Australia

Widespread support

Litigation funding enjoys widespread support in Australia under statute, case law and in public policy. Since 1995 the litigation funding industry in Australia has enjoyed a statutory exception to the common law prohibition against maintenance and champerty to assist company administrators and liquidators to pursue debts on behalf of creditors of a company.

Class actions

The industry subsequently expanded to fund class actions and large single plaintiff actions as successive superior court judgments overturned common law principles against maintenance and champerty, imported from UK common law. NSW, Victoria and most recently Queensland in 2016, have introduced court procedures specifically for class actions.

Progress

In 2006, the High Court of Australia confirmed the legitimacy of third parties funding litigation, or agreeing to indemnify litigants for costs, in exchange for a percentage of any recovery.

At common law, there are no formal restrictions on litigation funding arrangements other than the Rules of the Court and the Court’s consideration of whether the proceedings constitute an abuse of process (an avenue of objection which has been substantially narrowed by the High Court’s ruling in Fostif and Trendlen in 2006).

Although ‘no win no fee’ conditional cost agreements are permitted, restrictions apply regarding obtaining financial profit derived from a settlement/judgment other than agreed professional service fees.

The unregulated status of the litigation funding industry in Australia ended with the Corporations Amendment Regulation 2012 (No. 6), dated 12 July 2012. The focus of the regulation is on managing conflicts of interest which has the potential to provide substantial protections for class action participants, depending on how the requirements are implemented. However, the new regime contains no requirements for capital adequacy or any form of prudential regulation, so it is arguable that it does not go far enough in mitigating the risks posed by inadequately resourced funders.

The Victorian Law Reform Commission published its review of the regulation of litigation funders and lawyers in September 2017, suggesting the Supreme Court could introduce practice requirements relating to conflicts of interest for those funding class actions. In 2018 the Australian Law Reform Commission (ALRC) commenced an inquiry into the extent to which class action proceedings and litigation funders should be subject to new Commonwealth regulation. The ALRC is due to report by 21 December 2018.