House debates

Wednesday, 24 November 2021


Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021; Second Reading

10:27 am

Photo of James StevensJames Stevens (Sturt, Liberal Party) Share this | Hansard source

I rise to support the second reading of the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021. Of course, I don't support the amendment. This is a very important topic, and I would like to start by commending the contribution of the member for Mackellar yesterday on this bill, and I associate myself with the remarks he made.

When it comes to this topic, I'm reminded of when former Prime Minister John Howard talked about the fondness we have for the people of the United States but said there are some things about the United States that we are pleased don't occur in our country; he often uses the experience of firearms control. When it comes to this debate, I would like to say that I hope we don't, in this country, end up having a judicial system that in any way mirrors that of the United States. In particular, we don't want to have a system where people are profiteering from the judicial system; we want it to be founded and grounded on the basis of equity and serving the cause of justice and nothing else.

This bill is about addressing something which is seeping into our judicial system—that is, people seeking to profit, earn money, from financing actions in and through our courts, not necessarily with the best intentions of the plaintiffs who may well be aggrieved and entitled to recompense through the justice system. One of the most awful experiences we have as members of parliament in dealing with constituents is when matters to do with family law come to us as individual circumstances. I've had a few times just in my two-and-a-bit years as a member where a few people have come to see me, as their local member, who have been through a family situation like a divorce. Before their financial situation is settled the entirety of their fortune as a couple has been expended on legal processes to try and settle their matters—so, in effect, they have virtually abandoned the course of action through the courts because there's no money left to fight over, if you will. That's one of the disappointing areas of our judicial system, that people spend more than the value of money that they are disputing on the cost of disputing it.

When it comes to class action litigation, I reassure the member for Kennedy, though he has left the chamber, that in no way, in my reading of this bill, are we outlawing class actions or the right to take class actions, and I'm pretty confident that constitutionally we wouldn't have that power or jurisdiction anyway. What we are talking about is the way in which we regulate people that finance class actions.

Let's just reflect on this business model for a moment. These people, in many cases overseas entities or entities that are registered overseas, who go out in a marketplace to investors and say, 'Donate into this fund that we are going to use to finance legal action in a particular class action matter, in Australia, and if we are successful, this is the return we think we can get you on the money you plan to invest.' So, effectively, they are spruiking a circumstance where, if it's genuinely a matter that requires justice and determination in the courts, and saying, 'Let's go and profit on this. Let's go and invest money in the cost of litigation and, if the determination is in our favour, you are going to get your money back and more.' If they happen to succeed in their objective of financing a successful case, they of course, through the contract that they have put in place with the participants in the litigation, receive, in some cases, a very significant share of the determination that was made in their favour by the courts for the benefit, in theory, you would hope, for the plaintiffs that have been wronged if that is what a court holds and finds.

In that circumstance, if there is a determination in favour of a class of plaintiffs that a court has made that they believe is fair compensation for them in exchange for the wrong that they have endured, they don't get what that court has decided and believes is their just entitlements to create recompense for how they have been wronged, because, once that determination is made, if they have been financed by one of these litigation funding schemes, then of course the determination in their favour is subject to the clipping-of-the-ticket by the people that have stumped up the cash. So they might go out and find a category of people who not only are worthy of taking action but also for whom the courts may well find in their favour, and they are worthy and it is just that they receive compensation, but they never receive anything like the compensation that our judicial system determined they were entitled to as recompense for how they were wronged, because someone else has come in and pulled them into this circumstance where they sign up to, and have to agree to, forgo parts of their compensation to the people who are financing the scheme.

This legislation isn't even saying that we're going to shut that down. What it is saying is that we need to put much better restrictiveness and regulation around these practices. And I can't for the life of me understand how anybody in this chamber, particularly people who purport to represent and stand up for working-class people, would be against us trying to protect the just return from a judicial settlement going to the plaintiffs that the judicial system has determined have been wronged. I cannot for the life of me understand how that, as a principle, is something people are against.

So what are we talking about? We're talking about courts having the ability to limit, look at and consider some of these shady contracts that vulnerable people are asked to sign up to, probably not ever fully understanding the consequences of what they are committing to, and giving the courts the power—like they have the power to make all sorts of other determinations in cases, whether or not they are class actions—to consider and look at some of these litigation financing structures and contracts that are put in place and have the ability to have some jurisdiction and put some limitations over them.

I think this is very important. I think it is fundamentally unfair, if a court determines that someone has been wronged and is entitled to compensation for the wrongdoing against them. That goes through proper and appropriate courts, structures and appeals mechanisms within our judicial system. At the end of that process, if the judicial system has determined they are entitled to, and should have the right to, a certain compensation, they then get a small percentage of what the judicial system believes is justly theirs for what they have gone through and taken action over.

We're trying to put some boundaries around that. We are talking about some very vulnerable people. The member for Kennedy highlighted some examples of class actions. I'm not sure they were necessarily litigation funded and would be relevant to the provisions of this bill, but I take his point, in a very general sense, that there are vulnerable people in our society who are absolutely entitled to come together as joint plaintiffs and take action. In no way is anyone suggesting that we want to put any restriction or limitation on that—and, as I said earlier, I doubt we would even have the power or jurisdiction to do that, constitutionally. But of course it is important when there are large groups of people who are all equally affected. Some of the more common examples, apart from those used by the member for Kennedy, are wage cases. It might be that a whole group of employees may not have been adequately compensated by their employer. Some shortcomings in payroll systems or what have you, whether intentional or not, might have been identified, or appropriate award conditions might not have been not applied. This may be something that the company disputes and it may be that it needs to go to court for resolution. At times, that might affect dozens, hundreds or thousands of people.

Obviously, it would be patently ludicrous to suggest that we think each individual person affected should have to individually litigate those matters. Hence we have the concept of class actions, a thoroughly sensible and important right that we have in our legal system. No-one is disputing that principle and no-one is saying it is not very important. But, equally, we don't want to have unregulated exploitation of those people. The irony, given that they're being approached to seek to right a wrong that they have purportedly suffered, is that at the end of that process, having been pulled into a scheme and financed by people, potentially offshore sources of finance who have got a profit motive—they are adopting and bringing together investors and saying: 'Hey, put your money in here. You're going to get more back in return. We're going to identify cohorts of people and tell them they've been wronged. We're going to launch litigation.' When they're successful and have their successful day in court and the court says: 'Yes, you were wronged. Yes, you are entitled to financial compensation. We determine that the value to compensate you is this,' and the court makes that order, these people come back and say: 'Congratulations on that excellent settlement. Most of it we're taking from you. I don't know if you read the fine print on page 342 of the agreement we asked you to sign when you became a co-plaintiff in this class action, but we tipped in the money to finance this litigation and, now that we have been successful, the huge majority of the settlement is coming to us. We're profiting, and you're not, even though, under our justice system, rather than this being profit, this is in fact compensation that you are duly entitled to.'

We shouldn't stand for that in this country. We shouldn't stand for that sort of exploitation of vulnerable people. And we shouldn't stand for the principle that, if our court system has determined that somebody is entitled to compensation, it should be possible for them to receive barely any of the compensation that our court system has determined they should receive. It is absolutely appalling and outrageous. In some cases, the people who are propagating these schemes are doing it wilfully knowing they are going to succeed and deny the proper and full compensation that the people they are pulling together under these schemes would otherwise be entitled to through the court system. They're effectively saying: 'We are really confident that these people deserve financial compensation for something that's happened to them. Let's get a group of investors together and go and exploit them. Let's go to them and say: "Hey, we will take care of this for you. You sign up to this scheme we've got, we'll pay the bills, and when you're successful, we won't tell you until after the result that the justice we promised to secure for you and the financial compensation for that justice is largely going to be eroded away by the fees that we take in exchange for us coming along and purporting to make your life easy by managing and handling this matter for you."'

We are in a situation where this is a growing sector, unfortunately. It is interesting to see the advertisements on the television. Advertising on TV is not cheap, but these people are very rich people, and frankly they have become rich by exploiting vulnerable people in our society, so they can afford to run television ads and they can afford to campaign and lobby. That should really say it all. Why don't they want this bill to pass? Because it's going to end their profiteering of vulnerable Australians. It brings the scams to an end. It means there is actually proper regulation of their activities, and it means that we are protecting vulnerable people from being exploited.

We have a circumstance where there is a bill before the parliament to protect exploited people, and, potentially, some members of this chamber are not supporting that, which says a lot. It says a lot and it is very disappointing. Nonetheless, I have confidence that not only will it pass this House but it will be passed by the parliament, because the fundamental value here is honouring and protecting vulnerable people and the Australian justice system. If we pass this bill, it will have been a very good day at the office for all of us in this building. I commend the bill to the House.


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