Trends and Developments

03 March 2026 BY JASON GEISKER, DIRK LUFF, SAMUEL SHERIDAN & GEORGINA OVEREND

Overview

The litigation funding landscape in Australia has experienced significant evolution over the past three decades, transitioning from an emerging market to a sophisticated and competitive industry. With approximately 30 active funders now operating in the market, Australia has established itself as a mature jurisdiction for third-party litigation funding, particularly in the class action and insolvency spaces. However, the industry faces a complex interplay of regulatory developments, common law developments and market dynamics that continue to shape its trajectory.

Market Maturation and Competitive Dynamics

While Australia’s litigation funding market has grown substantially since its inception, there remains significant variability in industry revenue and profit from year to year. The market contracted by 13.7% per annum between 2020 and 2025 largely due to the COVID-19 pandemic, with industry revenue decreasing from AUD258.3 million in 2020-21 to an estimated AUD123.6 million in 2025-26. By contrast, estimates suggest growth of 4.4% per annum between 2025 and 2031 with revenue to total AUD153.6 million in 2030-31. This variability reflects the high-risk nature of litigation funding, characterised by volatile results and lengthy litigation timelines, particularly in class actions, which require increasingly rigorous case selection criteria and management.

The market has also diversified significantly from its early days, when only a handful of funders dominated. Today, both domestic and international funders compete actively. This increased competition has driven innovation in funding structures and pricing, and in the class action context it has also intensified scrutiny of the net returns delivered to class members.

Regulatory Evolution and Stability

After a period of significant regulatory flux, Australia’s litigation funding regime has stabilised under a lighter-touch regulatory framework, providing much-needed certainty for funders, investors and claimants.

The most significant recent regulatory development remains the Corporations Amendment (Litigation Funding) Regulations 2022, which exempt certain litigation funding schemes from the managed investment scheme, Australian financial services licence (AFSL), product disclosure and anti-hawking provisions of the Corporations Act. The Australian Securities and Investments Commission (ASIC) has also recently made amendments to existing legislative instruments that provide relief not covered by the regulations, extending these instruments for a further period of relief until 31 January 2029.

The regulatory journey has been notable for its shifts. In the last 20 years, the market experienced a period of uncertainty following the 2009 High Court decision in Brookfield Multiplex that characterised litigation funding schemes as managed investment schemes requiring registration and management by a public company holding an AFSL and strict compliance with managed investment scheme laws, which were never contemplated by legislators as being applicable to class action funding or multiparty funding arrangements.

In response, in 2012, regulations were enacted exempting litigation funders from the managed investment scheme provisions of the Corporations Act and the need to hold an AFSL. However, the early 2020s saw a temporary hardening of the regulatory position introduced by the then conservative coalition federal government. In August 2020, the Corporations Amendment (Litigation Funding) Regulations 2020 were introduced, requiring third-party litigation funders to again obtain an AFSL and comply with the managed investment scheme regime imposed under the Corporations Act. This regulatory change significantly increased the compliance costs associated with the provision of third-party funding and severely restricted the availability of funding in multiparty and class action proceedings. This position was reversed in December 2022 under the incoming Labor federal government with the relief extended again by ASIC in 2025 through to the end of 2029.

The current regulatory environment reflects a pragmatic, evidence-based approach that recognises the courts’ active role in managing litigation funding within the justice system. This regulatory stability is complemented by guidance from ASIC, particularly Regulatory Guide 248, which details how funders can meet their obligations regarding conflict-of-interest management imposed by the Corporations Regulations 2001 (Cth).

Class Action Trends and Activity

Class actions remain a primary focus of litigation funding in Australia, representing close to 50% of industry revenue in 2026. However, in recent years there has been a decline in funded class actions as a proportion of overall class actions, with funded class actions typically representing around less than half of all class action filings.

Recent class action activity has spanned diverse areas including financial services, employment law, shareholder disputes, privacy breaches, government accountability and consumer protection. Emerging trends point towards increased activity in regulatory compliance issues, environmental claims and climate-related litigation. High-profile funded cases have included the Australian Defence Force sex discrimination class action, the Queensland Floods class actions, various consumer product liability claims, and financial services misconduct proceedings.

Notably, despite the proliferation of funded shareholder class actions in Australia, very few cases have proceeded to trial. For the cases that have proceeded to trial, corporate defendants have generally succeeded on issues of causation, materiality and loss. Shareholder claims that have failed include the Myer Class Action [2019] FCA 1747; the Worley Class Action [2022] FCAFC 33; the Iluka Resource Class Action [2020] FCA 1568; the IOOF Class Action [2023] FCA 155; the Quintis Class Action [2024] FCA 160; and the CBA Class Action [2025] FCFCA 63 (which on 13 February 2026 obtained special leave to appeal to the High Court of Australia). This track record creates challenges for funders assessing the viability of shareholder claims and may influence case selection strategies going forward, particularly if the CBA Class Action appeal to the High Court is unsuccessful.

Relatedly, in the mass tort, competition and product liability space, several large funded claims have proceeded to trial in Australia, with mixed success. Notable recent class action losses include claims brought against Queensland Electricity [2024] FCA 1382 (currently on appeal), Gladstone Ports [2025] QSC 279 (case abandoned by funder) and Monsanto (Roundup Class Action) [2024] FCA 807 (no causation proved). In contrast, notable trial wins in class actions over recent years include the Toyota Diesel Emissions Class Action [2024] HCA 38 (upheld on appeal to the High Court); the Ford Transmission Class Action [2024] HCA 39 (similarly upheld on appeal to the High Court); the Stolen Wages Class Action (Western Australia) [2019] WASC 419 (liability trial win leading to a significant settlement); and the Montara Class Action [2021] FCA 237 (liability trial win leading to AUD192.5 million settlement).

In an overall context, historically most funded class actions in Australia have resolved by way of settlement prior to final trial or judgment. Notable examples of major settlements include the Robodebt Class Action (AUD548.5 million); the Kilmore Bushfires Class Actions (AUD494.6 million); the Queensland Flood Class Action (AUD440 million); the Murrindindi Bushfires Class Action (AUD300 million); the Uber Class Actions (AUD271.8 million); the De Puy Hips Class Action (AUD250.9 million); the NSW Junior Doctors Class Action (AUD229.8 million); and the Volkswagen, Audi & Skoda Class Actions (AUD173.5 million).

The Victorian Contingency Fee Experiment

Victoria’s introduction of damages-based contingency fees for lawyers in July 2020 marked a watershed moment for Australian litigation funding. Under Section 33ZDA of the Supreme Court Act 1986 (Vic), lawyers can now seek Group Costs Orders (GCOs) from the court allowing them to receive a percentage of any recovery in class actions. This represents a significant departure from traditional fee arrangements and provides an alternative to third-party litigation funding.

Numerous GCOs have now been granted, demonstrating the viability of this model. However, despite early predictions that Victoria would become the dominant jurisdiction for funded class actions, the Federal Court of Australia has maintained its position as the preferred venue for the majority of class action litigation. The reasons for this include the Federal Court’s established expertise in managing complex multiparty litigation and the broader range of claims that fall within federal jurisdiction.

The Victorian model has sparked debate about whether other jurisdictions should adopt similar provisions. The Australian Law Reform Commission has recommended harmonising contingency fee provisions across states and territories, though implementation remains pending. This recommendation reflects a broader policy objective of enhancing consumer choice and providing multiple pathways for access to justice.

Common Fund Orders and the Kain Decision

The evolution of Common Fund Orders (CFOs) has been one of the most significant developments in Australian litigation funding. Following the Full Federal Court’s 2016 decision in Money Max Int Pty Ltd v QBE Insurance Group Limited [2016] FCFCA 148, CFOs became a mechanism to ensure fairness between funded and unfunded class members by fixing the funder’s remuneration as a proportion of any recovery, with all group members bearing proportionate liability.

The doctrine appeared to face significant challenges when the High Court’s 2019 decision in BMW Australia Limited v Brewster [2019] HCA 45 held that courts lacked power to make CFOs prior to settlement. However, the recent 2025 High Court decision in Kain v R&B Investments Pty Ltd [2025] HCA 28 provided crucial clarity, confirming that courts retain power to make CFOs at the time of settlement or judgment under Sections 33V and 33Z of the Federal Court of Australia Act. With the High Court’s position now settled, debate has followed as to whether this area warrants statutory reform to permit the making of CFOs at an earlier stage of the proceeding to provide greater commercial certainty to claimant group members and funders and more closely align with the approach adopted by the Victorian Supreme Court in respect of GCOs, which are made at an early stage of the proceeding and subject to review at the settlement approval stage.

Significantly, Kain rejected the concept of “Solicitors’ CFOs”, which would have allowed plaintiff lawyers to obtain similar orders for their own remuneration. This limitation curtails the ability of plaintiff firms to innovate and offer contingency fee arrangements outside Victoria’s Supreme Court, reinforcing Victoria’s unique position in this regard. The decision represents a win for litigation funders while maintaining boundaries around how contingency fees can be structured in federal proceedings.

The Hunt Leather Decision and Damages Recovery

A critical question recently resolved by the High Court concerns whether litigation funding commissions can form part of recoverable damages. In Hunt Leather Pty Ltd v Transport for NSW [2025] HCA 53 (decided December 2025), the High Court unanimously held that litigation funding fees were not recoverable as damages from unsuccessful defendants.

The case involved representative proceedings arising from construction of the Sydney Light Rail infrastructure, where plaintiffs sought to recover a 40% funding commission as part of their damages claim. The plaintiffs argued this loss (funding commission) was reasonably foreseeable and caused by the defendant’s nuisance. However, the High Court rejected this argument, holding that the funding commission represented voluntary commercial decisions by the plaintiffs rather than losses caused by the defendant’s tortious conduct.

This decision has significant implications for the economics of litigation funding. Funders cannot expect to rely on defendants to bear the cost of funding commissions, meaning these costs will be absorbed by claimants or factored into the funder’s assessment of a case’s commercial viability. The decision demonstrates judicial reluctance to treat litigation funding arrangements as creating recoverable losses ‘caused by’ the defendant rather than commercial choices made independently of the defendant’s wrongdoing.

Insolvency and Commercial Litigation Recovery

Following a pandemic-induced lull in corporate insolvencies – driven by government support measures and temporary insolvency relief – the market has witnessed a gradual return to more normalised levels of insolvency-related litigation and funding in recent years. As economic pressures have intensified and government support has ended, corporate and personal insolvencies have risen, driving demand for funding of insolvency practitioners pursuing recovery actions.

This resurgence represents a return to a traditional area of demand for litigation funders, some of whom have extensive experience funding claims brought by insolvency practitioners against directors, auditors and other parties. However, there has been no boom in the insolvency funding market beyond pre-pandemic levels, with the uptick merely seeing corporate and personal insolvencies return to more long-term historical averages.

The commercial litigation funding space also continues to evolve, with funders increasingly positioning their services as strategic, non-debt tools for corporate legal needs rather than options of last resort.

After-The-Event Insurance: An Emerging Risk Management Tool

After-The-Event (ATE) insurance has emerged as an increasingly important component of Australia’s litigation funding ecosystem, providing parties with cover for adverse costs exposure in exchange for a premium payment. The prevalence of ATE products is particularly apparent in class actions and claims funded by litigation funders.

The Australian ATE market, while smaller than its UK counterpart, is developing rapidly in both sophistication and product offerings. However, there are currently only a few participants that have established presences in the Australian market.

ATE insurance serves multiple strategic functions in Australian litigation. Most fundamentally, it protects claimants from the financial risk of paying an opponent’s legal costs if their claim is unsuccessful. Where there is an appropriately worded policy, Australian courts are now prepared to recognise ATE insurance as one of the available options to provide security for costs, alongside more traditional options such as cash deposits and bank guarantees: see, for example, i-Prosperity Pty Ltd (in liquidation) v Crown Melbourne Ltd [2025] NSWSC 1525 (16 December 2025). This recent judicial acceptance will enhance the utility of ATE products as they develop, with courts now accepting appropriately structured policies and indemnities to satisfy security requirements.

The range of ATE products available has expanded significantly beyond traditional adverse costs cover. Providers now offer portfolio coverage for multiple claims, capital protection for litigation funders, anti-avoidance endorsements and various specialised products. Premium structures have also become more flexible, moving beyond traditional deferred payment models to include upfront and hybrid arrangements. Competition has applied downward pricing pressure, with more flexible options than the historical 20–40% of policy indemnity limits.

Despite growth, the market has faced challenges. Historical court decisions have scrutinised the adequacy of policies from overseas insurers without an Australian presence, highlighting enforcement concerns. The establishment of locally licensed entities by major providers addresses these concerns and signals market maturation. As the market evolves, the entry of locally licensed providers with substantial capital backing, combined with increased competition, suggests continued growth and innovation in ATE products as a complement to traditional litigation funding arrangements.

Looking Forward: Challenges and Opportunities

The High Court’s landmark decision in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41, finding that third-party litigation funding did not, itself, constitute an abuse of process and was not against public policy, paved the way for modern commercial litigation funding in Australia to become more mainstream. Along with the statutory abolition of the torts of maintenance and champerty across most Australian states, these developments represent important milestones towards legitimising litigation funding, though uniformity awaits action from remaining state jurisdictions.

The growth of ATE insurance products, though still a relatively small market dominated by UK-based providers, offers another avenue for risk management and may become more prevalent as the market matures.

The Australian litigation funding market stands at an important juncture. While regulatory stability has been achieved, several key issues remain unresolved. The federal parliament’s long-awaited response to the Australian Law Reform Commission report on contingency fees and funding regulation will provide direction on whether Victoria’s model will be adopted more broadly.

Funders face continued pressure to demonstrate fairness for class members in a class action context amid ongoing scrutiny of the net returns they receive. Courts have shown willingness to scrutinise funding arrangements in class actions closely, particularly regarding the reasonableness of funding commissions and their impact on group member recoveries. This judicial oversight, combined with regulatory attention from bodies like ASIC, creates an environment where transparency and fairness are paramount.

There is no doubt that the series of significant losses in major funded class actions in recent years has impacted the risk appetite of many commercial funders operating in the Australian market. Poor case selection, case performance and underinsured ATE positions have seen some funders significantly restrict their investments and risk tolerance, particularly in larger matters. Some funders have collapsed or withdrawn from the Australia market altogether. Continued anti-funding lobby group attacks on litigation funding, alleging that funders make ‘super profits’, have not proven to be the reality. In more recent years, the Australian funding market has become more volatile, with more matters proceeding to trial than in earlier periods. These elements have resulted in a more constrained, conservative and risk-sensitive market. Together with higher interest rates, more constrained access to capital and increasing litigation time frames and costs, this has meant that funders are looking more cautiously at funding applications, seeking to diversify and avoid concentration risk across their portfolios.

Over the longer term, both the Australian and global litigation funding markets are projecting growth. There will still be opportunities ahead as the market adapts. However, funders should expect to have to navigate longer, more complex litigation timelines, higher financial risks and intense competition, while maintaining rigorous case selection standards. The balance between providing enhanced access to justice through funding and the commercial sustainability of such arrangements as supervised by the courts will continue to define the industry’s rate of evolution.