A government-ordered inquiry into the funding of legal class actions descended into acrimony on its first day of hearings when the first witness from a Liberal party thinktank was accused of misquoting a federal judge and citing unreliable figures.
James Mathias, the chief of staff at the Menzies Research Centre (MRC) and a former Liberal candidate for federal parliament, sought to defend his submission during tense exchanges with the Labor senator, Deborah O’Neill, who described it as an “undergraduate essay that would fail” on multiple grounds.
Mathias appeared on Monday before a parliamentary committee investigating whether Australia’s class action industry needs tighter regulation to ensure “fair and equitable outcomes for plaintiffs” – with the government raising concerns about the role of large companies that sometimes fund class actions.
Labor has claimed the inquiry is “a sham set up by the Liberals to deny hardworking Australians any chance of defending their rights against large companies and governments with virtually limitless resources”.
The first line of the submission from the MRC – the Liberal party thinktank – quoted the federal court justice Michael Lee as saying in a judgment on 5 June: “The phrase ‘access to justice’ is often misused by litigation funders to justify what at bottom is a commercial endeavour to make money out of the conduct of litigation.”
It was purportedly from a judgment on class actions stemming from allegations that the Australian defence department negligently allowed toxic chemicals known as Pfas to escape from defence bases and contaminate local environments.
But Mathias, who was just 21 when he ran as a federal candidate for the Victorian seat of Holt in 2016, confirmed under questioning he had “not read the full judgment” cited in the submission as “judgments are very long – some hundreds of pages”.
O’Neill said the judgment was actually 37 pages long and “the words you quote in the very first line of your submission are nowhere, nowhere to be found in his honour’s judgment”.
The NSW senator said the only place that quote could be found was in an article in the legal journal Lawyerly on 9 June, titled “‘A significant inequality of arms’: Funding led to better outcomes in PFAS class action, judge says”.
Mathias took that question on notice. But when O’Neill accused him of “misquoting and taking Justice Lee completely out of context” in an attempt “to convey the false impression that Justice Lee is opposed to litigation funding”, Mathias said: “I fundamentally reject the premise of that, senator.”
In Lee’s judgment of 5 June, the judge made a more qualified statement that “the term ‘access to justice’ is commonly misused, most often by some funders who fasten upon it as an inapt rhetorical device”.
He then cautioned against generalisations. While noting “litigation funding is about putting in place a joint commercial enterprise aimed at making money”, Lee went on to say that recognising that reality “does not diminish the importance of litigation funding in allowing these class members to vindicate their claims against the commonwealth”.
Referring to the alleged victims in the Pfas class actions, Lee continued: “Without litigation funding, the claims of these group members would not have been litigated in an adversarial way but, rather, they would likely have been placed in the position of being supplicants requesting compensation, in circumstances where they would have been the subject of a significant inequality of arms.”
O’Neill also challenged Mathias over the claim in his submission that by 2019, the average amount paid to plaintiffs had fallen to just 39% of the settlement proceeds – a figure that has since been quoted in several news reports..
He said it was based on “a presentation contained within a PowerPoint” of analysis by the law firm Herbert Smith Freehills.
In later proceedings, Andrew Saker, the managing director of litigation funder Omni Bridgeway, said he believed the 39% figure was based on “incomplete data”.
Saker said Herbert Smith Freehills had informed his company that the figure had been included in a PowerPoint slide for continuing legal education, it related only to settlement approvals determined by the courts, and it was not authorised for outside use.
Earlier, Mathias said he was not arguing against class actions, but for reform to ensure they remained a vehicle for justice.
“We find ourselves in an environment where damages awarded to plaintiffs who have been most wronged is declining, and if you care about access to justice then you would care about the percentages that have been paid out to these people,” he said during a hearing conducted via videolink.
James Paterson, the Liberal chair of the parliamentary joint committee on corporations and financial services, repeatedly asked O’Neill not to interrupt or reflect on witnesses “with the protection of parliamentary privilege”.
O’Neill told the chair she was happy to discuss the issue offline “but I don’t want to be berated as a senator of the Australian public by you in front of the media”.
“We’ve got an undergraduate essay that would fail on plagiarism and [is] incorrect, put to us by the Menzies Research Centre - it’s just not up to standard,” she said.
When Mathias attempted to ask his own question of O’Neill, she shot back: “When you become another young senator for the Liberal party you might be able ask me questions, but at the moment you don’t have that opportunity.”
When contacted for a response to the criticism of his submission, Mathias said it was “astonishing that the Guardian would be siding with foreign backed, super-profitable litigation funders just because it does not like the politics of the MRC”
But the shadow attorney general, Mark Dreyfus, said the Liberal party had been “humiliated at the first day of its class actions inquiry”.
When setting up the inquiry in May, the attorney general, Christian Porter, cited “growing concern that the lack of regulation governing the booming litigation funding industry is leading to poor justice outcomes for those who join class actions, expecting to get fair compensation for an injury or loss”.