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Leading consumer law firm Slater and Gordon has responded to criticisms of Australia’s class actions regime with a detailed, data-driven assessment of the operation of the system.

Contrary to claims made by some members of the corporate lobby, the firm said that empirical data continues to show Australia’s class action regime is effective and efficient, and is a vital tool in protecting the interests of investors and consumers against the relative power and resources of large corporations and governments.

In its submission released today to the Australian Law Reform Commission’s Inquiry into Class Action Proceedings and Third-Party Litigation Funding, Slater and Gordon said a large body of evidence dispels claims by the corporate lobby that there had been a rise in class actions or that class action litigation is producing poor returns for group members.

The evidence in fact confirms that the regime is operating as was intended when it was first recommended around 30 years ago, and continues to be a vital tool to hold large corporations and governments to account and promote higher standards of corporate conduct.

Slater and Gordon Head of Class Actions Ben Hardwick said since the class action regime was established attacks on Australia’s class action regime by corporate interests, and consequential reviews and examinations of their effectiveness, have been the regime’s constant companions, however at each stage the data has shown that the system operates well.

“The real complaint from corporate Australia about class action litigation appears to be simply to the effect that companies are increasingly being held to account when they fail to meet the standards expected of them by Australian society.

“When companies breach their obligations and cause people to suffer losses, they ought to be held to account. Complaints from corporate Australia about the system that allows people to do that should be viewed as the self-interested advocacy that it is,” he said.

Mr Hardwick said against the current and developing background of corporate misfeasance, particularly in light of revelations by the Banking Royal Commission, any review of continuous disclosure obligations should be framed to strengthen the measures by which listed entities can be held to account for their misconduct by investors and consumers.

“Over the course of the lifetime of the continuous disclosure rules only a small proportion of ASX-listed companies have been the subject of shareholder class actions.

“The combination of strong disclosure standards and effective enforcement mechanisms has provided certainty and security for investors and other Australian companies, and has led to improved economic outcomes for the Australian market as well as improved disclosure standards within the market.

“There’s a clear argument to be made that a strong class actions regime creates value for our economy.

“We expect that the consequence of a weakened regime would be a reduction in disclosure standards and worse investment outcomes for individual and corporate investors – including, relevantly, Australian superannuation funds. The net result to the Australian economy may be significant,” he said.

Mr Hardwick said Slater and Gordon would support the introduction of contingency fee arrangements, in particular in relation to class action litigation.

“In our view, the availability of such arrangements will enhance access to justice and will assist in directing greater proportions of class action settlements to group members.

“The same safeguards should remain in place to ensure that the Court supervises all issues about legal costs in class actions, to guarantee that costs are reasonable and appropriate: this will enhance confidence in the changes and allow the benefits to group members to be fully realised.

“Furthermore, contingency fees would enable law firms, clients and litigation funders to employ the funding option that best reflects the circumstances and needs of the client and the nature of the particular case at hand.”

Principal Lawyer Andrew Baker said all of the evidence pointed to the fact that Australia’s class action regime was working well.

“Pleasingly our data suggests that since 2010 over 68 per cent of recoveries from class actions have ended up in the pockets of group members, with Slater and Gordon clients enjoying outcomes well above the industry average, receiving on average 75 per cent of the recovered sums across our successful class actions over this period.

“We support all measures proposed that can provide greater assurances and safeguards for group members in class actions – and many of the suggestions discussed in the ALRC Discussion Paper concerning management of possible conflicts and disclosure to group members will do this,” Mr Baker said.

“But it’s important to recognise that, despite what some recent commentary might suggest, the system has worked extremely well for a very long period of time.

“There is no flood of unmeritorious cases being issued and legal costs remain subject to close scrutiny by the courts, but more importantly the system ensures that when large corporate entities breach their legal obligations and cause individuals harm, there’s a way for people to hold them accountable.

“Any measures that might have the effect of taking those rights away from people can’t be justified on the data that’s available,” Mr Baker said.

To view Slater and Gordon’s submission click here.

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