Class actions are big business for Australian litigators and the funders that back them. Taking down a major financial institution like AMP gives you serious chops and can be extremely lucrative.
Of course, class actions are supposed to be about the outcomes for members, namely shareholders in the company defending the action. But that hasn’t stopped a phenomenon known as the “race to the registry” in which multiple actions are taken against the same company, usually for the same reasons. A “beauty parade” then takes place where the most attractive proceeding wins the right to continue against the defendant.
Following AMP’s appearance at the royal commission, five class actions were commenced against the company between 9 May 2018 and 7 June 2019.
The five class actions were brought by:
• Ms Marion Antoinette Wigmans;
• Fernbrook (Aust) Investments Pty Limited;
• Komlotex Pty Limited;
• Wileypark Pty Limited; and
• Mr Andrew Georgiou.
The Wigmans proceeding was the first to be commended in the Supreme Court of NSW, literally by a matter of hours, according to Corrs Chambers Westgarth.
It was ultimately decided that the Komlotex and Fernbrook proceedings be consolidated and proceed. The remaining class actions will not proceed. So five class actions against AMP in relation to the royal commission have now become one.
Interestingly, the judge’s decision hinged not on the size of the firm or how advanced the case was, nor who registered first (Wigmans by a nose).
“Ultimately, the factor which her [honour] found the most persuasive was the funding model – namely, a ‘no win, no fee’ model that involved no funding commission. This meant, based on the modelling undertaken, that the net return for group members in those proceedings would probably be the highest,” according to Corrs.
The consolidated Komlotex/Fernbrook class action must pay $5 million as security for AMP’s costs.
The decision was appealed by Ms Wigmans but not by Wileypark or Mr Georgiou.
Ms Wigman’s appeal was dismissed this week. The strong policy of law is to avoid a multiplicity of proceedings, hence the need for a “beauty parade” to choose which proceeding will go ahead.
Betting on class actions is a risky game for litigation funders. IMF Bentham was funding Wileypark while Augusta Ventures was backing Mr Georgiou. Neither of these class actions will go ahead.
Neill Brennan, the co-founder and managing director of Augusta, said a funder walks into a situation where legal merit is judged but not absolutely clear.
“It’s prior to disclosure, prior to witness statements, prior to a lot of information, so you’re making a call with limited information,” he said.
“Then you have question marks over whether or not the case will actually be run, because of multiplicity [of] hearings. And then when it comes to the end of it, the court can actually obviously step in and say, ‘Well, we think the funding commission should be X instead of Y,’ and that’s a hindsight decision.
“The risks that a funder faces are large, and if it all goes wrong, the money is nonrecourse, so the funder’s not going to be paid anything. And so, the risks a funder faces need to be commensurate with the rewards that they’re going to achieve in a competitive environment.”
