“The Australian Industry Group welcomes the introduction into Parliament today of the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021. The Bill will implement vital reforms to protect class action plaintiffs from the grossly excessive returns being earned by litigation funding firms. The Australian Law Reform Commission recently reported that in class actions involving litigation funders, the median return to plaintiffs was only 51 per cent of the amount awarded, while in cases not involving litigation funders, the median return to plaintiffs was 85 per cent.1 This highlights that plaintiffs are currently getting a raw deal from the class action system,” Innes Willox, Chief Executive of the national employer association Ai Group, said today.
“In addition to protecting plaintiffs, the Bill will assist in addressing the huge increases in business insurance costs of up to 600%2 that have resulted from the big increase in class action claims over recent years. When a class action is pursued against a company, the financial and other impacts can be devastating.
“Many class action claims are being pursued on a speculative basis with funding from litigation funding firms chasing excessive investment returns.
“The legislation includes a rebuttable presumption that returns to plaintiffs in a class action would not be fair and reasonable if more than 30% of the claim proceeds will be paid to any other parties, including a litigation funder. This is a fair and practical approach that will offer a lot more protection to plaintiffs.
“The legislation would also require plaintiffs to consent to participate in a class action litigation funding scheme rather than having fees imposed on them without their consent. This approach has obvious merit.
“Litigation funding firms and the plaintiff law firms they are partnering with can be expected to run a ‘chicken little’ campaign against these reforms. On any fair assessment, it is patently obvious that the sky is not going to fall in when the Bill is passed. It is important that all Parliamentarians put any vested interests aside and act in the interests of plaintiffs by supporting these sensible and fair reforms,” Mr Willox said.
1. Australian Law Reform Commission, Integrity, Fairness and Efficiency—An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (Final Report), December 2018. Published in Parliament on 24 January 2019.
2 Submission of Marsh to the Parliamentary Joint Committee’s Inquiry into Litigation Funding and the Regulation of the Class Action Industry, 11 June 2020.