Wednesday, 24 November 2021
Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021; Second Reading
I rise to support the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021. Can I start by rejecting the speech by the member for Cooper—what a load of hyperpartisan nonsense! This is not the end of the class-action system by any means. That is not what this bill does. This is not what this bill is aiming to achieve. This is the fallback we see from Labor all the time: when they can't mount a coherent argument, when they can't mount a coherent set of amendments, they simply enter into a race to the bottom with hyperpartisan arguments about how the world is going to collapse and the sky is going to fall in. It's simply not going to occur. We've seen it time and time again. They resorted to that so often during the COVID period. Labor would say that nobody could get a vaccine because of supply issues. That wasn't the case. All they did was succeed in convincing people not to ring their GP and make an appointment. They said that we would never meet the 70 per cent and 80 per cent vaccinated benchmarks because other countries around the world had not—yet Australians have done that, with the federal government's urging.
So, speaking in globo, I would encourage Australians who are listening to this debate to reject the 'sky is going to fall in' narrative from the Labor Party about this bill and have a really careful look at the changes this bill actually entails. This bill is about fairness. It is about accountability. It is about justice—all of those things that you would want, and you would be seeking, through a class-action system. But it would be a class-action system that delivers the results that it is designed to, and that we all want it to—on both sides of the chamber. At the end of the day, if somebody is involved in a successful class-action lawsuit, we want them to get the compensation they deserve. If the decision has been awarded in their favour, then a great wrong has been done to them and they deserve the compensation they have been awarded.
But the reality is that, as much as both sides of the chamber might want that to be the case, that is simply not happening right now. You can stick your head in the sand, like the Labor members opposite, and say nothing is wrong and if we touch anything about the class-action system the whole class-action system will collapse, which is just nonsense, or you can do what this bill does, what this government has done, and take a really thoughtful, considered approach and look at the class-action system and come up with some targeted recommendations and legislative changes as to how we can make the system better and how we can make sure the money finds its way to where it is needed, which is those who have had wrong done to them—not lawyers, although lawyers will still get paid, I'm certain of that; and not litigation funders, though they'll still take their cut, just hopefully not as much and not like the outrageous examples we have seen.
It's another example of how the Labor Party have completely forgotten and wandered away from their roots. They used to be about the working class. They used to be about everyday Australians. They used to be about Australians doing it tough. But they don't think about them anymore. They only think about what responds well on Twitter and what is trending out there and what argument is going to look great for their woke mates. It's this side of the House that is thinking about those Australians who are doing it tough.
When it comes to the class-action system, I really want to pay tribute to my colleagues who have already spoken who have been so passionate about pushing forward these changes. The member for Mackellar, ably assisted by the member for Curtin, as part of the Parliamentary Joint Committee on Corporations and Financial Services, has done a lot of the review work. But I go back to my point that these are very considered and targeted changes. We've had the Parliamentary Joint Committee on Corporations and Financial Services conduct a review. We've had the Australian Law Reform Commission conduct its inquiry into litigation funding and class actions. In addition to those reports, the bill itself has had extensive consultation by the Treasurer and the Attorney-General, which included a month-long consultation between 1 and 28 June 2021 on policy questions. As well as that month-long consultation, the exposure draft was released between 30 September and 6 October 2021 with a draft of the bill and regulations for public comment. Finally, following the exposure draft, there was further targeted consultation with both plaintiff law firms and litigation funders, including the Law Council, Litigation Lending, Omni Bridgeway and Shine Lawyers.
This legislation, through this consultation, has been designed to be a scalpel, not a broadsword. It's not a demolition; it's not a bulldozer running through the class action lawsuit scheme as those opposite would claim it is. It involves very targeted changes that are enabling more money to go to litigants who have been wronged. Let's re-establish the problem and the very stark examples of injustice that this government wants to confront and that those opposite are happy to stick their heads in the sand and ignore. I could look at their motives and consider that a lot of these large law firms that specialise in class action lawsuits have very deep links to the Labor movement and to unions, and I could speculate that it's just another example of how the Labor Party will stick up for their union mates and those affiliated with them before they'll stick up for everyday Australians who have been wronged.
But let's focus on the problem at hand that we are trying to address. Let me give you a few examples. In Liverpool City Council v McGraw-Hill Financial Inc, now known as S&P Global Inc, $215 million was awarded to the claimants as part of that class action. Of that, $92 million—43 per cent—was paid to the litigation funders. Another nine per cent was paid to the lawyers. So when all was said and done, those people who had actually been wronged, whose lives had been affected and who deserved compensation so they could get their lives back on track, shared in 48 per cent of the damages they had been awarded.
When those who are actually wronged and awarded compensation get less than half, something is wrong in the system. Something is rotten. In Petersen Superannuation Fund Pty Ltd v Bank of Queensland Ltd—a smaller settlement but important to those litigants nevertheless—$12 million in settlements was awarded as a sum in damage. Fifty per cent went to the litigation funders, and another 15 per cent went to the lawyers. Again, those people whose lives had been turned upside down, who deserved the damages in order to get their lives back on track, who had actually been wronged, got a grand total of 33 per cent of the damages awarded—a third. A third went to the actual claimants.
I'm just a layperson. I started a law degree, and I'm happy to tell you that I did not finish it, for very good reasons. It is not a subject I have a lot of affinity for. But, as a layperson, I look at the fact that these people who have suffered, who have taken the time to go about a class action and who have been awarded substantial damages, have gotten only 33 per cent of the damages. There's something very wrong. There are more examples that I could give you. They're not all as egregious as those. Those are certainly some of the worse. In Whittenbury v Vocation Ltd, $50 million in damages was awarded. Only 48 per cent returned to the class members, another 26 per cent taken by litigation funders and 25 per cent taken by the lawyers. The examples go on and on.
How are we trying to address that in this bill? The bill contains five fundamental elements. There is enhanced protection of the right of class action plaintiffs to choose whether to join a class action litigation funding scheme, a type of managed investment under the Corporations Act 2001. This is important because it's freedom of choice. The previous Labor speaker indicated that this was somehow removing people's rights, that they would somehow not be able to participate in class action lawsuits because of this. That's simply not true. It changes the default so that people who have joined a class action lawsuit have to consent to enter in part one of these litigation funding schemes.
Why? What's the practical thing that we're trying to achieve? When they enter these litigation funding schemes, we know from actual experience that they open themselves up to losing 43 per cent, 26 per cent, 50 per cent, 27 per cent of the damages they're awarded, before they even pay the lawyers, directly to the litigation funders so that they can get their profit margin, their yields, on their finance. It is right and proper that the default for people who are in a class action is that they have to consent to that. They have to be convinced that this is in their best interests. They may well consent, and they may consent for a variety of reasons: they don't want to put their own money into it, they can't get financing from somewhere else, it's a requirement from their lawyers—I don't know. They should have to be convinced of that. It shouldn't just be as a matter of fact. Somebody who's a class litigant shouldn't turn around at the end of the process and realise that 50 per cent of the damages they've been awarded have gone to feathering the beds and increasing the yields of the litigation funders.
I talk about the fact that this is not a broadsword but a scalpel; litigation funders will still be able to operate and they'll still take a clip because they are providing the funding. But in this legislation there's a rebuttable presumption that a distribution of over 30 per cent in total of the claim proceeds of the scheme to nonmembers of the scheme is not fair and reasonable, combined with court powers to approve or vary the distribution of the proceeds of the funded class action to ensure it is fair and reasonable.
What do those two, acting in concert, achieve? They give a presumption that the litigation funders can't take more than 30 per cent. They might even take less depending on what the court decides. Isn't that fair and reasonable? Should their yield on the financing be to such an extent that they need more than 30 per cent of the damages? That's essentially what Labor is arguing. The Labor speaker before me, the member for Cooper, said that we just want to leave it to the market to decide and let it rip. That's the opposite. We are actually trying to curtail the market here. If the market were 'let it rip', as it is now, litigation funders would simply take whatever margin they thought they could get away with, and, when people are vulnerable and they're trying to undertake a class action, that could be an awful lot, as we have seen.
What we're trying to do is in the interests of justice, in the interest of fairness and in the interests of ensuring that those who are wronged get the money that they are awarded by the court for the damages done so that they can rebuild their lives. We curtail the litigation funders to only take a fair and reasonable margin. Why is Labor against that? I don't understand it. I can only put it down to the fact that, again, a lot of the law firms that undertake these large class actions have deep roots in the labour movement and in the union movement. And at the end of the day we know that's the only thing Labor is interested in, not everyday Australians, fairness and justice but supporting their Labor mates.