A class action is a legal proceeding that involves a large number of people who have a claim against the same entity or person. Often, people will merge their claims into one in order to have the matter dealt with more quickly and cost effectively.

What is the difference between opt-out and opt-in class actions?

The majority of class actions that happen in Australia are ‘opt-out’ class actions. An opt-out class action is one where, although the people within the specific class are not actually parties to the litigation, they still form part of the class unless they take proactive measures to ‘opt-out’. When people opt-out of a class action, it signifies that they no longer wish to be involved or affected by the outcome of the case. The outcome might be a settlement or a judgment.

In the process of class actions, a Court will make an order so that all members of the group are notified of their rights to stop participating in the class action before a certain date and time.

Another type of class action is an opt-in class action whereby the members of the group consent to the proceedings on their behalf.

What is the difference between funded and unfunded class actions?

Some class actions are funded, whereas others are unfunded, but what is the difference?

When one or more persons pay for all or part of the legal and non-legal expenses, this is known as a funded class action. Only class members that are actually parties to the litigation (the representative applicant) will be liable to pay these expenses. There are a number of ways in which class actions get funding. It can be through the members or an individual member, from law firms or legal aid, commercial funding institutions, regulation bodies or insurance companies.

Alternatively, an unfunded class action is one where the members and the lawyers agree to a ‘no win no fee’ arrangement. This means that the members will not pay for the legal expenses unless the lawyers win the case.

Which type of class action is suitable for you?

As a member of the relevant class, you may decide that it is in your best interests not to opt-out of the proceedings. You may also decide that joining a class action, or opting-in, will be beneficial for the following reasons:

  • By joining the class action, you may be able to reach a resolution to a matter that involves a large number of people;
  • The class action allows you and others to access justice and this accessibility might not be achievable without each members support;
  • By banding together and creating a large group, the proceedings become more affordable; and
  • It also reduces the overall responsibility and expense that each member takes on.

What are the disadvantages?

In some cases, a class action may not be the most appropriate cause of action, and this can be for a number of reasons including:

  • The lawyers working on the matter might not be able to service each members individual and unique needs;
  • By joining a class action, the class members might be disqualifying themselves from being able to bring their own individual actions on a later occasion;
  • If the matter does reach a settlement or judgment, it is probable that the amount each member will receive will be lower than what you could be awarded if you were to personally pursue the matter;
  • You will have much less control over the proceedings in a class action than you would in your own personal matter; and
  • There is a chance that conflicts between party member will arise in a class action as to how the matter is run.

Is a class action right for you?

Before you go ahead and opt out of a class action, you should look at what other options you have and whether these are viable in the circumstances. Are you able to afford private litigation? Would looking into alternative dispute resolution be more appropriate? Perhaps a claim for compensation is the right path for you.

There are a number of questions you should ask yourself before you decide whether to opt in or opt out of a class action, such as:

  • Will joining the class action mean that your personal loss and damage is addressed?
  • Will it cost you more to opt in as a member of the class action than the potential settlement you may be entitled to? In other words, is it worth it financially?
  • Will you be heard during the proceedings and have a chance to tell your story?
  • What will be the decision-making process during the class action?
  • Will the members funding the action itself be able to continue funding the matter until its conclusion?
  • Do you know what your rights are with respect to opting-out of the class action and whether any time limits apply?

Conclusion

Make sure you familiarise yourself with all the information about class actions before you participate in one. It would be worth speaking with a business lawyer to discuss your matter in more detail. If you wish to discuss your rights in a class action with an experienced litigation lawyer, contact LegalVision on 1300 544 755.

Lachlan McKnight

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