Victorian Law Reform Commission recommendations may simply encourage more competing class actions in Victoria

On 19 June 2018, the Victorian Law Reform Commission (VLRC) published its report on litigation funding and group proceedings. IMF Bentham Limited is concerned that some of the recommendations will merely result in more class actions being brought in the Victorian State Supreme Court and may encourage more competing class actions filed in different courts.

Contingency fees in Victorian class actions

The VLRC report states that the class action regime in Victoria “appears to be underutilised” and recommends that Victorian lawyers be permitted to charge contingency fees in class actions. Specifically, it recommends that the Victorian Supreme Court Act 1986 be amended to provide the Court with the power to make a common fund order for the lawyers acting for the plaintiff in a class action to be paid a percentage of the recovered amount, subject to certain conditions being met.

This recommendation is stated to be independent of any decision to remove the prohibition on lawyers charging contingency fees nationally (currently being considered by the Australian Law Reform Commission (ALRC). See, Litigation Funding under Inquiry. If the ban on lawyers charging contingency fees is not lifted nationally, this could potentially result in contingency fees being permitted in Victorian class actions and not in any other jurisdiction in Australia.

This may encourage more competing class actions filed in different courts. Without a national approach, greater complexity will arise with respect to multiplicity of and competing class actions.

This recommendation appears to be at odds with preliminary proposals made in the ALRC Discussion Paper released last month as part of its Inquiry. See, ALRC announces preliminary ideas on the regulation of litigation funding and class action reform. The ALRC has made some proposals aimed at addressing the issue of competing class actions in order to avoid multiple class actions proceeding in relation to the one legal dispute.

Regulation of funders

IMF Bentham welcomes the VLRC’s recommendation that the Victorian Government should advocate for stronger national regulation and supervision of the litigation funding industry (also currently under consideration by the ALRC). IMF Bentham has been a constant and enthusiastic proponent of regulation in a measured and proportionate manner, endorsing the 2014 Productivity Commission’s recommendation to introduce minimum capital adequacy requirements. For many years IMF Bentham operated under ASIC’s licensing regime, and now does so under conflict regulations and other procedures and laws which apply to it. 

Amendments to Victorian class action procedure

The VLRC’s report also makes several other recommendations aimed at improving efficiency and accountability. For example, the VLRC recommends amendments to the Victorian Supreme Court Practice Note for class actions to require the disclosure of litigation funding agreements to the Court and other parties to class actions. IMF Bentham supports this recommendation which would bring it in line with the Federal Court Practice Note. However, as submitted to the VLRC, IMF Bentham considers that equal disclosure should be imposed on both plaintiffs and defendants where any form of external funding is involved for either party.

The VLRC also recommends amendments to Part 4A of the Supreme Court Act 1986 (Vic) to provide the Court with specific power to review and vary all legal costs, litigation funding fees and charges, and settlement distribution costs to ensure that they are fair and reasonable. Under the current class actions regime, settlements are required to be approved by the Court. As part of a settlement approval process, the Court already assesses the reasonableness of any litigation funding fee and has the power to reject a settlement proposal due to the size of the fee.

IMF Bentham suggests the Courts consider introducing a costs budgeting procedure (similar to the UK Jackson reforms), requiring both claimant and defendant lawyers to file in court at an early stage their estimated costs. If budgets are exceeded, the excess would not be recoverable from the unsuccessful party, unless exceptional circumstances apply. If introduced here, this would provide the Courts with a procedure by which costs can be considered and assessed at the beginning of a matter, rather than at the end, after the costs have already been incurred. It would also provide the Court with a measure to assess costs at settlement.

Next steps

The Victorian Attorney-General has said the Victorian state government would consider the VLRC’s recommendations, as well as the interaction with the ALRC’s work. The ALRC has invited submissions by 30 July 2018 and IMF Bentham will be contributing a submission. The ALRC is due to report to the Commonwealth Attorney-General by 21 December 2018.

ABOUT IMF BENTHAM

IMF is one of the leading global litigation funders, headquartered in Australia and with offices in the US, Singapore, Canada, Hong Kong and the UK. IMF has built its reputation as a trusted provider of innovative litigation funding solutions and has established an increasingly diverse portfolio of litigation funding assets.

IMF has a highly experienced litigation funding team overseeing its investments. We have a 90% success rate over 166 completed investments and have recovered over A$1.3 billion for clients since 2001. 

For further information regarding IMF and its activities, please visit www.imf.com.au.