Public interest costs orders in federal class actions: Time for a new approach

Australia’s oldest and most important class action regime, which has been regulated since March 1992 by Part IVA of the Federal Court of Australia Act 1976 (Cth), is predominantly based on a regime recommended by the Australian Law Reform Commission (“ALRC”) in 1988. The ALRC was acutely aware of the need to deal with one of the barriers to the filing of group litigation: the risk of being required to pay a substantial portion of the costs incurred by class action defendants, in the event of an unfavourable outcome. To address this problem, the ALRC recommended the creation of a class action fund to provide financial assistance to lead plaintiffs. It was not implemented by the government of the day. More than 29 years later, no measures have been taken by successive Commonwealth governments to address this problem. In practice, this liability has been removed from lead plaintiffs in Part IVA litigation supported by litigation funders and/or After-the-Event insurance. But this solution - and in particular the support of litigation funders - has been largely confined to commercial class actions like shareholder class actions. As a result, this barrier has remained with respect to many of the potential class actions likely to be appropriately characterised as public interest litigation, including proceedings brought on behalf of vulnerable or disadvantaged persons. It is the principal aim of this article to submit that, in the current climate of significant class action reform initiatives and recommendations designed to ensure that class actions serve the interests of class members and the broader community, it is time to introduce a legislative measure designed to reduce this barrier to class action litigation; thus facilitating the filing of class actions that raise matters of public interest. In light of the continued bipartisan political opposition to the creation of a public class action fund, our recommendation is to add to Part IVA a modified version of a provision recommended by the Victorian Law Reform Commission (“VLRC”) in 2018, in relation to Victoria’s class action regime, which is based on Part IVA. The provision recommended by the VLRC would have empowered trial judges, when deciding whether to make an adverse costs order against unsuccessful lead plaintiffs, to take into account, among other things, the function of class actions in providing access to justice and whether the class action involved a matter of public interest.