"The Australian Industry Group welcomes today’s release of exposure draft legislation to rein in the excessive profits being earned by litigation funding firms at the expense of businesses and class action plaintiffs. Overseas litigation funding firms have moved into Australia in a big way due to the potential super-profits on offer. No doubt there will be a hue and cry from the litigation funders and plaintiff law firms who have a vested interest in preserving the current system. However, on any impartial assessment, the proposals in the draft legislation are fair and reasonable for all parties," Innes Willox, Chief Executive of the national employer association Ai Group, said today.
"The legislation includes a rebuttable presumption that returns to plaintiffs in a class action of less than 70% of the gross proceeds would not be fair and reasonable. The importance and fairness of this reform is obvious given that the Australian Law Reform Commission recently reported that in class actions involving litigation funders, the median return to plaintiffs was only 51 per cent of the amount awarded, while in cases not involving litigation funders, the median return to plaintiffs was 85 per cent.1
"The legislation would also require plaintiffs to consent to participate in a class action litigation funding scheme rather than having fees imposed on them without their consent. This proposal has obvious merit.
"The legislation would give the Courts a lot more assistance in protecting plaintiffs from unfair fees and commissions. There are many recent examples of judges strongly criticising the returns that litigation funders have proposed in particular class actions and the unfairness that would be inflicted on plaintiffs if those returns were allowed.
"It is important that all Parliamentarians put any vested interests aside and support these sensible and fair reforms once the legislation is introduced into Parliament. Ai Group will study the terms of the exposure draft carefully during the consultation period and bring any unintended consequences to the Government’s attention," Mr Willox said.
Treasury Laws Amendment (Measures for Consultation) Bill 2021: Litigation funders
1. Australian Law Reform Commission, Integrity, Fairness and Efficiency—An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (Final Report), December 2018. Published in Parliament on 24 January 2019.
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