Research Paper #5: Costs and Funding Commissions in Class Actions

Abstract

In this paper, we examine the problem of costs in class actions in Australia. We review factors giving rise to substantial costs; costs in civil litigation more generally; current methods for the regulation; review and control of costs and possible reforms; reasons for excessive costs in some class actions, including problematic or unethical practices; and costs in North American jurisdictions. Empirical data on litigation funding and legal fees in class action settlements is examined. We also discuss the intersection of legal costs with fiduciary duties and other ethical obligations which may exist in the context of class actions. In our view, in many class actions the legal and transaction costs are excessive. This is, of course, a matter of some significance, not only from the perspective of professional and commercial beneficiaries, class members and judicial officers presiding over applications for approval of settlements, but also in considering the price of access to justice and in evaluating the operation of the civil justice system. We recommend the imposition of more focused and specific affirmative statutory obligations on all participants in the conduct of class actions with broad ranging sanctions and penalties for noncompliance and the establishment of an independent statutory fund, in which funding is secured on the basis of access to justice considerations, rather than the pursuit of profit.