A ruling in the High Court has put the brakes on class action lawsuits, in a blow for the lucrative industry but a win for boards
that could put them at serious risk. In the BMW-Westpac case, it ruled common fund orders were outside the power of the NSW Supreme Court and the Federal Court, at least early in litigation.BSA, a telecommunications company facing an unfiled class action from Shine Lawyers alleging it used sham contracts to avoid classifying thousands of technicians as employees, made a statement to the ASX on Monday saying: "In the light of the High Court decision...
"To avoid the free riders, [litigation funders] came up with the idea of the closed class, [they said] 'we're only going to bring it on behalf of some people'," Legg says. Just how well the courts have been doing that is a multibillion-dollar question as the industry looks towards state and federal governments to figure out what happens next.Credit:Stuart Clark, an adjunct professor at Macquarie University who was a top class action defence partner with Clayton Utz, says litigation funders are making "obscene profits".
The litigation funders disagree. Tom McDonald, litigation funder Vannin Capital's regional managing director, says judges carefully weigh the returns litigation funders receive for risking their capital on expensive, complex litigation that is not guaranteed to succeed and in many cases could not otherwise be run.
Monash's Morabito also argues that the boom in class actions has been overstated relative to jurisdictions like Israel and some Canadian provinces. Andrew Watson, who heads Maurice Blackburn's class action division, says common fund orders have increased competition and helped bring down prices.
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