Group Claim Freqently Asked Questions


 

Do Group Claims make a settlement more difficult?

No. Group claims can increase the chances of a settlement because a key motivator for defendants to settle a claim is that that they can bring closure to the entire issue.

Can I be part of a Group Claim, or be bound by its outcome if I haven’t done anything to participate?

Yes. If you are covered by the criterion in the definition of the group, you could be bound by the outcome even if you do nothing, even if you don’t know about the case. This happens because the creators of Group Claims wanted the procedure to benefit people who may be too nervous or uninformed to take active steps to join the case.

If you are bound by the outcome, it means that you can not bring your own case. Sometimes this will mean that you are entitled to the proceeds of the case (if there is a settlement or award involving payment) or sometimes it means that you are prevented from any recovery and from bringing a future case.

So, the Group Claim system usually works on the basis that you are included in the case unless you take a positive step to opt-out (see What does it mean to opt-out?)[1]

However, in some cases the class definition includes in the criterion that to be a group member a party must have signed a funding agreement. In such a case, a party is only effected if they have taken that active step of signing a funding agreement.

What does it mean to opt-out?

Opt-out means taking an active step to be excluded from the case. Usually the court will set a deadline for opting-out, and a procedure for doing so – which typically involves sending the court and/or the lawyers for the representative party a simple notice stating that you opt-out.

Are there disadvantages to participating in a Group Claim compared with more conventional court processes?

Sometimes participation in a Group Claim, in a group together with other claimants, means not having the ability to have complete control of the case or to chose your own lawyers. It can also mean that the outcome generalises about the loss of the group members, because the costs and effort of a complete assessment of each group member’s circumstances would not be viable. Often, this is considered satisfactory because the alternative of an individual stand-alone case is not financially viable.

Sometimes the costs of a Group Claim are much more than an individual case, because the stakes are higher so the battle is larger. However, the fact that the stakes are higher means that the costs are much less of a proportion of the claim. For example, a case which is conducted as a Group Claim claiming $200m for 100 people, may cost $7.5m to run (which is viable), but the same case for an individual seeking $200,000 could cost $2.5 million (which is obviously not viable even though the costs are only one-third of the Group Claim.) 

See some advantages to participating in a Group Claim.

Where is the exact legal definition of Group Claim? Are there similar procedures for multiples of claimants?

In Australia Group Claims are sometimes called Representative Proceedings (the name used for a Class Action in the rules of the Federal Court of Australia ) or “Group Proceedings” (the name used in the rules of the Supreme Court of Victoria ). In the US these claims are commonly known as Class Actions. They all generally mean legal procedures with lots of claimants.

Are there different categories of claimants in a Group Claim?


Just as the phrase Group Claim has a different name in specific courts, so does the claimant who acts as a representative of the others. That party is sometimes called an applicant (in the Federal Court of Australia) or a plaintiff (in the Supreme Court of Victoria) or a representative plaintiff.

Usually the claimants standing behind the representative are called Group Members. There can also be sub-groups and sub-group representatives.

If the representative party has their own lawyers, who protects the interests of group members?

The court supervises Group Claims, and considers the interests of group members who are not represented by lawyers. In some cases, group members will also have engaged the same lawyer as the representative party, in which case the lawyers should protect those group members’ interests too.

Can a settlement occur without a group member’s consent?

A settlement in a Group Claim only becomes binding on Group Members once approved by a court.  The court can only approve a settlement which is fair and reasonable. Usually, the representative party first reaches an in-principal settlement, subject to approval, and then the court orders a timetable for the approval process which includes the chance for objections. Group members can often lodge their objections and have a chance to argue any objections in court.

If I exclude myself from the Group Claim and it achieves a good outcome, can I get the same outcome by myself (for example riding on the coattails of a Group Claim without any costs)?

Being able to rely on a separate case to obtain the same outcome is risky because applying one case to another is usually not straightforward and opens up room for legal debate. A well-resourced defendant is often likely to exploit any opportunity to challenge the applicability of an earlier Group Claim outcome, or engage in other typical litigation tactics to avoid focussing on the real issues, which can make it difficult to run a copycat case.

There are also time limits for bringing court claims and a claim which has been excluded from a Group Claim may expire and become unable to be pursued simply on the basis of being too late.

Do I have to pay any up front legal costs for the claimants’ lawyers?

Legal costs in Victoria can only be charged where there is a cost agreement between the party to be charged and the law firm. The position is the same in most, if not all, Australian states and territories.

Some Group Claims in Australia are conducted without the claimants having to pay fees up front or out of their own pocket. In exchange, fees are deducted from any recovery from the case. This is sometimes called no win/no fee, no cure/no pay or conditional fees. 

In Australia, as at March 2016, it is currently forbidden for lawyers to charge a fee which is a percentage of a recovery, although there is a lot of ongoing debate about whether that restriction should continue. 

That restriction on percentage fees (typically called contingency fees) does not apply to non-lawyers who finance litigation (typically called litigation funders or third party funders). Until now funders have only been able to obtain their fee from parties who have entered into an agreement with them. However, in recent times some litigation funders have asked courts for a percentage of a Group Claim recovery from all group members, even those who have not reached an agreement with the litigation funding company. As at March 2016 no such request has been granted.

What does a litigation funder do?

Sometimes Group Claims do not have to be paid for by the Group Members, because a business invests in the claim. Those types of businesses are called litigation funders, or third party funders. Typically, a litigation funder pays the costs for running the case and only gets repaid if the case is successful. In exchange for that investment, and the risk and inherent unpredictability of court procedures, litigation funders normally get paid a success fee from the recovery (and only if there is a recovery). The amount of a success fee and the way it is calculated varies. Sometimes it is a percentage of the recovery and other times it is a multiple of the litigation funder’s contribution. Having to pay a success fee means that if a case which utilises litigation funding is successful, then the recovery for claimants may be less than if litigation funding had not been used, however it also means less risk for Group Members or representative plaintiffs.

Litigation funders often also provide protection from adverse costs (see  If the Group Claim loses, do I have to pay legal costs to the defendant?).

What does no win no pay mean (also called no cure no pay or no win no fee)?

No win no pay usually refers to fees which are only paid to a lawyer if a victory is achieved in a case. A lawyer can agree to some or all of their costs being charged on a no win no pay basis. In other words, if the case doesn’t win then the lawyer does not get paid the no win no fee costs.

An agreement to be paid on a no win no fee basis is technically called a conditional costs agreement.

In exchange for entering a conditional costs agreement and for taking the risk of not getting paid a lawyer is permitted to increase by up to 25% the fees which they will be paid upon success. That 25% is only an increase on their usual fees, and is not a percentage of what a client recovers.

For example, if a lawyer normally charges $100 an hour, and they enter a no win no fee agreement and then spend 400 hours on a case (equating to $40,000 work of work) the following scenarios are possible:

  1. The case enjoys a spectacular win and the defendant pays $650,000 for the claim plus $24,000 as a contribution towards the claimant’s legal costs (NB - it is typical that the losing party’s contribution to the winner’s legal costs is not the full amount):
    • The lawyer will be paid $50,000, being the $40,000 worth of fees subject to the no win no fee arrangement plus an extra 25% of that $40,000 for the risk; and
    • The claimant will end up with $624,000.
  2. The case loses completely – the lawyer recovers nothing, and will remain unpaid for $40,000 worth of work. The claimant also receives nothing, but has avoided having to pay the lawyer.

Any client entering a conditional costs agreement should make sure that they properly understand what outcomes constitute a win under the agreement.

Even where there is a conditional fee agreement, it may be only for the lawyer’s costs (or just some of those costs), meaning that a client might still be required to pay expenses such as barristers’ fees or experts’ charges or court fees. Such fees are not mentioned in the worked examples above, but they typically come up in litigation.

The Victorian and NSW rules regarding conditional costs agreements are set out in the Legal Profession Uniform Law. These rules prohibit lawyers from calculating fees using a percentage of the amount recovered (which a litigation funder is permitted to do – see What does a litigation funder do?). For example, using the win scenario above, a lawyer would not be able to charge a fee calculated as 25% x $650,000 (because the 25% is only allowed to be calculated on the lawyer’s typical charges, not on the amount recovered).

What are fixed fees?

Historically, lawyers’ fees were charged based on the number of hours worked multiplied by the lawyers’ hourly rates. For example the fees may be $175 for a junior lawyer, and $650 for a senior partner (and lawyers at other levels in between). 

This method has good points and bad points. On one hand the fees reflect the time put in by the lawyers and gives the client control over how much work she / he wishes the lawyer to perform, but on the other hand it has been said to reward inefficiency, encourage making a matter take longer, and – perhaps most importantly – remove a relationship between the fees and the actual added value to the client.

In many cases, Adley Burstyner will be prepared to charge fixed fees as an alternative to hourly fees. Fixed fees means that charges for specific work items are agreed in advance. This gives clients certainty and budgeting ability. 

If the Group Claim loses, do I have to pay legal costs to the defendant?

Under the Group Claim systems of the Federal Court of Australia and the Supreme Court of Victoria, the Court may not order a group-member to pay costs unless:

  1. they are a sub-group representative; or
  2. they took part in the proceeding for a question relating only to them.

However, the representative party can be held liable for the costs of the defendant. Sometimes insurance or litigation funding can be obtained to cover that exposure. The cost of insurance is usually a premium, and the fee for protection by litigation funding is usually by way of a success fee payable from a win.