House debates

Wednesday, 24 November 2021


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

11:41 am

Photo of David SmithDavid Smith (Bean, Australian Labor Party) Share this | Hansard source

I rise to speak on the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021. I recognise the contributions made by members in this debate. This bill has a magnificently Orwellian title. It is another bill that will not do what it says on the tin. In fact, it will do the opposite. As previous speakers have said, it will make it more difficult not just for my constituents but for constituents right across the country to access justice. The stated intent of this bill is to protect the interests of plaintiffs in class actions by setting limits on litigation funding schemes—funded class actions—by, firstly, providing that a court must approve or vary the distribution of claim proceeds between class members, lawyers and funders, which is fair and reasonable, and, secondly, by imposing a rebuttable assumption that a proposed distribution would not be fair and reasonable if less than 70 per cent of proceeds goes to the plaintiffs.

However, it is clear this bill is primarily aimed at making class actions more difficult for plaintiffs and protecting the interests of wealthy and powerful defendants. This is not a new story, but part of a continued pattern of hostility on the part of coalition members to the ability of individuals to access justice through class action lawsuits. In Asbestos Awareness Month, this bill is particularly galling. It should be noted that as part of this process—and it has been a pretty rushed process—the Treasury certified a partisan report by government members of the Parliamentary Joint Committee on Corporations and Financial Services as an independent report, as the equivalent of a regulatory impact statement for the many measures outlined in this bill. As somebody who in a previous life had to put together many regulatory impact statements, I'm flabbergasted.

The bill has been subject to an incredibly short inquiry by the Parliamentary Joint Committee on Corporations and Financial Services. Not only was the inquiry short; it provided limited opportunities for public engagement, including only a one-week period for people to make submissions. If this is such an urgent bill to get through, there should have been appropriate consultation. Thankfully, Labor members of the committee opposed the bill and produced a dissenting report recommending that this bill not be passed.

As I said earlier, the stated objective of this bill is to protect the interests of plaintiffs in class actions, but the real, though unstated, objective of the bill is to protect the interests of powerful defendants by making it more difficult for people to bring class actions in the first place. It is a testament to the current government's incompetence that the bill fails to achieve either the real or the stated objective. As one of the submitters to the committee in that very short time span, Phi Finney McDonald, put it:

That the Government is seeking to present this reform as a consumer protection measure is Orwellian gaslighting.

Further highlighting the idiocy of this legislation is that it is opposed by leading class action defendant lawyers Herbert Smith Freehills. Phi Finney McDonald wasn't alone in his assessment. The committee heard overwhelming evidence that most of the measures in this bill would leave class action plaintiffs and defendants significantly worse off. For example, the evidence received by the committee strongly indicated that the overall impact of the rebuttal 70-30 presumption would, in fact, be to drive up litigation costs, discourage plaintiffs and defendants from settling disputes and so, in fact, delay the resolution process and, more generally, make the law worse for everyone. Moreover, such a presumption would also raise the risk for funders. No funding would be available for some meritorious claims, and funding costs for all claims would likely be higher than they otherwise would be.

Most submitters argued that, rather than resolving uncertainty in the existing law in relation to the availability of common fund orders as recommended by all the members of the committee back in December 2020, instead the bill promotes uncertainty and confusion around common fund orders, to the detriment of plaintiffs and defendants in class actions. By requiring class members to agree in writing to be members of a litigation funding scheme, submitters have argued that the bill would lead to an increase in the number of closed class actions. This would in turn result in multiple class actions for a given event. In other words, it would actually lead to much greater inefficiency and possibly much greater litigation costs.

It's also important to mention that, while the explanatory memorandum acknowledges that the bill gives rise to a range of regulatory impacts on business, the committee in making the dissenting report to this bill makes the point that those impacts have not been properly considered or even understood by the Treasury or the government. That is because, instead of preparing a comprehensive regulatory impact statement in relation to the bill—something I mentioned earlier is a task I've been involved in previously myself—the Treasury certified a report by Liberal members of the committee as an independent review which involved a process and analysis equivalent to arrears. It's quite extraordinary, really. In other words, the Department of the Treasury certified a report written by government MPs as independent and used that report as a primary justification for going forward with this bill.

But there are also broader constitutional concerns around the validity of this bill. According to the Law Council, former solicitor-general Justin Gleeson SC and other legal experts, it's not clear that the bill is constitutional. Multiple and serious concerns were raised in submissions, including but not limited to whether the corporations power in the Constitution and/or the referral powers to the Commonwealth can support the provisions in the bill, whether the provisions would amount to an inconsistency with state class action provisions so as to override them pursuant to section 109 of the Constitution, impacts on the group costs order provisions unique to the Supreme Court of Victoria and potential issues arising in respect of overriding the power of state courts or directing state legislatures.

The explanatory memorandum fails to mention or address these constitutional questions in any way. Indeed, in response to these concerns raised in submissions, the Attorney-General's Department itself was unable to provide the committee with any meaningful assurance that the bill was constitutional or offer any rebuttal whatsoever to any of the concerns set out in Mr Gleeson SC's legal opinion. There was literally no explanation offered as to how or why the bill is constitutional. Indeed, according to the dissenting report, 'it was clear from the long silences, non-answers and visible discomfort at the questions that the officials from the A-G's Department themselves harboured doubts as to the bill's constitutionality'. It's extraordinary for it to have been brought forward without these questions having been answered.

Many of these concerns were raised most recently in a decision by Justice Beach, of the Federal Court of Australia, on 17 November 2021 in Stanwell Corporation Limited and LCM Funding Pty Ltd. Justice Beach raised some of these issues around the constitutionality and drafting of the bill and actually went to some of the rationale behind this bill. Some of the comments in that judgement included that the bill:

… may need to be modified to bring its scope within the referral contemplated by paragraph 51(xxxii) of the Constitution. It may need to be modified to address direct or indirect conflicts with the provisions of Pt IVA of the FCA Act.

This was only a week ago. In the same decision, Justice Beach found:

… the proceeding dispels the myth of the so called advantages of book building in a case of this type. The book building here has resulted in an unnecessary, costly and inefficient delay of seven months in order that over 50,000 retail customers be separately signed up to individual funding agreements. There is little justification for such a barrier to entry so to speak or justice. Fourth, to allow the proceeding to remain closed will incentivise others to launch parasitic actions to cover the balance of the universe of electricity consumers. So the potential for and the vice of a multiplicity of proceedings. And indeed if not productive of such multiplicity now, that position may be all but inevitable if I later deliver a judgment in favour of the present closed class, unless I open the class after judgment.

Yet that is exactly what this bill will invite.

But it's not just about those particular important issues that go to the constitutionality of the bill; it also goes to the real-world impacts. This isn't merely some sort of academic process. There are many landmark class actions that wouldn't have gone ahead had the measures in this bill been in place. My colleague the member for Moreton has provided some of those examples: Mervyn Street v State of Western Australia—otherwise known as the Western Australia stolen wages action—a class action involving thousands of Indigenous Australians in Western Australia whose wages were unjustly withheld or not paid as a result of wage control legislation in effect until 1972; Eileen Cummings v the Commonwealth of Australia—a class action involving stolen generations survivors; and Gregory John Lenthall and Anor v Westpac Banking Corporation and Anor—a class action alleging that Westpac overcharged its life insurance customers. There's a bit of a theme emerging here about who exactly is going to be excluded if these measures actually go through.

Bradley James Hudson & Ors v Commonwealth of Australia, an environmental contamination class action against the Commonwealth of Australia relating to chemical contamination at the Army Aviation Centre at Oakey in Queensland, resolved losses in property and business values. A couple of my colleagues in this House have worked hard to bring those key concerns about the consequences of PFAS: the impacts on small farms and tenancies outside defence bases. The idea that those sorts of participants should be excluded is quite extraordinary. Riley Gall v Domino's Pizza Enterprises Limited was a class action brought by delivery drivers and in-store workers who had systematic underpayment relative to award entitlements. We shouldn't be surprised with that last example about why this government would like to exclude such actions from coming forward.

Even when they try to give Orwellian titles to their legislation at times, they allege that they are on the side of working people and their families across this country. The minority dissenting report on this bill finally came down to make the case that in the end the proponents of this bill haven't made their case. Today, again, they haven't made their case. This bill should be voted down.


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