Contingency fees to boost access to justice: Productivity Commission

3 December 2014
A recommendation from the Productivity Commission in favour of a damages-based fee system has been welcomed by Maurice Blackburn Lawyers’ class actions leader Andrew Watson, as a key way to improve access to justice.

Today’s Productivity Commission report into Access to Justice Arrangements, has made a compelling case for abandoning the current ban on damages-based fees (contingency fees), in order to better align the interests of lawyers and their clients.

Principal and national head of class actions at Maurice Blackburn, Andrew Watson, says the independent report to government has opened the door for the Federal and State Attorneys-General to implement simple changes that will have widespread benefits.

“This report could well provide the blueprint for the next phase of the evolution of class actions, and see a greater balancing of the scales of justice,” Mr Watson said.

“Damages-based fees will increase access to justice and improve competition, delivering benefits to consumers.

“The report contains further hard evidence from an unbiased source about the true state of affairs of class action litigation in this country, and importantly, makes sensible recommendations about improving people’s access to redress through the existing system.

“The importance of the class action regime is evident in the increasing participation of institutional investors in shareholder class actions and support from both the ACCC and ASIC accepting the role of class actions as a complementary private enforcement activity to their own regulatory role.

“The class actions regime is a market-based mechanism that is effective and efficient in opening access to justice and holding mass wrongdoing accountable. This report’s recommendation to allow contingency fees will only enhance this important function.”

From the report:

  • A well‑functioning system also gives people the confidence to enter into business relationships, to enter into contracts, and to invest. This, in turn, contributes to Australia’s economic performance.
  • The Commission is unconvinced that any perverse incentives inherent in damages‑based billing are more pronounced than those embodied in conditional billing. Rather, damages‑based billing has the potential to provide several advantages, including better aligning the interests of lawyers and their clients by removing incentives to over service.
  • The Commission considers that the prohibition on damages‑based billing should be removed, subject to consumer protections such as comprehensive disclosure requirements and percentage limits on a sliding scale to prevent lawyers earning windfall profits on high value claims.