Justice and Integrity Program

The MRC’s Justice & Integrity Program has been seizing every opportunity to argue for reform to ensure our justice system is recognised by all as fair and independent.

Class actions

We made a submission to the Parliamentary Inquiry into the Litigation Funding Industry and exposed the outrageous profits being made by mainly offshore funders at the expense of the victims they are meant to represent. Some are seeing returns on invested capital at 500 per cent.

The returns available to investors in funded litigation are, quite frankly, astonishing. When benchmarked against other asset classes, litigation funders in Australia are generating ROIC returns around 17 times more than investors in ASX 200 stocks and more than 10 times the average global hedge fund.

Many have established sophisticated arrangements through tax havens such as the Cayman Islands, Malta, and the Island of Jersey, and used tax treaties between Australia, the UK and Singapore to pay little or no tax on the massive profits they are reaping from backing Australian class actions.

For example, Omni Bridgeway, Australia’s largest litigation funder’s most recently completed fund, fund 5, is run through a Cayman Island based entity. It has raised investments of up to $1 billion from foreign investors to deploy into Australia and the region.

Over the last 10 years the numbers of class actions filed has boomed. The number of actions over the last decade represent more than 56 per cent of all the actions brought over the last 28 years.

As highlighted in his appearance before the Parliamentary Inquiry into the industry, the MRC’s James Mathias highlighted the bizarre lack of oversight in the industry when he said “this has never had any particular oversight. I simply put to you, Ms Hammond, that, if the Italian Mafia had in place appropriate conflicts-of-interest procedures, they could fund Australian class actions through litigation finances”.

In our report Litigation Nation, we recommended that the Government require litigation funders, and any law firms seeking contingency fee commissions (should that be allowed), to hold an AFSL and regulate their practices through ASIC. This would cover both state and federal funded class actions. This has now been legislated by the Government.

In a number of articles published on the MRC’s website, we argued for reasonable changes to the continuous disclosure regime that allowed for these speculative actions to be run. These actions had let to a substantial increase in the costs of doing business in Australia. According to Marsh Insurance the average increase in premium for the ASX200 in 2019 was 118 per cent with extreme cases at a staggering 600 per cent. Marsh details that corporate entitles are now paying between $5 and $10 million for cover that previously cost between $500,000 and $800,000.

As far back as February 2020, Nick Cater was writing in The Australian about the growing scourge of speculative class actions where victims and the damages awarded to them were simply by-products of the extraordinary profits made by litigation funders and lawyers.

The Government listened and recently changed the laws to tighten the rules such that companies and their officers are liable for civil penalty only if they acted with ‘knowledge, recklessness or negligence’ in not providing adequate updates to the market on price sensitive material.

We continue to advocate for a benchmarked return to members of class actions to ensure the damages awarded to them are not eroded by profit seeking lawyers and funders.

judicial integrity

Our submission to the Australian Law Reform Commission’s Inquiry into Judicial Impartiality analysed 271 employment related cases over a two-year period and accurately detailed the way judges in the Federal Court have decided. This analysis produced results which showed some judges had made decisions that upheld union cases over employers up to 91 per cent of the time during that period.

We noted the ongoing use of Australian courts for activist purposes and emphasised the importance of maintaining public confidence that judges are making decisions free of bias and with a strict interpretation of the law.

The submission also proposed solutions to the current process for an application for apprehended bias which is currently decided by the very same judge the application was made against. Our submission noted research that showed only five per cent of Australians agreed with this process.

Ultimately, our work advocated for strengthening Australia’s courts and their officers to ensure continued public confidence and their appropriate use. Our research and advocacy in this area will continue to achieve reform and engage the wider public in this vital public policy arena.

casual employees

Building on our 2018 report Unions Inc: Casual Lies, and following a decision of the Federal Court to grant casuals permanent employee entitlements back-paid up to six years, the MRC produced a briefing note to MPs and stakeholders busting the myths that casuals are unhappy with the conditions afforded to them.

After this extraordinary decision, we worked immediately on behalf of shocked employers, who through this decision were estimated to be liable for tens of billions of dollars of backpay for simply doing the right thing.

As we had said, this was in our view always a strategy by the unions to destroy casual employment because so few casuals were card carrying members of a union.

Research conducted with Roy Morgan found that if the decision stood, 794,000 businesses would be hit by the decisions with 567,000 businesses saying this would deter them from ever hiring a casual again. Most concerningly, 123,000 businesses said this decision would force them to close because they simply could not afford the liability.

After many articles and continued advocacy within and beyond Parliament, the Government was able to pass legislation that once and for all defined the term casual employment into law and expunged the six years of backpay liability strapped to employers by the Federal Court decision.

Thankfully, not long thereafter, the High Court confirmed what we all knew, that the earlier decision was wrong by overturning the Federal Court. There is now greater clarity, certainty and stability for employers and employees alike. 

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The MRC’s record of achieving important legal reform could not have been possible without the support of our generous donors. Please help us advance justice and integrity in the legal system with a tax-deductible donation to the Menzies Research Centre.