Victoria’s Legal Innovation: GCOs - a blueprint for national reform

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The McKell Institute released its report, “A Model for the Nation? Four Years of Victoria’s Section 33ZDA” in May this year, in which it analysed the effectiveness of Victoria’s Group Costs Orders (GCOs) regime after several years of operation.

In its assessment, the McKell Institute highlighted the potential for GCOs to pave the way as a model for national reform to improve access to justice and reduce litigation costs.

The McKell Report highlights that Victoria has become a preferred jurisdiction for class actions, attributing the increased number of cases moving away from the Federal Court and the NSW Supreme Court to the improved transparency and financial returns for claimants under the GCO regime in Victoria. 

“Contingency fees, however, provide substantial certainty and transparency for claimants”

The report found that unlike traditional litigation funding, which often sees portions of settlements consumed by legal fees and funding commissions, GCOs consolidate these costs, ensuring a larger share of the settlement goes directly to claimants. The median GCO rate of 24.5% is significantly lower than the combined median funding rate and legal fees of 39.7% in traditional funding, promoting transparency and aligning the interests of lawyers and clients.

Additionally, the report finds that GCOs have helped foster competition among law firms and litigation funders, leading to more competitive rates and better financial outcomes for claimants. The report goes on to find that such a competitive environment ensures claimants receive the best possible terms, as firms strive to secure carriage.

“It is submitted that Victoria’s GCO model should, in the interests of access to justice, be replicated across all of the Commonwealth’s class action regime”

This report suggests the Victorian model has proven to be a viable alternative to traditional litigation funding, offering increased access to justice and more equitable solutions for class action plaintiffs. McKell’s analysis suggests that adopting the GCO model nationwide, could further enhance access to justice, reduce legal costs, and improve financial returns for claimants. All of which outweigh the challenges that past critics claimed would emerge.

The McKell report found that not only has the introduction of GCOs in Victoria delivered the downward pricing and transparency benefits advocates of the system suggested would occur, but it posed no serious challenge to the Court’s ability to case manage perceived conflicts or other potential concerns.

It also highlighted that the Victorian experience has proven that legislative innovation can significantly impact the fairness and efficiency of class action litigation, making it a compelling model for nationwide reform.

“Claimants would have almost nothing to lose, and plenty to gain by having access to another option for pursuing mass wrongs”

In conclusion, the overriding view of the report is that the evidence is clearly showing GCOs to be of benefit to clients pursuing remedy for mass wrongs via the class action regime, and that there is no sound reasoning GCOs should not be a standardised part of the case funding mix in all class action jurisdictions that operate across Australia. 

Link to Full Report

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