brings a claim on behalf of a wider group of people who have been affected in a similar way or by the same conduct—the general thesis being that a wrongdoer is believed to have caused widespread harm. Contingency fees are lawyers’ fees paid as a percentage of the settlement or amount recovered, as opposed to ordinary legal fees, which are charged for work done, most often at an hourly rate.
Now, the government in promoting this bill says that the changes that they are making in this bill allow contingency fees or group costs orders as determined by the bill and that this will enhance access to justice and pave the way for class actions to proceed where otherwise they may not have, such as class actions for silicosis or wage theft.
I note the opposition to this bill comes from a wide range of groups but probably with a narrow list of reasons for their opposition. They say that it will lead to more speculative class actions being filed in pursuit of lawyer payouts and will benefit lawyers at the expense of plaintiffs. They also say it creates a conflict of interest for the plaintiff firms or for the lawyers themselves. This bill has been before us and has been on our paper for quite some months, so I have had the opportunity to meet with people from both sides of this argument. I and the Reason Party and my office have really considered the details of this proposal quite closely and quite thoroughly, and despite the good work of Mr O’Donohue and the various briefings that he has provided me, I am actually certain of one thing—and that is that improving access to justice is important.
It has been interesting listening to the people opposing this bill talking about the role of litigation funders in this sphere, and for many of them it has been how greedy and desperate these litigation funders have been and how they have been stealing the money from the poor people who have been disadvantaged who were taking this class action. So their argument to protect us from these funders is to stay the same—to not change anything. Now, to me that does not make a lot of sense if there is something wrong with the system and if we think people are getting ripped off. Let us look at who these litigation funders are. They are usually global companies. They are usually foreign owned—possibly locally created but usually investing on the behalf of offshore funds. They are involved in more than 70 per cent of class proceedings, and as we have heard from the opposition to this bill, it is a lucrative business. Litigation funders usually charge a commission of 30 per cent of the proceeds recovered—at least 30 per cent. I think Mr Rich-Phillips was talking about an example where it was a much higher percentage than that.
The reality of the existing system is that plaintiffs who have suffered harm to the extent that they are awarded a payout by our courts hand over, let us say, a 30 per cent contingency fee to the litigation funder and then pay their law fees to their representatives on top of that. Despite hearing how terrible this system is and how people are being disadvantaged by this system, the end argument was, ‘Let’s keep it that way’. And that, to me, does not make a great deal of sense.
On the other hand this bill proposes that we cut out the middleman—that is, the litigation funder—and we require the Supreme Court of Victoria, which does not have a self-interest, to set the contingency fee or the group costs order. So we get the Supreme Court of Victoria to decide how much the plaintiffs will pay. That fee set by the court with the interest of the plaintiff in mind will be less than 30 per cent, no doubt.
This means that the person who has silicosis, who has been the victim of misleading and deceptive conduct by a company, who has a defective pacemaker or defective breast implants, whose land has been contaminated or who has cancer caused by unsafe employment conditions will give away less of their award. And that is by far and away the most important thing—that the person who is harmed benefits by their award to the greatest extent. That is the nub of it.
Mr O’Donohue has suggested that the Legal and Social Issues Committee conduct an inquiry into this. As chair of that committee, as delighted as I would be to take on another inquiry just to see us right through to probably the next term, I do not feel I have the same expertise as the Victorian Law Reform Commission or the Australian Law Reform Commission or the Productivity Commission. You know, maybe I am selling myself short, but I just do not think that I could do it better than they could.
And they were all very clear about this. They were all very clear that lifting the ban on lawyers charging contingency fees would create a significant source of new funding over and above that provided by litigation funders, and that it would be better for the plaintiffs—that the plaintiffs would see more benefit from their award.
They believe that lawyers may be better placed to assess risk and to fund a broader range of meritorious claims than those which fall within a litigation funder’s commercial parameters. And that is it: the funders at the moment take a gamble. They do not particularly care about the purpose of it; they take a gamble. Now, I would actually like to see a wider range of people being able to say, ‘No, we think you have got a case. We think this is important and we will go out there and support it’.
The Victorian Law Reform Commission in their report, Access to Justice—Litigation Funding and Group Proceedings, recommended these changes to increase access to justice for class action litigants, lifting the ban on contingency fees and increasing the Victorian Supreme Court’s role in managing class actions. And to me, that is the nub of it. We are actually giving the power to the Victorian Supreme Court to decide on how much people get paid—how much the lawyers get paid and, more importantly, how much the victims get paid as a result.
The fact that this reform has the support of the Productivity Commission and, as I said, the Australian and Victorian law reform commissions, from my perspective, abrogates any need for a parliamentary inquiry. And on that basis, I commend this bill to the house.