The Third Party Litigation Funding Law Review 1st edition

24 JANUARY 2018 BY JASON GEISKER 

1. Market overview

Australia is home to a well-developed and flourishing litigation funding market. Competition is accelerating among new local and offshore funders. In 2015 the Australian litigation funding market was estimated to be worth around A$3 billion compared with a total Australian litigation market of around A$21.1 billion. Estimates suggest a compounded annual growth rate of between 3 per cent and 11 per cent.2,3

A large segment of the Australian market is comprised of class actions across a broad spectrum, such as disaster or mass tort claims, shareholder and investor claims, product liability claims, and employment, consumer and environmental claims.4 By 2017, almost half of the class actions filed in the Federal Court of Australia were funded class actions.5 Funding also has a long history in the insolvency litigation space. More recently commercial litigation, intellectual property, family law and arbitration claims have begun to receive litigation funding.

Historically the funding market has been dominated by ASX-listed IMF Bentham Ltd, first established in 2001. However, this first mover advantage has been eroded over recent years as newer entrants drive competition. In 2015, IMF Bentham estimated that its market share was 69 per cent.6 There are now many Australian and offshore companies actively funding Australian claims including: Augusta Ventures; Burford Capital; Calunius Capital; Claims Funding Australia; Comprehensive Legal Funding; Harbour Litigation Funding; Hillcrest Litigation Services; ICP Capital; International Litigation Funding Partners; Ironbark Funding; Litigation Lending Services; LCM Finance; and Vannin Capital.

2. Legal and regulatory framework

i Legal basis of third party funding and any legal limits or prohibitions on funding others

Prior to 2006, encouraging litigation and funding another’s claim for profit were prohibited in Australia by common law doctrines of maintenance and champerty. These prevented the courts from being used for speculative business ventures.7Maintenance and champerty were the foundation for repeated challenges to the legitimacy of litigation funding before they were abolished as crimes and torts.8For instance, more than 20 challenges to funding agreements were mounted in the eight years between 1998 and 2006.9 Even after the abolition of maintenance and champerty, courts could still invalidate funding agreements on the basis that they were contracts that were contrary to public policy considerations upon which the previous prohibitions were based at common law.10

However, in 1995 insolvency practitioners began using third party funding for lawsuits under their statutory powers of sale, such as actions for voidable transactions or misfeasance by company officers. This allowed creditors to pursue wrongdoers or actions where it was otherwise impossible owing to lack of funds. A market in litigation funding then expanded into non-insolvency plaintiff lawsuits including class actions.11

The legality of litigation funding of a class action was promptly challenged in the 2006 landmark High Court of Australia decision Campbells Cash and Carry Pty Ltd v. Fostif Pty Limited (Fostif), which determined that third party litigation funding for a class action was not an abuse of process or contrary to public policy.12 The Court declared that maintenance and champerty could not be used to challenge proceedings funded by a litigation funder. Since that important decision in Fostif, litigation funding has become entrenched as part of the Australian legal system, playing a crucial role in providing greater access to the courts and bringing an equality of arms against well-resourced respondents.

A current issue for regulators is whether lawyers themselves should be permitted to fund claims via damages-based contingency fees. Presently Australian lawyers may use conditional billing arrangements where their fees are only paid upon a successful outcome. Such arrangements allow for an uplift payment of up to 25 per cent13 of the professional fees charged on a successful outcome. However, contingency fees calculated by reference to the amount recovered remain prohibited.

In December 2014 the Australian Productivity Commission released a report recommending the removal of this ban on damages-based contingency fees.14The Commission was unconvinced that any conflicting incentives said to arise in damages-based billing are any more pronounced than those embodied in conditional billing. The Commission considered that damages-based billing has the potential to provide several advantages, including better aligning the interests of lawyers and their clients, by removing incentives to over service. The issue is again being considered by the Victorian Law Reform Commission.15

The extent to which a lawyer may have a financial interest in litigation or be associated with the litigation funder has been extensively tested in the past three years by one particular Melbourne-based solicitor, who is the sole director and shareholder of Melbourne City Investments Pty Ltd (MCI). In 2014, a number of securities class actions were commenced in the Supreme Court of Victoria by MCI as the representative plaintiff. Actions were brought against ASX listed Treasury Wine Estates (TWE) and Leighton Holdings (LEI). At incorporation, MCI acquired shares in TWE and LEI and other small parcels of shares costing less than A$700 in various other ASX-listed companies. This same director also appointed himself as the legal representative for MCI, which was receiving litigation funding to conduct the claims.

In December 2014 the Victorian Court of Appeal permanently stayed the TWE proceeding. The Court of Appeal held that the TWE class action was an abuse of process because it had been commenced with the predominant purpose of earning legal fees for the solicitor, rather than such fees being an incident or by-product of the vindication of legal rights.16 The Court of Appeal stressed the importance of maintaining public confidence in the fairness of court processes.

In 2013 the same solicitor trialled a different funding model for another class action brought against Banksia Securities. He again sought to act as the lead plaintiff’s solicitor, while also being a director and secretary of the litigation funder and holding an indirect shareholding in the funder. Under the litigation funding agreement the litigation funder was entitled to 30 per cent of the amount received by way of an award or settlement of the proceeding, and was entitled to exercise control over the conduct of the proceeding. In November 2014, the Supreme Court of Victoria restrained the solicitor and senior counsel from acting for the lead plaintiff owing to conflicts of interest. Justice Ferguson considered that the main risk arising from the solicitor’s pecuniary interest in the outcome of the class action was that he might not fulfil, or might not be perceived to fulfil, his duties to the court or be independent and objective.17 Her Honour found ‘it would be inimical to the appearance of justice for lawyers to skirt around the prohibition on contingency fees by this means; particularly where the legal practitioner’s interest in the funder is sizeable’.18 The MCI litigation confirms that the courts will not permit lawyers to have any significant financial interest in a litigation funder financing a claim. Absent legislative change permitting damages based contingency fees; the funding market seems unlikely to be disrupted by Australian lawyers seeking to be both the funder and lawyer.

ii Corporate regulation of litigation funding

Litigation funders as providers of financial services and financial products are subject to the consumer provisions of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). The ASIC Act contains protections against unfair contract terms, unconscionable conduct, and misleading and deceptive conduct.19 These provisions provide redress against unfair or false and misleading terms or omissions in funding agreements.

Currently there are no licensing requirements imposed on litigation funders by the Corporations Act 2001 (Cth) (the Corporations Act), requiring them to hold an Australian financial services licence (AFSL) or by the National Credit Code, requiring them to hold an Australian credit licence. Consequently, litigation funders have no capital adequacy requirements, nor are they required to comply with various related corporate and risk management regulatory requirements, which would apply if they were licensed. This is not to suggest that the regulation of litigation funding has been without challenge. There have been two landmark cases challenging litigation funding arrangements and the regulatory regime.

In 2009, the regulation of litigation funding became the subject of national debate as a result of the Federal Court decision in Brookfield Multiplex Funds Management Pty Ltd v. International Litigation Funding Partners Pte Ltd (Multiplex), which determined that litigation funding agreements (including the funding agreement and retainer) in a funded class action constituted managed investment schemes within the meaning of Section 9 of the Corporations Act.20This was significant as managed investment schemes were required to be registered and managed by an entity holding an AFSL. It was an offence not to do so.

The second landmark case involved a dispute between a funder and client, which raised similar questions regarding the nature and regulation of funding arrangements. In Chameleon Mining NL (Receivers and Managers Appointed) (Chameleon) the litigant sought to rescind a funding agreement under Section 935A of the Corporations Act and thereby avoid payment of the funder’s commission.21 The funded client argued that the funding agreement was a financial product and that the funder did not hold an AFSL. The High Court concluded that the funding agreement was a ‘credit facility’ rather than a financial product and, while it did not need an AFSL, the funder did require an Australian credit licence.

In the wake of these two landmark cases the government intervened, announcing that it would protect funded class actions from too heavy a regulatory burden22. In 2010 the Australian Securities and Investment Commission (ASIC) issued class orders granting transitional relief to the lawyers and litigation funders involved in funded class actions, exempting them from the managed investment regulatory provisions. ASIC subsequently granted transitional relief from financial product regulatory requirements of the Corporations Act.

The Multiplex and Chameleon cases still left an important legacy on litigation funding in Australia, leading to the introduction of a new conflict management regime. In 2012 the government enacted regulations exempting litigation funders from managed investment provisions of the Corporations Act subject to their compliance with substantial new conflict management requirements.23 Litigation funders providing both single-party funding24 (litigation funding arrangements) and multiparty funding25 (litigation funding schemes) are now required to conduct reviews and maintain written procedures identifying and managing conflicts of interest with the procedures themselves being reviewed annually by senior management.26

In April 2013 ASIC released a regulatory guide detailing how litigation funders may satisfy the obligations to manage conflicts of interest (the Guide).27 The Guide describes the actual, potential and present or future conflicts of interest that may arise in a litigation scheme because of a divergence of interests between the funder, lawyers and claimants. The Guide requires funders to have robust arrangements in place to identify and assess divergent interests and conflicts, and to respond as needed.28 The regulations require funders to design their own conflicts management policy suited to the nature, scale and complexity of the litigation schemes funded29 in recognition that funding operations differ greatly.

Since these 2012 ‘conflict management’ procedures were introduced, the licensing of litigation funders continues to remain a live issue in Australia. In 2014 the Productivity Commission recommended that litigation funders be licensed to ensure they have adequate capital and liquidity to meet their obligations under litigation funding agreements, and to ensure that only ‘reputable and capable funders enter the market’.30 The Victorian Law Reform Commission is expected to consider these issues and report on how regulators might better protect litigants from unfair risks or disproportionate cost burdens.

3. Structuring the agreement

i Typical structure

Funded litigation involves a tripartite relationship between the litigation funder, the lawyers and the funded client, whereby the funder agrees to meet all the client’s legal costs and disbursements in return for receiving a percentage of any damages recovered. This percentage typically ranges between 20 per cent and 45 per cent of the settlement proceeds depending on the risks and time involved, and the type of funding required.31 In class actions, the funder typically also covers the cost of project management and pre-claim investigation. Litigation funders often agree to provide an indemnity to cover the risk of adverse cost orders in the event that the proceeding is unsuccessful. This may involve providing security for costs as agreed or ordered by the court.

Litigation funders are prohibited from acting as the legal representatives for the funded litigant. Consequently, clients generally enter into two agreements: (1) a standard retainer agreement with a lawyer recording the scope and terms of the legal services to be provided; and (2) a funding agreement with the funder recording the terms on which litigation funding is being provided. The funder and lawyers generally have no direct contractual relationship, although clients commonly authorise their lawyers to report to the funder directly. A funder may agree to pay a proportion or all of the lawyer’s fees. Where legal fees are partially deferred they are generally recovered from the resolution sum if a successful outcome is achieved. Often both the funder and the lawyer assume some financial risk if the claim is not successful.

Funding agreements often allocate project management responsibilities and day-to-day control over the litigation to the funder, giving the funder the right to provide instructions and administrative support to the lawyers. The ultimate level of control given to the funder can give rise to potential conflicts between the interests of the client in achieving the best possible outcome and the financial interests of the funder in resolving the claim for an acceptable return. The court of appeal in Fostif recognised that a high level of control by the funder is expected and permissible but determined that it would be contrary to public policy for the lawyers to fully abdicate to the funder the obligation to act for the representative party.32 Therefore while it is permissible for a funder to maintain day-to-day control of a claim, the legal representatives are expected to consult with the client on key issues.

Funding agreements may preserve the right of the client to override the funder’s instructions. They commonly include dispute resolution procedures to manage potential conflicts of interest between the funder and client. Disagreements between funders and clients as to proposed settlements can require the lawyers to brief a senior counsel to provide a final and binding opinion as to the reasonableness of the proposed settlement. The Federal Court of Australia Class Action Practice Note requires funding agreements and retainers to include provisions for managing conflicts of interest between the funded litigant (and any class members), lawyer and funder.33

The funded client will usually authorise the lawyer to receive any resolution sum on their behalf and for that sum to be applied in accordance with an agreed waterfall priority for payments. Generally payments are prioritised by first reimbursing the lawyer for any unpaid fees and the funder for legal costs and disbursements outlaid, before paying any funding commission and then paying the balance (or pro-rata share in the case of a class action) to the funded clients.

ii Judicial intervention

Australian courts have shown some willingness to scrutinise the commercial terms of litigation funding agreements and, in limited instances, intervene if they consider funding commissions to be excessive. In Earglow Pty Ltd v. Newcrest Mining Ltd Justice Murphy held that the court had power to reduce a litigation funder’s commission rate when approving a class action settlement.34 His Honour held that the court was not limited to the binary choice of either approving or rejecting the settlement – instead, the court had power to approve the settlement, while at the same time varying, of its own motion, the amount payable to the funder (thus, in effect, overriding the contractual arrangements between the funder and group members). Justice Murphy considered that such power derived from a combination of Sections 23, 33V, 33Z and 33ZF of the Federal Court of Australia Act (FCA), and that it was, in many respects, analogous to the court’s power to fix the amount of costs payable to the lawyers.

In deciding whether to exercise that power and approve a class action settlement, Australian courts will scrutinise funding commissions, legal costs, the amount that funded litigants will receive ‘in hand’, the risks taken on by the funder, the amount of adverse costs exposure, and the sophistication and experience of funded litigants. Applying these principles to the Newcrest settlement, Murphy J concluded that the aggregate funding commission of A$6.78 million at rates of between 26 per cent and 30 per cent was fair and reasonable. In reaching this conclusion, his Honour considered the published empirical research into the funding commission rates paid in Australian class actions, as well as a number of recent decisions in which settlements were approved, before concluding that those rates were at the lower end of the range. He also emphasised the need for transparency about matters relating to funding in judgments to allow proper benchmarking.

In the subsequent decision of Mitic v. OZ Minerals Ltd (No. 2) Justice Middleton agreed that the court had power to vary the amount payable to a litigation funder out of a settlement in a class action,35 but preferred to base that view on Section 33V of the FCA, rather than on the other provisions referred to by Justice Murphy.36 However, the question (and extent) of judicial power to vary terms of litigation funding agreements remains controversial and unresolved in Australia.37

4. Disclosure

The Federal Court’s Class Action Practice Note requires the disclosure of legal costs and any litigation funding charges to current and potential clients in class actions, in clear terms, as soon as is possible.38

Litigation funding agreements and costs agreements are also required to be disclosed to the court and to the other parties in any class action.39 Applicants may provide a redacted version to the other parties, so as to conceal any information that might confer a tactical advantage on the other party.40Commercial terms such as the litigation budget and the commission and costs structure are generally redacted and the court is given a complete version.41However, on occasion the Federal Court has been prepared to order the production of unredacted litigation funding agreements where relevant to an interlocutory application, for example, where funding rates were relevant to the respondent’s application to set aside the proceeding as an abuse of process,42 or where relevant to an application to de-class the proceeding on the ground that a closed class was said to be an abuse of process.43

Conversely, parties have also successfully resisted production of funding agreements and documents associated with the funding relationship, such as investigative reports and correspondence between the funder and a funded party, on the ground of legal professional privilege under Section 119 of the Evidence Act 1995 (NSW) (the Evidence Act). In the recent NSW Supreme Court case of Hastie Group Ltd (in liq) v. Moore the respondent successfully obtained orders at first instance for production of an expert report that had been provided to the prospective litigation funder.44 However, on appeal the NSW Court of Appeal overturned that decision and upheld a claim of legal professional privilege. It did so on the ground that the report was prepared for the dominant purpose of the provision of professional legal services in relation to proceedings or anticipated proceedings under Section 119 of the Evidence Act, having regard to the engagement letter to which it was attached, and that it was prepared in response to the terms of the engagement letter. The Court of Appeal held that the disclosure of the report to a litigation funder was not sufficient to waive privilege in circumstances where it was clear that the report was being provided on a confidential basis.

5. Costs

It is generally accepted that Australian courts have power to order costs against a non-party, including a third party funder. In Knight v. FP Special Assets Ltd the High Court held that the relevant provisions of the Supreme Court Act 1867 (Qld) empowered the Court to award costs against a non-party where the party to the litigation is an insolvent person or ‘man of straw’ and the non-party has played an active part in the conduct of the litigation and has (or some person on whose behalf that non-party has been appointed has) an interest in the subject of the litigation.45

Historically, litigation funders have not always assumed liability for adverse costs and the courts have not always ordered that third party funders should pay adverse costs. In Jeffery & Katauskas Pty Ltd v. SST Consulting Pty Ltd (SST) the High Court held that it was not an abuse of process where a plaintiff was unable to meet an adverse costs order because the funder had not assumed any liability for adverse costs.46 In that case the defendant had not sought adequate security for costs during the proceeding. The High Court clarified that a litigation funder does not always have to put the funded party in a position to meet any adverse costs order.47

The High Court’s SST decision has generated some apprehension and protest from the defence bar suggesting that funders might refuse to provide indemnities for adverse costs to the detriment of successful respondents. However, perhaps as a result of commercial realities and market supply and demand, these fears have not materialised.48 In practice, litigation funders now routinely agree to indemnify funded clients against adverse costs exposure and also lodge any security for costs that may be ordered. Representative applicants in funded class action claims will generally not be prepared to assume personal liability for the costs of the class without such costs indemnities.49

In Domino’s Pizza Enterprises Limited v. Precision Tracking Pty Ltd (No. 2) the funded party opposed a security for costs order being made on the grounds that there was no risk that any costs order would not be satisfied owing to the combined effect of the litigation funding indemnity, an adverse costs insurance policy and proposed undertakings by Precision Tracking Pty Ltd to notify the parties of any relevant change of funding circumstances.50 However, the court upheld the application for security for costs, concluding that (1) Precision Tracking Pty Ltd did not itself have the capacity to meet an adverse costs order, (2) the funding agreement limited the indemnity to a counterclaim in the proceeding and (3) the adverse costs insurance was taken out for the primary claim. Additionally, the funder had an absolute discretion to terminate its funding arrangements with Precision Tracking Pty Ltd at any time, including the adverse costs indemnity and the adverse costs insurance.

The adequacy of adverse costs insurance, as a form of security, was recently tested in the Federal Court case of Petersen Superannuation Fund Pty Ltd v. Bank of Queensland Ltd (Petersen).51 In that case Justice Yates accepted that, depending on the circumstances, ‘an appropriately worded ATE policy might be capable of providing sufficient security for an opponent’s costs’. But on the facts of Petersen the Court concluded that the specific policy offered was not sufficient as the beneficiary of the policy was the applicant, not the respondents.52 His Honour also found that there was no mechanism by which the respondents could compel the applicant to sue on the policy if it were breached. Although this could potentially be overcome by direct proceedings against the insurer under the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), there were other potential difficulties including numerous policy exclusions that might be relied on, and a lack of evidence in relation to procurement of the policy that might have an impact on non-disclosure and avoidance rights. Consequently, Justice Yates ordered that security be provided in the traditional form of payment into court or a bank guarantee.

6. The year in review

i Common fund orders

A major litigation funding development has been the granting of ‘common fund’ orders by the courts in some major class actions. Essentially, common fund orders seek to ensure equality and fairness between all class members by deducting funding costs from all group members in a class action, regardless of whether they have signed a funding agreement. Common fund orders have been made in Money Max Int Pty Ltd (Trustee) v. QBE Insurance Group Ltd (the QBE class action),53 Blairgowrie Trading Ltd v. Allco Finance Group Ltd (Receivers & Managers Appointed) (In Liq) (No. 3) (the Allco class action),54and Camping Warehouse v. Downer EDI (Approval of Settlement) (21 December 2016) (the Downer EDI class action).55

Common fund orders were made in the QBE class action at an early stage to assist group members in making an informed decision as to their participation prior to ‘opt-out’. The court did not set the funding commission rate, preferring to determine that issue at a later stage once the amount of any settlement, and therefore the amount of the commission, was known (the applicant had sought a rate of 30 per cent, being less than the 32.5–35 per cent provided for in the existing funding agreements).

Justice Beach made common fund orders at the time of settlement approval of the Allco class action at a rate of 30 per cent of the net settlement amount (i.e., after deduction of legal costs), which equated to about 22 per cent of the gross settlement amount. His Honour emphasised that the 30 per cent rate he had set should not be seen as a precedent and that he would have set a lower rate had the settlement amount been substantially higher. He also stated that ‘a 30% rate would be difficult to justify on a net settlement sum above $50 million’; albeit with the caveat that ‘valuable services such as that which a funder provides have a commercial cost and if it can be justified, so be it’.56

Common fund orders were also made in the Downer EDI class action, setting the commission rate at 10 per cent. Although this rate was comparatively low, the circumstances of that case were quite unique, including that ‘the funder only provided adverse costs cover and security for costs’, with the lawyers acting on a ‘no-win, no-fee’ basis, and the total settlement amount being relatively modest (A$8.25 million).

ii Competing funded class actions

In McKay Super Solutions Pty Ltd (Trustee) v. Bellamy’s Australia Ltd (Bellamy’s) the court scrutinised the funding packages offered by competing litigation funders in detail at the commencement of the case.57 Two open securities class actions had been filed against Bellamy’s Australia Ltd, in McKay Super Solutions Pty Ltd (Trustee) v. Bellamy’s Australia Ltd (the McKay class action) and Basil v. Bellamy’s Australia Limited (the Basil class action).58 The respondent applied to the court to stay one of the class actions on the grounds that it would be oppressive and an abuse of process to defend two similar class actions. The pleadings and claim period in each class action were very similar, each class action was of a similar size and claim value, and each had experienced class action solicitors on the record.

The major point of difference was the litigation funding. The McKay class action was funded by IMF Bentham. The Basil class action was funded by ICP Capital. Justice Beach described the Bentham IMF package as being in fairly standard terms with varying commission rates and caps that compared favourably with the rates and caps used in other group proceedings and approved by the court charged on gross recoveries depending upon the timing of resolution. In contrast, the ICP Capital funding package included several innovative features. Beach J held that neither class action should be stayed and that the IMF Bentham-funded class action should remain as an ‘open class’ and the ICP Capital-funded class action should remain on foot but become a closed class.59 The court’s reasons for preferring the former claim as the open class included that:

• a the ICP Capital funding arrangements were more opaque and evolved than IMF’s;
• b there was less confidence in the financial strength of ICP Capital compared to the IMF;
• c there were risks concerning ICP Capital’s ability to deal with adverse costs orders and insurance; and
• d avoiding the risk that any relevant insurance premium in respect of adverse costs would be passed on to group members.60

Ultimately the comparative financial position of IMF Bentham, the form of security provided and the standard terms of its funding agreement were key determinants in the court resolving which funded class action should proceed as an open class in Bellamy’s.

7. Conclusions and outlook

Litigation funding in Australia is now well established and entering into a mature phase of development. The common law and regulatory requirements have been radically reshaped over the past decade since the High Court’s seminal decision in Fostif. Market competition spurred by new local and international funding entrants is driving innovation and placing downward pressure on commission rates and terms.

In terms of multiparty and class actions the acceptance of the common fund doctrine has seen a significant and welcome step forward in the ability of funders to more promptly consider multiparty claims as commercially viable. Looking ahead, with the Australian litigation funding landscape maturing we can expect more subtle developments in the common law impacting funding terms with some incremental adjustments in the regulatory regime. Clearly, an important next step facing regulators and policymakers will be the introduction of damages-based contingency fees for lawyers as recommended by the Productivity Commission.

1 Jason Geisker is a principal and Jenny Tallis is a special counsel at Maurice Blackburn Lawyers. The authors wish to thank and acknowledge the assistance received from Daniel Noonan, Dirk Luff and Greg Tucker.

2 IMF Bentham Litigation Funding Masterclass October 2015 presentation p. 8.

3 IBIS World Industry Report OD5446, 2017, p. 3.

4 A class action is a procedure whereby a single representative can bring or conduct a claim on behalf of others in the same, similar or related circumstances (Part IVA Federal Court of Australia Act 1976 (Cth) Section 33C(1)).

5 Victorian Law Reform Commission report ‘Access to Justice – Litigation Funding and Group Proceedings’ Consultation Paper at p. 8, para. 1.47.

6 IMF Bentham Litigation Funding Masterclass October 2015 presentation p. 9.

7 Maintenance is assistance in prosecuting or defending a lawsuit by someone with no bona fideinterest in the case. Champerty is an agreement to divide litigation proceeds between the owner and another party unrelated to the lawsuit who helps enforce the claim.

8 Civil Law (Wrongs) Act 2002 (ACT) Section 221; Maintenance, Champerty and Barratry Abolition Act 1993 (NSW) Sections 3-4, 6; Criminal Law Consolidation Act 1935 (SA) Schedule 11 cll 1(3), 3; Wrongs Act 1958 (Vic) Section 32; and Crimes Act 1958 (Vic) Section 322A.

9 Litigation Funding Discussion Paper May 2006, prepared by the Standing Committee of Attorney Generals, p 4.

10 Wrongs Act 1958 (Vic) Section 32(2).

11 Litigation Funding Discussion Paper May 2006 Standing Committee of Attorney Generals pp. 5-6, citing Anstella Nominees Pty Ltd v. St George Motor Finance Ltd [2003] FCA 466.

12 Campbells Cash and Carry Pty Ltd v. Fostif Pty Limited [2006] HCA 41.

13 See, for example, Section 182 of the Legal Profession Uniform Law (NSW).

14 Inquiry report – Access to Justice Arrangements Productivity Commission 3 December 2014.

15 The arguments for and against lifting the ban on law firms charging contingency fees are set out in an appendix to the Victorian Law Reform Commission’s ‘Access to Justice – Litigation Funding and Group Proceedings’ Consultation Report.

16 Treasury Wines Estates Limited v. Melbourne City Investments Pty Ltd (2014) 318 ALR 121; [2014] VSCA 351 at [22].

17 Bolitho v. Banksia Securities Ltd (No4 [2014] VSC 582 (26 November 2014) at [53].

18 Ibid. [51].

19 Australian Securities and Investments Commission Act 2001 (Cth), ss 12BF-12BM, 12CA-12C, 12DA.

20 Brookfield Multiplex Funds Management Pty Ltd v International Litigation Funding Partners Pty Ltd (2009) 180 FCR 11.

21 Chameleon Mining NL (Receivers and Managers Appointed) [2012] HCA 45.

22 Treasury Press Release, Hon Chris Bowen, Minister for Financial Services, Superannuation and Corporate Law ‘Government acts to ensure access to justice for class action members.’ No 039, 4 May 2010.

23 Corporations Amendment Regulation 2012 (No.6) (Cth).

24 Corporations Regulations 2001 (Cth), r 5C.11.01(d).

25 Ibid. rr 5C.11.01(b)-5C.11.01(c).

26 Ibid. r 7.6.01AB.

27 ASIC Regulatory Guide 248 ‘Litigation schemes and proof of debt schemes: Managing conflicts of interest’.

28 Ibid. RG248.31.

29 Corporations Regulations 2001 (Cth) r 7.6.01AB(2)(a).

30 Productivity Commission, Access to Justice Arrangements, Inquiry Report No 72 (2014) vol 2, 631.

31 Victorian Law Reform Commission Access to Justice – Litigation Funding and Group Proceedings, p 115 [8.25].

32 Fostif v. Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203, 223-224 (Mason P).

33 Federal Court Class Action Practice Note (GPN-CA), paras. 5.9, 5.10.

34 Earglow Pty Ltd v. Newcrest Mining Ltd [2016] FCA 1433.

35 Mitic v. OZ Minerals Ltd (No 2) [2017] FCA 409.

36 In the Tamaya Resources class action ([2017] FCA 650 at [105]-[106]), Justice Wigney appeared to accept that the power existed, and so too did the Full Court in Melbourne City Investments Pty Ltd v. Treasury Wine Estates Ltd ([2017] FCAFC 98 at [90]).

37 See, for instance, observations of Justice MBJ Lee ‘Varying Funding Agreements and Freedom of Contract: Some Observations’ 1 June 2017, IMF Bentham Class Actions Research Initiative with UNSW Law: Resolving Class Actions Effectively and Fairly.

38 Federal Court of Australia, Class Action Practice Note (GPN-CA) – General Practice Note 25 October 2016, 4 [5.3].

39 Ibid, paras. 6.1, 6.4.

40 Ibid, para. 6.4(b).

41 Federal Court of Australia, Class Action Practice Note (GPN-CA) – General Practice Note 25 October 2016, para. 6.1.

42 Spatialinfo Pty Ltd v. Telstra Corporation Ltd [2005] FCA 455.

43 Dorajay Pty Limited v. Aristocrat Leisure Limited [2005] FCA 588.

44 Hastie Group Ltd (in liq) v. Moore [2016] NSWCA 305.

45 Knight v. FP Special Assets Ltd (1992) 174 CLR 178, [192]-[193]; see also Gore v. Justice Corporation (2002) 119 FCR 428.

46 Jeffery & Katauskas Pty Ltd v. SST Consulting Pty Ltd (2009) 239 CLR 75.

47 See also Grave, Adams and Betts, Class Actions in Australia at [17.1000].

48 Ibid.

49 Ibid.

50 Domino’s Pizza Enterprises Limited v. Precision Tracking Pty Ltd (No 2) [2017] FCA 211.

51 [2017] FCA 699.

52 Ibid. at [92].

53 (2016) 245 FCR 191.

54 [2017] FCA 330; (2017) 118 ACSR 614.

55 [2016] VSC 784.

56 Blairgowrie Trading Ltd v. Allco Finance Group Ltd (Receivers & Managers Appointed) (In Liq) (No 3) [2017] FCA 330 at [160].

57 McKay Super Solutions Pty Ltd (Trustee) v. Bellamy’s Australia Ltd [2017] FCA 947.

58 McKay Super Solutions Pty Ltd v. Bellamy’s Australia Limited (VID 163/2017); Basil v. Bellamy’s Australia Limited (VID 213/2017).

59 A closed class action is restricted to identified group members who have entered into a funding agreement with the funder. An open class action is a class action on behalf of both the funded group members and unfunded group members who fall within the group member definition.

60 McKay Super Solutions Pty Ltd v. Bellamy’s Australia Limited (VID 163/2017); Basil v. Bellamy’s Australia Limited (VID 213/2017) [73]–[82] and [94].

This article was originally published on The Law Reviews