What is a class action and is it right for your legal case?

Are you part of a group of people who have experienced harm or wrongdoing from the same source and that may entitle you to compensation? If so, a class action could be the perfect way to seek justice without the financial burden or risk of taking on the case individually.

In this blog, we’ll explore how class actions work, when they’re the right choice, and how to get started.

What is a class action?

A class action is a legal process that allows a group of people who have suffered compensable loss caused by the same legal breach/issue to combine their claims into a single case. This could be anything from employment underpayments to consumer fraud.

Instead of each person filing their own separate legal action in a court, a class action streamlines the process by consolidating all claims into one and allows a process to recruit other potential claimants.

What is a representative party?

To start a class action, one person must take on the role of the representative party (also known as the lead plaintiff).

This person acts on behalf of the entire group, dealing with lawyers, making decisions about the case, and approving any settlement offers. Their role is critical, and they must always act in the best interest of the whole group, not just themselves.

Are there any risks associated with being the representative/lead plaintiff in a class action?

Being the lead plaintiff in a class action comes with some risks/burdens, which arise from the extensive time required on the case, public exposure, and emotional stress. Although these risks are inherent in all litigation, because the lead plaintiff is acting for and making decisions on behalf of the group, they can feel these pressures more acutely.

Although there are some other risks, a competent and qualified legal team can mitigate or eliminate these. These include the risk of retaliation from the opposing party and orders against the lead plaintiff for legal costs if the case is unsuccessful.

How does a class action work?

You may be surprised to learn that a class action can be started for a group with as few as seven people. If you and others have been affected by the same legal issue, you may qualify to be part of or start a class action. The first step is therefore to form such a class, which can be done by various forms, including advertising and recruitment.

The legal process of a class action then begins when the lead plaintiff files the proceeding in court. A class action can be filed in various courts, but in this article, we’ll focus on the  Federal Circuit and Family Court of Australia.

As a group member, once the class action is filed, you’ll be automatically part of the action if you meet the group’s eligibility criteria. As part of the process, you’ll receive a notification about the case, including information about your rights, and a request to register so that you can receive updates from the firm.

If you are included in a class but don’t want to be part of the class action, you have the option to opt out, but this means you will not benefit from a successful outcome.

Who pays for a class action?

One of the most significant concerns when considering legal action of any kind is the cost.

Fortunately, with class actions, you likely don’t have to worry about paying upfront legal fees. Litigation funders typically fund class actions, meaning you won’t need to pay for legal costs as the case progresses. Hall Payne has existing relationships with a number of litigation funders.

Ordinarily, you will start with a consultation with a qualified and competent lawyer. Most firms will charge you for that initial consultation, which is an opportunity for them to understand your matter. You may also be required to get written advice on the prospects.

Once it is determined that you have good prospects of success, that there are sufficient members of the class, and a decision is made to proceed with a class action, from this point, the firm will handle the case, usually on a no-win, no-fee basis.  

This means that you and other group members, including the representative party, don’t have to worry about paying for the case out of your own pocket. All costs are covered, making it much more accessible for those who couldn’t otherwise afford legal representation.

So that the work can be performed, the usual arrangement is that a litigation funder will provide financial support for the legal case, covering costs like legal fees and expenses.

If the case is successful, the litigation funder receives a percentage of any successful settlement or judgment, and the firm usually gets an uplift on its fees to compensate for the risk it took in doing that work. To be clear, this means that the litigation funder and firm bear the financial risk, meaning if the case is unsuccessful, the lead plaintiff doesn’t have to repay any of the funds used to run the case.

How are class actions settled?

Class actions usually settle through mediation, a negotiation process where both sides try to come to an agreement. However, if mediation fails, the case will proceed to court, where a judge will decide the outcome.

Once an agreement is reached, the court must approve the settlement to ensure it’s fair to everyone involved. The court will also review any legal fees and payments to third-party funders to ensure that these are reasonable.

The Court approves what is known as a Settlement Scheme, which outlines the amount of compensation and how it will be distributed to the group members, which can then often be a complex and lengthy process.

Common types of class action cases in Australia

A class action may be suitable when many individuals have been affected by the same wrongdoing. Here are some of the most common types of cases suitable for a class action:

• Employee underpayments: If a group of workers has been denied proper wages or benefits, they may be able to bring a class action to recover their unpaid wages;
• Sham contracting business practices: If a company has engaged employees as contractors to avoid legal responsibilities like paying minimum wages and leave entitlements;
• Not paying casuals leave entitlements: If workers are engaged as casuals with a regular pattern of work and have a firm advanced commitment to such work, they are actually permanent employees and are entitled to leave.
• Negligence: This occurs when an organisation or company’s careless actions cause harm to multiple people. For example, a company’s unsafe practices may lead to personal injury or environmental harm to a group.
• Mistreatment of vulnerable people: This might include cases involving abuse or neglect in places like nursing homes or hospitals.
• Unfair selling practices: If a company uses deceptive marketing or sales tactics, a class action can help consumers seek compensation.

Should you opt-out of a class action?

If you’ve been wronged and are part of a group for which a class action has been filed, we generally recommend that you do not opt-out of the case. If you choose to opt-out of a class action, you will not be entitled to any benefits from a successful outcome. If your circumstances are unique and you feel as though you should opt-out, you should seek legal advice before doing so.

Conclusion

Class actions provide an effective way for groups of individuals to take legal action against wrongdoers, whether for workplace violations, negligence, mistreatment of vulnerable people, or unfair selling practices. Class actions make it easier for individuals to seek justice without the upfront financial burden of a traditional legal proceeding.

How to get legal help for a class action

If you are part of a group that has been harmed by the same or similar wrongdoing, it’s crucial to seek legal advice. At Hall Payne, our experienced team is ready to assist in handling your class action from start to finish.

Contacting Hall Payne Lawyers

You can contact us by phone or email to arrange your consultation; either face-to-face at one of our offices, by telephone or by videoconference consultation.

Phone: 1800 659 114
Email: general@hallpayne.com.au