Class Actions

Question 1

What are class actions?

Answer 1

A class action, also referred to as a group proceeding, is a type of proceeding where a group of people, who all have claims against the same party, join together in a proceeding. A class action can be commenced if…
-7 or more people have claims against the same person.
-The claims relate to the same, similar or related circumstances.
-The same issues need to be decided.

Question 2

How a class actions works

Answer 2

A class action is commenced by a single person who ‘represents’ the group. This person is formally known as the lead plaintiff. The people who form the group are known as group members. Group members do not actively participate in the case and aren’t named in court documents. Their role is to opt in or out of the settlement if there is one.

Question 3

Costs in class actions

Answer 3

If a class action fails, it is the sole responsibility of the lead plaintiff to cover any potential adverse costs order. Leading to a reluctance in being lead plaintiff.
Although the lead plaintiff is solely responsible for costs, law firms usually act on a ‘no win no fee’ basis meaning they aren’t paid if the case is lost.

Question 4

Litigation Funder

Answer 4

A third party who pays for some or all of the costs and expenses associated with initiating a claim in return for a share of the amount recovered. The percentage normally being 20-40% of the total amount awarded.

Question 5

Appropriateness of Class Actions

Answer 5

The following factors will be considered in determining whether a class action can be commenced…
-Whether there is 7 or more people who have a claim against the defendant that arises from the same or similar circumstances.
-Whether a plaintiff law firm or litigation funder is prepared to fund the claim
-The nature and size of the claims.
-Whether there is someone willing to be the lead plaintiff.
-Whether one group member has suffered significantly more than other group members.

Question 6

Strengths of Class Actions

Answer 6

-Group members are not responsible for the payment of any costs (increasing access)
-More efficient way of dealing with a many number of claims.
-People can pursue civil claims they might’ve otherwise not been prepared to due to the size of the claim and costs.
-Convenient for group members who wish to pursue a claim but don’t want the burden of actively participating in proceedings.

Question 7

Weaknesses of Class Actions

Answer 7

-Class actions impose a large cost burden on the lead plaintiff if it fails without a ‘no win no fee’ agreement.
-The size of class actions can take up a significant amount of courts time and resources.
-A large percentage of the settlements are taken by litigation funders reducing the amount paid to group members.