Consultation Paper on Multi-Party Litigation (Class Actions)
Tuesday, 29 July, 2003
Law Reform Commission to Recommend Introduction of a Class Action Procedure
The Law Reform Commission has made provisional recommendations in a Consultation Paper published today for legislation to introduce a new class actions procedure. This procedure would allow one or more representatives to sue on behalf of themselves and the members of a class of persons who have a similar claim. In other jurisdictions class action procedure has been a useful vehicle for civil rights and environmental remedies. Any settlement reached or judgment secured would bind all the parties in the class action.
The main recommendation of the Commission is to have a class action procedure in Ireland.
In recent years there has been a marked increase in the number and range of multi party litigation in Ireland. Topical examples include claims relating to army deafness, contaminated blood products and tobacco-related illnesses. The Paper examines existing mechanisms for dealing with large scale actions such as the representative action, the test case and compensation tribunals and concludes that at the present time the Irish legal system might benefit from having a comprehensive procedure which would tackle such actions in a consistent, effective and expeditious manner.
In particular, the Commission notes that the vast majority of multi-party actions are dealt with individually which involves duplication of legal proceedings in relation to common issues, thereby increasing the amount of litigation and the overall cost of proceedings. The test case, for example, although the most popular route in practice, operates in an ad hoc fashion without regard to the suitability or typicality of the lead case and is premised on an individual rather than collective resolution of common claims. Compensation tribunals, which have been established in a number of high-profile cases where the State was responsible for the injury or has shouldered responsibility for the wrong, may also not prove the best means of resolving claims in every case. Class proceedings through the courts may prove more economical than a compensation tribunal, allow claimants to assume a bigger role in the resolution of their claims and reduce the number of legal layers in the compensation system.
In the light of this and having surveyed the provisions made in respect of multi party litigation in a number of jurisdictions such as Australia, Canada, England and the US, the Commission recommends the introduction of a procedure along the lines of the class action procedures currently operating in Canada and Australia. The concept of a single multi-party action has the potential to cure the deficiencies in the current system and at the same time further the legal system's objectives of fairness, efficiency, accessibility and legal certainty. While legitimate criticisms have been levelled at class action practice in other jurisdictions and in particular in the US, some of the more extreme aspects of US experience, however, can be explained in large part by the unusual features of the American legal system, such as unregulated contingent fee arrangements, civil jury trials and punitive damages. Accordingly, the provisional recommendations are designed to ensure that the proposed Irish procedure would avoid these shortcomings as far as possible. The proposed procedure is not intended to benefit plaintiffs over defendants or vice versa. The Commission's recommendations are designed to strengthen the civil justice system and ultimately benefit all participants in the legal process.
The Commission makes a number of provisional recommendations in the Paper which relate primarily to procedural aspects of the proposed class action. The Commission recommends that the court should have the authority to deal with common issues and individual issues within the framework of a single proceeding. A requirement of judicial certification is recommended to ensure that certain criteria for a class action have been met, namely, that the pleadings disclose a cause of action; there is an identifiable class of ten or more persons; the existence of common issues of fact or law and that overall the class action is an appropriate, fair and efficient procedure. Significantly, it is further recommended that the court should exercise a supervisory role over class proceedings, from the certification of an action to approval of any eventual settlement or judgment.
The Commission has, however, left open for further debate two important matters. First, the question of whether the procedure should be defined as an "opt-out" or an "opt-in" procedure. The issue is whether injured parties who wish to join a class action should be required to opt-into the proceedings or, alternatively, whether injured parties who do not wish to join a class action should be given an opportunity to opt-out of the proceedings. While it is considered that on balance the arguments in favour of an opt-out system (such as increased efficiency and a more coherent resolution of claims resulting in a fairer distribution of the funds available to meet the claim) outweigh those favouring an opt-in procedure, the Commission does not seek to make a recommendation on this critical issue at this juncture.
Secondly, the Commission makes no recommendation on the issues of funding and costs. The lack of adequate funding and the operation of a "costs follow the event" rule may prove a significant economic barrier to the development of class, as opposed to individual, litigation. The Commission therefore seeks views as to liability for costs in class actions and also as to the enactment of legislative provisions which would allow the court to regulate and approve contingency, speculative or uplift fee arrangements in class actions.
The Paper will be launched by the Minister for Justice, Equality and Law Reform at a reception in the Law Reform Commission Offices on Tuesday evening, 29 July 2003. The document just published is a Consultation Paper. The Consultation Paper is intended to form the basis for discussion and accordingly the recommendations, conclusions and suggestions contained therein are provisional. The Commission will make its final recommendations on this topic following further consideration of the issues and consultation, including a seminar which it is hoped will be attended by a number of interested and expert people. The Commission now invites further submissions from members of the public before 31 October 2003.