A proposed 30 per cent cap on gross returns to litigation funders would make a large number of class actions financially unviable, new research by PwC chief economist Jeremy Thorpe shows.

When applied to class actions from the past 20 years, the research showed returns in 36 per cent of matters would not have covered the legal costs of running the case, let alone adequate returns to the funder.

Omni Bridgeway CEO Andrew Saker backs a 50 per cent floor on returns to class action members. 

Commissioned by Australia’s largest litigation funder, Omni Bridgeway, Mr Thorpe’s report found even a 50 per cent cap would make some actions unviable and leave Australians without access to justice.

“This demonstrates the trade-off inherent in any cap on litigation funder returns,” the report said.

“It would provide higher returns to some class members, but some members would not receive returns they would have otherwise expected as fewer actions would be undertaken.”

Omni Bridgeway chief executive Andrew Saker said a 70 per cent floor for member returns would not lead to adequate revenue for litigation funders when balanced with the “considerable risks” associated with “long, expensive, complex and bitterly fought actions with uncertain outcomes”.

“In other words, many funder-backed class actions that have led to recoveries for group members arising from negligence, misleading conduct and other illegality, would not have been brought, denying a significant number of Australians any financial recovery,” Mr Saker said.

“To the extent that proceeds from a successful action are eroded by legal fees, this is largely a function of the high costs of pursuing litigation in Australia and not a reflection of litigation funding.”

A parliamentary inquiry looking into litigation funder-backed class actions last year was generally scathing of the sector, which it accused of using the justice system for the primary motive of generating a return on investment.

The final report recommended the government consult on the best way to introduce a statutory minimum return of gross proceeds from class actions (including where the matter is settled out of court) to members.

It also recommended the government explore a minimum gross return of 70 per cent to class members from any damages awarded; and whether a graduated approach could be taken based on risk and complexity.

Full story: Australian Financial Review

COMMENT: Moves to cap gross returns for litigation funders reek of the big end of town - those whose actions have caused the need for class actions - trying to influence their mates in government to minimise pay-outs to those who legally deserve them.

If this happens, justice will be denied to battlers across Australia whose only recourse in recent years has been to avail themselves of various class actions on a "no win, no fee" basis. What could be fairer than that?

Indonesian seaweed farmers win class action following one of Australia's largest oil spills

Lead plaintiff Indonesian Seaweed farmer Daniel Sanda 

Some 15,000 Indonesian seaweed farmers whose livelihoods were destroyed by one of Australia's largest oil spills have won a Federal Court class action

The company behind one of Australia's largest oil spills has been found liable for damaging the livelihoods of thousands of Indonesian seaweed farmers.

The Federal Court on Friday afternoon ruled the operator of the Montara Wellhead Platform, about 700 kilometres west of Darwin, breached its duty of care to the farmers after untested, deficient barriers were used to cap its H1 Well in 2009.

Oil and gas spilled uncontrollably from the well into the Timor Sea for 74 days, damaging seaweed farms off Timor and an island further south.

Class action lead applicant Daniel Sanda, who lived on about $2,000 a year before taking up seaweed farming on Rote Island, had calculated the oil spill cost him 739 million Indonesian rupiah ($A67,000) in profits over six years.

"I am satisfied that this oil caused or materially contributed to the death and loss of (Mr Sanda's) crop," Justice David Yates said.

"I am satisfied that, although difficult to assess, and although attended with uncertainty, the applicant's loss can be calculated, and that he is entitled to an award of damages."

The oil company, PTTEP Australasia, accepted it was negligent in suspending and operating the well but contended it didn't owe a duty of care to the farmers.

Even if that duty of care was owed and breached, it said there wasn't any evidence the oil reached the areas, let alone that oil was in a form that would be toxic to the seaweed crops.

It told Australian Maritime Safety Authority in August 2009 that about 200 to 400 barrels of oil was spilling per day, revising that to the higher figure at trial.

But Justice Yates found the rate was 920 barrels per day "as a minimum" and was likely being discharged at an uncontrolled rate exceeding 2,500 barrels per day.

PTTEP had shown in its oil spill contingency plan that it was concerned as to whether oil spilled at the H1 Well could reach shorelines in Australia, Timor and Indonesia and harm the marine ecosystems there, he said.

While the modelling showed no impacts, it was not dealing with an uncontrolled well blowout arising from a failure to properly suspend the well, the judge said.

"The possibility of impacts to those shorelines and harm to the marine ecosystem carried with it the possibility of harm to those businesses or enterprises that depended on the commercial exploitation of that ecosystem, including in relation to seaweed," the judge said.

"I am satisfied, therefore, that the foreseeability of that risk of harm arising from the respondent's actual acts or omissions is established and that the respondent breached its duty of care to the applicant and the Group Members.

"No other consideration has been raised which militates against a finding of breach."

Class action lead applicant Daniel Sanda had calculated the oil spill cost him 739 million Indonesian rupiah ($A67,000) in profits over six years.

Justice Yates ruled Mr Sanda should be awarded 253 million Indonesian rupiah, having applied a discount of 40 per cent due to uncertainty in Mr Sanda's exact income and found that no income loss occurred in 2013.

Full story: SBS

$25M Dick Smith Holdings class action settlement approved but judge says "disappointing"

The $25 million settlement resulting from class actions launched against Dick Smith Holdings (DSHE Holdings), the entity remaining after the collapse of electronics retailer Dick Smith, and insurer Alliance, has been approved, but only a small portion will end up in the hands of shareholders.

The cases were launched after the collapse of the retailer in early 2016, along with the closure of its stores, which followed closely on from a $60 million inventory write-down revealed in late 2015.

A rebate-focused inventory buying policy was one of the main triggers of the company’s collapse, according to a subsequent creditors’ report.

It should be noted that online retailer Kogan.com purchased the Dick Smith online retail business in 2016, taking over from June that year. 

The online business is unrelated to Dick Smith Holdings, the entity at the centre of the class actions.

Two of three proceedings were brought against DSHE Holdings Ltd and Dick Smith’s then executive directors, Nick Abboud and Michael Potts, and its auditor, David White of Deloitte Touche Tohmatsu. 

The other action was brought against Allianz Australia Insurance.

Broadly, two of the proceedings were securities class actions, with the plaintiffs representing people or entities that had purchased shares in Dick Smith. 

These actions alleged misleading or deceptive conduct of Dick Smith, Abboud, Potts and Deloitte.

The proceedings settled in principle on 3 December 2020, with the settlement involving a payment by several defendants of a total amount of $25 million.

Now, Supreme Court of NSW justice James Stevenson has approved the settlement, which he described as “disappointing”.

Full story: ARN from IDG

Current Class Actions across Australia in the Federal Court

 

List of current class actions across Australia as at March 2020 in the Federal Court of Australia on a state-by-state basis.

Keep up-to-date about all Federal Court class actions.

Click: Federal Court Class Actions