tag:theconversation.com,2011:/africa/topics/class-actions-4348/articlesClass actions – The Conversation2023-12-07T01:16:24Ztag:theconversation.com,2011:article/2192292023-12-07T01:16:24Z2023-12-07T01:16:24ZNobody reads T&C’s – but the High Court’s Ruby Princess decision shows consumer law may protect us anyway<p>How many times have you booked travel - like a cruise or a tour - and simply clicked that you’ve read and agreed to the terms and conditions for your trip without actually reading them? </p>
<p>What if something went wrong on your trip and it turned out the terms you didn’t read prevented you from suing in certain courts? </p>
<p>This was just one problem faced by some of the passengers on the now infamous Ruby Princess cruise ship, which was supposed to be making a pleasant trip from Sydney to New Zealand and back in March 2020, but instead became the location for one of the most well-known <a href="https://www.abc.net.au/news/2020-04-18/how-coronavirus-turned-the-ruby-princess-into-a-bastard-cruise/12158924">early outbreaks of COVID</a>.</p>
<p>Now, the High Court has found that consumers can be protected even if they haven’t fully read their terms and even if they were outside Australia when they accepted them.</p>
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Read more:
<a href="https://theconversation.com/stormy-seas-ahead-confidence-in-the-cruise-industry-has-plummeted-due-to-covid-19-152146">Stormy seas ahead: confidence in the cruise industry has plummeted due to COVID-19</a>
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<h2>Class action against cruise lines</h2>
<p>As a result of the outbreak, Susan Karpik brought a <a href="https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2023/1280.html">class action suit</a> in the Federal Court of Australia against Carnival plc and Princess Cruise Lines Ltd, the owners and operators of the ship. </p>
<p>The suit alleged that Princess had not taken appropriate safety precautions to best ensure passengers did not get COVID while on board. Karpik won her suit on her own claims, with the Federal Court finding Princess <a href="https://www.abc.net.au/news/2023-10-25/nsw-ruby-princess-passengers-win-class-action-carnival/103018412">was liable to her</a>, including for damages related to her husband’s death from COVID. </p>
<p>This was also a win for the other 2,600 passengers, who can now rely on the Federal Court’s ruling that safety precautions were not taken.</p>
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Read more:
<a href="https://theconversation.com/if-you-want-to-avoid-giving-away-your-first-born-make-sure-you-read-the-terms-and-conditions-before-signing-contracts-218705">If you want to avoid ‘giving away your first born’ make sure you read the terms and conditions before signing contracts</a>
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<p>Karpik and most of the Ruby Princess passengers were subject to Australian terms and conditions for their travel. However, nearly 700 passengers were subject to US terms and conditions. </p>
<p>These terms stated that any lawsuit related to travel on the Ruby Princess could only be brought in US Federal Court in Los Angeles, California, and that passengers were not allowed to sue in a class action - known as a class action waiver. </p>
<p>This means any lawsuit could only be brought individually, something that could be very expensive for each of the passengers. Princess argued that these passengers were bound by the US terms and therefore could not be part of the Australian class action.</p>
<h2>International complications</h2>
<p>The 700 passengers were represented by Patrick Ho, a Canadian citizen who had booked his cruise through a Canadian travel agent. He argued he was not made sufficiently aware of the US terms for them to apply. He also argued the class action waiver was unfair under Australian law and so could not be enforced. </p>
<p>Judge Stewart of the Federal Court agreed with some of these arguments and found the class action waiver was unfair under the Australian consumer law and that Ho could remain in the class.</p>
<p>But Princess then appealed to the Full Federal Court, which disagreed with Judge Stewart and found Ho had sufficient notice of the US terms before taking his trip and had agreed to them. </p>
<p>The court also found no unfairness in any of the terms under Australian law. This meant that Ho - and the 700 other passengers - could not be part of the Australian class, or any other class action.</p>
<p>The passengers then appealed that decision in the High Court.</p>
<h2>What did the High Court decide?</h2>
<p>Yesterday, the High Court <a href="https://eresources.hcourt.gov.au/downloadPdf/2023/HCA/39">unanimously ruled in favour</a> of the passengers. In so doing, it put companies doing business in Australia on notice that Australia’s consumer protection laws apply both inside and outside the country’s borders.</p>
<p>It decided the class action waiver was unfair to the passengers. This was because Australian consumer law prohibits unfair consumer contracts and because the express terms of that law apply to companies doing business in Australia, regardless of whether they are headquartered in Australia or overseas. </p>
<p>As the High Court explained, a price of a company doing business in Australia is that it must adhere to Australia’s consumer protection laws. </p>
<p>As the High Court made clear, the consumer laws exist for the protection of people who enter into contracts with companies. </p>
<p>Parts of those contracts may be considered unfair where there are terms that are one-sidedly beneficial for the company, where that benefit is not necessary to protect a legitimate interest of the company, and where the consumer is harmed in some way by the existence of the benefit.</p>
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<p>All these elements were present in the US terms as applied to Ho. </p>
<p>As the High Court found, the class action waiver was only beneficial to Princess. The only interest served was to reduce passengers’ ability to sue as a class (and therefore Princess’s need to defend itself against such a suit) and that Ho would be harmed by not being able to be a part of a legitimate Australian class action.</p>
<p>The High Court further found that since the class action waiver was unfair, there were good reasons not to enforce the additional term that all suits had to be brought in US courts in California. </p>
<p>This decision stands as a strong protection for consumers entering into agreements with companies doing business in Australia. It also makes class actions in Australian courts more available for consumers who might benefit from the protections the Australian consumer laws offer. </p>
<p>It is still a good idea to read your terms and conditions before agreeing to anything. But as the High Court has just ruled, you may not be completely out of luck if you don’t.</p><img src="https://counter.theconversation.com/content/219229/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James D Metzger does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The High Court has found that consumers can be protected even if they haven’t fully read their terms and even if they were outside of Australia when they accepted them.James D Metzger, Senior Lecturer in Law & Justice, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1707132021-10-28T02:22:32Z2021-10-28T02:22:32ZIf governments fail to act, can the courts save our planet?<figure><img src="https://images.theconversation.com/files/428963/original/file-20211028-25-18gsi8w.jpg?ixlib=rb-1.1.0&rect=774%2C48%2C3791%2C3571&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Talei Elu</span></span></figcaption></figure><p>The climate crisis threatens all life on our planet. Even the people who a few years ago were shouting from the rooftops that it was all a hoax have suddenly acknowledged the need for urgent action.</p>
<p>But Australia’s response remains the worst in the developed world. As a result, lawyers have commenced multiple legal proceedings as a way of bringing change.</p>
<p>With their crops flooded with salt water and their sacred sites disappearing under the waves, a group of Torres Strait Islanders this week <a href="https://www.lawyersweekly.com.au/biglaw/32858-australian-government-to-face-landmark-climate-class-action?utm_source=LawyersWeekly&utm_campaign=26_10_2021&utm_medium=email&utm_content=1&utm_emailID=a33c78ab70a30870263fd397c9e9a7de7d77d3bf28a953f2026a2b5f41a7af61">brought a class action lawsuit</a> against the Australian government.</p>
<p>Two First Nations Elders, Pabai Pabai and Paul Kabai, will argue in court that the Australian government has a duty to cut greenhouse gas emissions to ensure their homeland and their people are not harmed by the climate crisis.</p>
<p>The class action follows <a href="https://www.smh.com.au/environment/climate-change/anjali-sharma-breaking-new-ground-in-climate-fight-20210304-p577ym.html">another case</a> brought against Environment Minister Sussan Ley by a group of eight children, led by Anjali Sharma. The group attempted to stop the minister from approving a proposed coal mine extension in the Hunter Valley, New South Wales. </p>
<p>In a <a href="https://www.theguardian.com/australia-news/2021/may/27/australian-court-finds-government-has-duty-to-protect-young-people-from-climate-crisis">landmark ruling</a> earlier this year, the Federal Court <a href="https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2021/2021fca0560">found</a> the minister </p>
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<p>has a duty to take reasonable care to avoid causing personal injury to the children when deciding […] to approve or not approve the coal mine expansion. </p>
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<p>This groundbreaking decision set an important precedent and has clearly emboldened the Torres Strait Islands elders to demand the Australian government take urgent action to protect their homes, culture and food sources.</p>
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<h2>The basis for the Torres Strait islanders’ claims</h2>
<p>Mr Pabai and Mr Kabai’s class action is based on the famous <a href="http://climatecasechart.com/climate-change-litigation/non-us-case/urgenda-foundation-v-kingdom-of-the-netherlands/">Urgenda case in the Netherlands</a>, in which more than 800 plaintiffs argued the Dutch government had an obligation to protect its citizens from climate change. That case was successful and forced the Dutch government to take action to reduce the Netherlands’ greenhouse emissions.</p>
<p>However, there is an important difference between the suits. While the Dutch courts concluded the Dutch government was in breach of the European Convention on Human Rights, we have no such rights protections in Australia. Environmental groups here are forced to use the common law instead.</p>
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Read more:
<a href="https://theconversation.com/ive-won-cases-against-the-government-before-heres-why-i-doubt-a-climate-change-class-action-would-succeed-129707">I've won cases against the government before. Here's why I doubt a climate change class action would succeed</a>
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<p>To complicate matters, the Morrison government is trying to overturn the Sharma decision by appealing it to the full Federal Court and possibly the High Court, a process that is expected to take a further two years.</p>
<p>For lawyers, it is fascinating to see, in real time, how the law of negligence – which developed from a <a href="https://legalheritage.sclqld.org.au/donoghue-v-stevenson-1932-ac-562">1932 Scottish case</a> of a woman who ingested a snail in a bottle of ginger beer – is being stretched to protect Pacific islands from the risk of future inundation.</p>
<p>Unfortunately, these claims are not always successful.</p>
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<img alt="A sea wall on Boigu Island in the Torres Strait." src="https://images.theconversation.com/files/428964/original/file-20211028-15-1v1cmj9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/428964/original/file-20211028-15-1v1cmj9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/428964/original/file-20211028-15-1v1cmj9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/428964/original/file-20211028-15-1v1cmj9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/428964/original/file-20211028-15-1v1cmj9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/428964/original/file-20211028-15-1v1cmj9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/428964/original/file-20211028-15-1v1cmj9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A sea wall on Boigu Island in the Torres Strait.</span>
<span class="attribution"><span class="source">Talei Elu</span></span>
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<h2>A legal hurdle in a similar NZ case</h2>
<p>Last week, the New Zealand Court of Appeal <a href="https://www.nzherald.co.nz/northern-advocate/news/northland-activist-loses-appeal-for-courts-to-hold-big-business-accountable-for-climate-emissions/NIMYDGC4HYBLFMFJAXMGHZKWJA/">ruled</a> in <a href="https://www.courtsofnz.govt.nz/cases/smith-v-fonterra-co-operative-group-limited">another case</a> that common law tort claims are not an appropriate vehicle for addressing the problems of climate change. </p>
<p>Like Mr Pabai and Mr Kabai in the Torres Strait Islands, a Maori leader, Michael Smith, argued that various sites of customary, cultural, historical, nutritional and spiritual significance to his people are close to the coast on low-lying land or in the sea. As such, they were all at risk of harm from the greenhouse emissions of the dairy giant Fonterra and six other companies.</p>
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<p>In a legal slapdown, three judges found Mr Smith’s three “tort-based” arguments departed from the fundamental principles of the common law and they refused to extend the existing law to cover his claims. </p>
<p>A <a href="https://www.alrc.gov.au/publication/traditional-rights-and-freedoms-encroachments-by-commonwealth-laws-alrc-interim-report-127/17-immunity-from-civil-liability/what-is-a-tort/">tort</a> is a legal wrong committed by one person or entity against another, which is usually remedied through an award of damages. Since 2016, the potential remedies have been expanded from damages to injunctions as a result of the work the National Justice Project did in an <a href="http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2016/483.html?context=1;query=Plaintiff%20S99/2016%20;mask_path=">asylum seeker case</a>.</p>
<p>Rejecting the idea that the law of negligence was appropriate in the Fonterra case, the New Zealand court added it was an inherently inefficient and ad hoc way of addressing climate change, likely to cause arbitrary outcomes and protracted litigation.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/children-deserve-answers-to-their-questions-about-climate-change-heres-how-universities-can-help-169735">Children deserve answers to their questions about climate change. Here's how universities can help</a>
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<h2>Why these cases matter</h2>
<p>If it is applied by the Australian Federal Court, the Fonterra case presents a serious legal impediment to the Torres Strait Islands class action. </p>
<p>Despite the chance of failure, climate change litigation based on tort law plays an important role in drawing the risks of inaction by our federal government to the attention of all Australians.</p>
<figure class="align-center ">
<img alt="An aerial view of Boigu island." src="https://images.theconversation.com/files/428965/original/file-20211028-17-iit2u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/428965/original/file-20211028-17-iit2u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/428965/original/file-20211028-17-iit2u9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/428965/original/file-20211028-17-iit2u9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/428965/original/file-20211028-17-iit2u9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/428965/original/file-20211028-17-iit2u9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/428965/original/file-20211028-17-iit2u9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">An aerial view of Boigu island.</span>
<span class="attribution"><span class="source">Talei Elu</span></span>
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</figure>
<p>Crucially, these cases highlight the moral imperative for our leaders to do something, as <a href="https://www.acf.org.au/sharma-v-minister-explained">summed up</a> by Justice Mordecai Bromberg in the Sharma case:</p>
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<p>It is difficult to characterise in a single phrase the devastation that the plausible evidence presented in this proceeding forecasts for the children. […] Lives will be cut short. Trauma will be far more common and good health harder to hold and maintain. </p>
<p>None of this will be the fault of nature itself. It will largely be inflicted by the inaction of this generation of adults, in what might fairly be described as the greatest intergenerational injustice ever inflicted by one generation of humans upon the next.</p>
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<p>Through my work at the <a href="https://justice.org.au/">National Justice Project</a>, I have worked for years on strategic court cases to establish a duty of care for the federal government to provide medical treatment for asylum seekers on Nauru and to eliminate systemic prejudice.</p>
<p>I can tell you the legal process is hard and drawn out, but the results are worth fighting for. The road ahead through the legal system may be tough but it can be a catalyst for change. </p>
<p>Mr Pabai and Mr Kabai should be congratulated for their brave stance.</p><img src="https://counter.theconversation.com/content/170713/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>George Newhouse does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Two First Nations Elders will argue in court the Australian government has a duty to cut greenhouse gas emissions to ensure their homeland and people are protected.George Newhouse, Adjunct Professor of Law, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1501692020-11-16T10:57:56Z2020-11-16T10:57:56ZRobodebt was a fiasco with a cost we have yet to fully appreciate<figure><img src="https://images.theconversation.com/files/369519/original/file-20201116-19-xlt5vd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">DAVID MARIUZ/AAP</span></span></figcaption></figure><p>The Robodebt class action bought by Gordon Legal has been settled at a cost to the government of around $1.2 billion. According to federal Labor frontbencher Bill Shorten, this is the <a href="https://www.sbs.com.au/news/federal-government-settles-class-action-over-its-unlawful-robodebt-scheme-for-1-2-billion">biggest class action</a> in Australian legal history. </p>
<p>This <a href="https://www.smh.com.au/politics/federal/robodebt-class-action-settles-on-cusp-of-trial-20201116-p56f0u.html">comprised</a> refunds of $721 million to 373,000 people, $112 million in compensation and $398 million in cancelled debts.</p>
<p>As is well-known, “Robodebt” is the label commonly applied to the initiative starting in 2016 designed to increase recoveries by government of “overpayments” made to social security recipients, retrospectively dating back to 2010. </p>
<p>This table sets out a chronology of the major developments in Robodebt from 2016 up to this week.</p>
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<h2>How Robodebt began</h2>
<p>The “Robodebt” story started with an announcement as part of the <a href="https://formerministers.dss.gov.au/15850/welfare-integrity-fairness-and-sustainability-for-all-australians/">2015-16 budget</a> that the government would save $1.7 billion over five years by enhancing the Department of Human Services (DHS) fraud prevention and debt recovery capability. </p>
<p>Data-matching with the Australian Tax Office had been started in 1991 by the then-Labor government, with the automation of the system being increased in 2011. </p>
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Read more:
<a href="https://theconversation.com/the-problem-is-not-fixed-why-we-need-a-royal-commission-into-robodebt-141273">The 'problem' is not 'fixed'. Why we need a royal commission into robodebt</a>
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<p>The 2015 measures reduced human oversight once discrepancies between income reported to the ATO and income reported to the DHS were identified. Previously, officers had scrutinised each discrepancy on a case by case basis before raising an over-payment. </p>
<p>In addition, where previously the DHS collected verifying information from employers, the new system shifted responsibility for providing information to the individuals concerned, reversing the “onus of proof”. </p>
<p>As the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/SocialWelfareSystem/Report">2017 Senate committee report</a> points out, </p>
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<p>the responsibility for checking and clarifying income information has shifted from the department to current and former recipients of Centrelink payments. … the significant reduction in workload for the department by this outsourcing, has allowed for a huge increase in the number of income discrepancy investigations that the department initiates </p>
</blockquote>
<p>As a result, the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/SocialWelfareSystem/Report">Senate report</a> pointed out the number of “debt interventions” increased from 20,000 in 2015-16 to nearly 800,000 in 2016-17. </p>
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<img alt="" src="https://images.theconversation.com/files/369523/original/file-20201116-15-11ltkjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/369523/original/file-20201116-15-11ltkjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/369523/original/file-20201116-15-11ltkjh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/369523/original/file-20201116-15-11ltkjh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/369523/original/file-20201116-15-11ltkjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/369523/original/file-20201116-15-11ltkjh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/369523/original/file-20201116-15-11ltkjh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Scott Morrison has apologised for any hurt people suffered as a result of the Robodebt scheme.</span>
<span class="attribution"><span class="source">Mick Tsikas/AAP</span></span>
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</figure>
<h2>Concerns are raised</h2>
<p>In late 2016, members of the public raised concerns about letters from the DHS advising they owed the government significant debts for past income support payments they had received. </p>
<p>The controversy escalated, with the shadow human services minister requesting the auditor general to investigate, and an independent MP separately asking the Commonwealth ombudsman to look into the matter after receiving more than 100 complaints about the debts. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/government-to-repay-470-000-unlawful-robodebts-in-what-might-be-australias-biggest-ever-financial-backdown-139668">Government to repay 470,000 unlawful robodebts in what might be Australia's biggest-ever financial backdown</a>
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<p>In January 2017, a <a href="https://www.notmydebt.com.au/">website</a> now sharing more than 1,200 personal accounts, a Facebook account and a Twitter account with the hashtag <a href="https://twitter.com/not_my_debt">#notmydebt</a> were all set up to record contested debts. </p>
<p>A number of <a href="https://twitter.com/Asher_Wolf">other</a> <a href="https://twitter.com/jpwarren">individuals</a>, <a href="https://twitter.com/lukehgomes">journalists</a> and <a href="https://law.blogs.latrobe.edu.au/2019/07/30/dial-1800-reverse-onus-coming-to-grips-with-robodebt/">legal academics</a> consistently highlighted the issue on social and mainstream media.</p>
<p>There have since been <a href="https://www.ombudsman.gov.au/__data/assets/pdf_file/0022/43528/Report-Centrelinks-automated-debt-raising-and-recovery-system-April-2017.pdf">two</a><a href="https://www.ombudsman.gov.au/__data/assets/pdf_file/0025/107836/Inquiry-into-Centrelinks-compliance-program.pdf">reports</a> by the Commonwealth ombudsman and two parliamentary committee inquiries (<a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/Centrelinkcompliance">one ongoing</a>). </p>
<h2>The unravelling of the scheme</h2>
<p><a href="https://www.legalaid.vic.gov.au/about-us/news/centrelink-waives-another-robo-debt-legal-challenge-continues">Victoria Legal Aid</a> experienced a large spike in calls for legal help with Robodebt issues going back to 2016. In 2018, Centrelink raised a debt of over $3,700 against a former student, <a href="https://www.theguardian.com/australia-news/2019/may/05/centrelink-drops-womans-robodebt-after-she-mounts-court-challenge">Madeleine Masterton</a>, and in February 2019, VLA filed an application for judicial review. Within a week, the debt was reduced to around $600. </p>
<p>At the first case management hearing, Centrelink accepted Masterton’s original declared income, with the result that there was no debt, and no legal ruling on the issue. </p>
<p>The second case also involved a former student, <a href="https://www.theguardian.com/australia-news/2019/sep/06/centrelink-wipes-robodebt-in-second-case-set-to-challenge-legality-of-scheme">Deanna Amato</a>, who only became aware that a debt of just over $3,200 had been raised against her — plus a penalty of 10% for “not engaging” — when her income tax refund of around $1,700 was taken as repayment. </p>
<p>After the litigation began, Centrelink gathered information from her employers to determine the debt should be reduced to $1.48. A subsequent Freedom of Information request revealed she had actually been underpaid by $480.</p>
<p>In September 2019, the DHS completely dropped the Amato debt but refused to pay interest. Then in November, the Federal Court ruled that income averaging was unlawful – a conclusion the <a href="https://www.theguardian.com/australia-news/2019/nov/27/government-admits-robodebt-was-unlawful-as-it-settles-legal-challenge">government conceded</a> a week before the case came to trial. </p>
<p>It was this ruling that required the government to have more than 500,000 individual debts manually recalculated - at an unknown cost. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/369520/original/file-20201116-21-r2p8dc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/369520/original/file-20201116-21-r2p8dc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/369520/original/file-20201116-21-r2p8dc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/369520/original/file-20201116-21-r2p8dc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/369520/original/file-20201116-21-r2p8dc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/369520/original/file-20201116-21-r2p8dc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/369520/original/file-20201116-21-r2p8dc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Lawyer Peter Gordon (right) led the class action against the government.</span>
<span class="attribution"><span class="source">James Ross/AAP</span></span>
</figcaption>
</figure>
<h2>What is a policy fiasco?</h2>
<p>There is an extensive literature on “<a href="https://journals.sagepub.com/doi/10.1177/0952076715593139">policy</a> <a href="https://doi.org/10.1177/095207679501000205">failure</a>”. Well-known examples range from cost overruns in constructing the <a href="https://www.couriermail.com.au/news/why-sydneys-opera-house-was-the-worlds-biggest-planning-disaster/news-story/9a596cab579a3b96bba516f425b3f1a6">Sydney Opera House</a> and the <a href="https://www.bart.gov/about/history/history3">Bay Area Rapid Transit</a> network in San Francisco, to the <a href="https://catalogue.nla.gov.au/Record/482750">poll tax</a> in Britain in the 1980s. </p>
<p>What separates a “fiasco” from other forms of policy failure is that it is commonly regarded as being reasonably foreseeable – that is, the failure should or could have been avoided with foresight. </p>
<p>The current situation was clearly foreseeable. The income reported to the ATO is what people receive in the financial year from July 1 to June 30. Social Security payments are made fortnightly and the level of entitlement is based on the financial and personal circumstances that apply during that reporting period. </p>
<p>In January 2017, <a href="https://theconversation.com/note-to-centrelink-australian-workers-lives-have-changed-70946">I pointed out on this website</a> that “this approach [averaging] will only work correctly if individuals receive exactly the same income each fortnight. For students, this is very unlikely.”</p>
<p>More significantly, in July 2017, Peter Hanks gave the <a href="http://www.austlii.edu.au/au/journals/AIAdminLawF/2017/15.pdf">National Lecture at the Australian Institute of Administrative Law National Conference</a> in which he criticised the Commonwealth for its new method of raising and recovering what “Centrelink chose to describe as ‘debts’”. </p>
<p>Professor Terry Carney – who served for nearly 40 years as a member of the Social Services and Child Support Division of the Administrative Appeals Tribunal and its predecessor the Social Security Appeals Tribunal – also <a href="https://www.theguardian.com/australia-news/2020/feb/12/coalition-warned-robodebt-scheme-was-unenforceable-three-years-before-it-acted">made five judgements</a> in 2017 that there was no debt where Centrelink calculated overpayments by applying averaged annual income to shorter periods. </p>
<p><a href="http://www.unswlawjournal.unsw.edu.au/wp-content/uploads/2018/03/006-Carney.pdf">In an article in 2018</a>, Carney noted the Commonwealth had to prove that debts existed rather than requiring individuals to prove they did not. This was also pointed out by <a href="http://www.austlii.edu.au/au/journals/AIAdminLawF/2017/15.pdf">Hanks</a> in 2017, and was the conclusion reached by the Federal Court in the Amato case.</p>
<p>The department could have appealed these judgements to the next level of the AAT where rulings would have been published, but chose not to – suggesting it was not confident of its position. </p>
<p><a href="https://www.theguardian.com/australia-news/2020/sep/19/robodebt-court-documents-show-government-was-warned-76-times-debts-were-not-legally-enforceable">The Guardian</a> also revealed there were 76 other AAT cases where robodebts were set aside because the calculations used by Centrelink “could not lawfully support the existence of a debt”. In each case, the Commonwealth elected not to appeal. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/from-robodebt-to-racism-what-can-go-wrong-when-governments-let-algorithms-make-the-decisions-132594">From robodebt to racism: what can go wrong when governments let algorithms make the decisions</a>
</strong>
</em>
</p>
<hr>
<p>What is most striking about Robodebt is how it differs from earlier examples that focus on problems of implementation, or where outcomes do not match intended objectives. </p>
<p>Essentially, the Robodebt fiasco arises from the very formulation of the policy. From the beginning, a central feature of the program was unlawful. </p>
<p>The unlawfulness does not relate to a legal technicality or a mistake in drafting. In brief, the “overpayments” the government recovered using income averaging were not overpayments. No one who understood the social security system and its governing legislation could have realistically thought they were.</p>
<h2>What does the future hold?</h2>
<p>The Robodebt fiasco involves policy failures across numerous dimensions. The most obvious – and in many ways the least important failure – is it failed to achieve the budgetary savings that were its main objective. </p>
<p>More seriously, hundreds of thousands of people were adversely affected. This human cost is difficult to assess and involves much more than financial losses. </p>
<p>Just over 2,000 people who had received a Robodebt notice between July 2016 and October 2018 <a href="https://www.lexology.com/library/detail.aspx?g=b0cd6dc3-3373-45c7-b97a-a0692987e808">died</a> during that period, although in the absence of an official coroner’s report, no causes can be attributed. </p>
<p>However, it <a href="https://www.lexology.com/library/detail.aspx?g=b0cd6dc3-3373-45c7-b97a-a0692987e808">has been noted</a> that from January 2017, Centrelink began tweeting the contact number for Lifeline, the national charity providing 24-hour support and suicide prevention services.</p>
<p>This story is not yet finalised. The Federal Court has yet to approve the terms of the settlement. The second inquiry by the Senate Community Affairs is due to present its report in February 2021. </p>
<p>The opposition has indicated it would set up a royal commission into Robodebt if elected to office.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1328148534802010112"}"></div></p>
<p>Nevertheless, there are some reasons to be cheerful. While the checks on power that are built into the appeals processes in the Australian social security system were initially brushed aside, the combination of community activism, journalistic investigation, political scrutiny and the legal aid system appear to have ultimately provided a remedy to the victims of this major policy fiasco. </p>
<p>In future, there is clearly a need to strengthen these formal accountability and review structures.</p><img src="https://counter.theconversation.com/content/150169/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Whiteford has received funding from the Australian Research Council and the Department of Social Services. He is affiliated with the Centre for Policy Development and is a Policy Adviser to the Australian Council of Social Service.</span></em></p>The combination of community activism, journalistic investigation, political scrutiny and the legal aid system has ultimately provided a remedy to the victims.Peter Whiteford, Professor, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/969762018-05-21T22:26:52Z2018-05-21T22:26:52ZSupreme Court ruling against class action lawsuits is a blow for workers – and #MeToo<p>The Supreme Court on May 21 <a href="https://www.supremecourt.gov/opinions/17pdf/16-285_q8l1.pdf">narrowly ruled</a> that employees who sign arbitration agreements cannot band together to sue their employers for unpaid wages. </p>
<p>As a law professor who directs a clinical legal program that regularly represents low-wage workers, I believe this ruling essentially allows employers to hide workplace injustices while also potentially making it harder for workers – including victims of sexual harassment – to find justice. </p>
<h2>Why workers need class actions</h2>
<p><a href="https://theconversation.com/cheating-workers-out-of-wages-is-easier-than-ever-96758">Wage theft</a> – which includes wage and hour violations such as paying below minimum wage, misclassifying employees to avoid overtime pay and illegal deductions – is a widespread and underreported problem. </p>
<p>For instance, <a href="https://www.epi.org/publication/employers-steal-billions-from-workers-paychecks-each-year-survey-data-show-millions-of-workers-are-paid-less-than-the-minimum-wage-at-significant-cost-to-taxpayers-and-state-economies/">one 2017 study</a> by the Economic Policy Institute, a liberal think tank, found that in the 10 most populous states, 2.4 million workers were paid less than the minimum wage, to the tune of an estimated US$15 billion in lost wages per year nationwide.</p>
<p>In the Epic Systems Corp. v. Lewis case, an employee sought to join with co-workers to challenge unlawful wage and hour violations. Individually, an employee’s claim is usually not worth enough money to entice a lawyer to take the case. Collectively, however, employees can spread the costs of litigation.</p>
<p>Moreover, by uniting, workers reduce the employer’s ability to retaliate against them. A <a href="http://www.nelp.org/content/uploads/2015/03/BrokenLawsReport2009.pdf">2009 study</a> found that 43 percent of workers who complained to an employer or tried to organize a union faced retaliation, such as being fired or threatened with reduced pay. </p>
<p>In the case before the Supreme Court, the employers said that because their workers had signed arbitration agreements, they had to pursue any claims individually and could not join a class action lawsuit or arbitrate as a group.</p>
<h2>A tale of two acts</h2>
<p>The case pitted two federal laws against each other. On the one hand, the <a href="http://apps.americanbar.org/litigation/committees/adr/articles/spring2014-0614-federal-arbitration-act.html">Federal Arbitration Act</a>, enacted in 1925, requires courts to enforce arbitration agreements. On the other, the <a href="https://www.nlrb.gov/resources/national-labor-relations-act-nlra">National Labor Relations Act</a>, enacted in 1935, protects the right of employees to join together to enforce rights for their “mutual aid or protection.”</p>
<p>Associate Justice Neil Gorsuch, who authored the majority opinion, held that the arbitration act carried the day, reasoning that the labor act’s protections are narrowly limited to organizing unions and collective bargaining.</p>
<p>In my view, his opinion rests on a view of the workplace that few workers would recognize. In Gorsuch’s world, employers and employees have equal bargaining power and mutually agree to arbitrate disputes.</p>
<p>This equal footing may have been true at the white-shoe law firm where Gorsuch once worked. However, in today’s workplace, most employees must either take it or leave it when it comes to the terms of employment. <a href="https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration/">Over 55 percent</a> of non-union, private sector employees are subject to mandatory arbitration – a percentage that has more than doubled since the early 2000s.</p>
<p>Gorsuch also has a very rosy view of arbitration as quick, informal and cheap. Yet if arbitration was so effective at dispensing justice, employees would be lining up to take advantage of this forum. They are not. The Economic Policy Institute found that only 1 in 32,000 employees actually files for arbitration. </p>
<p>And arbitration is not free. To begin with, employees need a lawyer if they want any hope of prevailing – although this is nearly impossible in the absence of a class action option. In addition, <a href="https://www.americanbar.org/content/dam/aba/publications/dispute_resolution_magazine/spring2017/3_rothman_trends_in_arbitrator.authcheckdam.pdf">arbitrators charge hundreds of dollars an hour</a>, and many agreements require employees to <a href="https://scholarship.kentlaw.iit.edu/cgi/viewcontent.cgi?article=1363&context=fac_schol">pay part of the costs</a>.</p>
<p>Finally, arbitration proceedings are not swift, rather <a href="https://digitalcommons.law.msu.edu/cgi/viewcontent.cgi?article=1051&context=lr">they look almost exactly like trials</a>. Indeed, they are often presided over by retired judges, who wield more discretion in arbitration than in the courtroom.</p>
<h2>Why employers like arbitration</h2>
<p>Business groups <a href="https://www.businessmanagementdaily.com/51467/big-win-employers-supreme-court-rules-arbitration-agreements-can-prohibit-class-action-suits">declared</a> the ruling a huge “win” for employers. </p>
<p>So why do they favor arbitration? </p>
<p>Well, first of all, employers <a href="https://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=2019&context=articles">typically prevail</a>, and damage awards are generally smaller than in trials. </p>
<p>Second, unlike court trials, arbitrations are confidential and thus keep the facts of the case from public view. In turn, this means that employers do not have to change their workplace practices even if they lose the arbitration.</p>
<p>Moreover, employers know that employees lack the resources or wherewithal to file for arbitration, especially when they must go it alone. In other words, arbitration agreements do not just reduce the number of court cases an employer has to contend with, they reduce the possibility of liability altogether. Employers also know that <a href="https://digitalcommons.law.msu.edu/cgi/viewcontent.cgi?article=1051&context=lr">government agencies lack the resources</a>, or political will, to enforce wage and hour laws.</p>
<h2>What comes next</h2>
<p>And what will be the result of this ruling? </p>
<p>In her 30-page dissent, Justice Ruth Bader Ginsburg <a href="https://www.supremecourt.gov/opinions/17pdf/16-285_q8l1.pdf">summed it up</a>: “The inevitable result of today’s decision will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”</p>
<p>In other words, as employers gain impunity from liability, wage violations will increase. Workers will suffer.</p>
<p>It will also be chilling for the #MeToo movement, which has made <a href="https://nwlc.org/resources/metoowhatnext-strengthening-workplace-sexual-harassment-protections-and-accountability/">getting rid</a> of mandatory arbitration agreements paramount. That’s because arbitration shrouds workplace sexual harassment claims in <a href="https://www.theguardian.com/commentisfree/2018/apr/18/supreme-court-metoo-arbitration-clauses-decision-sexual-harassment">secrecy</a>, thus making it hard for victims to come forward while protecting serial abusers.</p>
<p>For the sake of American workers, I hope Congress intervenes soon to preserve collective actions and the enforcement of workplace rights.</p><img src="https://counter.theconversation.com/content/96976/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>
Michele Gilman is affiliated with the Women's Law Center of Maryland and the ACLU of Maryland.</span></em></p>The court narrowly ruled that employees who sign arbitration agreements can’t bring class action suits over unpaid wages.Michele Gilman, Venable Professor of Law, University of BaltimoreLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/662202017-07-24T11:51:57Z2017-07-24T11:51:57ZMasterCard survives £14 billion class action but more could follow<figure><img src="https://images.theconversation.com/files/179413/original/file-20170724-24759-pjgfp8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Should convenience come at a cost?</span> <span class="attribution"><span class="source">nevodka / Shutterstock.com</span></span></figcaption></figure><p>Convenience often comes at a cost. As consumers, many of us are resigned to seeing a surcharge or “processing fee” on goods and services when we pay by credit or debit card. At present, it is lawful for businesses to charge consumers these fees although <a href="http://www.legislation.gov.uk/uksi/2012/3110/regulation/4/made">the amount should be limited</a> to the actual cost to the retailer of the transaction. </p>
<p>Bank charges for processing card payments <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/466783/Interchange_fee_regulation_response.pdf">were capped in the UK in 2015</a>, but many businesses have <a href="https://www.fairerfinance.com/business/blog/why-are-we-still-being-charged-for-paying-by-credit-card">continued to charge</a> consumers inflated fees to generate further profit. Even <a href="https://ion.icaew.com/taxfaculty/b/weblog/posts/revisedchargesforpayinghmrcbycreditcard">the government’s tax department</a> routinely adds a surcharge of up to 2.4% to bills paid by card.</p>
<p>Now, <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/629988/Implementation_of_the_revised_EU_Payment_Services_Directive_II_response.pdf">the government has announced</a> that charges for paying by debit or credit card will be outlawed completely from January 2018. This raises several questions, not least whether retailers will simply increase their prices to cover any shortfall. Many companies <a href="https://www.thetimes.co.uk/article/no-more-cheeky-credit-card-fees-fsvwdtb86">argue</a> that fees are there to cover their transaction costs, which consist of an “interchange fee”, levied by the card issuer such as Visa or MasterCard (capped by law at 0.3%) and the “merchant fee”, charged by the bank for handling each payment. This is not capped but for large businesses it should not amount to more than about 0.3%.</p>
<p>It is also unclear how the ban will be policed. Local authority Trading Standards departments are tasked with dealing with complaints from buyers, but the widespread flouting of the current cap indicates that embattled officers are <a href="https://www.tradingstandards.uk/news-policy/news-room/2016/trading-standards-experts-respond-to-gov-cutting-red-tape-review">under-resourced</a> to deal with the issue.</p>
<h2>Class action rejected</h2>
<p>Future charges are to be outlawed, but what about the millions in surplus fees paid by consumer buyers in the past? A recent attempt to secure £14 billion in compensation for UK consumers was <a href="http://www.catribunal.org.uk/238-9925/Judgment-CPO-Application.html">recently rejected</a> by the Competition Appeal Tribunal (CAT).</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/179436/original/file-20170724-10327-13yjxvq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/179436/original/file-20170724-10327-13yjxvq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/179436/original/file-20170724-10327-13yjxvq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/179436/original/file-20170724-10327-13yjxvq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/179436/original/file-20170724-10327-13yjxvq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/179436/original/file-20170724-10327-13yjxvq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/179436/original/file-20170724-10327-13yjxvq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The new law covers all card companies.</span>
<span class="attribution"><span class="source">dean bertoncelj / Shutterstock.com</span></span>
</figcaption>
</figure>
<p>The trailblazing claim against MasterCard, initiated by <a href="https://www.linkedin.com/in/walter-merricks-cbe-3487a139">Walter Merricks</a>, who was head of the Financial Ombudsman Service from 1999-2009, was the first collective claim of its kind under new rules introduced by the <a href="http://www.legislation.gov.uk/ukpga/2015/15/contents/enacted">Consumer Rights Act 2015</a>. </p>
<p>Previously, US-style class actions were not permitted under UK law and consumers affected by price fixing or anti-competitive behaviour had to either actively opt in as a named participant in a claim, or bring proceedings on their own behalf. In cases where the loss to the consumer was relatively small, the cost of bringing a claim meant that pursuing the trader was often not worthwhile. </p>
<p>Under collective proceedings rules, there is no need to register for a stake in the claim – anyone who fulfils the criteria is automatically joined in the action unless they expressly opt out. Under the new Consumer Rights Act, claims can be brought by a suitable representative of the group affected. In the Mastercard case it was Walter Merricks, on behalf of every consumer who purchased goods from a retailer in the UK between 1992 and 2008. </p>
<p>Had the claim succeeded, it would have given individual consumers the collective legal power to call a corporation to account. Ultimately, the claim faltered under the huge complexity of trying to quantify the total compensation payable, and then allocate it fairly among consumer claimants. Notwithstanding the CAT’s decision, the case has <a href="http://www.pymnts.com/news/regulation/2016/mastercard-uk-class-action-lawsuit/">prompted fears</a> from card companies that the UK will see a tsunami of similar claims, possibly resulting in vast payouts.</p>
<h2>Onslaught of action</h2>
<p>What happens next will be scrutinised closely by banks and other credit providers. The decision is the latest chapter in an <a href="https://www.ft.com/content/50342c2c-e703-11e6-893c-082c54a7f539">onslaught of legal action</a> against MasterCard dating back to 2007. The fees charged to retailers are determined in large part by interchange fees agreed between groups of banks and in 2007, MasterCard was subject to an investigation by the European Commission, which <a href="http://eur-lex.europa.eu/legal-content/en/TXT/PDF/?uri=uriserv%253AOJ.C_.2012.200.01.0011.01.ENG">ruled</a> that its interchange fees were anti-competitive and violated the EU Treaty.</p>
<p>MasterCard appealed the ruling but the European Court of Justice confirmed the decision in <a href="http://europa.eu/rapid/press-release_MEMO-14-528_en.htm">September 2014</a>. Fees were subsequently capped at 0.3% of the transaction value for credit card payments and 0.2% for debit card payments. </p>
<p>In July 2016 MasterCard was ordered to pay <a href="https://www.ft.com/content/35fcd220-49c2-11e6-8d68-72e9211e86ab">substantial damages to the supermarket Sainsbury’s</a>, after it successfully sued MasterCard over processing fees. While the court in this case acknowledged that electronic payment arrangements benefit both customers and retailers, it ultimately concluded that MasterCard’s charges were excessive and breached EU and UK competition law. This judgement potentially paves the way for a wave of further claims from retailers who were charged similar rates.</p>
<p>MasterCard is not the only lender affected. Visa was <a href="http://europa.eu/rapid/press-release_IP-10-462_en.htm?locale=en">also investigated in 2007</a>, but managed to avoid formal sanctions by agreeing voluntarily to reduce its fees and improve transparency around charging. </p>
<p>The British government’s move to scrap charges completely by January 2018 promises greater transparency over future prices paid by consumers. But, future class actions should not be ruled out. The recent rejection of Merricks’s case against MasterCard was down to the complexity of computing individual losses – if this issue is remedied then future claims could well succeed.</p><img src="https://counter.theconversation.com/content/66220/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joanne Atkinson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A recent ban on charges for paying by credit or debit card could open the door to legal action for surplus fees paid in the past.Joanne Atkinson, Principal Lecturer, Law, University of PortsmouthLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/725022017-02-15T02:15:21Z2017-02-15T02:15:21ZRegulations needed for litigation funders who can’t pay out when cases fail<figure><img src="https://images.theconversation.com/files/156699/original/image-20170214-25977-1ypmm83.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The lead claimant in an equine influenza class action managed to avoid incurring a substantial costs order being made against them.</span> <span class="attribution"><span class="source">AAP/Sergio Dioniso</span></span></figcaption></figure><p>Access to funding for litigation has become a critical component of class action cases in Australia. This is because it provides the necessary financing for this form of expensive and complex litigation.</p>
<p>Yet its unregulated nature may expose consumers to the risk of the funder becoming insolvent or simply failing to pay legal fees – or, if a class action is lost, the defendant’s costs.</p>
<p>To create regulations that cover this, the courts and regulators need to pay attention to unsuccessful class actions, where the funder is required to honour obligations to claimants to pay legal fees and the defendant’s costs. </p>
<p>But, currently, the only guidance, such as the Federal Court’s recent judgments and the Victorian attorney-general’s <a href="http://www.lawreform.vic.gov.au/projects/litigation-funding/litigation-funding-terms-reference">referral of the issue</a> to the Victorian Law Reform Commission, focuses on a successful class action where the funder is actually receiving its fee. </p>
<p>Two important regulatory pillars – licensing and capital adequacy – are missing. This is despite the Productivity Commission <a href="http://www.pc.gov.au/inquiries/completed/access-justice/report">recommending in 2014</a> that both be introduced.</p>
<p>The lack of a licensing regime means anyone or any entity can fund litigation in Australia – except for lawyers, as contingency fees are illegal. Also, without capital adequacy requirements, there is no protection for claimants (or defendants) to ensure the funder has sufficient resources to be able to pay legal fees and meet any adverse costs order. </p>
<p>This creates the potential for inadequately resourced funders to litigate for profit but avoid the costs if unsuccessful. Currently, funders can protect themselves by being based offshore and/or by using subsidiaries with limited financial resources to undertake funding obligations.</p>
<p>There is only partial protection against a funder with inadequate capital at the moment. This involves a court order for “security for costs”. This requires the funder to take steps to make funds or assets available at the beginning of litigation to pay the defendant’s costs in the event the litigation fails.</p>
<p>However, it is common practice that the amount of security a court requires to be posted is substantially lower than the costs the defendant actually incurs. So, the claimant bringing the case may be still liable for those costs.</p>
<h2>How does litigation funding work?</h2>
<p>In a typical litigation funding arrangement, the funder will enter into an agreement with one or more potential claimants. The funder agrees to pay the litigation costs – such as lawyers’ fees and expert witness fees – and promises the claimant will pay the defendant’s costs if the claim fails.</p>
<p>Litigation funding removes all of the costs exposure a claimant may have. In return, if the claim is successful, the funder will receive a fee. This is typically a specified percentage of any funds recovered by the claimants either by way of settlement or judgment. The funder will also be reimbursed the litigation costs.</p>
<p>The Federal Court has taken significant steps to reassert that court access is primarily for the people who have been harmed. It says it has the power to supervise litigation funding charges in class actions.</p>
<p>In the recent shareholder class actions against insurance giant <a href="http://www.austlii.edu.au/au/cases/cth/FCAFC/2016/148.html">QBE</a> and <a href="http://www.austlii.edu.au/au/cases/cth/FCA/2016/1433.html">Newcrest Mining</a>, the court recognised that the funder’s fee is usually the largest single deduction from what the claimants manage to recover in funded class actions. </p>
<p>Many claimants are at a disadvantage in negotiating litigation funding agreements because they have small claims and need the funding more than the funder needs them to be part of the class action.</p>
<p>The Federal Court aims to prevent excessive or disproportionate charges to claimants. This means funders are subject to the same scrutiny that already exists for lawyers and their fees. </p>
<p>The court’s supervision of funding charges will mean funders will need to justify the fees charged. Therefore, a fee must reflect the real risks the funder assumes in facilitating access for the claimants to justice and the recoveries achieved.</p>
<h2>Examples of near-disasters</h2>
<p>The failure to regulate litigation funders is becoming more problematic. This is because more funders, particularly from overseas, are entering the market. There have been class action failures, which may become more common as more funders start to chase profits in Australia.</p>
<p>Class actions over <a href="http://www.austlii.edu.au/au/cases/cth/HCA/2016/28.html">bank fees</a> and <a href="http://www.austlii.edu.au/au/cases/cth/FCA/2016/1119.html">equine influenza</a> are two recent examples of litigation that failed.</p>
<p>The bank fees class action was a highly publicised attempt to seek repayment of overdraft and other bank fees to customers. This failed when the fees were found not to be illegal. </p>
<p>The case involved a number of hearings and multiple appeals, which led to a large liability for costs. Fortunately for the claimants (and the defendants), an Australian-listed corporation with a healthy balance sheet funded the class action. </p>
<p>The equine influenza class action dealt with claims against the federal government for failing to prevent the virus escaping from a quarantine station, which led to the infection of thousands of horses. </p>
<p>Partway through the class action, the overseas funder became bankrupt amid allegations its parent company was engaged in fraudulent activities. The class action settled for no compensation; each side bore its own costs. Justice Foster observed the settlement meant the lead claimant avoided:</p>
<blockquote>
<p>… a very substantial adverse costs order being made against them.</p>
</blockquote>
<p>Lawyers acting for the plaintiff reportedly had A$11 million in unpaid fees. The litigation funder would have been liable to protect the claimants from adverse costs orders and pay the legal fees had it not collapsed. The settlement’s terms averted a near-disaster for the lead claimant. </p>
<p>Oversight of litigation funders in victorious class actions has begun. But more action is required to regulate losing litigation funders to protect claimants and defendants.</p><img src="https://counter.theconversation.com/content/72502/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Legg is affiliated with the Law Council of Australia's Class Actions Committee, Jones Day and the Australian Pro Bono Centre. He is the director of the IMF Bentham funded Class Actions Research Initiative at UNSW Law. </span></em></p>The failure to regulate litigation funders is becoming more problematic. This is because more funders, particularly from overseas, are entering the Australian market.Michael Legg, Associate Professor of Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/322662014-12-18T19:48:00Z2014-12-18T19:48:00ZGreat Southern class action calls for debate on lawyers fees<p>The failed <a href="https://au.news.yahoo.com/thewest/a/25754633/23m-great-southern-settlement/">Great Southern class action</a>, which saw lawyers receive substantially more compensation than victims, could be seen as making the case for contingency fees. The Productivity Commission recently recommended the removal of the ban on contingency fees that exists in all Australian states.
However, contingency fees also have dangers for consumers.</p>
<p>Contingency fees can be advantageous to clients because the lawyer only gets paid if the client wins and only in proportion to the victory. The lawyer bears some of the risk of the proceedings, by acting as both lawyer and banker to the client. </p>
<p>In the Great Southern class action the clients would have been much better off with a contingency fee arrangement. The lawyers charged A$20 million using a fixed fee and achieved a settlement of $3.55 million, or about $17 for every $10,000 invested. If a contingency fee of 25% applied, then the amount being paid to the lawyers would have been A$887,500. </p>
<p>Contingency fees are an alternative to time-based billing, fixed fees and even the conditional fee. A conditional fee, also called a “no win – no fee” approach, is where the lawyers also only get paid if there is a recovery. However, the payment to the lawyer is usually based on time worked. The lawyers may also charge an uplift of no more that 25% of their time-based fee. </p>
<p>The Great Southern class action shows the main issue is not embracing contingency fees, but instead the more difficult issue of how to ensure fees are charged in an appropriate manner that is fair to both lawyer and client. The Productivity Commission acknowledges this issue by stating in its report:</p>
<blockquote>
<p>The unfortunate reality for consumers of legal services is that lawyers can charge excessive fees, adopt a position that is incongruous to the needs of the client and fail to adequately inform their client under any billing arrangement.</p>
</blockquote>
<p>Great Southern illustrates that when a case is risky lawyers may chose a billing method that makes sure they get paid, rather than a contingency fee which exposes the lawyer to risk. The opposite position may also apply: contingency fees being adopted for cases with low risk or for cases that are currently undertaken using conditional billing. </p>
<p>Contingency fees may make litigation more expensive for plaintiffs. For example the Commission presents data on the fees charged in Victorian Supreme Court personal injury cases in 2009 and 2010. </p>
<p>For cases with recoveries over $1 million dollars legal fees equate to about 5% of the recovery. Compare that with a contingency fee of 25%. If contingency fees are greater than what is charged through time-based billing then transaction costs for the compensation of injuries will increase. If that happens then the plaintiff has less funds. Does that mean that compensation payments will increase, or does the injured individual have to make do with less, or is society to make up the shortfall in some way?</p>
<h2>The UK experience</h2>
<p>Regulators in the UK responded to this concern about the adoption of contingency fees in three ways: </p>
<ul>
<li>Increasing the compensation to be paid in personal injury cases by 10% </li>
<li>Requiring that the amount payable is reduced by the amount of legal costs recovered from the opponent in the litigation. In England, as in Australia, the loser usually pays the winner’s legal fees</li>
<li>Placing a cap on the percentage that could be charged as a contingency fee.</li>
</ul>
<p>The fact that regulation was needed in the UK to ensure clients are adequately compensated suggests this is a real area of concern. If lawyers use contingency fees to feather their own nests then there are some very real and serious implications for the rest of society. The problem of cost in the civil justice system is made worse. The Productivity Commission has recommended the use of caps, but has not addressed the other measures. </p>
<h2>Independent review of costs</h2>
<p>Another key protection for consumers is that the current regulation of legal costs includes the ability of a client to seek the independent review of a bill of costs. The review of costs determines if the costs are fair and reasonable. Contingency fees would presumably operate within this regime but to do so additional information is needed. Traditionally records of work done and time expended are considered. But a contingency fee is not based on work or time. </p>
<p>The fee review system would need some way to determine what a reasonable percentage for a particular case is. </p>
<p>Experience with uplift fees in Australia and contingency fees in the US is that lawyers usually charge the maximum allowed – if there is a cap they charge the cap amount. One response, recommended by the Victorian Law Reform Commission in 2008, was to make lawyers continue to record time and tasks so that a time or task based fee could be compared with the percentage actually charged. However, this does not take into account the risk of the litigation, in particular, the risk of the lawyer not being paid. The Productivity Commission devotes a chapter to protecting consumers of legal services but does not consider how contingency fees would operate in this system.</p>
<p>The Great Southern class action demonstrates lawyers can choose fee arrangements that are to their advantage. Rather than being an endorsement for contingency fees it suggests we must consider how contingency fees may be misused and the mechanisms for guarding against such misuse.</p><img src="https://counter.theconversation.com/content/32266/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Legg is affiliated with Jones Day, Law Council of Australia Class Actions Committee and the National Pro Bono Resource Centre.</span></em></p>The failed Great Southern class action, which saw lawyers receive substantially more compensation than victims, could be seen as making the case for contingency fees. The Productivity Commission recently…Michael Legg, Associate Professor of Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/106302012-11-28T19:11:13Z2012-11-28T19:11:13ZIt’s about money, not morality: how to assess shareholder class actions<figure><img src="https://images.theconversation.com/files/18045/original/9c7973gt-1353985170.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Great Southern class action was one of numerous shareholder class actions to have taken place this year.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Shareholder class actions have become a prominent aspect of the Australian litigation landscape, with suits against blue chip Australian corporations such as <a href="http://www.smh.com.au/business/court-approves-centros-200m-classaction-settlement-20120619-20m2m.html">Centro</a>, <a href="http://www.abc.net.au/news/2012-11-09/nab-agrees-to-multimillion-legal-settlement/4363114">NAB</a> and <a href="http://www.itnews.com.au/News/96784,telstra-to-cough-up-5-million-in-class-action-settlement.aspx">Telstra</a>. But what do shareholder class actions achieve? Do they compensate? Do they name and shame?</p>
<p>Class actions have certainly resulted in some large settlement payments. The top four shareholder class action settlements in Australia are: the <a href="http://www.clmr.unsw.edu.au/article/deterrence/public-v-private-enforcement/price-settlement-centro-class-action-and-divide-between-private-and-public-enforcement">$200m Centro class action settlement</a>, which included a contribution from PriceWaterhouseCoopers; the <a href="http://www.smh.com.au/business/aristocrat-settles-1445m-class-action-20080828-44iu.html">Aristocrat class action</a> settlement of $144.5m; the <a href="http://news.smh.com.au/breaking-news-business/courts-okays-110m-multiplex-settlement-20100721-10kxi.html">Multiplex settlement of $110m</a> and NAB, which is still subject to Court approval, but is reported to have settled for $115 million. All of these amounts include the lawyer’s fees of $31 million, $8.5 million, $11 million and $12.5 million (estimated) respectively, and the litigation funder’s cut, which is around 30% of the settlement after legal costs are deducted. Consequently, the amount of compensation available for the actual shareholders is much lower than the headline figure.</p>
<p>However, the concern is that the focus on the quantum of the settlement misses a more important question: what proportion of shareholders’ actual losses is being compensated? This requires a comparison between the settlement amount and the shareholders’ losses that are the subject of the claim. This comparison is made difficult because the law is unsettled as to how both causation and quantification of loss are to be determined in shareholder class actions. Nonetheless, the efficacy of shareholder class actions in achieving compensation means the comparison is essential.</p>
<p>Some judges have included this calculation in the settlement approval judgment. Settlements in class actions, unlike most litigation, need to be approved by the Court to ensure that the settlement is fair and reasonable. In the Multiplex case, Justice Finkelstein observed that the class members would recover in the order of 62 cents in the dollar of the ‘reasonable value’ of their claims. In the <a href="http://www.austlii.edu.au/au/cases/cth/FCA/2011/801.html">Oz Minerals settlement</a>, Justice Emmett stated that the total settlement sum of $60 million equated to about 32% of the value of the claims if they were completely successful. However, most judgments do not include this important factor. For example, in the Centro class action, many estimates of the total size of the claim were $1 billion or more. If the $1 billion estimate (or more) is correct, then the $200m settlement equates to 20 cents in the dollar, or less. No such calculation is reported.</p>
<p>Many factors can have an impact on the size of a settlement relative to actual losses, but to understand whether a class action settlement is in the interests of shareholders, reference must be made to how the settlement compares to the losses suffered. </p>
<p>Class actions are also claimed to promote deterrence because they increase the possibility that contraventions are more likely to result in litigation and its related costs thus creating an incentive for corporations to comply with the law. Those costs include both the payment of a settlement or judgment and reputational effects. A significant settlement may indicate that there is merit to an allegation and the law has been violated. But if that settlement equates to only a fraction of the actual losses, then deterrence is undermined.</p>
<p>The impact on reputation comes from the association with wrongdoing. One exuberant lawyer has stated that “those who steal from shops are criminals. Those who mislead, deceive or breach the Corporations Act disclosure requirements are generally no better than common criminals”.</p>
<p>The problem with equating shareholder class actions with any sort of moral condemnation is that the alleged contraventions that are relied on are not about fraud, nor even negligence. </p>
<p>There is no requirement to show intent in relation to the prohibitions on misleading or deceptive conduct. The provisions are drafted so as to be concerned with consequences rather than the contravener’s state of mind. In relation to the original misleading and deceptive provision, section 52 of the Trade Practices Act, on which the corporations law provisions are based, the High Court observed that conduct not intended to mislead or deceive and which was engaged in “honestly and reasonably” might nevertheless contravene section 52. </p>
<p>The same is true of the continuous disclosure regime. As Justice French observed in <a href="http://www.austlii.edu.au/au/cases/cth/federal_ct/2006/936.html">ASIC’s civil penalty case against Chemeq Limited</a> in 2006, the continuous disclosure requirements prior to 11 March 2002 “imposed a prohibition against intentional, reckless or negligent non-disclosure” but that due to subsequent amendments these “are no longer elements of the prohibition”.</p>
<p>The Australian shareholder class action does not equate with securities fraud. The focus is consumer protection and fostering an informed market rather than seeking to demonstrate moral turpitude. To be added to the lack of a moral element in the underlying law, all shareholder class actions to date have been concluded by settlement and settlements are almost always on the basis that there is no admission of liability. </p>
<p>The legislature has created laws without reference to fault to protect the consumers of corporate information by lowering the bar for proving a contravention. As a result, both the role and meaning of a shareholder class action is defined by the amounts of money paid. It is crucial to know what a settlement amount means for shareholders.</p>
<p><em>Associate Professor Michael Legg will be speaking at a seminar, Regulating Culture in Financial Organisations, presented by the Centre for Corporate Law and Securities Regulation at Melbourne Law School and the Centre for Law Markets and Regulation, Faculty of Law, University of New South Wales today. More details <a href="http://cclsr.law.unimelb.edu.au/files/CCLSR_CLMR_Seminar_29Nov2012FullProg1.pdf">here</a>.</em> </p><img src="https://counter.theconversation.com/content/10630/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Legg consults to the law firm Clayton Utz.</span></em></p>Shareholder class actions have become a prominent aspect of the Australian litigation landscape, with suits against blue chip Australian corporations such as Centro, NAB and Telstra. But what do shareholder…Michael Legg, Associate Professor of Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.