Well before the delivery of the Hayne report following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, several class action proceedings were brought against banks for various misconduct such as excessive fees, failing to disclose information on loan contracts and systemically failing to comply with credit regulations.
Following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, class actions against banks are increasing, along with the financial advisory and superannuation industry.
What are class actions?
‘Class actions, or representative proceedings, involve the bringing of court proceedings by a single class representative on behalf of the claims of a group or ‘class’ or applicants, against the same respondent, or number of respondents (for example, a class of customers against a single bank).
Class actions are an important aspect of Australian law, particularly because they allow increased access to justice for those with smaller, less commercial claims against respondents with substantial financial resources, originally by sharing legal costs across a wide range of applicants, and since 2006, by allowing litigation funders to fund the litigation for a share of the costs awarded and percentages of awards.
Class actions generally need to be brought by a class of at least 7 applicants, arise out of similar or related circumstances and give rise to at least one substantial common issue of law or fact. If you are a member of a class, proceedings can be brought on behalf of that class, of which you will be included unless you ‘opt out’ of your share of the damages or settlement payment. This is called an ‘open class’.
Where a litigation funder is funding the proceedings, classes will generally be ‘closed’ or confined to those who agree to the terms of the litigation funding agreement. Alternatively, the Court can make funding orders to the effect that before a person in a class is paid their portion of the judgment, an amount is paid to the funder.
To protect the class members, any settlement of a class action must be approved by the Court.
Why would I want to opt out?
By participating in a class action, you risk settling your dispute with the particular respondent on terms that may be less favourable than you may have hoped, or you may be paying a premium to a litigation funder on any award of damages you receive.
In addition, as a participant in a class action proceeding, you will have limited control over the conduct of the proceedings, including settlement discussions.
These factors may ultimately lead you to decide that you do not wish to be involved in the proceedings.
Before making a decision about whether or not you wish to participate in proceedings against your bank, you should seek legal advice about the possible benefits and detriments of remaining in the action.
For more information, please contact Associate Mitchell Micevski.