Disappointing Full Federal Court decision on security for costs in Fair Work class actions

“It is disappointing that the Full Federal Court has overturned the decision of Justice Lee in the Turner v Tesa Mining case. Justice Lee had ordered Augusta Ventures (a UK-based litigation funder) to provide security up-front for the costs likely to be expended by the relevant employers in defending a class action relating to casual employment issues,” Australian Industry Group Chief Executive, Innes Willox, said today.

“Importantly, the Court did not rule out Augusta Ventures being required to pay the employers’ costs at the conclusion of the litigation, if the claims are rejected by the Court.

“Notably, Chief Justice Allsop highlighted the absence of regulation that requires foreign litigation funders to have proper capitalisation or sufficient funds in Australia. This could impact upon employers being able to recover their costs in class action litigation and this regulatory gap needs to be addressed without delay.

“Comprehensive litigation funding legislation needs to be implemented requiring licence holders to:

  • Have sufficient capital in Australia;
  • Act in the best interest of plaintiffs at all times;
  • Fully disclose funding arrangements to plaintiffs and the Court;
  • Ensure that any returns are reasonable, having regard to Returns on Invested Capital (ROIC) being earned at the relevant time for other classes of investments with similar risks; and
  • Pass, on an ongoing basis, a ‘fit and proper person’ test.

“A Parliamentary inquiry is currently looking at the need for reforms to class action and litigation funding laws, and Ai Group has put forward a comprehensive reform plan.

“An Australian Law Reform Commission report last year on Class Actions Proceedings and Third-Party Litigation Funders reported that, in cases involving litigation funders, the median return to plaintiffs is only 51% of the amount awarded, while in cases not involving litigation funders the median return to plaintiffs is 85%. This highlights that the current arrangements are not benefiting plaintiffs and that reforms are urgently needed,” Mr Willox said.

Full Federal Court’s decision

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