Class action attack

A crackdown on the funding of class action lawsuits could impact the ability of car owners to fight for their rights in court.

Some of Australia’s largest-selling brands including Toyota, Ford and Volkswagen have been the subject of class actions recently, while Nissan and Mitsubishi are among others that law firms are studying as potential targets.

Class actions are designed to overcome the prohibitive cost and risk of legal action by allowing a group of people facing the same problem to band together and go to court. It also frees up court time by dealing with multiple complainants in one sitting.

Many of these cases are supported by litigant funders, who make their money by creaming off a share of the damages awarded in a successful litigation.

It is these funders – many of them based off-shore – that the federal government has now decided to reign in.

Publicly it’s saying this is happening to stop ‘mums and dads’ litigants being ripped off, but the federal opposition argues it is protecting “big business mates”.

The highest profile automotive class actions in Australia have included the Volkswagen ‘dieselgate’ emissions case carried out by Maurice Blackburn Lawyers and Bannister Law, which settled after more than four years in April. VW Group will pay $120 million plus legal costs.

Another is the Bannister Law action against Toyota over the diesel particulate filter issue affecting 1GD-FTV engines in more than 250,000 HiLux, Prado and Fortuner vehicles.

Corrs Chambers Westgarth is pursuing Ford over the DPS6 PowerShift transmission debacle, for which the company was fined $10 million by the Federal Court in 2018.

In a statement supplied to carsales.com.au, Julian Schimmel, a Principal with Maurice Blackburn Lawyers, slammed the federal government’s review of class action system.

“Car manufacturers are huge multinational companies with vast resources who import hundreds of thousands of new cars and trucks into Australia each year,” he said.

“This government’s continuing campaign to undermine the class action system is an attack on the rights of consumers, including motorists who expect that they will get what they paid for and that their new cars work properly and are fully compliant with Australian laws and regulations.

“There have now been several class actions relating to motor vehicles, and it was only Australia’s class action system which enabled owners of certain diesel VW, Audi and Skoda vehicles to achieve a substantial settlement from an automotive giant.

“A functioning class actions system is a deterrent to corporate malfeasance, and signals to consumers that wrongdoing comes at a price. It also gives consumers a potential road to redress if OEMs and importers don’t comply with their legal obligations.”

Volkswagen Group Australia declined our approach for comment.

There are several ways the federal government has cracked down on class action funders. Last week treasurer Josh Frydenberg announced third-party litigation funders would need to hold a financial services licence and be subject to new regulations. He has also moved to protect company directors from shareholder class actions.

Separately, attorney general Christian Porter has announced an inquiry into the class action industry and the profits generated by the litigation funders. It is due to report by December.