A major compensation law firm has slammed AMP for claiming class actions against it are the fault of Australia’s litigation system, saying the institution had earned a “gold medal for disgrace” at the royal commission.
Facing questioning around the number of lawsuits currently pending against his firm at a House standing committee on economics hearing this week, AMP chief executive Francesco De Ferrari opined that the huge returns available to litigation funders from successful class actions in Australia had increased business costs while delivering little benefit to misconduct victims.
“Australia given its current set-up is the second most attractive for class action litigation in the world – the returns are 17 times returns on the ASX200,” Mr De Ferrari said.
“Menzies [Research Centre] research states that in 2016, 59 per cent of settlements went to plaintiffs, that number has dropped to 39 per cent only so litigation plaintiffs are taking a smaller share of settlements.
“That creates an escalating cost of doing business in Australia – it is reflected in the fact that a number of large reinsurers are considering Australia very dangerous to reinsure the risk. That will ultimately result in job losses and higher costs being passed to consumers.”
In a statement, Slater and Gordon head of class actions Ben Hardwick hit back at Mr De Ferrari’s comments, saying given the revelations heard at the Hayne royal commissions around misconduct at all levels of AMP’s business, it was “arrogant” for the AMP boss to claim class actions against the institution were unfounded.
“Mr De Ferrari runs an organisation that somehow managed to claim a gold medal for disgrace at the banking royal commission in a highly competitive field,” Mr Hardwick said.
"It's difficult to imagine the arrogance necessary to show up to parliament as the boss of AMP and start whinging about how inconvenient it is for ordinary Australians to want their money back.”
Mr Hardwick said Mr De Ferrari’s comments were indicative of the government’s hopes for its current inquiry into litigation funding, as its big business donors were hoping “to go back to acting with impunity” without the threat of a lawsuit.
“CEOs like Francesco De Ferrari are telling politicians the solution to getting hit by class actions is to make it harder for Australians to sue them,” Mr Hardwick said.
“I would argue the solution is to stop breaking the law.”
In his comments at the hearing, Mr De Ferrari also argued the threat of litigation was increasing costs for small business advisers, many of whom would need to source their own PI insurance as the institutions left the advice space.
“With the decisions of top players [in the industry] to exit it is becoming increasingly fragmented – if you put yourself in the shoes of an independent adviser, he will need to source professional indemnity to have security to reimburse clients when things go wrong,” Mr De Ferrari said.
“That is a significant risk if we don’t get litigation funding under control.”
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