Significant ruling has impact on payouts from class-action lawsuits

Date: Dec 25, 2019

A recent High Court ruling is likely to have a major effect on the amount of class action lawsuits filed in coming years.

According to a number of news outlets, a recent ruling decided that a “key mechanism” used to fund class action litigation has now been made invalid. With this major avenue of funding shut off, it’s likely that class action lawsuits will decrease.

Background of the decision

Before the rules were made invalid, the funders of class action cases were able to automatically collect a particular share of the money won in a lawsuit. The new ruling, according to the Guardian, dictates that “funders will now have to return to the previous practise of getting individual permission from each person or company participating in a class action in order to get paid”.

Often known as a “common fund order”, and sought in the NSW Supreme Court, the prior mechanism saw that individuals who joined class action lawsuits would be bound to contribute to the percentage taken by the funding body, even if they did not personally sign any contract with the funder. This new ruling ensures that nobody is forced into a funding agreement just by having joined in on a class action lawsuit.

The case which prompted the change would’ve seen one financing company take a 25 per cent share of the eventual payouts for a class action claim involving faulty airbags, according to ABC News. The High Court decided that the lower courts do not have the power to make such orders, and therefore the “common fund order” concept, is no longer legally valid.

Proponents of the order argued that it was necessary to help assure that potential litigation funders would later see a “return on [their] investment”. However, the High Court ruled that doing so was a matter “beyond legislation”.

What effect might it have on class action lawsuits?

The number of class action lawsuits is expected to decrease as a result, further emphasising how important it is for individuals making a compensation claim to do so with the advice of personal legal counsel.

Do you need to make a claim for compensation? If so, contact Gerard Malouf & Partners Compensation, Medical Negligence & Will Dispute Lawyers. Whether for a public liability claim, a medical negligence claim, or any other kind of accident compensation, our team of expert lawyers have the experience required to ensure that you’ll receive full payout for your injuries.

Call us now on 1800 004 878 to book a free appointment with one of my compensation experts, or email your enquiry.