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Vic Law Reform Commission backs class action contingency fees
The Victorian Law Reform Commission has called for lawyers to be allowed to charge a percentage of the settlement in successful class actions, as part of its recommendations put forward to State Parliament this week.
Emma Musgrave
As part of the report, Access to Justice: Litigation Funding and Group Proceedings, which was tabled in the Victorian Parliament on Tuesday, the commission recommended that the law in Victoria should be changed to allow lawyers to charge a percentage of the settlement in a successful class action, with the approval of the Supreme Court.
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As it currently stands, lawyers are not allowed to claim a share of the settlement, known as a “contingency fee”.
“There are cogent reasons for permitting lawyers to charge contingency fees in appropriate areas of law. Previous reviews, including the commission’s 2008 Civil Justice Review, have recommended it,” the commission argued.
“There is also persistent concern that lifting the ban would increase the risk or incidence of unethical conduct because of conflicts of interest. However, existing rules and ethical guidelines for the legal profession are comprehensive and more robust than those that apply to litigation funders, and the commission recommends further guidance on the recognition, avoidance and management of conflicts of interest in class actions.
“The commission has concluded that, in principle, lawyers should be able to charge contingency fees because it would provide another funding option for litigants who are unable to bring proceedings without financial assistance.”
The commission noted that a reform to current laws surrounding the subject would see many benefits.
“It would increase competition. It may reduce costs in some cases and enable the pursuit of claims that are not financially viable investment opportunities for litigation funders,” the commission said.
“The challenge of how to improve access to justice by permitting lawyers to charge contingency fees, with appropriate regulation, should continue to be pursued nationally.”
Slater and Gordon principal lawyer Andrew Baker welcomed the recommendations put forward by the commission.
“The report is a strong endorsement of the importance of class actions and the role that they play in facilitating access to justice for tens of thousands of everyday Australians, consumers and investors,” Mr Baker said.
“The recommendations released [this week] by the VLRC are sensible and pragmatic suggestions for reforms that will strengthen the regime and improve the experience of group members in class actions.
“We think these are a strong answer to the issues we’ve seen raised repeatedly from other quarters about the way they see the class actions regime operating and these reforms seem to sensibly address those concerns. What’s more, they do so without restricting the rights of individuals or their ability to access the courts.”
