House debates

Wednesday, 24 November 2021


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

1:09 pm

Photo of Tony PasinTony Pasin (Barker, Liberal Party) Share this | Hansard source

Like the member for Fremantle, I was privileged to be educated with a law degree. And, like the member for Fremantle, I worked in the law before I came to this place. In fact I worked for a very large law firm in Adelaide before determining that I couldn't live in Adelaide and I needed to return home. Home for me is Mount Gambier, in the south-east of South Australia. When I did that I worked for a local practitioner before establishing my own firm. I say this because I reckon, of all the members in this House, I am perhaps one of the only people to have acted as a litigation funder. You might ask: how that could be? The majority of my practice involved working in the criminal law. I'll talk a little bit about that in a minute, in particular motive, and why perhaps those opposite are motivated to be debating this issue so voraciously.

In other fields of practice I would act on behalf of plaintiffs in personal injury claims. In those circumstances I would fund those proceedings where the plaintiffs had no capacity to meet my costs from day to day. Instead, I would carry that work in progress and finalise the matter in settlement, either at trial or ultimately when the matter settled. But that's where the similarity between the firm I operated and litigation funders ends, because, quite frankly, there was no return on that particular investment. Indeed, it would have been improper for me to do so. Fees were rendered in accordance with the work undertaken and, if successfully resolved, either by settlement or at judgement, my fees would be paid. If unsuccessful, then we would notch that down to experience and move on, because, quite frankly, the clients I acted for had no capacity to meet those fees independently.

I briefly mentioned the criminal law, and in criminal investigations I think the most important element is always to understand the motive of why someone may have acted in a particular way. It's certainly the approach taken by investigative authorities like the police. For those listening to this broadcast, I'd like you to pause for a minute and consider the motive of those opposite. I'm going to come back to that motive in a minute because I think it's incredibly instructive as to why we're seeing such strong, if you like, defence in this place of litigation funders.

Now, what's litigation funding about? Well, it's effectively about saying, in class action matters, that someone needs to pay the lawyers. As with my clients, there are circumstances where plaintiffs in class actions aren't in a position to do that. The class action industry in this country has embarked upon a campaign to try to scuttle this piece of legislation. In their advertisement, which is running on television, they try to paint this as the little guy versus big business. They say, 'If we all work together we can achieve our outcomes.' But the question becomes: what's the outcome? And the outcome to the ordinary viewer of that advertisement is about the little guy being appropriately compensated in circumstances where a court determines that they have been wronged in a way that sounds in damages. But that's not quite how it works, particularly when it relates to matters involving litigation funders. A recent Australian Law Reform Commission report indicated that, on review, those cases that involve litigation funders saw a median return to the plaintiffs of 51 per cent. You might say, 'Big deal.' Well, it is a big deal, because that same report went on to say that, in cases not involving litigation funders, the median return to plaintiffs was—wait for it, not 51 per cent—85 per cent. So, effectively, same plaintiff, same claim, same court, same wrong, same damages, but a very different outcome. We can measure that outcome. That very different outcome is a matter of 34 per cent. If a plaintiff has been wronged and is awarded damages of $100,000 then, in the case of not involving litigation funders, they can expect to pocket $85,000. But, in the case involving a litigation funder, that $100,000 awarded damages becomes $51,000. Same plaintiff, same court, same action, same damages, same compensation—different result.

The issue I have with this doesn't fall with practitioners. Practitioners need to be paid for the work they do, no question, and nor do I have a beef with someone who might step in as a litigation funder to meet the cost of that representation. But I do have an issue with those opposite suggesting that a provision in this bill, which effectively creates a rebuttal presumption—let's be clear about that; it's a rebuttal presumption, not a definitive position—that a distribution of more than 30 per cent in total of the claim proceeds of the scheme to non-members of the scheme is not fair and reasonable. In effect, what the law is saying is that courts need to determine, effectively, that these arrangements are fair and reasonable. And they will start from a presumption that anything more than 30 per cent being distributed other than to the plaintiffs is not fair and reasonable. Well, I reckon that's about right.

That's not to say that, in certain circumstances, you can't partition the court and indicate that this matter was of such complexity and such difficulty that there will need to be a greater proportion. It simply says that that's the starting position. I think people listening to this debate would reasonably say that people should benefit from the claims they bring in consequence of actions that have wronged them, and the damages that flow from those claims should rest with them—the majority of that benefit should rest with them. It shouldn't rest with litigation funders.

I think it's best that I give some examples, such as Liverpool City Council v McGraw-Hill Financial. The matter settled for $215 million—a whopping sum. The legal costs associated with achieving that outcome were $20 million, or nine per cent of the settlement proceeds. It is important we keep these numbers in mind: nine per cent of the settlement proceeds. Those that paid those legal fees, the litigation funders, received $92 million, or 43 per cent of the proceeds. To be clear, the lawyers charged and were paid $20 million for the plaintiff. Those who were paying the lawyers' bills paid that $20 million, but, in return for doing that, they were paid $92 million. Are we serious—43 per cent of the proceeds? This meant the plaintiffs—who, by the way, news flash, are the people that were wronged and that compensation was awarded to—received 48 per cent of those proceeds. So, having brought a claim and having obtained a judgement, they received less than 50 per cent of what they were awarded by the court.

Mr Deputy Speaker, you might ask me why I was so fixated on motivation. Quite frankly, I'm going to sound the bell here. I'm sure others have as well, but I'm going to ring it loud and clear. The member for Fremantle sought to suggest that the legal profession is in some way overwhelmingly centre Right. The reality, I expect, is that the legal profession, like the Australian population, is split right down the middle. I practiced the law, as did the member of Fremantle, proving the point. But the reality here—and I'd love anyone over there to take this point with me—is that plaintiff firms in Australia, particularly those specialised in class actions, are overwhelmingly, if not exclusively, Labor law firms. Great; fantastic! As I said, I have no particular issues with the legal fees paid here, but what I am particularly concerned about is the return on investment being achieved by litigation funders. And I've got to think to myself: who stands to benefit from this legislation being scuttled? The reality is that, disproportionately, litigation funders and, to some degree plaintiff law firms, and both of those cohorts are significant contributors, major donors, to those opposite. That's what we've got here, ladies and gentlemen.

For those out there listening to this debate, understand this: this is about protecting the Labor Party business model. That business model works as follows: 'We protect your ability to raise fees and achieve return on investment both as plaintiff law firms in class actions and as litigation funders. We protect that circumstance for you and, in return, of course, you will bulge our election-time coffers with contributions to the campaign.' There it is. This is a model that has been used ad infinitum by the union movement for a very long time. They often settle workers compensation matters. They step in, provide assistance to plaintiffs in those circumstances, injured workers, but then—and many members of this place and those listening otherwise might not know this—they take a significant cut of that compensation.

I would have thought that those opposite, if they bear true to the traditional Labor values, would step in, do that work, ensure workers are compensated appropriately and take almost no compensation other than the union due that was paid by every single member in support of those individual members who were impacted more disproportionately. But that's not what they do, because it is a business model—just like this is a business model—and they want to protect it. I have to tell you that it is an incredibly lucrative business model. As I said, $215 million worth of damages, with $92 million paid to the litigation funders and $20 million to the lawyers, leaving the plaintiffs—the plaintiffs; those that were wronged—with a mere 48 per cent of the judgement.

Well, quite frankly, the gig is up. We on this side have identified this as a real issue. We are not suggesting—like those opposite are—that this will be the end of class actions in Australia and that they will fall by the wayside. Of course, they won't! We are simply saying: give the plaintiffs a fair go. Don't take advantage of the fact that they don't have the resources, the means and the wherewithal to pursue their claim and, in circumstances where they are at that disadvantage, don't effectively hoodwink them into an arrangement which will see much of their compensation shoehorned to the litigation funders and effectively thereafter diverted in donations to the ALP. Don't do that. Create a circumstance where people are appropriately compensated and lawyers and those that provide capital to fund litigations are appropriately compensated. Who in their right mind would think that a contribution of $20 million paid over time to the plaintiff's lawyers should result in a dividend to litigation funders of $92 million? That's a 400-plus per cent return on investment. That's not fair for the plaintiffs who were injured, suffered loss and were compensated. It's not right, and those opposite know it. I expect better from them.


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