State serves up a lawyers’ picnic

05 Mar State serves up a lawyers’ picnic

Chris Merritt – The Australian – Thursday 05 March

The threat to the national economy from excessive litigation has prompted the federal government to launch an inquiry into Victoria’s move to encourage class actions by allowing lawyers to charge US-style contingency fees.

The inquiry, unveiled on Wednesday, has been triggered by concern that Victoria’s plan will increase the litigation risk confronting business at a time when the economy is weakening because of coronavirus and the ­aftermath of summer bushfires.

It follows government ­research identifying a spike in political donations to Victoria’s Labor government from the ­nation’s two largest class action law firms, Maurice Blackburn and Slater and Gordon.

The inquiry, to be undertaken by senator James Paterson’s parliamentary joint committee on corporations and financial ser­vices, comes after the government found Maurice Blackburn made 65 donations to the Labor Party last financial year, with 39 going directly to the Victorian branch.

Almost half of Slater and Gordon’s donations in 2018-19 went to the Victorian branch of the Labor Party, the research found.

Maurice Blackburn made political donations last financial year of $354,805, more than twice the size of the law firm’s next biggest year for donations: $163,300 in 2009-10.

Attorney-General Christian Porter said Victoria’s move to allow contingency fees was at odds with the Hayne royal commission’s concern about placing service providers in a position where their own interests conflicted with those of their clients.

It was also inconsistent with the need for all governments, commonwealth and state, to do everything possible to support business through the economic threat and risks posed by coronavirus and the recent bushfires.

“All governments should be working to ensure our economy can perform as best it can, rather than pursuing reforms aimed at lining the pockets of politically aligned lawyers and overseas ­investors,” Mr Porter said.

“Victoria has not discussed this at the Council of Attorneys-General, raising serious questions as to the motivation of the Victorian government in pursuing this model, which is completely out of step with the rest of the country,” he said.

A bill before the Victorian parliament would overturn the ban on contingency fees that applies elsewhere and allow lawyers who run class actions in that state to take a percentage of whatever they win for their clients. It is outlined in the Justice Legislation Miscellaneous Amend­ments Bill, introduced after the Andrews government ignored a call from Victoria’s Law Reform Commission to introduce contingency fees only as part of an agreement with other jurisdictions.

The federal inquiry will re-open the question of whether financiers who have been making massive profits by backing class actions should be subjected to regulation to protect their clients.

The inquiry will examine factors driving the rise of class ­actions, consider whether links between class action lawyers and litigation funders affects the ­duties lawyers owe to clients, and whether contingency fees lead to less viable outcomes for plaintiffs.

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