Chapter 7.8

Question 1

Introduction to class actions

Answer 1

A class action (also referred to as a group proceeding or a representative proceeding) is a type of
proceeding where a group of people, who all have claims against the same party, join together in a
proceeding. The ‘class action’ or proceeding can be commenced if:
* seven or more people have claims against the same person
* those claims relate to the same, similar or related circumstances
* the same issues need to be decided (such as whether the defendant owed a duty of care to those
plaintiffs).

Question 2

How class actions work

Answer 2

Class actions are typically initiated by a single individual known as the lead plaintiff, who represents a group of individuals referred to as group members. These group members do not actively participate in the case and are not named in court documents. In many instances, the lead plaintiff and their legal team may not know the identities of the group members, who might be unaware that a class action has been filed. The group is broadly described in the statement of claim.

Question 3

lead plaintiff

Answer 3

the person who is
named as the plaintiff
in a class action
and represents the
group members; also
sometimes referred to
as the representative
plaintiff

Question 4

group member

Answer 4

(in relation to class
actions) a member of a
group of people who is
part of a class action

Question 5

litigation funder

Answer 5

a third party who pays
for some or all the
costs and expenses
associated with
initiating a claim in
return for a share of
the amount recovered.
Litigation funders are
often involved in class
actions

Question 6

Costs in class actions

Answer 6

Generally, if a class action fails, then the lead plaintiff alone is responsible for the costs of the proceeding
and any potential adverse costs order. This means that not everyone may be prepared to be the lead
plaintiff.

Question 7

adverse costs order

Answer 7

an order (i.e. legal
requirement) that a
party pay the other
party’s costs

Question 8

Types of class actions

Answer 8

• business owners suing Esso as a result of the Esso Longford gas explosion in 1998
• claims in relation to the bushfires that occurred in Victoria in 2009
• a series of bank fee class actions for repayment of fees charged by banks to their customers.
  Types of class actions include:
• shareholder class actions, where shareholders of a company may make a claim about being
  misrepresented about the state of the company’s affairs. For example, a claim was made against National
  Australia Bank in 2010 on behalf of the bank’s shareholders, who alleged that the bank failed to disclose
  information to them that should have been disclosed. The case settled for $115 million plus costs
• product liability class actions, where consumers who have purchased a good or service have all
  suffered the same loss or damage. For example, a class action was launched in relation to alleged
  defective air bags in cars. Other products that have been the subject of class actions include soy
  milk, herbicides and medication
• class actions where employees group together to make claims in relation to underpayment or poor
  work conditions. For example, a class action was commenced against Domino’s Pizza in relation to
  alleged underpayment of workers
• natural disaster class actions, where the group members have suffered loss or damage as a result
  of a natural disaster.

Question 9

Appropriateness of class actions

Answer 9

Determining the appropriateness of a class action to resolve a dispute depends on several factors:
- Number of Claimants: There must be at least seven individuals with similar claims against the defendant; fewer than seven or differing claims make a class action unsuitable.
- Funding Availability: A plaintiff law firm or litigation funder should be willing to cover costs; smaller claims (under $1 million) are often less attractive to funders, while those over $5 million are more likely to receive support.
- Lead Plaintiff: There needs to be someone willing and capable of acting as the lead plaintiff.
- Nature and Size of Claims: Very small claims may not justify the costs and effort involved in a class action.
- Disparity Among Group Members: If one group member has suffered significantly more, they may prefer to pursue an individual claim rather than share a settlement.

Question 10

strengths of class action

Answer 10

• Cost-Free for Group Members: Group members are not responsible for costs, enhancing access to justice for those who may not afford to initiate claims individually.
• Efficiency: Class actions streamline the court process by consolidating multiple similar claims, saving time and resources.
• Pursuing Small Claims: Individuals can pursue smaller claims more effectively when grouped with many others, making it economically viable.
• Support from Funders: Litigation funders and law firms offering “no win, no fee” arrangements improve access to justice, especially when no lead plaintiff is available.
• Reduced Costs for Defendants: Defendants can address multiple similar claims in a single proceeding, rather than facing numerous separate cases.
• Convenience for Group Members: Group members can pursue claims without the burden of actively participating in the legal process.

Question 11

weaknesses of class actions

Answer 11

• Cost Burden on Lead Plaintiff: If a class action fails and there is no litigation funding or “no win, no fee” agreement, the lead plaintiff may face significant costs, though such scenarios are rare.
• Resource Intensive: Class actions can consume substantial court resources and time, including a lengthy approval process for settlements.
• Lawyer Compensation Concerns: There are fears that class action lawyers may benefit more than group members, receiving significant fees while group members receive only small amounts.
• Litigation Funders’ Impact: Criticism arises over litigation funders taking a large percentage of the awarded amounts, which reduces the compensation for group members and may not reflect their actual losses.
• Multiple Actions Increase Costs: Different law firms may initiate multiple class actions on the same issue, raising costs for defendants.
• Lack of Communication: Many group members may not receive adequate or timely information about the proceedings, leading to a lack of awareness about the status of the class action, especially in large cases with thousands of members.