The Third Party Litigation Funding Law Review 9th edition: Australia

06 March 2026 BY JASON GEISKER, DIRK LUFF & SAMUEL SHERIDAN

Introduction

Australia is home to one of the world’s most sophisticated third party litigation funding markets. Initially, litigation funding was used by insolvency practitioners to pursue insolvency-related legal claims, but since the turn of the millennium litigation funding has been utilised in a far broader range of civil and commercial disputes and arbitrations. Even so, third party litigation funding services remain relatively underutilised in Australia.¹ In 2023, the addressable market for third party litigation funding in Australia and New Zealand was estimated at A$4 billion.² In contrast, the Australian litigation funding market had an estimated revenue of only A$123.6 million in 2024–2025.³ The litigation funding market is estimated to have contracted by 13.7 per cent per annum between 2020 and 2025 largely due to the covid-19 pandemic. Industry revenue is forecast to expand over the next five years at a rate of 4.4 per cent per annum.⁴

In 2019, the Australian Law Reform Commission (ALRC) estimated there were approximately 33 litigation funders active in the Australian market,⁵ a number that has since remained relatively stable.⁶ The use of litigation funding for a broad range of class actions⁷ is a well-known aspect of the Australian market. Class actions have generally represented around half of the litigation funding market and although this rate dropped to less than 36 per cent during 2023,⁸ class actions continued to represent just under 50 per cent of the market again in 2025.⁹ The balance of the funding market in Australia comprises claims brought by small to large businesses and individuals.¹⁰

In the decade ending with 2020, the majority of class action filings were receiving litigation funding support. For instance, in the 12 months ending 3 March 2021, approximately 72.5 per cent of all class actions filed in Australia were supported by third party litigation funders.¹¹ However, since that time there has been a steady decline in funded class actions, as a proportion of the overall class actions commenced in Australia, such that they now represent less than half of all class actions filed.¹² By mid 2024, total class action filings themselves (funded and unfunded) were at the lowest level since 2016–2017, reflecting the broader slowdown of this market segment.¹³ This longer term trend experienced an anomaly in the 12 month period ending June 2025, when overall class action filings spiked, primarily due to the commencement of 19 employment class actions filed in March 2025. However, in recent years funded class actions have continued to represent only around half of all class action filings,¹⁴ and in the most recent 12 month period ending in June 2025, funded class actions represented a decade-low proportion of less than one-third of all class action filings.¹⁵

In terms of insolvency-related litigation funding, despite the biggest economic downturn since the Great Depression, covid-19 did not immediately produce the tsunami of corporate insolvencies and related litigation that the Australian business community had initially anticipated. Due largely to unprecedented levels of government financial assistance and legislative intervention, external administrations during the covid period dropped to record lows,¹⁶ resulting in a subdued demand for litigation funding in the insolvency market segment for several years after the pandemic. However, in more recent times corporate insolvency appointments have spiked,¹⁷ where now the share of companies entering insolvency has risen sharply to be at the top of the range observed in the 2010s following the GFC.¹⁸ In the 2024–2025 financial year, the number of Australian corporate external administrations peaked at 10,496 (the highest figure in over a decade), with construction representing 21 per cent, accommodation and food services 15 per cent and other services 10 per cent, constituting over half of total external administrations for 2024–2025.¹⁹ The combination of record insolvency appointments and a more challenging class action landscape has led to increased competition in the insolvency funding segment of the Australian litigation funding market in recent times.²⁰

Year in review

Australian Securities and Investments Commission (ASIC) amends relief for litigation funding schemes

On 19 December 2022, following the commencement of the Corporations Amendment (Litigation Funding) Regulations 2022 (the Funding Regulations), ASIC announced amendments to existing legislative instruments that provided relief not covered by the Funding Regulations. Two critical instruments due to expire on 31 January 2023 were extended for three years until 31 January 2026, being:

1. ASIC Credit (Litigation Funding—Exclusion) Instrument 2020/837, which exempts litigation funding arrangements and proof of debt arrangements from the application of the National Credit Code; and
2. ASIC Corporations (Conditional Costs Schemes) Instrument 2020/834, which exempts litigation funding arrangements funded by conditional costs arrangements (no-win no-fee retainers) from MIS obligations, AFSL requirements, product disclosure and anti-hawking requirements.

In extending these instruments, ASIC noted that the purpose of the extension of the relief was “to provide certainty for litigation funders, lawyers and members of litigation funding and proof of debt funding arrangements while the Government considers further its policy position for these types of arrangements”.²¹

On 20 October 2025, ASIC sought submissions²² on a proposal to extend both these instruments for a further period of relief until 31 March 2030. The Association of Litigation Funders of Australia (AALF) has made submissions advocating for the continued need for regulatory certainty – specifically, the AALF recommends that the exemption for litigation funding be made permanent.²³ On 12 December 2025, ASIC again extended the operation of both these instruments for another three years until 31 January 2029.²⁴

Common fund orders

A significant evolutionary step in the Australian legal system has been the judicial consideration of common fund orders (CFOs) in class actions. CFOs can provide for the legal costs of a proceeding and the commission charge of a litigation funder to be pro rata shared by all members of a class who succeed, or achieve a settlement, in a class action, irrespective of whether they have agreed to any legal retainer or funding contract. However, the court’s ability to make a CFO at an early stage of a class action proceeding was successfully challenged in the High Court (by a 5:2 majority) in the Lenthall and Brewster class actions on 4 December 2019.²⁵

The first CFO in a class action was made by the Full Court of the Federal Court on 26 October 2016 in the QBE class action.²⁶ The order was made at an early stage of the proceedings to assist group members in making an informed decision as to their participation in the class action prior to opting out. In approving the order, Murphy, Gleeson and Beach JJ stated that upon any successful settlement or judgment in the proceeding, the applicant and class members must pay a reasonable, court-approved funding commission from any monies received, prior to distribution of those monies.²⁷ The Full Court declined to set the funding commission rate, preferring to determine that issue at a later stage, “when more probative and more complete information will be available to the Court, probably at the stage of settlement approval or the distribution of damages”.²⁸

Following the QBE class action, a number of CFOs were made in a range of class actions, including Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed) (In Liq) (No 3),²⁹ Camping Warehouse v Downer EDI (Approval of Settlement),³⁰ Lenthall v Westpac Life Insurance Services Limited³¹ (the Lenthall class action) and Catherine Duck v Airservices Australia.³²

In 2019, the judicial power enabling CFOs at an early stage of the proceeding was challenged in a landmark series of cases involving the Lenthall class action and Brewster v BMW Australia Ltd (the Brewster class action),³³ where a separate question for determination as to the power to make CFOs was referred directly to the NSW Court of Appeal. In a historic first joint sitting of the Full Federal Court of Australia (via Lenthall) and the NSW Court of Appeal (via Brewster), the courts heard these challenges. On 1 March 2019, both courts concluded that there is sufficient statutory power enabling CFOs to be made. Allsop CJ, Middleton and Robertson JJ were unanimous in dismissing the Lenthall appeal, finding that section 33ZF of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) (the basis for the general power of the courts to make orders appropriate or necessary to ensure that justice is done in the proceedings) enabled the courts to make such orders.³⁴ Likewise, Meagher JA, Ward JA and Leeming JA agreed that CFOs were authorised pursuant to section 183 of the Civil Procedure Act 2005 (NSW) (CPA).³⁵ It was held that the making of CFOs was a proper exercise of judicial power and in no way contravened Chapter III of the Commonwealth Constitution.³⁶

However, the High Court subsequently granted special leave to hear appeals in both Lenthall and Brewster as to whether the courts had erred in concluding that section 33ZF of the FCA Act and section 183 of the CPA validly enabled the making of CFOs. On 4 December 2019, a majority of the High Court of Australia (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) held that neither section 33ZF of the FCA Act nor section 183 of the CPA empowers a court to make a CFO.³⁷ In a joint judgment, Kiefel CJ, Bell and Keane JJ held that although the power conferred on the court by those sections is broad, considerations of text, context and purpose all point to the conclusion that it does not extend to the making of a CFO.³⁸ Nevertheless, the High Court’s judgment left two questions unresolved: (1) whether the court has power to make a CFO at the conclusion of a representative proceeding, pursuant to section 33ZF of the FCA Act and section 183 of the CPA (following a judgment) or section 33V(2) of the FCA Act and section 173(2) of the CPA (following a settlement); and (2) whether the making of a CFO would be unconstitutional.

On 20 December 2019, following the High Court’s decision in the Brewster and Lenthall class actions, the Federal Court issued a new class actions practice note (GPN-CA) to confirm that the Court will still consider appropriate applications for orders sharing the costs of class actions at the conclusion of proceedings of this kind.³⁹

Different approaches have been taken by judges in interpreting the scope of the High Court’s decision in Brewster and Lenthall. Justices Beach, Murphy and Lee of the Federal Court have expressed the view that the court has the power to make CFOs (sometimes referred to as “expense sharing orders”) at the time of settlement under section 33V(2) of the FCA Act,⁴⁰ with those Justices making such orders in subsequent cases.⁴¹ Other Federal Court judges have taken a different view,⁴² with some considering that the majority of the High Court gave strong reasons favouring a funding equalisation order over a CFO.⁴³ The question of whether the court has the power to make CFOs at the time of settlement under section 33V(2) was ultimately referred for consideration by the Full Court of the Federal Court of Australia in the McDonald’s employment class action.⁴⁴ The Full Court, comprised of Justices Lee, Beach and Colvin, unanimously affirmed this proposition. Justice Beach noted the wide judicial discretion conferred by section 33V(2), finding that “none of the terms used in section 33V(2) would, as a matter of natural meaning, be read as precluding a settlement CFO”.⁴⁵ His Honour also considered the context and purpose of section 33V(2), in that it is a provision addressing the settlement of proceedings⁴⁶ and, while there is no specific guidance on section 33V(2) from extrinsic materials, the purpose of Part IVA is not in doubt.⁴⁷ Justices Lee and Colvin made similar assessments of section 33V(2), in that it confers a broad discretion⁴⁸ and that its purpose is obvious.⁴⁹ Submissions made by the court-appointed contradictor included that making a settlement CFO would not constitute an exercise of judicial power, principally because it would involve the creation of rights and obligations for which the FCA Act does not provide, and that it also involves the weighing of policy considerations in quantifying the amount of commission to be paid. The Court rejected these propositions, finding that the making of a settlement CFO was simply an exercise of a discretionary power (in accordance with the requirements of section 33V(2)), and noting that courts very commonly “set rates of return of interest, calculate economic loss, and fix the remuneration of executors, trustees, liquidators and salvors” and that these “tasks can involve commercial assessments and considerations of risk”.⁵⁰ Importantly, the Court gave careful consideration to the decision in Brewster, and distinguished it as being confined to the question of whether a CFO could be made early in a proceeding under the “gap-filling” power in section 33ZF(1).⁵¹

Separately, the question of whether CFOs can be made at settlement under section 173 of the CPA was referred to the Court of Appeal of the Supreme Court of NSW in Brewster,⁵² although the Court of Appeal promptly declined to decide the issue because no settlement had been reached at that time and therefore the Court was effectively being asked to deal with the issue in a factual vacuum.⁵³ This issue was subsequently considered in the case of Haselhurst v Toyota Motor Corporation Australia Ltd, where Justice Stevens confirmed that the court had the power to make a CFO at settlement under section 173(2) of the CPA.⁵⁴

Given these decisions and practice notes, the Federal Court of Australia and Supreme Court of NSW seem to have endorsed the view that both courts have the power to make a CFO at the time of settlement, and that the High Court’s earlier decision in Brewster is limited to commencement CFOs. However, it was likely this issue would ultimately be referred to the High Court of Australia for determination.⁵⁵

In Pearson⁵⁶ (the stolen wages class action), Murphy J of the Federal Court also considered whether a CFO made pre-Brewster had continuing effect. His Honour found that although it is apparent, as a result of the decision in Brewster, that the extant CFO made earlier in the proceeding was beyond power, as an order of a superior court, the CFO remained valid until and unless set aside,⁵⁷ and as no party had sought to have the CFO set aside, it continues in effect.⁵⁸

Most recently, in Blue Sky,⁵⁹ the Full Court of the Federal Court considered an application, in the form of a reserved question, as to whether the Federal Court has the power to make a CFO at the time of settlement or judgment in favour of a solicitor (a “Solicitors’ CFO”). The practical effect of such an order would be to allow a contingency fee. The Full Court confirmed that, under section 33V or 33Z of the FCA Act, it has the requisite power to make a Solicitors’ CFO at the time of settlement, discontinuance or judgment, provided it is “just” to do so in all of the circumstances. The Full Court addressed several contentions against the finding of the power – principally that a Solicitors’ CFO would not contravene the prohibition against contingency fees⁶⁰ on the basis that there was no promise to pay an amount, but rather a promise to apply for an order directing remuneration on a specific basis.⁶¹

The decision of the Full Court of the Federal Court in Blue Sky was appealed to the High Court in Kain.⁶² The High Court unanimously held that under sections 33V and 33Z of the FCA Act, the Federal Court has the power to make a CFO at settlement or judgment in favour of a litigation funder. However, the High Court determined that the Federal Court has no power to make a Solicitors’ CFO. The High Court’s reasoning was that the Federal Court exercises power in federal jurisdiction against the background of the scheme of regulation of the legal profession in the State or Territory in which the solicitors in the proceeding are practising. Where, as in these appeals, the solicitors are practising in New South Wales, the Federal Court cannot make a Solicitors’ CFO as that would be contrary to the prohibition on contingency fee agreements in section 183 of the Legal Profession Uniform Law (NSW).⁶³ The plurality and Justice Jagot also made clear that it was not necessary to reopen and overturn Brewster as that decision concerned only a commencement CFO.⁶⁴

Notwithstanding these subsequent developments which clarify that the court has the power to make a CFO at the conclusion of a representative proceeding, the High Court’s decisions in the Brewster and Lenthall class actions have, to some extent, constrained the courts’ ability to adopt CFOs and to deal with commission rates. The decisions have also been viewed as being likely to substantially reduce the interest of litigation funders in the Australian class action market.⁶⁵ With some judges now calling for legislative intervention on the issue,⁶⁶ there appears to be a strong basis for regulatory intervention to clarify this area and allow for financial certainty for claimants, solicitors, litigation funders and defendants. Further, in the absence of legislative intervention, solicitors funding a class action in any jurisdiction other than the Supreme Court of Victoria can only do so on a no-win no-fee basis.

Contingency fees in the Supreme Court of Victoria (class actions)

Another evolutionary step in the Australian system occurred on 18 June 2020 with the introduction of damages-based contingency fees in class actions applicable in the Supreme Court of Victoria. These changes were introduced via a new section 33ZDA of the Supreme Court Act 1986 (Vic) allowing for group costs orders in class actions. Group costs orders can now be made where it is “appropriate or necessary to ensure that justice is done”. This is a first in Australia and, consistent with recommendations from academics,⁶⁷ the Productivity Commission, Victorian Law Reform Commission (VLRC) and ALRC, permits the court to make orders allowing a plaintiff law firm to charge its fees as a percentage of the amount recovered rather than on a time or scale fee basis. Fundamental to the making of a group costs order is that the plaintiff law firm must assume liability for adverse costs risks as a condition of the order and be prepared to satisfy any security for costs orders.⁶⁸ Consequently, comparisons with no-win no-fee contingency fee arrangements (which do not require the plaintiff’s lawyers to provide security or cover adverse costs exposure) are not apt.

At an early stage in the proceeding, the court will determine the percentage to be allocated to the plaintiff law firm that can be charged as a contingency. It may revisit this percentage at a later stage.⁶⁹ Guidance as to procedural matters is set out in the Supreme Court’s practice note,⁷⁰ (the Practice Note), which came into operation on 1 July 2020 with the commencement of section 33ZDA.

Since the introduction of section 33ZDA, the Supreme Court has considered numerous applications for group costs orders made in varying circumstances, including where law firms were self-funded, funded by a litigation funder and where multiple firms were acting jointly under differing funding arrangements. By way of non-exhaustive survey, examples include: Fox v Westpac Banking Corporation (September 2021);⁷¹ Allen v G8 Education Ltd (February 2022);⁷² Bogan v The Estate of Peter John Smedley (Deceased) (April 2022);⁷³ Nelson v Beach Energy and Sanders v Beach Energy (August 2022);⁷⁴ Lay v Nuix Ltd, Batchelor v Nuix Ltd and Bahtiyar v Nuix Ltd (Nuix) (August 2022);⁷⁵ Gerhke v Noumi Ltd (November 2022);⁷⁶ Mumford v EML Payments Ltd (December 2022);⁷⁷ Lieberman v Crown Resorts Ltd (December 2022);⁷⁸ Fuller & Anor v Allianz Australia Insurance Ltd & Anor (Allianz) (December 2022);⁷⁹ Fox v Westpac Banking Corporation (No 2) (March 2023);⁸⁰ Anderson-Vaughan v AAI Ltd (August 2023);⁸¹ the Star Entertainment group matters (September 2023);⁸² Lidgett v Downer EDI Ltd (September 2023); Five Boroughs NY Pty Ltd v State of Victoria & Ors (November 2023);⁸³ Maglio v Hino Motor Sales Australia; McCoy v Hino Motors (Hino) (December 2023);⁸⁴ Thomas v The a2 Milk Company Ltd (December 2023);⁸⁵ Norris v Insurance Australia Group Ltd (February 2024);⁸⁶ Kilah & Anor v Medibank Private Limited (March 2024);⁸⁷ Raeken Pty Ltd v James Hardie Industries (April 2024);⁸⁸ Gawler v FleetPartners Group Ltd (June 2024);⁸⁹ Warner v Ansell Limited (August 2024);⁹⁰ Dawson v Insurance Australia Ltd (December 2024);⁹¹ Clarke v JB Hi-Fi Group Pty Ltd (May 2025);⁹² Edwards v Hyundai Motor Company Australia Pty Ltd; Sims v Kia Australia Pty Ltd (July 2025);⁹³ Laricchia v WiseTech Global Ltd (August 2025);⁹⁴ Bergman v Sportsbet Pty Ltd (August 2025);⁹⁵ Byrnes v Origin Energy Ltd (August 2025);⁹⁶ and Collens ATF the Collens Superannuation Fund v Mineral Resources Limited & Anor (November 2025).⁹⁷

Whether the making of a group costs order is appropriate or necessary to ensure that justice is done (the criterion for the exercise of the discretion) will depend upon a broad evaluative assessment of the relevant facts and evidence before the Court. The price, or the costs that group members are likely to pay, is relevant but not the only consideration.⁹⁸ A review of the decisions to date provides several key points. First, the Court has approached the question of whether to make an order in a similar manner as when asked to approve a settlement and deductions for legal and funding costs under section 33V of the FCA Act. The decisions (and the Practice Note) acknowledge that disclosing matters relevant to an application for a group costs order involves a similar degree of transparency as a section 33V application. Absent a confidentiality regime, this is prejudicial to the interests of the plaintiff, therefore the Practice Note (section 14.2) allows for the plaintiff to approach the Court regarding confidentiality arrangements. The Court has often delivered its decisions in a public version of the judgment with a separate and further confidential schedule provided only to the plaintiff. Similarly, the Court developed a practice, in the early applications (though also utilised in Star), of appointing a contradictor, which allowed the Court to consider arguments independently made in the interest of group members.

Second, while section 33ZDA specifically refers to the setting of a percentage, the Court has emphasised that there is no set range. This reflects the fact that each circumstance presented to the Court is unique. A survey of the decisions where an order has been made shows that the range, so far, has varied from a low of 14 per cent in Star, to a high of 40 per cent in Bogan. The factors considered relevant by the Court in determining whether a percentage is fair and reasonable have included: (1) the risks that the proceeding will not progress without an order; (2) the costs to group members under alternative funding arrangements (including predictive modelling cautions discussed in later cases such as Gerhke);⁹⁹ and (3) investment evaluation principles relevant to law firms (as discussed in Bogan).¹⁰⁰

Third, the Court expects a high degree of candour in the provision of supporting evidence for it to be satisfied that an order is fair and reasonable. In Nuix, the evidence provided in support of the application failed to satisfy Justice Nichols that the plaintiffs’ lawyers had sufficient financial resources to fund the proceedings. Critical evidence, such as financial statements from the funder and precise details of the relevant insurance policy, was not forthcoming.

Finally, the return to group members is not the sole determining factor in group costs order applications. This was emphasised in Fox, and has been reinforced in subsequent decisions, including the following formulation:

Whether the making of a group costs order (at all or at a particular percentage rate) is appropriate or necessary to ensure that justice is done in the proceeding (the statutory criterion for the exercise of the discretion), will depend upon a broad, evaluative assessment of the relevant facts and the evidence before the court. In making that assessment the interests of group members must be given primacy. In that assessment price, or the costs that group members are likely to pay, is a relevant consideration, but not the only consideration.

In terms of general data on group costs orders made since the June 2020 introduction of the regime, in his report titled Group Costs Orders and Funding Commissions published in January 2024, Professor Vince Morabito concluded that the median group costs order rate was 24.5 per cent, with a range of between 14 per cent and 40 per cent. Interestingly, this median closely compared with the 24 per cent median rate for third party litigation funding commissions, which had been considered by the Court during the seven-year period following the Money Max decision in October 2016 up until 31 December 2023.¹⁰¹ Professor Morabito also explains that, where the group costs order rate is 24.5 per cent, unless altered by the court, class members will commonly receive 75.5 per cent of monetary compensation (because the solicitor’s percentage is typically the only deduction).¹⁰² However, there has been an increasing trend in group costs order rates in recent years, with the median commencement group costs order rate at 27.75 per cent in 2024 and 30 per cent in 2025.¹⁰³

The first detailed judicial treatment of how the Supreme Court of Victoria would approach the confirmation of group costs orders at the time of settlement occurred on 28 August 2024. In approving a proposed settlement, Justice Watson of the Supreme Court of Victoria determined that the group costs order previously made on 26 November 2021 in G8 Education should not be amended.¹⁰⁴ This decision represented the first time the Court has considered the exercise of any power under section 33ZDA(3) in the context of a settlement approval. In this context, Watson J set out guiding principles concerning amendment, de novo hearings, implied limitations, attention to original reasons, and proportionality of costs payable to the lawyer under the group costs order.¹⁰⁵ His Honour also emphasised avoiding hindsight bias when assessing proportionality of the percentage.

Since G8 Education, the Supreme Court of Victoria has (at the time of writing) made final group costs orders in matters including Allianz,¹⁰⁶ O’Brien v ANZ & Anor,¹⁰⁷ Hino,¹⁰⁸ and Crown Resorts.¹⁰⁹ Save for Hino, the Court in each instance determined that there was no reason making it appropriate or necessary to amend the group costs orders previously made. In Hino, the Court reduced the group costs order percentage from 24.66 per cent to 17.39 per cent on the basis that the lower percentage was “an appropriate reward in the context of the effort and investment of the legal practice, the duration of the proceeding, and the risks which were undertaken under the group costs order”.¹¹⁰ Justice Delany’s decision in Hino is notable for its treatment of internal rate of return and return on investment metrics, early settlement effects, and proportionality concerns.¹¹¹

Funding commission as a recoverable head of damage in Australia

In May 2025, the High Court of Australia heard argument in Hunt Leather Pty Ltd & Ors v Transport for NSW¹¹² (Hunt Leather) to consider a range of questions, including a significant issue that arose in that case as to whether a litigation funding commission, payable to a third party litigation funder in the event of success, can constitute part of the damages to be recovered from the defendant. The matter concerned a claim in private nuisance commenced in the Supreme Court of NSW as a class action on behalf of those affected by the prolonged construction of the Sydney Light Rail system. The claimants alleged that the construction caused substantial and unreasonable interference with the quiet enjoyment of property occupied by the claimant group, comprising many retail businesses along the construction corridor. At first instance the plaintiff’s claim in nuisance was successful (in part) although the court declined to order litigation funding commissions as part of the damages award¹¹³ and the matter was then appealed to the NSW Court of Appeal,¹¹⁴ which overturned the primary judge’s decision on private nuisance. On the novel issue concerning the plaintiffs’ ability to recover litigation funding commission as a part of any damages award the NSW Court of Appeal largely agreed with the trial judge, saying the entry into the funding agreement was a voluntary act to mitigate litigation risk and did not comprise foreseeable loss caused by the defendant’s nuisance.¹¹⁵ In December 2025, the High Court unanimously held that the litigation funding commission was not recoverable as damages.¹¹⁶ The High Court’s reasoning was that the funding commission was not a consequence of the action in private nuisance.

It should be noted that there may still be scope for a funding commission to be recoverable as damages in the context of other causes of action, such as claims under specific contractual arrangements.

Legal and regulatory framework

The legal basis and limits of third party funding

Prior to 2006, encouraging litigation and funding another’s claim for profit were prohibited in Australia by the common law doctrines of maintenance and champerty.¹¹⁷ These doctrines prevented the courts from being used for speculative business ventures. Maintenance and champerty were the foundation for numerous challenges to the legitimacy of litigation funding before being progressively abolished as crimes and torts in most Australian states.¹¹⁸ More than 20 challenges to funding agreements were mounted¹¹⁹ in the eight years leading up to the 2006 landmark decision of the High Court in Campbells Cash and Carry Pty Ltd v Fostif Pty Limited (Fostif).¹²⁰

In a pivotal moment in the development of Australian jurisprudence, the High Court held in Fostif that third party litigation funding of a class action was not an abuse of process or contrary to public policy.¹²¹ The Court stated that notions of maintenance and champerty could not be used to challenge proceedings simply because they were funded by a litigation funder.¹²² Following Fostif, litigation funding has become an entrenched part of the Australian legal system, playing a crucial role in providing greater access to the courts and bringing equality of arms to claims often against well-resourced respondents.

Even so, courts may still intervene in funded litigation where funding arrangements are contrary to the public policy considerations upon which the previous prohibitions were based at common law.¹²³ Fostif reserved the question as to what those public policy considerations might be in the Australian states that have not abolished the torts of maintenance and champerty by statute. Hence, challenges to litigation funding agreements still arise from time to time.¹²⁴ A more recent example arose in the Queensland Court of Appeal decision in Gladstone Ports Corp Ltd v Murphy Operator Pty Ltd¹²⁵ (Gladstone). That case involved a challenge to the adequacy of security for costs provided by way of a deed of indemnity from the funder. The defendant joined the funder to the proceeding and sought a declaration that its funding arrangements supporting the class action were unenforceable by reason of public policy. Gladstone argued the funder had been given an impermissible level of control, particularly in relation to settlement and other decision-making, in the litigation.

The Court of Appeal rejected these arguments. To the extent that “maintenance offends against the law”, the Court considered this can be adequately dealt with through the doctrine of abuse of process and should be subsumed into that body of law, rather than dealt with as a separate tort of maintenance.¹²⁶ The Court said a litigation funder was not in any substantially different position from “an insurer defending a claim or suing to recover under a right of subrogation”.¹²⁷ An application for special leave to appeal was subsequently dismissed, with the High Court concluding Gladstone’s arguments had insufficient prospects of success.¹²⁸

Likewise, the extent of a lawyer’s ability to fund claims, in the same way that third party funders might, has been reviewed by the Court too. Apart from Victoria, legal practitioners in all other Australian states and territories are presently prohibited from entering into any arrangement for payment of damages-based contingency fees (where fees are calculated by reference to a percentage of the amount recovered).¹²⁹ Unsurprisingly, practitioners in all states are still entitled to enter into conditional billing arrangements whereby their ordinary fees are payable upon a successful outcome.¹³⁰ These arrangements, known as no-win no-fee agreements, sometimes permit an uplift of up to 25 per cent of the lawyer’s ordinary fees where a successful outcome is achieved.¹³¹ For obvious reasons, such arrangements are often not commercially viable for practitioners, particularly for larger or more complex claims, such as class actions. Victoria has been the only state to address this issue. Victorian practitioners have been permitted to enter into damages-based contingency fee arrangements for class actions since 1 July 2020.¹³²

Over the last decade the extent to which a lawyer may be associated with a litigation funder was extensively tested by a Melbourne-based solicitor, Mark Elliott (now deceased), who was formerly a sole director and shareholder of Melbourne City Investments Pty Ltd (MCI). In 2014, two securities class actions were commenced by MCI, as the representative plaintiff, against ASX listed Treasury Wine Estates (TVE) and Leighton Holdings (LEI). MCI had acquired shares in TVE and LEI. Mr Elliott 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 stayed the proceedings as an abuse of process. The stay was granted because the proceedings had been commenced with the predominant purpose of earning legal fees for Mr Elliott, rather than the fees being an incident or by-product of the vindication of legal rights. In their majority judgment, Maxwell P and Nettle JA emphasised the importance of maintaining public confidence in the fairness of court processes; confidence that “would undoubtedly be shaken” if the enrichment of a solicitor were held to be a legitimate purpose for bringing proceedings.¹³³

Separately, Mr Elliott trialled a different funding model for a class action brought against Banksia Securities.¹³⁴ 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. The litigation funding agreement entitled the funder to a 30 per cent commission and to exercise control over the conduct of the proceeding. The Supreme Court of Victoria restrained Mr Elliott from acting in the Banksia Securities class action owing to conflicts of interest. Justice Ferguson considered that the main risk arising from Mr Elliott’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.¹³⁵ His 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.¹³⁶

In February 2018, a A$64 million settlement of the Banksia Securities class action was approved but then made subject to judicial review following an appeal from a disgruntled group member. The review involved the appointment of a contradictor to assist the Court to consider the amounts to be paid for legal costs and funding commission. In the dramatic developments that followed, allegations were presented to the Court suggesting the plaintiff’s solicitor and counsel had engaged in serious misconduct in connection with their billing practices. In response, both the plaintiff’s senior and junior counsel elected not to dispute the allegations and offered to have their names removed from the roll. The review hearing before Supreme Court Justice Dixon, which examined the funder’s and lawyers’ conduct, including whether they should be ordered to forego all costs and commission and pay additional damages to the 16,000 class members, concluded on 18 March 2021, with judgment delivered on 11 October 2021.¹³⁷ In his judgment, Justice Dixon found that the litigation funder and five lawyers involved engaged in egregious conduct in connection with a fraudulent scheme, intending to claim more than A$19 million in purported legal costs and funding commission from the settlement sum. Justice Dixon noted that their conduct had shattered confidence in, and expectations of, lawyers as an honourable profession, and corrupted the proper administration of justice. The Court concluded that the lawyers’ and funder’s actions were appalling breaches of their respective duties to the court, particularly the paramount duty and overarching obligations imposed on them by the Civil Procedure Act 2010 (Vic). As well as removing some of the lawyers involved from the roll of admitted practitioners, Justice Dixon also referred the matter on to the Director of Public Prosecutions for further investigation and appropriate action.¹³⁸

Post-Fostif developments in litigation funding regulation

As providers of financial services and credit facilities, litigation funders are subject to the consumer provisions of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act), which contains protections against unfair contract terms, unconscionable conduct, and misleading and deceptive conduct.¹³⁹ These provisions provide avenues for redress against unfair or false and misleading terms or omissions in funding agreements. Funders are also subject to the general regulatory requirements under the Corporations Act 2001 (Cth) (the Corporations Act) and the general law, including equity.¹⁴⁰

In 2009, litigation funding regulation prompted national debate following the landmark decision in Brookfield Multiplex Funds Management Pty Ltd v International Litigation Funding Partners Pte Ltd (Multiplex), which determined that litigation funding agreements and the lawyer’s retainer in a funded class action constituted managed investment schemes within the meaning of section 9 of the Corporations Act.¹⁴¹ Managed investment schemes are required to be registered¹⁴² and managed by a public company holding an AFSL.¹⁴³ Failure to comply is an offence.¹⁴⁴

A second landmark case involving a dispute between a funder and client raised similar questions at the time regarding the nature and regulation of funding arrangements. In Chameleon Mining NL (Receivers and Managers Appointed) (Chameleon) the funded client sought to rescind a funding agreement under section 925A of the Corporations Act and thereby avoid payment of the funder’s commission.¹⁴⁵ The 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 constituted 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 aftermath of these two landmark decisions the federal government intervened, announcing that it would protect funded class actions from too heavy a regulatory burden.¹⁴⁶ In 2010, 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 obligations. ASIC subsequently granted transitional relief from the financial product regulatory requirements of the Corporations Act. In August 2020, those protections were significantly scaled back for a period but subsequently reinstated in December 2022, as discussed below.

Initially the Multiplex and Chameleon cases led to the introduction of a conflict management regime. In 2012, regulations were enacted exempting litigation funders from the managed investment scheme provisions of the Corporations Act, subject to compliance with certain conflict management requirements.¹⁴⁷ During this time litigation funders providing both single-party funding¹⁴⁸ (litigation funding arrangements) and multiparty funding¹⁴⁹ (litigation funding schemes) were required to conduct reviews and maintain written procedures identifying and managing conflicts of interest.¹⁵⁰ In April 2013, ASIC released a regulatory guide detailing how litigation funders may satisfy these obligations.¹⁵¹

However, in a dramatic policy change on 22 May 2020, the then Federal Treasurer, the Honourable Josh Frydenberg, announced significantly expanded regulatory requirements were to be imposed on litigation funding via the 2020 Regulations. The stated effect of the 2020 Regulations was twofold: to require third party litigation funders to hold an AFSL, and to require funders to comply with the managed investment scheme regime under Chapter 5C of the Corporations Act. The 2020 Regulations were published on 23 July 2020 under a cloud of controversy,¹⁵² and took effect on 22 August 2020.¹⁵³ The 2020 Regulations reflected the detailed recommendations of the ALRC report Integrity, Fairness and Efficiency – An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (the ALRC report) delivered to the Federal Attorney-General on 21 December 2018.¹⁵⁴ A number of applications were made in connection with funded class actions to determine if they contravened the 2020 Regulations or were protected by the transitional provisions.¹⁵⁵ At the time, some funded class actions also experienced delays due to significant additional compliance obligations associated with the managed investment scheme regime.¹⁵⁶

Subsequently, in Stanwell Corporation Ltd v LCM Funding Limited,¹⁵⁷ one of the respondents to the class action, Stanwell, alleged that the funding arrangements for the class action were unlawful, in that they constituted a managed investment scheme that failed to comply with the 2020 Regulations. In response, the litigation funder (LCM) filed a cross-claim seeking a declaration that the funding arrangements did not constitute a managed investment scheme, and contended that the earlier Full Court decision of Multiplex was wrong. Justice Beach dismissed Stanwell’s claims, holding that the litigation funding arrangements were grandfathered by reason of the transitional provisions in the 2020 Regulations.¹⁵⁸ As such, his Honour found that it was not necessary to deal with the litigation funder’s cross-claim and dismissed the cross-claim.¹⁵⁹ Justice Beach did, however, state that there is a strong case for arguing that it is appropriate for a Full Court to reconsider the majority decision in Multiplex.¹⁶⁰ His Honour then went on to identify (in some detail) the problematic aspects of the reasoning in Multiplex, including the “unresolved conceptual incoherence in applying Chapter 5C of the Corporations Act to litigation funding schemes”.¹⁶¹ On 13 December 2021, the litigation funder appealed from the dismissal of its cross-claim.

In 2022 in the landmark decision of Stanwell,¹⁶² the Full Court of the Federal Court of Australia unanimously held that the decision in Multiplex was plainly wrong, and that a litigation funding scheme did not constitute a managed investment scheme.¹⁶³ The Court agreed with Justice Beach’s analysis of the deficiencies in the reasoning in Multiplex.¹⁶⁴ Justice Lee found that the “characterisation of litigation funding arrangements as managed investment schemes is a case of placing a square peg into a round hole”.¹⁶⁵ His Honour also dismissed the idea that litigation funding schemes are unregulated, citing the Court’s close protective and supervisory role “to ensure that any class action is conducted in a way which best facilitates the just resolution of the disputes according to law and as quickly, inexpensively and efficiently as possible. Relatedly, the Court is also obliged to protect group members and manage the class action recognising that conflicts of interest, or conflicts of duty and interest, between and among representatives, group members, funders and solicitors can arise.”¹⁶⁶

Following the Stanwell decision, the federal government has clarified the regulatory position to align with Stanwell by introducing amendments to the Corporations Regulations. This has been implemented via the Funding Regulations, which commenced on 10 December 2022. The Funding Regulations (among other things) exempt litigation funding schemes from the managed investment scheme provisions of the Corporations Act, effectively bringing the arrangements for litigation funding schemes in line with the regime prior to 22 August 2020 and the law following Stanwell.

Abolition of torts of maintenance and champerty and new class action regime in Western Australia

A further development towards aligning the states with the federal jurisdiction occurred in September 2022, when the Western Australian parliament followed the Victorian, NSW and Queensland jurisdictions by establishing a legislative framework for class actions for the Supreme Court of Western Australia.¹⁶⁷ In an effort to seek uniformity, the Western Australian government chose to model its own class action regime on the federal system as detailed in Part IVA of the FCA Act, although with some minor variations. Additionally, as part of the same reforms in September 2022, the Western Australian parliament also abolished the torts of maintenance and champerty in that state as part of the government’s civil procedure reforms.¹⁶⁸ This legislation was careful not to interfere with the common law restrictions on contracts that might be found to be contrary to public policy or otherwise treated by the courts as illegal.¹⁶⁹ These statutory abolitions followed the path taken in other Australian jurisdictions, such as NSW, Victoria, South Australia and the Australian Capital Territory, and adopted earlier recommendations of the Western Australia Law Reform Commission.¹⁷⁰

Since its introduction, the Supreme Court of Western Australia has seen its first class action commenced in the matter of Buck & Ors v BGC Residential Pty Ltd & Ors, a third party funded class action in relation to alleged breaches of the Australian Consumer Law concerning residential building and construction work for thousands of home owners.¹⁷¹

Reviews into the regulation of litigation funding

The regulation of litigation funding in Australia has evolved through a long history of reviews and reports.

Productivity Commission report. Just over a decade ago, in September 2014, the Productivity Commission delivered a comprehensive report regarding access to justice, which favoured two major reforms which, if implemented, would greatly impact litigation funding.¹⁷² The two proposed reforms were the introduction of a licensing regime for litigation funders¹⁷³ and the removal of the ban on lawyers charging damages-based contingency fees, thereby introducing another funding option for clients.¹⁷⁴ Both reforms (and an array of other proposals) received further independent consideration at state and federal level by the VLRC and the ALRC.¹⁷⁵

VLRC. On 16 December 2016, the Victorian Attorney-General commissioned the VLRC to report on litigation funding and the conduct of class actions and to consider how regulators might better protect litigants from unfair risks or disproportionate costs burdens.¹⁷⁶ The VLRC report, Access to Justice: Litigation Funding and Group Proceedings, tabled in the Victorian parliament on 19 June 2018 (the VLRC report), recommended that, subject to careful regulation, legal practitioners be permitted to charge contingency fees so as to provide another funding option for clients who are unable to bring proceedings without financial assistance in appropriate cases. The VLRC report also supported industry-wide national regulation of litigation funders and recommended that Victoria advocate for stronger national regulation through the Council of Australian Governments.¹⁷⁷

ALRC. On 11 December 2017, the federal government announced that the ALRC would conduct a similar federal review into litigation funding and the conduct of class actions. The ALRC Inquiry, led by the Honourable Justice Sarah Derrington QC, consulted broadly with judicial and expert panels, regulators, stakeholders and interested parties in the United Kingdom and Canada. A discussion paper released on 1 June 2018 (the ALRC paper)¹⁷⁸ attracted more than 70 formal submissions from a broad range of industry stakeholders, including funders, law firms, insurers, industry super funds, non-government organisations, business lobby groups, and regulatory bodies and professional associations.

The ALRC report was delivered to the Attorney-General on 21 December 2018 and makes 24 recommendations, predominantly relating to the reform of class action law and procedure. Consistent with the earlier recommendations of the VLRC and the Productivity Commission, the ALRC report recommends that percentage-based fee arrangements or contingency fee arrangements for solicitors be permitted in Australian class action proceedings with some limitations.¹⁷⁹ This would allow solicitors to receive a proportion of the sum recovered at settlement, subject to court approval, to ensure arrangements are reasonable and proportionate. The four key arguments advanced in favour of contingency fee arrangements are that they will: (1) increase access to justice for prospective group members of medium-sized class actions (between A$30 million and A$60 million); (2) promote competition; (3) increase returns for group members; and (4) provide clarity and certainty for group members.¹⁸⁰ The recommended limitations to be placed on contingency fee arrangements include that the contingency fee be the one and only form of funding; the solicitors are precluded from also recovering any professional fees on a time-cost basis; and the solicitors bear the onus of paying for the disbursements and must account for these within the contingency fee.¹⁸¹

Notably, in relation to the regulation of litigation funders, the ALRC report recommends against the introduction of a licensing regime (contrary to the initial proposal in the ALRC paper). It suggests improved court oversight of litigation funders on a case-by-case basis.¹⁸² The ALRC considers this will “achieve at least the same level of consumer protection without the regulatory burden of a licensing regime”.¹⁸³ The ALRC report suggests a suite of amendments to the FCA Act aimed at strengthening the Federal Court’s supervision of litigation funders, including to provide that litigation funding agreements for class action proceedings are enforceable only with the approval of the court; expressly empowering the court to award costs against litigation funders (and insurers) who fail to comply with the overarching purposes of the FCA Act (to facilitate the just resolution of disputed claims according to law and as quickly, inexpensively and efficiently as possible); and a statutory presumption that litigation funders who fund class action proceedings will provide security for costs in a form that is enforceable in Australia.¹⁸⁴

The ALRC report also recommends that ASIC Regulatory Guide 248 be strengthened to require that litigation funders who fund class action proceedings report annually to ASIC on their compliance with the requirement to implement adequate practices and procedures to manage conflicts of interest.¹⁸⁵ In recognition of the wide range of funding models emerging since the 2012 conflict management procedures were introduced, the ALRC also recommends that the scope of Regulation 5C.11.01 of the Corporations Regulations be amended to include law firm financing and portfolio financing within the definition of a litigation funding scheme, so that litigation funders who provide such funding are also required to implement conflict management procedures.¹⁸⁶

PJC review. In May 2020, the former federal government announced yet another review of “litigation funding and the regulation of the class action industry” – this time via a referral to the Parliamentary Joint Committee on Corporations and Financial Services (PJC).¹⁸⁷ A four-week period was allowed for short submissions followed by a series of short hearings in July and August 2020. The stated terms of reference of the inquiry were to consider whether the current level of regulation applying to Australia’s growing class action industry is impacting fair and equitable outcomes for plaintiffs.¹⁸⁸ In mid-2020, the hastily convened PJC review¹⁸⁹ considered the regulation of “litigation funding and the class action industry” prior to the federal government responding to the 24 detailed recommendations contained in the ALRC report.¹⁹⁰

On 21 December 2020, precisely two years after the ALRC report was completed, the PJC delivered its own, far briefer report (PJC report). In it, the PJC recognised that litigation funders close the considerable gap in financial resources between the two sides of a class action, reducing the defendant’s ability to defeat the case through superior economic power. The PJC recognised that, in many instances, a class action in Australia may not proceed without a litigation funder. However, in many respects, the PJC report took a major departure from many of the comprehensive recommendations contained in the ALRC report.

The PJC report proposed a series of additional legislative, regulatory and practice requirements be introduced with the stated objective of constraining litigation funders and class actions more generally. These recommendations include procedural proportionality concepts, presumptions on security/indemnities, enhanced court powers over funding contracts, minimum returns to class members (including a flagged 70 per cent proposal), contradictors, uplifts review, financial services regulation for lawyer contingency models, ongoing conflict disclosures, alignment of funder duties with lawyer duties, forum limitations for Corporations Act claims, and harmonisation work with states and territories.¹⁹¹ In contrast to the ALRC report, the PJC report adopts a far more aggressive stance on what the PJC report authors consider to be the appropriate level of regulatory intervention.¹⁹²

To date the federal government is yet to respond in full to aspects of the PJC report and has not responded to the previous comprehensive recommendations set out in the ALRC report.¹⁹⁵

Corporations Amendment (Litigation Funding) Regulations 2022

On 16 December 2022, changes to the regulation of litigation funding schemes under the Corporations Act were introduced by the commencement of the Funding Regulations. The broad effect of the Funding Regulations is to return the regulatory position back to the position that existed immediately prior to the Corporations Amendment (Litigation Funding) Regulations 2020 (the 2020 Regulations). The Funding Regulations once again provide litigation funding schemes with an explicit exemption from the managed investment scheme (MIS), Australian financial services licence (AFSL), product disclosure and anti-hawking provisions of the Corporations Act.¹⁹⁶ In part, this is to ensure that the Corporations Regulations 2001 (Cth) (the Corporations Regulations) reflect the status of the law following the Full Court of the Federal Court’s decision in LCM Funding Pty Ltd v Stanwell Corporation Limited (Stanwell).¹⁹⁷ The explanatory statement, issued by the authority of the Assistant Treasurer and Minister for Financial Services, notes that the MIS and AFSL regimes were not designed or intended to regulate the litigation funding industry.¹⁹⁸ The Funding Regulations bring arrangements for litigation funding schemes in line with arrangements for other types of funding schemes (i.e., insolvency funding schemes) and litigation funding arrangements.

Structuring the agreement

Typical structure

Funded litigation can involve a contractual relationship between the litigation funder, the lawyer and the funded client, whereby the funder agrees to provide for some or all of the client’s legal costs and disbursements in return for receiving a percentage of any damages recovered. The remuneration can take any form, although more common forms include a multiple of the funding, a percentage of the proceeds, a fixed amount, or a combination of these.¹⁹⁹ Percentages typically range between 20 and 45 per cent of the settlement proceeds depending on the risks and time involved and the type of funding required.²⁰⁰ The ALRC report noted that the median commission rate for third party litigation funding of Federal Court class actions between March 2017 and March 2018 was 30 per cent.²⁰¹ However, in the context of insolvency litigation funding, commission rates can be considerably higher.²⁰² In contrast, the median rate for “common fund” orders in class actions during the period October 2016 to December 2019 was 21.9 per cent.²⁰³

In class actions, the funder may also assist with project management, administration and pre-claim investigation and may charge a project management fee. Litigation funders routinely agree to provide security for costs and an indemnity to cover the risk of adverse costs orders if the proceeding is unsuccessful.

As litigation funders do not act as the legal representatives for the funded litigant, clients generally enter into two agreements: a standard retainer agreement with their lawyer recording the scope and terms under which the legal services are to be provided; and a litigation funding agreement with their funder recording the terms on which litigation funding is to be provided. Commonly, the funder and lawyers have no direct contractual relationship, although clients often authorise their lawyers to report directly to the funder and agree to funder-approved standard lawyer terms. Funders may agree to pay a proportion, or all, of a lawyer’s fees during the claim. Where legal fees are partially deferred, they are generally recovered from any resolution sum if a successful outcome is achieved. The client usually authorises the lawyer to receive any resolution sum on the client’s behalf to be applied in accordance with an agreed priority.²⁰⁴

Funding agreements often allocate project management responsibilities and day-to-day administrative control over the litigation to the funder, allowing the funder the right to provide instructions and administrative support to the lawyers, subject to the client’s overriding instructions. In theory, the ultimate level of control given to the funder might be seen to give rise to potential conflicts between the interests of the client, in achieving the best possible outcome, and the interests of the funder, in resolving the claim for an acceptable return on its investment. In Fostif, the Court of Appeal recognised that a high level of control by the funder is expected and permissible but cautioned 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.²⁰⁵ 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. Hence, funding agreements often preserve the client’s right to override the funder’s instructions and commonly include dispute resolution mechanisms.

In the recent decision of Mitchell v Roads and Maritime Services (now known as Transport for NSW) (No 2)²⁰⁶ the court was asked to intervene in a dispute that had arisen between a funder, on the one hand, and the funded representative plaintiffs and their lawyers, on the other. The dispute centred on the ongoing conduct of the claim and how certain funds paid by the funder into the solicitor’s trust account should be dealt with. The funder sought to have the dispute referred for expert determination administered by the Australian Commercial Disputes Centre, relying on certain dispute resolution provisions of the funding agreement, whereas the funded plaintiffs sought to join the funder as a party to the funded class action and have the dispute determined by the court. As a preliminary point, the court determined, on public policy grounds, that the funder should be joined as a party to the class action proceeding.²⁰⁷ As to the question of whether the dispute should be referred to a private determination, given the representative nature of the class action proceeding, McGrath J rejected the funder’s attempts and observed:

I consider that it is apparent from the protective and supervisory nature of the statutory provisions in Part 10 of the CPA that it is appropriate for disputes over the funding of class actions to be determined by this court rather than by way of private agreement between the parties through arbitration.²⁰⁸

In accordance with the overarching purpose,²⁰⁹ Justice McGrath also considered the dispute (between the funder and the client/lawyers) should be determined without the need for any separate proceeding. McGrath J proceeded to exercise the power in section 183 of the Civil Procedure Act 2005 (NSW) to determine the funding dispute, permitting the trust funds to be used for payment of legal fees incurred, with any remainder to be returned to the funder.

An agreement to purchase or assign a claim to a funder is also possible in certain circumstances. It may be structured in a number of ways, including providing for the funder to pay an upfront payment, a back-end payment contingent on success (such as a percentage of any damages recovered), or a combination of both. In more recent times, some litigation funders have purchased claims as an alternative to traditional litigation funding.²¹⁰ This has largely occurred in the context of insolvency litigation as a result of amendments to the Corporations Act allowing external administrators (including liquidators) to assign rights to sue.²¹¹

Judicial intervention

Over the past decade, Australian courts have shown a willingness to scrutinise the commercial terms of litigation funding agreements and, in some instances (somewhat controversially), intervene if they consider funding commissions to be excessive. In Barglow Pty Ltd v Newcrest Mining Ltd (Newcrest), Justice Murphy considered that the court had power to reduce a litigation funder’s commission rate in the context of a class action when approving the settlement.²¹² 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).²¹³ Justice Murphy considered that this power derived from a combination of sections 23, 33V, 33Z and 33ZF of the FCA Act, and was analogous to the court’s power to fix the amount of costs payable to the lawyers.

In deciding whether to exercise that power in the context of a class action settlement approval, Australian courts have also shown a willingness to review and consider legal costs, the amount that funded litigants will receive “in hand”, the risks assumed by the funder, the amount of adverse costs exposure, and the sophistication and experience of funded litigants. Applying these principles to the Newcrest settlement approval application, Justice Murphy concluded that the aggregate funding commission of A$6.75 million, at rates of between 26 and 30 per cent, was fair and reasonable. His Honour considered the published empirical research into the funding commission rates paid in Australian class actions, and previous settlement approval decisions, before concluding that those rates were at the lower end of the range. His Honour also emphasised the need for transparency about matters pertaining to funding in settlement approval judgments to allow proper benchmarking.

In contrast, in 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,²¹⁴ but preferred to base that view on section 33V(2) of the FCA Act, rather than on the other provisions referred to by Justice Murphy.²¹⁵

This issue appears not to be settled. In Liverpool City Council v McGraw-Hill Financial Inc (now known as S&P Global Inc),²¹⁶ Justice Lee approved a comparatively large funding commission of A$92 million out of a total settlement of A$215 million (about 43 per cent) through a funding equalisation order, but, in doing so, considered that section 33V(2) of the FCA Act did not give the court the power to interfere with the amount of a funding commission to make a settlement reasonable, or to alter a valid contract between parties (including a funding agreement).²¹⁷ In doing so, Justice Lee noted that there were no objections or applications to set aside the agreement and that a large portion of the class were sophisticated institutional investors. Although his Honour did not ultimately decide on whether the court has an inherent power to alter a funding agreement,²¹⁸ he did express significant doubt about the existence of such a power, which would allow the court to interfere and vary funding agreements in the context of a settlement by altering the contractual promises of group members to pay a commission.²¹⁹

Consequently, the question (and extent) of judicial power to vary terms of litigation funding agreements remains somewhat controversial and unresolved in Australia.²²⁰ The courts have since considered this question in a number of cases and have either declined to vary the commission rate,²²¹ or, in some cases, varied the commission rate.²²² On 30 September 2021, the former federal government responded to the specific recommendations of the ALRC report and PJC report that the Federal Court be given an express statutory power to reject, vary or amend the terms (such as the commission rate) of such litigation funding agreements, and that litigation funding agreements (for class action proceedings) be enforceable only with the approval of the Federal Court, via the new Treasury Laws Amendment (Measures for Consultation) Bill 2021: Litigation Funders (the Funders Bill), which, among other things, aimed to provide the court with express statutory power to do so.²²³ The Funders Bill was introduced into Parliament on 27 October 2021 but did not pass the Senate.

A more recent decision gives an example of the overriding consideration of whether a proposed order is reasonable and just in all of the circumstances. In Gill v Ethicon Sarl (No 2),²²⁴ the Federal Court rejected an application under section 33V(2) by solicitors (being a wholly owned subsidiary of an ASX listed entity) acting for a group of plaintiffs affected by serious and chronic complications caused by pelvic mesh implantations. The solicitors sought approval for a deduction of well over A$32 million out of a $300 million settlement amount, representing the accrued interest payable on two disbursement loan facilities taken out by the solicitors, which carried interest charges initially calculated at rates between 22.4 per cent and 31.5 per cent per annum. Evidence was led as to the circumstances that led to the solicitors having to resort to sourcing disbursement funding at such exorbitant rates. In a judgment that raised a range of concerns, including as to the potential for a conflict of interest for the solicitors, the calculations as to the net proceeds for the plaintiffs, whether the proposed arrangements were properly notified to the plaintiffs and the reasonableness of the settlement itself (even before the proposed deduction of the interest), Justice Lee dismissed the application in its entirety and discouraged the solicitors from making a further application.²²⁵

Scrutiny of the commercial terms of litigation funding agreements has also arisen in the insolvency context. In Re Jabiru Satellite Limited (in liq) and NewSat Limited (in liq),²²⁶ the Supreme Court of New South Wales (NSW) dismissed an application for the appointment of a special purpose liquidator seeking to pursue claims available to the companies against secured lenders. The Court determined that the appointment was not beneficial to creditors of the companies, placing considerable weight on the onerous proposed funding terms. In particular, Justice Black was concerned with the size of the potential funding fee (of at least 70 per cent of the net resolution sum), which the Court found would be “wholly disproportionate” to the costs the funder would likely incur.²²⁷

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.²²⁸ Broader disclosure to the court and other parties is also required in any class action.²²⁹ Funded applicants are entitled to redact these materials to conceal information that might confer a tactical advantage on another party.²³⁰ Commercial terms, such as the litigation budget, the commission and the costs structure, are generally redacted, whereas the court is given a complete version.²³¹ On occasion, the Federal Court has been prepared to order production of unredacted litigation funding agreements where relevant, for example, where funding rates were relevant to the respondent’s application to set aside the proceeding as an abuse of process,²³² or where an application to de-class the proceeding on the ground that a closed class was said to be an abuse of process.²³³ Similar requirements as to the disclosure of funding arrangements in class actions are in place in the Supreme Courts of New South Wales, Victoria, Queensland and Western Australia.²³⁴

Outside the class action realm, there are few mandatory requirements for disclosure of funding agreements, with the notable exceptions of arbitration conducted under the Arbitration Rules of the Australian Centre for International Commercial Arbitration²³⁵ and proceedings advanced in the insolvency context.²³⁶ Under section 477(2B) of the Corporations Act, a liquidator must obtain the approval of the court, the committee of inspection or a resolution of creditors before entering into any agreement that has a term (or obligations which may be discharged) beyond three months. The approval process requires an assessment by the court that entry into the agreement is a proper exercise of power and not ill-advised or improper, rather than involving the exercise of commercial judgment.²³⁷ Applications for approval to enter into funding agreements are often made together with further requests for that material to remain confidential and for the application to be heard in camera. This is because liquidators in section 477(2B) applications may need to disclose commercially sensitive details, such as the terms and conditions of funding, including, for instance:

1. any limit of funding, the terms of repayment to the funder and the funder’s success fee and the terms of the provision of security for costs;
2. privileged legal advice;
3. confidential details of insurance policies; and
4. confidential investigations and the liquidator’s proposed strategy for future investigations.

As explained by Justice Barrett in McGrath & Anor re HIH Insurance Ltd,²³⁸ it is often the case that liquidators are in the unenviable position of needing approval from the court to fund claims against third parties where disclosing the details of that funding and the terms on which it is to be provided is an incidental part of obtaining approval. This sets their case apart in such a way that justice will best be served by an examination of the matters the liquidators are bound to raise with the court, in an atmosphere where they can lay them before the court fully and frankly and without any apprehension that the interests they are bound to serve will thereby be prejudiced. In considering whether to grant suppression orders, the court will consider what is necessary to prevent prejudice to the proper administration of justice²³⁹ and the authorities show that where the liquidators can demonstrate that the proposed proceeding would be undermined by the publication of the materials, then the entirety²⁴⁰ or the sensitive parts of the material²⁴¹ will be suppressed.

In Kogan, in the matter of Rogulj Enterprises Pty Ltd (in liq) (Rogulj),²⁴² the Court noted that funding agreements, and information regarding attempts to secure funding, are “routinely the subject of a court ordered confidentiality regime” and that it is “convention to make a confidentiality order to protect the terms of funding arrangements between liquidators and funders”.²⁴³

Parties have 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). Communications to a litigation funder for the purpose of it considering the provision of funding, or the continuation of funding, have been held to fall within the terms of section 119.²⁴⁴ For example, materials containing estimates of the possible quantum of the claims, strategic forensic recommendations about a prospective proceeding or frank assessments of prospects and potential risks of a proceeding are generally redacted or not disclosed to other parties with adverse interests.²⁴⁵ In 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.²⁴⁶ However, 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 attached. Importantly, the Court of Appeal also 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.²⁴⁷

The extent of the disclosure of a funding agreement was a factor in Mitchell v Roads and Maritime Services (now known as Transport for NSW), a case which involved a third party funded class action in respect of the compulsory acquisition of land for the construction of a tunnel as part of the WestConnex M4–M5 Link Project. A dispute arose as to whether security for costs should be ordered in circumstances where the funder had only provided a redacted copy of the funding agreement, including redactions preventing the identity of the funder from being disclosed. The respondent made an application for an order for security for costs and sought an unredacted version of the funding agreement and details of the funder’s financial position,²⁴⁸ which was refused by the funder. Justice Ball concluded there were strong reasons in support of the court exercising its inherent power, and power under section 67 of the Civil Procedure Act 2005 (NSW), to order that security for costs be provided. His Honour noted that because the litigation funder had not been named there was an inability for the respondent to determine whether the indemnity in respect of costs offered by the funder would be honoured, nor was it possible to determine how easy or difficult it would be to enforce any costs order against the funder.²⁴⁹

Finally, it should also be noted that there may be in some jurisdictions the requirement that a party to a civil proceeding notify the other parties and the court of the name of any non-parties holding an interest in the proceeding.²⁵⁰ Where there is such a requirement, typically a litigation funder will be identified as an interested non-party.

Costs

Superior Australian courts generally 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 1970 (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.²⁵¹

This principle was applied in Jin Lian Group Pty Ltd (in liq) v ACapital Finance Pty Ltd (No 2),²⁵² where the Court held a third party funder jointly and severally liable for the defendant’s costs from the date security for costs was provided.²⁵³ In this case, security for costs was ordered in the sum of A$149,000. As the plaintiff was an insolvent company and the liquidators were without funds to pay the security, the liquidators entered into a funding agreement pursuant to which the funder provided funding for the security and an adverse costs indemnity up to A$150,000. The plaintiff was ultimately unsuccessful at trial, and the defendant’s costs exceeded the amount of security provided. The Court considered the matters relevant in determining whether it is appropriate to make a non-party costs order, including that the funder provided funds for the litigation, had a direct interest in the fruits of the litigation and had agreed to provide an adverse costs indemnity, and determined that each of the matters were present in this case.²⁵⁴ The Court formed the view that “but for the intervention of the Funder … the proceeding would not have continued”,²⁵⁵ and stated that “Litigation funders should be aware that if they involve themselves in pending court proceedings in circumstances where their intervention is the factor that causes those proceedings to continue and go to trial, they risk an adverse costs order”.²⁵⁶

More recently, in Davis v Wilson (Costs),²⁵⁷ the Federal Court made a third party costs order against a funder despite the fact that the funder provided an indemnity for adverse costs under its funding agreement and had separately offered undertakings for any costs liability of its client. The decision eschews the orthodox position that only in “exceptional circumstances” will third-party cost orders be made, derived most recently from Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) (2012) FCAFC 50. The decision reinterprets this principle, distinguishes the authority and affirms that it does not apply to funded litigation.²⁵⁸

In Hardingham v RP Data Pty Limited (Third Party Costs),²⁵⁹ the Federal Court made a third party costs order against a funder in circumstances where the funding agreement expressly excluded the funding of an adverse costs order. Again, the Court emphasised that “one obvious risk for any commercial litigation funder is that, if the funded litigation is unsuccessful, the funder might face an application that it pay the successful parties’ costs. That risk arises whether or not it has agreed to indemnify the applicant against an adverse costs order.”²⁶⁰

The limits of this principle have been tested on the related question of whether security for costs can, and should, be ordered against third party litigation funders in “no costs” jurisdictions.²⁶¹ In Augusta Ventures Ltd v Mt Arthur Coal Pty Ltd (Augusta),²⁶² the Full Court of the Federal Court was asked to consider whether the court has power to make a security for costs order against a third party funder in a no costs jurisdiction²⁶³ and, if so, whether the order should be made on discretionary grounds.²⁶⁴ The Court reiterated that it retains power to stay proceedings (including by reference to considerations concerning the exposure of a litigation funder to costs) as part of its power to control its own processes.²⁶⁵ However, the focus is different when exercising discretion to make security for costs orders against third party funders in no costs jurisdictions. It was said the prejudice the claimants themselves would suffer from not being able to vindicate their rights, should the funder not provide such security, is inappropriate where such claimants are not ordinarily liable for costs.²⁶⁶ Accordingly, the Court upheld the appeal and set aside the order for security for costs originally made against the third party funder.

Similarly, in Duck v Airservices Australia (No 3),²⁶⁷ the Court considered an application for an order that the third party litigation funder pay the respondent’s costs of the proceeding in a no costs jurisdiction. The Court held that the no costs jurisdiction did not prevent a costs order being made against the third party funder, but declined to exercise the discretion to make the costs order sought because it was not in the interests of justice to do so in the particular circumstances of the conduct of the proceedings.²⁶⁸ The Court concluded that the no costs jurisdiction is but one factor to consider in the exercise of the court’s broad costs discretion, and that the conduct of the litigation is always likely to be an important consideration.²⁶⁹ The Court attached considerable weight to the efficient determination of the proceedings, especially by way of a separate question, which saved substantial costs and court time, and stated that it was very much in the interests of justice to encourage this sort of conduct, especially by the potent exercise of the costs discretion.²⁷⁰ However, the Court recognised that a costs order might be warranted against a funder in certain circumstances, for example, if the proceeding was instituted vexatiously or without reasonable cause, or if there was an unreasonable act or omission in the conduct of the proceedings that caused the respondent to incur costs.²⁷¹

However, examples exist where a litigation funder did not provide any contractual indemnity against adverse costs and where the court subsequently refused to order that third party funder to 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 simply because the funder had not assumed any liability for adverse costs.²⁷² 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.²⁷³ At the time, the High Court’s SST decision generated apprehension from some quarters, suggesting that funders might refuse to provide indemnities for adverse costs to the detriment of successful respondents. Perhaps as a result of commercial realities and market competition, these fears have not materialised.²⁷⁴ In practice, litigation funders routinely agree to indemnify clients against adverse costs exposure and provide security for costs that may be ordered. Representative applicants in funded class action claims will often not be prepared to assume personal liability for costs without such indemnities.²⁷⁵

Where security for costs has been sought in funded litigation, the adequacy and form of security proposed by some funders has also given rise to disputes. 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 a costs order would not be satisfied because of 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.²⁷⁶ The Court ordered security for costs to be lodged, concluding that Precision Tracking did not have the capacity to meet an adverse costs order; the funding agreement restricted the indemnity to a counterclaim in the proceedings; and the adverse costs insurance was taken out for the primary claim. Additionally, the funder had absolute discretion to terminate its funding arrangements with Precision Tracking 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 again tested in Petersen Superannuation Fund Pty Ltd v Bank of Queensland Ltd (Petersen)²⁷⁷ and Equititrust Limited v Tucker.²⁷⁸ In the Petersen 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 concluded that the specific policy offered was not sufficient, noting the beneficiary of the policy was the applicant, not the respondents.²⁷⁹ 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.

The costs of providing security, including the costs of obtaining an after the event (ATE) policy, will typically be borne by funded clients either indirectly in the sense that they are absorbed in the funding commission, or directly in that they are recovered through a payment made to the funder of an amount in addition to the funding commission.²⁸⁰ The ability of a funder to recoup the costs of obtaining an ATE policy in a funded class action was recently considered in Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 3).²⁸¹ In approving a settlement by way of a common fund order, the Court decided that the costs of obtaining an ATE policy should not be passed on separately to group members when the court controls the remuneration, but should be incorporated into the commission paid to the funder. The Court noted that it is a matter for the funder whether to obtain an ATE policy to defray the risk of providing an adverse costs indemnity.²⁸² A similar approach was adopted in Equity Financial Planners Pty Ltd v AMP Financial Planning Pty Ltd,²⁸³ where the Court did not allow a separate deduction for ATE policy costs, not only because it compensated the funder for a cost of defraying a component of the very risk which it contracted to accept, but also because allowing the funding commission plus the proposed deduction for ATE costs produced an overall commission that was excessive and outside of the range of what is fair and reasonable. These two cases can be distinguished from Ewok Pty Ltd v Wellard Limited, where the Court allowed the deduction for ATE costs in addition to the funding commission on the basis that all 23 group members in the closed class proceeding, each of whom were institutional investors, had entered into funding agreements and agreed to the funder being reimbursed for these costs.²⁸⁴

Special considerations

In the Australian context, special consideration should be given to the increasing willingness of the courts to make non-party costs orders against commercial litigation funders, irrespective of the contractual terms entered into between a claimant party and funder. More recent cases in this area, such as Davis v Wilson (Costs), Hardingham v RP Data Pty Limited (Third Party Costs) and Jin Lian Group Pty Ltd (in liq) v ACapital Finance Pty Ltd (No 2) demonstrate the court’s willingness to disregard the agreed contractual terms and funding arrangements in favour of scrutinising who ultimately stood to benefit from the litigation, when considering the issue of costs.

We think that the only precondition to the exercise of power would have to be that the non-party has a sufficient connection with the unsuccessful party and the litigation to warrant the Court exercising its jurisdiction. The connection between the non-party and the unsuccessful party and the litigation must be material to the question of costs; Vestris v Cashman (1995) 72 A Crim R 449 at 467 per Lander J.²⁸⁶

Outlook and conclusions

The litigation funding landscape in Australia is mature and continues to evolve into a more sophisticated and diverse market. In the past 20 years, the common law has steadily refined and clarified the regime’s requirements following the High Court’s seminal 2006 decision in Fostif. Increased competition, coupled with the availability of group costs orders in Victoria, has driven innovation. While the early 2020s saw a dramatic hardening of the regulatory environment, particularly in relation to class action and multiparty litigation funding, the position has since reverted to the longer term hybrid approach of judicial oversight coupled with a light touch regulatory regime.

An important milestone in the evolution of litigation funding in Australia has been the progressive abolition of the torts of maintenance and champerty across various states of Australia. Comity and uniformity will hopefully see the remaining few states and territories follow suit.

In the six years since the introduction of damages-based contingency fees for lawyers in Victoria, there have also been significant changes in the way litigation funding support is provided to support class actions. Primarily, “back to back” funding of law firms is more prevalent than a decade ago. Numerous group costs orders have now been made under section 33ZDA of the Supreme Court Act 1986 (Vic) in class actions conducted in the Supreme Court of Victoria, establishing the contours of the system and an expectation of the likely range of contingency fee percentages. Even so, despite a marked increase in the average annual number of class actions commenced in the Supreme Court of Victoria, it has not become the dominant jurisdiction for funded class actions, with the Federal Court of Australia maintaining that mantle.²⁸⁷

The recent High Court decision in Kain, reflecting the concept of a Solicitors’ CFO, has also somewhat curtailed the ability of plaintiff lawyers to innovate in this area. For solicitors, absent legislative change, the Kain decision effectively closes the door on contingency fees in class actions conducted outside the Supreme Court of Victoria.

As to the validity of CFOs more broadly, after a long wait following Brewster, the High Court in Kain confirmed the court has power to make CFOs at the time of settlement or judgment. This decision puts an end to a decade of CFO litigation following the Money Max decision, with the CFO model finally preserved, albeit in a denuded mode, requiring the parties and funders to await the conclusion of a class action proceeding before applying for and obtaining any CFO.

Consequently, harmonising the damages-based contingency fee provisions for class actions in other states, territories and federally, still presents as an option for lawmakers and regulators, should they choose to adopt this key ALRC report recommendation. The authors consider that these steps would also enhance consumer choice, reduce costs and provide additional pathways for access to justice.

The federal parliament’s long awaited response to the ALRC report more broadly will potentially have a significant impact on the litigation funding market in Australia. Until then, the current hybrid approach, pairing the current regulatory regime with judicial oversight appears to be working effectively, and appears to be avoiding unfair outcomes for participants while limiting excessive compliance burdens and costs for funders. In the class action context, notwithstanding the High Court’s constraints on the timing of when CFOs can be made, the adoption of the common fund doctrine has certainly improved fairness and equity between class members. It has also enabled funders to more efficiently consider the commercial viability of multiparty claims by decreasing the need to engage in costly and time-consuming client book-building.

In terms of other regulatory reform, this does not appear to be a priority for federal or state governments at present. The courts are taking a more active approach to the management of their own processes in respect of litigation funding, setting parameters and expectations by which litigation funding are permitted to operate within the justice system. As a general proposition, the authors consider that incremental developments in the common law should ordinarily be favoured over the blunt tools of legislative intervention, unless a clear case for intervention is warranted. As Justice Beach observed in McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd:

Trial judges need flexible tools to regulate these funding arrangements and to tailor solutions to each individual case. And preferably that regulation should take place closer to the outset of proceedings rather than at the other end, particularly where competing class actions are in play.²⁸⁸

Finally, in considering the regulatory pathway ahead it is worth reflecting on the objectives outlined in the second reading speech for the introduction of Australia’s class actions regime made back in 1992. During that period, the (then) Attorney General, the Honourable Michael Duffy, said:

… the new procedure will enhance access to justice, reduce the cost of proceedings, and promote efficiency in the use of court resources.²⁸⁹

Borrowing from these noble objectives, espoused over 30 years ago, the evolving regulatory environment for litigation funding in Australia has now settled at a pragmatic, evidence-based and workable regime for litigation funders and claimants alike, which does enhance access to justice. Having entered a period of regulatory stability and judicial clarity, litigation funding should continue to offer options for better access to justice in Australia in the years ahead.