A government-backed fund is needed to ensure access to justice for cases where litigation funders and plaintiff lawyers are unwilling to back court action, says a leading expert in the field.
Vince Morabito, a professor at the Monash Business School, said a fund to pick up strong cases that were unattractive to commercial operators would help ensure access to justice for vulnerable claimants such as homeless people, refugees or Aboriginal communities.
"That's one of the crucial things, we need some kind of legal fund," Professor Morabito said.
He said just such a fund was recommended in 1988 by the Law Reform Commission as part of the work that helped eventually lead to the establishment of a class action regime in 1992.
"Class actions on behalf of vulnerable people was what they had in mind, where it might not be as commercially attractive or it might not make sense to run on a no-win, no-fee basis," he said.
"Litigation funders are the major players and so far they have had a clear preference for shareholder class actions."
The reluctance to back cases on behalf of the vulnerable ignored the relatively strong success rate of such actions when they were brought, he said.
A fund would probably need between $15 million and $20 million in seed funding and would need to pick cases very carefully initially but would not necessarily need ongoing funding, he said.
In Canada, a similar fund was self funding due to the proceeds from settlements being reinvested, he said.
Professor Morabito will speak at the Maurice Blackburn BusinessDay Class Actions Symposium event in March to mark 25 years of class actions in Australia.
He referenced a 2014 study he did with Maurice Blackburn's Jarrah Ekstein that found 54 per cent of such case resulted in success for the plaintiffs, usually through a settlement.
"We actually found that the success rate of those class actions on behalf of vulnerable people was slightly higher than all other class actions," he said.
There were also some encouraging signs that litigation funders would look at broader types of class actions, he said, pointing to IMF's funding of a Queensland floods action.
"They are beginning to look beyond the shareholder class actions," he said.
Another development that would assist was the landmark full Federal Court judgment on open funding of class actions, which would allow suits to be brought before the individuals represented were completely identified.
Professor Morabito said the introduction of contingency fees, as recommended by the Productivity Commission its 2014 inquiry, would also boost competition and would help the non-investor class actions get up.
"It would make for a much more competitive market than it is now," he said.
