Abstract

Shareholder class action is still relatively new in Australia. The procedure for a class action became available through legislation in Australia in 1992. It provides an “opt out” mechanism, that is, all members who have a claim or claims arising from the same similar or related circumstances will automatically be included in the class action, unless they choose to opt out. Shareholders did not utilise the procedure as a source of remedy until a decade later, though it has now become more common. This chapter examines how an “opt out” class action as provided under the legislation often appears as an “opt in” class action. It examines the problems in the procedure and considers some shareholder cases as an example to see how the use of commercial litigation funding has changed the way the class action procedure is being used in the past 10 years.
This chapter will consider shareholder class action as an example to illustrate why there are problems in the Australian class action procedure, and why the “opt out” provision is in need of clarification. The example as illustrated will be applicable to other forms of class action in Australia. The chapter divides into the following parts. Part 2 briefly explains the nature of an Australian class action and its special features. Part 3 then examines some of the difficulties in the Australian class action procedure; in particular, it will look at how an “opt out” class action under section 33J of the FCAA has often been turned into an “opt in ” class action, contrary to the intention of the provision. It will also explain the difficulty in proving the necessary causation in a case where there is uncertainty in the class size under the FCAA. The recent developments in the law relating to third party litigation funding will also be considered briefly within this Part. Part 4 provides a review of some important shareholder class actions in Australia to illustrate how these cases have shifted from being an “opt out” class action to an “opt in” class action. Part 5 concludes with a note that until the volatile state of the litigation funding industry is sorted, amendments to the class action procedure are unlikely to be effective in the long term.