Corporations Amendment

November 26, 2021

I rise to speak on the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021 and to support the amendment moved by the member for Whitlam. The Joyce-Morrison government and all the speakers that have trotted out on their behalf say that the purpose of this bill is to protect the interests of plaintiffs in class actions. That is the furphy being peddled by the coalition. They say that they are all about protecting the exploited. There's no suggestion that people are adults able to enter into contracts with a law firm funded by financial backers, and no suggestion that they have the freedom to enter into that contract. For some reason, when it comes to this type of freedom, legal freedom, Australians are to be treated like they are children. The Morrison-Joyce government is here to rescue these poor exploited people who do not have the ability to enter into a contract by themselves.

They clearly say that that is the intention of the bill. But, like most things that the Morrison government says, you have to have a look at the fine print to get to the real story. What they actually want this bill to do is to make it more difficult for people, everyday Australians, to bring class actions. The Morrison government is trying to protect wealthy and powerful defendants. This bill was the subject of a short inquiry by the Parliamentary Joint Committee on Corporations and Financial Services. One submitter to this inquiry, Phi Finney McDonald, said:

That the Government is seeking to present this reform as a consumer protection measure is Orwellian gaslighting.

Further highlighting the idiocy of this legislation is that it is opposed by leading class action defendant lawyers at Herbert Smith Freehills.

Don't be fooled by another Orwellian title trotted out by the Morrison-Joyce government. Like many bills we have seen the coalition ram through this parliament, this bill is friendless.

One of the new requirements this bill will implement is that class members agree in writing to be members of a litigation-funding scheme and to be bound by the scheme's constitution. This will mean that, for a funder to obtain a fee from a claimant, the claimant must be a member of the funding scheme. This is a departure from the current opt-out model, where individuals who do not wish to participate in a class action have to opt out. The current model and its advantages are summarised by the Law Council in its submission as follows:

15. Part IVA of the Federal Court of Australia Act 1976 … which contains the federal class action regime operates on the default basis of an opt-out structure. Under this system a class action can be commenced without the express consent of group members … Instead, the class action defines the group … and then a court-approved notice is given to group members advising that they may exclude themselves from the proceedings by advising the court … The opt-out class action is also referred to as an open class action.

16. The opt-out structure was recommended by the Australian Law Reform Commission … because it promotes access to justice and efficiency.

Take note, those opposite: it promotes access to justice and efficiency.

Group members who cannot be identified at the outset or who are unable to elect affirmatively to participate due to social or economic barriers are not excluded from the legal system and a potential remedy. That is particularly important for large classes of potential claimants in—

I say this for the National Party—

rural, regional and remote, Aboriginal and Torres Strait Islander and/or culturally and linguistically diverse communities and for those with disability. The opt-out approach also promotes efficiency by including all group members at the outset and binding them, unless they opt-out, to the outcome of the proceedings …

The committee, even in its short inquiry, heard overwhelming evidence that most of the measures in the bill that the Morrison-Joyce government has brought to the chamber would leave class action plaintiffs and defendants significantly worse off. For example, the dissenting report from Labor members of that committee said:

The evidence received by the committee strongly indicated that the overall impact of the "rebuttable 70-30 presumption" would be to drive up litigation costs, discourage plaintiffs and defendants from settling disputes and so delay their resolution and—more generally—make the law "worse for everyone". Moreover, as such a presumption would also raise the risk for funders, "no funding [would be] available for some meritorious claims and … funding costs for all claims will likely be higher than they would otherwise be".

So here we go. The party that once upon a time used to believe in free markets and free choice and individual liberties is suddenly going to drive up legal costs and make the avenues available for the vulnerable less attractive. The dissenting report continues:

Most submitters argued that, rather than resolving uncertainty in the existing law in relation to the availability of common fund orders as recommended by all members of this committee in December 2020, the bill "promotes … uncertainty and confusion around common fund orders" to the detriment of plaintiffs and defendants in class actions.

By requiring class members to agree in writing to be members of a litigation funding scheme, submitters have argued that the bill would lead to an increase in the number of closed class actions and this would, in turn, result in multiple class actions for a given event.

Imagine being the insurance company for those companies.

There are other concerns about the process in bringing this bill before the parliament. Instead of preparing a comprehensive regulatory impact statement in relation to this bill so that the Treasury and government can understand the regulatory impacts on business, the Treasury certified a report by Liberal members of the parliamentary committee as being an independent review. I kid you not. That is actually what happened in 2020 and 2021 in this parliament. I will just make this a bit clearer. The Department of the Treasury officials certified a report written by Liberal MPs as being independent and then used that report as the primary justification for a Liberal government policy. You wouldn't do this in a dodgy dictatorship, never mind a healthy democracy like Australia. This is unbelievable. It's astounding that that would happen. There are processes to ensure that the parliament knows the impact that bills will have on the wider community and the economy. The Morrison-Joyce government, the car park rorts people, the sports rorts people, the Leppington Triangle land people—those people—have basically said: 'We know better than the public officials. Just believe us. We got the car parks right, building car parks outside train stations that are going to be closed down, and paid way over for land for an airport.' Unbelievable!

There are also some constitutional issues surrounding this bill. The Law Council, former Solicitor-General Justin Gleeson SC—widely respected—and other legal experts have concerns about the constitutionality of this bill. Some of the concerns raised include whether the corporations power in the Constitution, section 51(xx), and/or the referral powers to the Commonwealth can support the provisions; whether the provisions would amount to an inconsistency with state class actions provisions so as to override them pursuant to section 109 of the Constitution, including impacts on the group costs order provisions unique to the Supreme Court of Victoria; and potential issues arising in respect of overriding the power of state courts or directing state legislatures. The Morrison-Joyce government has not addressed any of these concerns either in the explanatory memorandum or through the Attorney-General's Department when questioned about these concerns during the inquiry process. There has simply been no explanation or assurances that this bill is constitutional. One would think you'd get your house in order before trotting this into the chamber. The Attorney-General's Department itself appeared to harbour some doubts when questioned during the inquiry process.

Justice Beach of the Federal Court of Australia referenced this bill in a recent judgement in Stanwell Corporation Ltd v LCM Funding Pty Ltd. It considered whether a class action brought against two Queensland state owned coal-fired power companies was grandfathered for the purpose of the Corporations Amendment (Litigation Funding) Regulations 2020 from a requirement to be registered as a managed investment scheme. The judgement made some important comments about this bill. At paragraph 19, Justin Beach referred to a previous decision which characterised a particular litigation funding scheme as a managed investment scheme. He said:

… it is arguable that the majority mischaracterised litigation funding arrangements as an investment by group members of property to achieve benefits, when such arrangements principally provide a mechanism for persons who share commonality in their unlitigated and separate choses in action to secure the payment for legal services necessary to vindicate those choses on a contingent basis.

At paragraph 218 Justice Beach also said this bill:

… may need to be modified to bring its scope within the referral contemplated by paragraph 51(xxxii) of the Constitution bestowed by the States under the Corporations Agreement 2002 (as amended), assuming that the approval of the Forum constituted thereunder has not been sought, and also assuming that the concept of "managed investment schemes" under clause 507(1)(a) is limited to its objectively ascertained meaning as at the inception of that clause, which pre-dated Brookfield and was also not affected by or considered under the 2017 amendments. It may need to be modified to address direct or indirect conflicts with the provisions of Pt IVA of the FCA Act or at least to deal with the arguable conceptual incoherency in seeking to shoe-horn the statutory model for managed investment schemes under the Corporations Act into a funding mechanism designed to facilitate access to justice under the open class regime enshrined in Pt IVA, where class actions are controlled by representative applicants, with external legal representation and advice, and by the Court, rather than by group members exercising their democratic rights under a so called managed investment scheme, or by funders or any other entity expediently nominated as a responsible entity.

This is an important judgement that provides reasoned commentary about the bill that is now before this parliament, commentary that has not been addressed by the Attorney-General or by the Morrison-Joyce government in any way from the speakers I have heard on this issue.

These issues are not theoretical. This bill would have real-world impacts for Australians. Litigation funders and plaintiff law firms gave evidence to the committee inquiry about class actions that would not have taken place if the Morrison-Joyce government had had their way and got this legislation through. Let's look at them. Mervyn Street v State of Western Australia, known as the Western Australian stolen wages class action, was a class action involving thousands of Indigenous Australians in Western Australia whose wages were unjustly withheld or not paid, as a result of wage control legislation in effect until 1972. Imagine if that had not run. Eileen Cummings v Commonwealth of Australia was a class action involving stolen generations survivors. Imagine being the Attorney-General that stopped such an action. Gregory John Lenthall and another v Westpac Banking Corporation was a class action alleging that Westpac overcharged its life insurance customers. I will touch on that in a minute. Hudson against the Commonwealth was an environmental contamination class action against the Commonwealth of Australia and the Department of Defence relating to chemical contamination at the Army Aviation Centre at Oakey in Queensland, which resulted in diminution in property and business values. Those PFAS cases would not have occurred if the Morrison-Joyce government had their way. Riley Gall v Domino's Pizza Enterprises was a class action brought on behalf of delivery drivers who allege systemic underpayment relative to award entitlements. That would not happen if the Morrison-Joyce government had their way.

Some of the speakers opposite obviously have not practised as lawyers. That's fine. We need a wide range of people in this parliament. That's important. When I was elected, 14 years ago today, 40 per cent of the parliament had a law degree. I had previously worked at Quinn & Scattini, not in personal injury law but in commercial law. That law firm, now Ryan Murdoch O'Regan, dealt in this sort of matter. I need to stress to those opposite that no lawyer can charge for work that they do not do. No lawyer gets paid for an hour of work that they have not properly billed. The previous speaker talked about shady contracts between people, when, really, this is all about protecting the wealthy from the actions of those who need someone to speak up on their behalf. I urge the parliament to support the amendment moved by the member for Whitlam.