Litigation 2025

AUSTRALIA Law and Practice Contributed by: Amanda Banton, Elliott Smith, Melissa Morgan and Paul Smith, Banton Group

2. Litigation Funding 2.1 Third-Party Litigation Funding In Australia, third-party litigation funding is allowed with certain restrictions, requiring funders to manage conflicts between their inter- ests, the lawyers, and the funded party. Histori- cally, litigation funding faced few restrictions and has grown significantly, becoming integral to Australian legal practice, notably in class actions. In 2009, the Federal Court recognised litigation funding schemes as managed invest- ment schemes under the Corporations Act. Amendments in 2020 mandated that litigation funding scheme operators hold an Australian financial services licence (AFSL) and comply with managed investment scheme regulations. However, the 2022 Federal Court ruling in LCM Funding Pty Ltd v Stanwell Corporation Limited exempted litigation funding schemes from being managed investment schemes. As of November 2023, the Federal Parliament is consulting on legislation to amend the Corporations Regula- tions, explicitly exempting litigation funding schemes from managed investment scheme, AFSL, product disclosure, and anti-hawking provisions. 2.2 Third-Party Funding: Lawsuits No restrictions exist on the types of cases that can be funded by third parties, though recent trends show funders typically backing share- holder and investor claims, mass torts, and con- sumer claims due to potential high recoveries. Outside class actions, third-party funding is also utilised in insolvency and high-value commercial litigation. 2.3 Third-Party Funding for Plaintiff and Defendant Though third-party funding is primarily for plain- tiffs due to its entrepreneurial nature, it can be

provided to defendants in rare cases, often driv- en by political or ideological motivations. 2.4 Minimum and Maximum Amounts of Third-Party Funding There are no limitations on the funding amount a third party can provide. The funding typically depends on estimated legal costs, the class size in class actions, and the claim’s complexity and merits. 2.5 Types of Costs Considered Under Third-Party Funding The specific costs covered by third-party fund- ing depend on the litigation type and the fund- ing agreement. Generally, funders advance legal costs and related expenses and may cover pro- ject management and administration costs in class actions. Funders often indemnify the rep- resentative applicant and provide security for Until recently, contingency fees were generally prohibited for legal practitioners in Australia. However, recent developments have permitted contingency fees in the case of class actions filed in the Supreme Court of Victoria and in the Federal Court of Australia. Elsewhere, solicitors cannot charge fees based on settlement or judg- ment amounts but may agree to be paid only if the client wins, including a regulated premium or “uplift” payment. 2.7 Time Limit for Obtaining Third-Party Funding No time limits regulate when litigants can obtain third-party funding. potential adverse costs. 2.6 Contingency Fees

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