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Class action lawsuits have become a key avenue for access to justice in Australia, but they are often criticised for their legal costs and fee structures. This article explores the realities of class action legal fees, shedding light on how settlements are distributed and challenging the common misconception that “only lawyers make money.”
We’ll examine the court’s role in overseeing settlements and how class actions ensure fair outcomes for everyday Australians while keeping legal costs manageable.
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One of the most common criticisms we hear about class action lawsuits is that ‘only the lawyers make money’. This sentiment, while understandable, overlooks the complex reality of how class actions work and the vital role they play in providing access to justice for everyday Australians.
The truth is that without class actions, many individuals would have no practical way to seek compensation for their losses.
Consider the case of the 2009 Black Saturday bushfires in Victoria.
Individual survivors faced insurmountable challenges in proving their cases against powerful electricity companies. The class action mechanism allowed thousands of victims to pool their resources and evidence, ultimately securing a $494 million settlement. While legal fees were substantial, they represented a fraction of the total settlement, and without them, most victims would have received nothing at all.
When looking at class action legal fees in Australia, it’s important to understand that the system has built-in protections for class members.
The Federal Court of Australia must approve all legal costs and settlements, ensuring they are fair and reasonable. This is not a simple rubber-stamp process. Courts regularly scrutinise, and at times reject, proposed fee arrangements they deem excessive.
For instance, in 2021 the Federal Court rejected a proposed settlement in a class action against Westpac concerns about excessive legal costs. This demonstrates how the court system actively protects class members’ interests, ensuring that legal fees remain proportionate to the work performed and the outcomes achieved.
Legal fees in class actions are made up of various components that reflect the complexity and risks involved in these cases. Professional fees for legal services are typically documented in detail, with lawyers recording their time in six-minute increments. These records are then reviewed by independent cost assessors before the court grants approval.
Disbursements—which cover expenses such as court filing fees, expert witness costs, and other case-related expenditures—can accumulate to millions of dollars in more complex cases. For example, in the recent mesh implant class action, miscellaneous fees alone exceeded $2 million. Disbursement costs are vital for developing strong cases against well-funded defendants, but must be thoroughly justified to the court before they can be approved.
In Australia, class action plaintiffs typically have two primary financial pathways: litigation funding and No Win No Fee arrangements.
Many leading class action law firms, including ours, offer No Win No Fee agreements, meaning we take on the financial risk of pursuing your claim. This ensures that everyday Australians can access justice, even if they can’t afford to fund their legal costs upfront.
With a No Win No Fee arrangement, law firms cover significant expenses, which can amount to millions of dollars, including expert reports, court fees, and other essential case costs. If the case is unsuccessful, the law firm absorbs the loss, not the class members.
In cases involving litigation funding, the funder typically covers additional costs such as expert reports, document management, and court fees. The law firm then provides legal services on a No Win No Fee basis. This collaborative approach ensures that class members are not financially burdened during the litigation process and only pay if the case is successful.
Litigation funders such as IMF Bentham (now Omni Bridgeway), CASL, and Litigation Lending often participate in these arrangements. These funders invest in cases they believe have strong merits and the potential for a significant return. Their role is to cover the upfront costs of litigation (which can be substantial) in exchange for a share of the settlement or damages if the case is won.
By funding class actions, they enable access to justice for plaintiffs who might otherwise be unable to pursue legal action due to financial constraints, while also profiting from the successful outcomes of these high-stakes cases. GMP Law does not engage with litigation funders in class actions. Instead, we focus on ensuring that class members receive the maximum settlement possible, prioritising their best interests throughout the process.
The distribution of settlement funds in a class action is often more complex than many people realise.
Let’s consider a hypothetical example: a class action involving a faulty household appliance.
The settlement process could unfold as follows:
While some may focus on legal costs, these expenses are essential to make the settlement possible. Without the backing of legal professionals and the funding required to build the case, class members would likely have had no practical way to recover any sum. Most individual claims would have been too small to justify pursuing legal action independently, especially for those claimants who may only receive a few thousand dollars from the settlement.
This example shows how the costs of litigation enable class actions to deliver justice for those who might not otherwise be able to pursue their claims.
The 2017 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry highlighted systemic issues leading to numerous class actions.
In one notable case, a successful class action was launched against the Commonwealth Bank of Australia (CBA).
The class action alleged that between 1 January 2010 and 7 March 2018, approximately 700,000 group members were sold the CreditCard Plus policy and Loan Protection policy, which were deemed by many to be worthless. The claimants argued that CBA advisors failed to act in the best interests of their clients, leading to financial losses. As a result, CBA agreed to a $50 million settlement in 2021 to compensate affected clients. While significant legal costs were incurred, the settlement provided meaningful compensation to thousands of customers who would have been unable to pursue individual claims due to the small amounts involved.
Conversely, failed class actions demonstrate the risks lawyers and funders take.
In this case, a class action was filed against NULIS, the trustee of the MLC Super Fund, which is owned by the National Australia Bank (NAB). The claim alleged that NULIS charged fees to fund commissions for financial licensees and failed to provide proper services, prioritising NAB’s interests over those of the fund’s beneficiaries.
However, in December 2024, the court dismissed the case, ruling in favour of NAB and NULIS. It found that NULIS had acted to preserve the status quo within the MLC Super Fund, and the allegations of mismanagement were not substantiated. Despite years of legal work, the class action ultimately failed, with no compensation secured for the claimants. As a result, both the lawyers and funders absorbed the financial losses, underscoring the substantial risks involved in class action litigation.
Legal costs in class actions reflect several realities of our justice system and the combination of these factors explains why class actions can be prohibitively expensive.
Class actions, by their nature, deal with large groups of individuals and often involve intricate legal and factual issues. For a class action to succeed, both sides may require expert testimony to establish points such as the nature of the harm, damages calculation, and industry standards.
For example, in a product liability case, expert witnesses might be needed to explain scientific or technical details that the court needs to understand. This expert evidence can require significant time and financial resources to gather, evaluate, and present, driving up the overall legal costs.
Class actions often involve vast quantities of documents and evidence.
Since they deal with multiple claimants, each of whom might have different experiences or injuries, organising and managing these records is an enormous task. Additionally, the scope of these cases often means that thousands, if not millions, of documents need to be reviewed, processed, and stored.
Modern technologies, such as e-discovery tools, assist in the process but still come with significant costs. The complexity of sorting through this information to identify relevant documents and organise them for presentation in court increases the cost of litigation significantly.
In many class action cases, the defendant—usually a large corporation or government entity—has far more financial and legal resources than the claimants. These defendants have large legal teams, expert witnesses, and consultants, which give them a significant advantage in defending themselves.
This imbalance in resources can be a strategy in itself. For example, defendants can use their legal teams to file multiple motions, extend the discovery process, or delay proceedings. These tactics can drive up the costs and complexity of the case for the plaintiffs. Additionally, defendants can afford to hire expert witnesses to challenge the plaintiffs’ claims, making it harder for the claimants to present their case.
This financial disparity increases the overall costs of class action lawsuits, creating further challenges for the plaintiffs.
Discussions surrounding Australia’s class action system are ongoing, with a focus on improving accessibility, fairness, and transparency while maintaining financial viability. These conversations are part of a constantly evolving landscape in which reforms are being explored to better support claimants and ensure the system functions effectively.
In 2020, the Australian Parliament invited submissions addressing the rising legal costs associated with class actions, particularly when litigation funders are involved. The Law Council of Australia’s submission presented data on costs and funding commissions from 2001 to 2020, revealing that litigation funders earned $642.63 million in commissions, amounting to 26.9% of the total gross settlement sum.
Additionally, the Victorian Law Reform Commission’s 2018 report considered whether allowing lawyers to charge contingency fees instead of time-based billing could reduce overall costs for class members and improve access to justice.
While no set reforms have been implemented, these ongoing discussions reflect a commitment to improving the class action system.
At GMP Law, we prioritise complete transparency throughout the entire class action process. Our approach is designed to maximise returns for class members while ensuring that legal costs remain fair and proportionate.
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We are fully committed to ensuring that the process remains clear, manageable, and focused on achieving the best possible results for you.
If you’re considering joining a class action or want to explore the details of a potential claim, contact GMP Law’s experienced team today.
In the spirit of reconciliation GMP Law acknowledges the Traditional Custodians of country throughout Australia and their connections to land, sea, and community. We pay our respects to their Elders past, present, and emerging, and extend that respect to all Aboriginal and Torres Strait Islander peoples today.
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