The NSW Attorney-General has this month announced plans to introduce new class action laws which will give the NSW Supreme Court the power to order that unclaimed damages awarded in class actions be paid to a public interest beneficiary which is not a party to, or represented in, the proceedings.

While a draft of these laws is not yet available, the proposals raise a number of important legal issues and practical concerns for business.

When class action procedures were introduced in Australia, the expressed purpose was to improve access to justice for those who could not otherwise afford to bring Court proceedings and to improve the efficiency with which Courts were able to deal with a multitude of claims which had substantially common issues in dispute. Currently the Federal Court cannot make orders involving direct or indirect payments for the benefit of persons who are not a party to the proceedings or part of a represented class.

Any unclaimed monies revert to the defendant. This position will change if the proposed class action laws are introduced in NSW.

Other jurisdictions have already used so called Cy-pres Remedies to distribute unclaimed monies in class actions.

Cy-pres Remedies were developed by Courts as part of the law of trusts. The term means "as close as possible". Where a trust would otherwise fail, Courts imputed an intention to the creator of the trust to confer the benefit on a closely related object or purpose.

What cy-pres awards inevitably do is to require judges to make public policy decisions which should be the exclusive provenance of government. Why should persons who were not directly or indirectly involved in the litigation benefit from its outcome? How is a Court to choose among a plethora of charities or other public benefit interests?

Cy-pres awards are also likely to give rise to an increase in speculative litigation.

Under the existing class action procedures, a Court may order that a class action not proceed because the costs involved in identifying and distributing funds to class members would be excessive. These provisions discourage speculative litigation, but are unlikely to be included in the new class action proceedings for that very reason.

Very careful consideration needs to be given to these new class action laws once a draft bill is released. If cy-pres awards are to be part of the new laws, and assuming they survive potential constitutional challenge, at a minimum, clear and specific direction needs to be given as to how and when judges should exercise their discretion to make such awards.

This article is available in full at Mondaq.