Tuesday, 18 February 2020

Justice Legislation Miscellaneous Amendments Bill 2019

Second reading

Debate resumed on motion of Ms HENNESSY:

That this bill be now read a second time.

Mr SOUTHWICK (Caulfield) (18:32): I rise to speak as the opposition’s lead speaker on the Justice Legislation Miscellaneous Amendments Bill 2019. This bill seeks to do a number of things: firstly, to amend the Supreme Court Act 1986 to provide the Supreme Court of Victoria with the power to make a group costs order with a stated claim that this would improve access to justice for plaintiffs bringing class actions to the Supreme Court. So this is really dealing with contingency fees and allowing those contingency fees to be charged. Certainly in the 20 or 30 minutes that I have got I will have a fair bit to say on that part of the bill because there are some issues that we in opposition have in regard to the contingency fees. I will elaborate a bit further on that shortly.

There are two other parts of this bill which are fairly straightforward and that certainly the opposition does not see any problem with. Firstly, regarding the Local Government Act 1989 and the Magistrates’ Court Act 1989, the bill ensures the validity and enforceability of actions and decisions by improperly established municipal electoral tribunals, known as METs, and affected reserve magistrates. That effectively looks at correcting something that is known as an issue that affects local councils predominantly. The Department of Justice and Community Safety advise that in 2003 MET members were appointed in perpetuity; however, in fact there was a legislative requirement that was incorrectly interpreted and therefore not adhered to, and the members should have been appointed every 12 months. So it is effectively clearing that up and ensuring that those that were appointed in perpetuity were meant to be appointed. The bill fixes that.

It is also pretty much to deal with elements of local government, so those appointees within local government and tribunals that are constituted under the jurisdiction of the Magistrates Court of Victoria that consider disputes about the validity of local government elections. That is pretty timely because later this year we will have local government elections, and this is looking at where there are disputes around jurisdictions, effectively, where people have disputed returns. What that means is that somebody who actually puts themselves up for local government election has to file all of the paperwork and ensure that all of the processes and systems of somebody putting themselves up for election are followed and processed and that these people are able to have that properly reviewed. We need to ensure that those people that do that are able to do that in line with the law, and this will fix all of that, so we have no problems with that part of the bill.

The bill looks at a whole range of other changes, and it includes amendments to the Evidence Act 2008, which is basically to allow postal articles sent by prepaid post to an Australian address to be taken to have been received on the seventh working day. This amendment reflects the same time period for the presumption of service by postal delivery in other jurisdictions. Basically when you are receiving evidence, it ties it into the evidence in other states. It is really just bringing that in line with the way that other places operate.

Amendments to the Evidence (Miscellaneous Provisions) Act 1958 make changes to provide for the County Court to make orders for evidence on commission in its own proceedings. Currently the parties must apply to the Supreme Court for an order to allow evidence to be taken on oath or affirmation outside of court, which is considered unnecessary and burdensome. It is cleaning it up to allow a more streamlined approach.

Minor amendments to the Oaths and Affirmations Act 2018 clarify that certain offences under the act are indictable offences. Amendments to the Professional Standards Act 2003 allow the Victorian Professional Standards Council to delegate functions to any person employed pursuant to part 3 of the Public Administration Act 2004.

They are pretty much the main elements of the acts that are being covered in this bill, but the main part that I wanted to really focus on are the contingency fees. The primary element of this is to ensure that group costs orders are in reality the vehicle to introduce percentage legal contingency fees recovered from successful damages and settlements by a group of plaintiffs, which will be sanctioned in Victoria for the first time in Australia—they were previously outlawed—in class actions. So contingency fees have been banned in all Australian jurisdictions, and we propose to be the first jurisdiction in Australia to have contingency fees that lawyers can charge.

We have seen situations where Slater and Gordon and others have gone ‘no win, no fee’, which is used in class actions in getting people to come together if they have got an issue with something that a number of people have been affected by. They come together and they effectively do not pay unless there is success, and that is certainly a way that some of these big law firms have operated.

Lawyers in Australia have only been able to charge fair and proper fees based on the work that they complete. So we would all be familiar with this: we meet with a lawyer, we sit down and we work it out—you never really know how long a lawyer is going to bill you for or how long the case is going to go for, but you know that there is an hourly rate and you know that ultimately you get charged for the time, and at the end of that time you will receive a bill.

Contingency fees basically say, ‘You know what? We won’t be charging you that, but we need you to sign up to this, and if we end up with this particular windfall, then we might take 30 or 40 per cent of it’. That might sound great. You might not get caught up with anything up-front, but what about vulnerable people?

Take the bushfires. You have lost your house—you are one of many people who have lost their houses—and you have nothing, and you want to sue the government because they did not do what was right. You end up in a class action, and you get into a situation where Slater and Gordon or Maurice Blackburn come to you and say, ‘You know what? Sign up here. Sign up for a contingency fee, and we will represent you’. A situation then arises where you say, ‘That’s great. I have received now’. There are millions of dollars awarded to all these people, because it gets divided amongst the class action, and you end up with $500 000 each. If a contingency fee gets charged of 40 or 50 per cent, you might only end up with $250 000. So you have run a case, it is not fair and reasonable, and for something which would normally cost 10 to 12 per cent in the current form, where you might be charged $50 000 to $60 000, you might be charged $400 000 to $500 000. For a vulnerable person we do not think that is fair.

We do not think that lawyers should now be in the business of entrepreneurship. We think the whole legal system has been set on the basis that they should be representing people for justice and they should be working for what is right and not working for the dollar. That is where we have a concern. We have a concern that lawyers will be motivated by profit ahead of ultimately what is right in running a case.

You will find situations, as many people have stated, where a case might be run, and because of the windfall if they have these contingency fees that the government is now proposing, the lawyer’s advice might be very different if they stand to take 40 per cent rather than their normal fees. They might say, ‘You know what? Let’s settle. Let’s settle now at this fee, and I will take my 40 to 50 per cent, and I will move onto the next one’.

There are a number of concerns that we have with contingency fees. Our courts are absolutely clogged; you cannot run a court case. If you are waiting to get a court case today, you will be waiting months to get a date for a court case. Our courts are clogged. Victoria will be the only jurisdiction in Australia that will have these contingency fees. Guess what will happen? You will have the honey-pot effect of other states running here. You will have big multinationals being chased down here and cases being run out of Victoria. So you will have big law firms running a case that may have been in New South Wales or in another state, but it gets run down in Victoria because of the contingency fees. We already have a court system that does not work—a system that cannot meet demand, that does not have efficiencies in our system here in Victoria. How do we cope when all the other states have agreed not to have contingency fees, all of a sudden when Victoria is the only one the big Maurice Blackburns, the big Slater and Gordons—all these big firms that happen to be major donors to the Labor Party—turn around and say, ‘Thank you very much. We are going to set up shop and make sure we run all of our cases down in Victoria’?

There is no coincidence here—the fact that these major law firms that stand to gain the most out of this happen to be donors to the Labor Party. We have seen that, and I will go into some more detail. It is a concern—the situation Slater and Gordon found themselves in when they effectively had bankruptcy in terms of their growth and a shareholding of major loss because they were chasing the dollar versus going out there and doing what they should have been doing. If you look at Maurice Blackburn, Maurice Blackburn is by far the largest player in the class action market, with a 17.8 per cent share in the business. They have got 17.8 per cent in the business. It is also one of the largest donors to the Labor Party. Last year it chipped in $554 000 to the ALP and affiliated entities. Of that, $122 000 went to the Victorian branch, where it helped re-elect the current government, the Andrews Labor government.

So we have a law firm that has 17.8 per cent of the market that has gone on the record and said, ‘Bring on contingency fees—we love this stuff’, and they stand to gain the most benefit out of this. Maurice Blackburn and Slater and Gordon stand to gain the most benefit out of this. It is on this basis that I would like to move a reasoned amendment if I could. I move:

That all the words after ‘That’ be omitted and replaced with the words ‘this bill be withdrawn and redrafted to:

(1) take into account further consultation about the benefits of removing the group costs orders and contingency fees provisions proposed for the Supreme Court Act 1986; and

(2) retain the remaining provisions of the bill.’

The ACTING SPEAKER (Mr Carbines): The reasoned amendment will be circulated to members. The member for Caulfield can continue.

Mr SOUTHWICK: Thank you very much. As I said, there are the two elements of the bill we do not have a problem with. We want contingency fees taken out. We do not think it is right. We do not think that the government has done their work on this. I refer you to an article from 14 February by Chris Merritt, ‘States split on fees for class actions’. It says:

Almost two years ago, the commission produced a report—

about contingency fees.

Other jurisdictions have confirmed that Victoria has not even tried to have this added to the agenda of the Council of Attorneys-General—

at COAG.

Victorian Attorney-General—

who happens to be here—

… has instead embarked on a course that will make Victoria the only state where class action lawyers will be allowed to take a percentage of what they win for their clients.

This has raised concerns about forum shopping and the possibility that the big plaintiff law firms will choose to launch national class actions in Victoria—

which is effectively the honey-pot effect.

‘The Victorian government did not consult with NSW on its proposed scheme. NSW has no plans to introduce contingency fees’.

This will come as a relief to the business community and the national insurance industry …

They are proposing that it will cause fees to skyrocket in terms of a lot of companies now having to take insurance out on the threat of them being sued in these class actions. It says in this article that this might encourage some companies to do business in New South Wales instead of Victoria and it refers to New South Wales companies being dragged into national class actions.

If Victoria’s move triggers a spike in anti-business class actions, the federal government could face pressure to intervene.

That is just one. There are a number of other articles, such as ‘Law Council of Australia rejects success fees’:

The Law Council of Australia has decided that lawyers won’t be allowed to take a portion of their clients’ winnings in lawsuits, a change that could have been a boon for plaintiff lawyers.

They say:

‘Everyone agrees with the premise of increasing access to justice but contingency fees could create conflicts of interest for lawyers, including in relation to their fiduciary duties to clients, as well [as] lead to more … litigation’ … ‘We need to get the rules right’.

Nick Cater wrote ‘Unethical litigators cash in on the left’s “lawfare”’, saying:

Class actions once allowed grievances by people of limited means to settle at an affordable price. Today they are a cash cow for lawyers, who scour the transcripts of royal commissions, soliciting for business.

Until five years ago, the number of class actions filed each year hovered around the high teens. In the past two years they have been lodged at a rate of about one a week.

So we are talking 50-plus when a few years ago there were 12.

Forget the … narrative of the passionate lawyer acting pro bono for the marginalised and vulnerable. Three-quarters of these are so-called funded cases, investment vehicles for financiers …

A bushfire victim, for example, awarded $250 000 in a successful class action, would typically receive about $210 000 after legal costs …

If this was allowed to play, we could see the victim receive $130 000. From $210 000 to $130 000. That is because of the additional profits that they could choose. The bill:

… would allow lawyers to loot their own clients by claiming costs as a percentage of damages. Contingency fees are banned everywhere else in the country for good reason.

Justice is ill-served by lawyers motivated to inflate claims of marginal quality and merit …

…

Worse, contingency fees will be charged on an opt-out basis.

That is really important. An opt-out basis means that you may not even know whether you have been caught up in this, and all of a sudden you receive a bill. You may be unintentionally caught up in this, and that is one of the issues that we have in terms of this particular bill. There are a number of points, and I am sure the government will talk about trying to help the more vulnerable. There are some really good points that the ABC actually raised in ‘Why giving lawyers a profit motive won’t help the system’s neediest’. Basically this, which was posted on 29 June 2018, said:

The proposition that contingency fees will allow greater access to justice, by permitting uneconomical claims presently ignored by third-party funders to be pursued, should be carefully tested.

…

It is hard to see the profit motive associated with contingency fees encouraging lawyers to pursue small claims with low potential damages …

Say you are in a situation where you are really vulnerable and you do not stand to gain a whole lot of something as a windfall but you need representation. Take a situation where you have a developer in my area—in, say, Caulfield. You might have, say, a developer that decides they are going to put up a whole lot of apartments and block out the sun, and you have got a whole lot of houses that have got solar panels that they have put on and the government has said to them, hypothetically, ‘We’re going to ensure that your sun is protected because you have these solar panels that you’ve invested in and now this developer has taken out your sun’. These various houses that have put in the solar panels on a government rebate and have paid for 50 per cent of the solar panels themselves might want to take issue with the government and might want a class action. They might only stand to get themselves $20 000 or $30 000 each back on their solar panels. It might be worth a couple of million dollars—$20 000 is a lot for an individual. Certainly for many of my residents in Caulfield, in Elsternwick, in surrounding suburbs that $20 000 could put a lot of food on the table and pay electricity bills. But do you think a Maurice Blackburn is going to take an upside of $2 million on a contingency fee where they get 20 or 30 per cent of that to run a case for six months versus a case that is going to bring them a $20 million windfall of which they get 40 or 50 per cent? Where is the balance for the vulnerable? Which cases are the big Slater and Gordons and Maurice Blackburns going to go for? Are they going to go for the big-ticket items, or are they going to help the most vulnerable? That is what this is all about. They are looking for the uplift. The big law firms are looking for the uplift; they are not looking to help the little people, and that is where our concern is here. It is fairness.

We all know there are many lawyers on that side and we have got a few on our side. In fact my son is about to study law at Monash. We are very proud of that. He has signed up to hopefully be able to do good for society, community and everything else.

Mr Edbrooke: He could work for Slaters!

Mr SOUTHWICK: He will not be joining Slaters. I can assure you he will not be joining Slaters or Maurice Blackburn. No, he will not be, member for Frankston. He will not be doing that. But hopefully he will be doing what we would hope most lawyers would set out to do, and that is to seek justice for all. We do not want to see that being skewed by a motivation for profit. We have no problem on our side with business, with free enterprise. We are a party of all of that. But we do not want lawyers to get caught up in a profit motivation ahead of a justice motivation and a fairness motivation. That is why we think it is a very slippery slope for Victoria to be the first state to really trial this. Have a look at what is happening in America, the absolute lawsuit capital. We are two behind them; we are just behind them. We are really concerned that this is what might happen because of the government.

As I said, the biggest donations by Maurice Blackburn and Slater and Gordon are to the Labor Party—they are on that side, not on our side. This is a free kick to them. This is a thankyou very much. It is a handshake to Maurice Blackburn, Slater and Gordon and other major donors of the Labor Party to say, ‘You know what, we’ll give you another uplift’. I tell you what: if anyone complains about developers and what they do, this could be potentially very, very toxic where you see a windfall of millions of dollars, and we are talking only a few law firms here that could even enter into a market like this. This is big risk, and a small law firm is not going to get involved in this. Only the big Slater and Gordons and Maurice Blackburn and others are going to get involved in this. The Labor Party’s donors—they are the ones that are going to get involved, they are the ones that have the biggest risk in this, and they are the ones that we have the most concern about with all of this.

On that note I am going to wind up our contribution and ask that the government considers our amendment. We have no problems with the other two parts of this bill. We think the other two parts of this bill are fair and reasonable, bringing things in context with other states. I am always one that says Victoria should be leading the way on a number of things, but I also have concern when we are the only jurisdiction doing something. That is particularly so around fairness, particularly so around the law system, that potentially could be a real concern where we have had the feds, where we have had other states, where we have had law firms, where we have had industry—where we have had a number of people—warn us about the unintended consequences of being able to give a massive uplift of contingency fees to allow lawyers to effectively gouge a huge amount of money that ultimately should go to the most vulnerable and ultimately should go to those people that are seeking that compensation in the first place.

On that note I will conclude by once again asking the government to support our amendments.

Mr EDBROOKE (Frankston) (18:57): It is an absolute pleasure to rise this evening and speak on the Justice Legislation Miscellaneous Amendments Bill 2019. From the outset, I just want to say that while we have listened to the opposition, I think there is a fair bit of misunderstanding about where this bill is going and what access for justice it provides to Victorians. It is also interesting to hear members of the opposition saying they want Victoria to lead but they are not willing to take those steps to ensure Victoria does lead. This bill is essentially, in a nutshell, about improving access to justice and making it easier for people to bring class actions against employers and groups that might be responsible for wage theft, silicosis and other types of wrongdoing.

I just want to address a real flaw in the opposition’s reasoned amendment and the logic behind that, because I am not a lawyer and I take my advice on bills like this from representatives of lobby groups and lawyers. We have seen in the reasoned amendment that essentially the opposition would like to remove contingency fees from this bill and continue on. The previous speaker has outlined some reasons for that. But I just wanted to say that the fact is that three independent bodies, peak bodies, have recommended that this model go forward and be legislated, and they are the Victorian Law Reform Commission, the Australian Law Reform Commission and the Productivity Commission. They have recently recommended the ban be lifted across Australia, and Victoria will be the first to do that, in respect of these class actions. The Supreme Court has even been consulted on the proposed group costs order, or the amendments, and is supportive of this bill. Where I am coming from is that I wonder how we can have such a hurried and rushed reasoned amendment that actually does not make much sense if you read the bill book that is provided to all members and if you have been briefed on it. It is very clear that the experts that people like me rely on for information about legislation that certainly will—

Business interrupted under sessional orders.