Product Liability - Australia

Introduction
Significant Recommendations
Comment

Introduction

The Victorian Law Reform Commission (VLRC) has conducted a review of the Victorian civil justice system. The VLRC’s Civil Justice Review Report was released on May 28 2008 and includes 177 recommendations (nine in respect of class actions) which aim to reduce the costs, complexity and inefficiency of civil proceedings.

As part of its review of the Victorian civil justice system, the VLRC has recommended substantial changes to Part 4A of the Supreme Court Act 1986 (Vic) with respect to class actions. Product liability suits are often litigated as class actions, and Victoria is a jurisdiction of choice for such litigation because it has specific class action rules.

These recommendations may also affect Part IVA of the Federal Court of Australia Act 1976 (Cth), as the Victorian legislation is modelled on this, and as such the two contain many of the same provisions.

Significant Recommendations

No requirement for each class member to have a claim against each defendant
There are conflicting authorities on the question of whether a class action legislation requires each class member to have a legal claim against all of the defendants in proceedings involving multiple defendants. The VLRC recommends that there should be no such requirement, but rather that all class members must have a legal claim against at least one of the defendants. This recommendation would, for example, permit a class action suit to be brought against the manufacturer and distributors of an allegedly defective product. If implemented, this would increase the risk of different claims being included in proceedings and thus increase the cost, length and difficulty of the class action.

‘Closed’ classes should be allowed
The issue of whether classes can be defined as being limited to persons who have signed a litigation funding agreement (a ‘closed’ class) is a contentious one. The VLRC recommends that there should be no restrictions on a class action being brought on behalf of a subset of the total number of persons who may have the same, similar or related claims, even if the class comprises only those who have signed a funding agreement. This could encourage multiple proceedings by different groups with claims against the same defendant and may increase the number of actions generated by litigation funders.

Cy-pres remedies
A cy-pres remedy allows a distribution of class action damages, in whole or in part, to a charity or public interest beneficiary instead of individual class members. Cy-pres distributions are used in the United States and Canada where the cost of distribution would outweigh the individual recovery or where there are residual funds which have not been claimed by class members. The VLRC recommends that the Victoria Supreme Court have the discretion to order cy-pres remedies in class actions in situations where the loss suffered or the gain obtained by the defendants is capable of assessment, but it is not practicable or cost effective to identify all or some of the persons who have suffered a loss. This is likely to increase the cost of class actions for defendants, as any undistributed portion of a damages award could be made the subject of a cy-pres order and not returned to the defendants. It is unclear how this recommendation will interact with Section 33M of the Supreme Court Act (and the analagous provision in the federal legislation), which in effect allows the court to discontinue or partially stay class action proceedings where the likely costs of identifying and distributing any award of damages to group members will exceed the likely total award.

Establishment of the Justice Fund
Perhaps the most controversial aspect of the review is the VLRC’s recommendation that a new funding body, the Justice Fund, be established to provide financial assistance to parties with civil claims and provide indemnity for any adverse costs order or order for security for costs made against a party assisted by the fund.

The VLRC envisages the Justice Fund being involved in class action funding and deriving revenue by taking a share of the total amount recovered by the class in assisted class actions or by receiving funds from cy-pres distribution. The VLRC also recommends that the Justice Fund have the ability to apply to the court to cap the amount of costs payable by the plaintiff to the defendant if a class action funded by the Justice Fund is unsuccessful. This would expose defendants to potentially substantial unrecoverable legal costs and increase the number and nature of class actions commenced.

Pre-trial oral examinations
The VLRC recommends that a new informal pre-trial procedure be introduced, which would allow parties, with leave from the court, to examine on oath or affirmation any person who has information relevant to the issues in dispute in the proceedings before the hearing. Pre-trial oral examinations or depositions are common in the United States, the United Kingdom and Canada, but are not commonly used in Australia. Pre-trial oral examinations are not intended to be a substitute for adducing oral evidence at trial, but rather are used to:

• facilitate early disclosure of information;
• narrow issues in the proceedings; and
• encourage settlement.

Individuals being examined would have the right to refuse to answer questions on grounds of legal professional privilege or privilege against self-incrimination, but the rules of evidence would not apply.

The report recommends the introduction of pre-trial oral examinations because it is:

“in the interests of justice for all relevant information to be disclosed at an early stage in proceedings, in an environment not constrained by the rules of evidence, to assist the parties to assess the strengths and weaknesses of their respective cases.”

While pre-trial oral examinations may potentially increase the costs of civil proceedings and could be used as ‘fishing expeditions’, in the United States they have been used equally by plaintiffs and defendants (to examine the representative plaintiff of a class) to facilitate the early settlement of claims.

Comment

The VLRC’s recommendations are being considered by the Victorian government. If accepted, they will have a significant impact on the civil justice system (and, in particular, product liability proceedings) in Victoria, with possible civil litigation reviews in other states of Australia.

For further information on this topic please contact Julie Walsh, Moira Saville or Tania Noonan at Mallesons Stephen Jaques by telephone (+61 2 9296 2000) or by fax (+61 2 9296 3999) or by email (julie.walsh@mallesons.com or moira.saville@mallesons.com or tania.noonan@mallesons.com).