Think Tank Director: Modern Class Actions Miss The Point

13th Feb 2020

The executive director of the Menzies Research Centre wrote in The Australian that class actions are being used “as a political weapon.”

Nick Cater said class actions in Australia “once allowed grievances by people of limited means to be settled at an affordable price.” When that was the case, the number of new class actions filed hovered around the high teens.

Now, though, he says class actions “are a cash cow for lawyers, who scour the transcripts of royal commissions, soliciting for business.” In the past two years, Cater said the rate of new filings is one per week, a significant jump from just five years ago. He also says that most new cases are backed by third party litigation funders, “who bet their money on a successful court finding and trouser a third of the spoils.”

In fact, he says a bushfire victim awarded $250,000 in a successful class action would have typically gotten around $210,000 after fees, according to Australian Law Reform Commission figures. If the case is funded, though, that number drops to less than $130,000. Some funders have been reporting investments returns of “up to135 per cent in a little over two years.”