Class actions are often portrayed as a tool for justice, enabling individuals to band together and hold powerful entities accountable. However, the reality of these lawsuits, as highlighted in this article and video, paints a troubling picture. The story of Minnie McDonald and Mervyn Street, Aboriginal workers who led stolen wage class actions, raises serious concerns about the fairness and integrity of the Australian class action system.
McDonald and Street, both unable to read or write and reliant on others to navigate the legal process, became the faces of class actions in the Australian Northern Territory and Western Australia. As reported by Four Corners, an investigative journalism program hosted by the Australian Broadcasting Corporation, lawsuits sought redress for Aboriginal workers who endured decades of unpaid labor, often compensated only with food and basic supplies. Despite settlements totaling hundreds of millions of dollars, the workers themselves are expected to receive as little as AUS $10,000 to $14,000 each. Meanwhile, Shine Lawyers and Litigation Lending Services, the law firm and litigation funder behind these cases and others, are set to pocket over AUS $98 million combined. This stark disparity underscores the unfairness of the current system.
The business model underpinning class actions in Australia has transformed justice into a profit-driven enterprise. Litigation funders, often backed by private equity and hedge funds, provide the capital to pursue these cases in exchange for a significant share of any settlement. Four Corners quotes John Walker, chairman of the Association of Litigation Funders of Australia, saying bluntly that litigation funders “see it as investing. It’s a market”—a clear enunciation of the fact that litigation funders are primarily motivated by profit and not the welfare of victims.
The lack of transparency in how legal fees and funding commissions are calculated further exacerbates the problem. While court-appointed costs experts review and at times reject legal and funding fees in Australia, costs remain disproportionately high. This lack of accountability allows law firms and funders to prioritize their financial interests over the needs of the plaintiffs. In the Northern Territory and Western Australia cases, the judges expressed concerns about the high costs and the exploitative nature of the system. In the Northern Territory case, Chief Justice Debra Mortimer remarked that the pursuit of profit had overshadowed the good intentions of the lawyers, leaving many Aboriginal workers feeling that the process was merely a money-making exercise. Justice Bernard Murphy in the Western Australia case criticized Shine Lawyers for “excessive” and “overblown” fees.
Issues like these could be mitigated by reinstating targeted TPLF safeguards, implemented in 2020, that were unfortunately repealed under the new Labour government in 2022. Among other measures, the 2020 reforms subjected litigation funders to regulatory oversight and required funders to hold a financial services license and register their claims as managed investment schemes. Additional safeguards that were proposed before the last election, including a statutory minimum return on gross proceeds for class members, court oversight of funder agreements and legal fees, mandatory transparency of funding agreements, obligations for funders to act in the best interests of class members, and legislation requiring compliance with financial services regulations should also be implemented.
Reforming the class action system in Australia is imperative to ensure that justice is not just a slogan but a reality for those who need it most. Greater safeguards and transparency are needed to hold law firms and funders accountable for their fees and practices. Justice should not come at the expense of those it is meant to serve. By addressing the systemic flaws in the class action system, Australian lawmakers can create a framework that prioritizes fairness, accountability, and the true pursuit of justice.
