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Journalist and lawyer Kieran Pender on the new government legislation that could spell the end of class actions in Australia, and what that would mean for access to justice.

The bill that could end class actions

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Class action lawsuits are one of the only ways ordinary people can get justice and compensation if they’ve been mistreated by powerful corporations and institutions. 

Successful class actions have held companies and even governments to account over stolen wages, emissions fraud, and chemical contamination.

But now, their future is under threat. 

Today, journalist and lawyer Kieran Pender on the new government legislation that could spell the end of class actions in Australia, and what that would mean for access to justice. 

 

Guest: Journalist and lawyer, Kieran Pender.

 
Read Transcript

[Theme Music Starts]

RUBY:
From Schwartz Media, I’m Ruby Jones, this is 7am.

Class action lawsuits are one of the only ways ordinary people can get justice and compensation if they’ve been mistreated by powerful corporations and institutions.

Successful class actions have held companies and even governments to account over stolen wages, emissions fraud, and chemical contamination.

But now, their future is under threat. 

Today, journalist and lawyer Kieran Pender on the new government legislation that could spell the end of class actions in Australia, and what that would mean for access to justice. 

It’s Wednesday, March 2. 

***

RUBY:
Kieran, a few days ago, you met with a man called Lindsay Clout. Can you tell me a bit about him and why you were talking to him? 

KIERAN:
Sure. So Lindsay is a seventy year old from a place called Fullerton Cove, up towards Newcastle, just north of Newcastle - him and his wife and have lived on a property there. It's about 30 hectares, quite a large place for decades.

Lindsay Clout:
You’re lucky, I chose Sunday as a double convenience because we work six days a week, so it won't be interrupted today or this afternoon, but we live next to an Air Force base, and I can tell you when the jets are up, there's no recording…

KIERAN:
Originally they were rearing cattle, and then maybe 15 years ago, they decided that a garden centre would be a better retirement project. And they started running that instead. And they're workaholics. When I spoke to Lindsay, it was on a Sunday afternoon because that was the only time during his six and a half day work schedule that he could fit me in. And he was wearing a fluro orange work shirt that suggests he certainly wasn't exaggerating his work routine.

Lindsay Clout:
And things started to pick up in the area and we thought it was looking good…

KIERAN:
I was chatting to Lindsay because in 2015, he got a phone call that left him really rattled. 

Lindsay Clout:
Yeah, we had a pretty close relationship with our local media, Newcastle ABC. And he rang me - it was about five past seven, and he said “What's this story with this PFAS contamination?” And my answer was “Matthew, I've got no idea. You’d better tell me.”...

KIERAN:
So he learnt that his property had been contaminated with a potentially dangerous chemical from the RAAF base in Williamtown, just five Ks up the road. Overnight, land values plummeted, but banks wouldn't lend to people wanting to buy in the area, so it was an equity trap for those who lived there. And that phone call really began a multi-year legal battle for his local community. 

RUBY:
Hmm. OK. And before we talk more about that legal battle, can we step back for a moment? What exactly is this chemical, PFAS, that Lindsay's property was contaminated with? 

KIERAN:
PFAS is the label for a class of manufactured chemicals that are used in a whole range of things, including as fire retardant in firefighting.

Lindsay Clout:
The biggest problem here has been that the Department of Defence, with an air base close to us, has used this chemical as a retardant in their firefighting drills for a long, long time…

KIERAN:
The jury's still out a little bit on the science because it's still relatively new. But there is really significant concern that high levels of exposure could have a lasting negative impact - these chemicals are sometimes called forever chemicals because they don't break down. 

Lindsay Clout:
It was contaminating our water table - I mean we've got a number of people in this area who have had their bore water connected directly to the house system…

KIERAN:
Now, in the general population, PFAS levels in the blood in people like you or me are about 15 nanograms per millilitre. But in some Williamtown residents who live near this Air Force base, their ratings were well over 100. So that's really troubling. And it's not just in Williamtown, it's in other parts of the country, too.

So it was found in areas adjacent to a number of defence bases because it had been used by defence in these firefighting trails over the decades, places like Oakey in Queensland and Katherine in the Northern Territory. 

RUBY:
Okay, so what did they do, when they discovered PFAS around their properties? 

KIERAN:
So after that phone call, the communities banded together, they tried to get answers, they raised concerns in the media, they got their local MPs involved…but the Department of Defence weren't having it. They denied liability, and federal and state agencies just blamed each other. So ultimately the local communities were forced to sue the federal government for this wrongdoing. 

Lindsay Clout:
All our plans that we were putting together, whether it was media pressure or registered campaign, whatever was directed towards having this area cleaned up and having our lives back. 

RUBY:
OK, so you've got this group of people who live in various suburbs close to defence bases across Australia who've come together, including Lindsay and his wife, Ann, and they've decided to launch a class action, to try and get some compensation from the federal government over this contamination. So, can you tell me about the case and what the outcome was? 

KIERAN:
So it took almost four years of intense legal wrangling. The government denied liability. They denied that they were at fault and should pay compensation. And the case almost went to trial. And then just before it did, the government caved. And Lindsay and his community won.

Kieran Pender:
And what was the settlement?

Lindsay Clout:
Overall I think it was 212 million. Now that was for Williamtown, Oakey, and Katherine. And the Williamtown component was 86…

KIERAN:
The worst affected households got about $300,000 each. I asked Lindsay how much he received, but fair enough he said he'd rather not say. 

But this was really significant litigation that cost a huge amount just to get to that pre-trial stage because the government didn't back down, because they didn't at the very beginning, say, “OK, we accept liability, we'll figure something out”. Instead, Lindsay and this community had to fight it every step of the way.

And so their legal bill at the end of all that, despite the fact the case didn't actually go to trial, was $10 million, which is a huge amount of money. And without the backing of a litigation funder, they never would have got to the courtroom steps. They would have faced the risk of owing the government millions in costs if they lost.

So this was a happy ending. The case was won. Lindsay and his community got justice. 

But the reason Lindsay was talking to me, the reason he gave me some time in his busy six and a half day work week was because he's worried that the next Lindsay Clout might not be able to afford justice.

RUBY:
Right. And why is that, Kieran?

KIERAN:
That's because the Morrison government currently has legislation that's before the Senate that will curb the ability of litigation funders to support class action litigation. This is legislation that critics say will diminish access to justice.

It'll mean that ordinary Australians like Lindsay can't pursue compensation, and big businesses and the government are shielded from liability even when they've done wrong. 

RUBY:
We'll be back in a moment.

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RUBY:
Kieran, can you tell me a bit more about this legislation currently before the Senate, exactly what will it mean for the future of class actions?

KIERAN:
Sure. So it's called the ‘Corporations Amendment Improving Outcomes for Litigation Funding Participants Bill’. And now that sounds pretty benign, right? You look at that, you think, Oh, well, that sounds OK. Improving outcomes - what does that mean? In plain language, it means putting more money in the pockets of plaintiffs of people who've been impacted. You know, that seems like a good idea, right? 

Unfortunately, these confusing, poorly draughted amendments will make it more difficult for plaintiffs to seek justice. So really, central part of what's been proposed by the Morrison government is a floor on minimum levels of payouts to litigants - that class members in litigation have to receive at least 70 per cent of the total sum of the payout or the settlement, or the judgement won't be approved by the judge.

RUBY:
Mm-Hmm. OK. So essentially then this bill, it would ensure that litigants who are the people who are launching the class action, they would get a bigger share of the money if they win. But how is that different to what happens now? Who gets the money in class actions now?

KIERAN:
So at the moment, payouts are approved by the court. And so the exact split will vary. But essentially there's three pieces of the pie. You've got the payout to the litigants, the people who've suffered, you've got the payout to the lawyers for running the case, and you've got the payout to the litigation funder for taking on the risk; so these are companies deep pocketed sort of specialised companies that fund litigation in a range of context, but particularly in class actions. And they bankroll this litigation in return for a portion of the amounts if they win.

But in doing so, they take on the risk of having to pay their own lawyers and the other side's lawyers if they lose. 

So in a case like the PFAS case, that could be tens of millions of dollars that the funder would have been on the hook for if the case had been unsuccessful. And so by imposing this minimum floor on the payout, it might mean that litigation funders decide not to fund these cases because they can't afford it, because it's uneconomical for the level of risk they're taking on.

Now, that might mean that some of these really important high profile class actions might have never gone ahead. So some really significant class actions of light have been the PFAS case, an Indigenous stolen wage case…

Archival tape -- ABC Radio News Reporter:
“The Queensland government today agreed to pay the workers a record $190 million settlement. Lawyers say it's the largest financial settlement outside a native title ruling and the fifth biggest class-action settlement in Australian history…”

The Wivenhoe dam case…

Archival tape -- News Reporter:
“Six and a half thousand claimants in the 2011 Queensland floods class action have reached a partial settlement with Sunwater and the state government. In 2019, they were awarded $880 million in damages…”

There was ‘Dieselgate’ against Volkswagen for their emission testing fraud…

Archival tape -- News Anchor:
“Car maker Volkswagen has settled multimillion dollar class actions in Australia over its global diesel emissions scandal-...”

Archival tape -- News Reporter:
“Under the agreement, a minimum of $87 million will be paid out to customers, but that figure could rise to as much as 127 million…”

And despite the fact that lawyers, the law council, litigation funders, academics are saying, “Hey, this is maybe not a good idea”, the government wants to go ahead anyway. 

RUBY:
Hmm. Ok, so if there is little support for these changes, why is the government actually introducing this bill? Is this a deliberate attempt to reduce or even completely eliminate class actions or not? What is going on here?

KIERAN:
People I speak to think that this is really being driven by big business both in Australia and overseas. There's been some big American lobby groups have been involved in the parliamentary process around this bill because basically what this will mean is that if it's not economical for a case to run where 70 per cent is returned to the class, it won't run at all. 

So you going to have all of these situations where companies have committed wrongdoing have left ordinary Australians injured, sick and, well, otherwise impacted…but unless that 70-30 split can be achieved, the case won't go ahead. And so the company that's committed the wrongdoing will get to keep 100 percent cent of whatever their liability might be. So that benefits big business.

It's also part of a broader theme, particularly from the Treasurer Josh Frydenberg trying to minimise accountability and oversight for big business and protect big business from consumers from consumers bringing claims.

RUBY:
Mm-Hmm. OK, so that's who would benefit then from this bill. But what about if it doesn't pass here and then the situation remains as it is now? Doesn't that still point to these big problems in terms of access to justice? Because potential litigants, people like Lindsay Clout, they're still essentially at the mercy of these litigation funders who pay for these class actions and then go on to take a large portion of the money that is recuperated.

KIERAN:
Of course, so this is an imperfect system as it is at the moment. The courts, the legal system, lawyers are expensive. Some would say they're too expensive, and that means that access to justice is really limited for people that don't have deep pockets. That is a problem. That's certainly a problem, but litigation funding is a peculiarly Australian invention in response to that - it originated in Australia, some big Australian funders have emerged as a result - and it's a practical solution to this access-to-justice problem. And it's not perfect, but it does mean that people like Lindsay clout can run these cases, can have justice achieved. 

And so I guess what I worry about with these proposed changes is what if the litigation funders step away?

I think it's easy for ordinary Australians to look at this and wonder why they need to care. There’s so much going on in the world right now, and this probably doesn't seem like a big deal. But this is one of the things that doesn't affect you until it does, doesn't affect you until your car is dodgy, or until something bad is implanted in you, or until there's chemicals that have leaked and impacted your land. 

Lindsay Clout:
I would think lightning wouldn't strike a second time, and I would need to enter into a class action, but I feel strongly enough about it that there will be other people out there that will need that resource, and if it's taken away from them, they will be helpless.

KIERAN:
There's so many examples recently where litigation funding and class action has achieved justice for ordinary people, ordinary Australians. And I worry that if this becomes law, those Australians won't be able to get justice. 

RUBY:
Hmm. Kieran, thank you for your time.

Kieran Pender: Thanks a lot.

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***

RUBY:
Also in the news today… 

Both NSW and Queensland are still in the midst of floods following huge downpours in both states.

Queensland Premier Annastacia Palaszczuk said that Brisbane received about 80 per cent of its annual rainfall in just three days - with 30 of the city’s suburbs experiencing rainfall totals of more than one-metre during that time. 

In NSW, about 340,000 residents are now under evacuation orders or warnings, as water levels continue to rise in a number of coastal towns. The NSW Premier, Dominic Perrottet has called the floods a one-in-1000-year natural disaster. 

The death toll from the floods stands at eight people, with concerns for several others still missing. 

And Russian forces have launched intense rocket attacks that have killed at least 10 civilians in the eastern Ukrainian city of Kharkiv, and left dozens more injured.

An estimated 500,000 Ukrainians have now evacuated the country. 

As of Tuesday, the United Nations High Commissioner for Refugees reported at least 406 civilian casualties and at least 102 dead from the conflict so far.

I’m Ruby Jones, this is 7am, see ya tomorrow.