Discussion paper

Inquiry into class action proceedings and third-party litigation funders: discussion paper

Litigation Class actions Australia

The Australian Law Reform Commission (ALRC) today released a Discussion Paper, Class Action Proceedings and Third-Party Litigation Funders (DP 85), and is calling for comments and feedback on its questions and proposals for law and system reform.

The ALRC has conducted more than 40 consultations to date for this Inquiry, which have informed the development of the questions and proposals. Following the release of the Discussion Paper, the ALRC will begin a second round of stakeholder consultations.

The Terms of Reference for this Inquiry ask the ALRC to consider whether, and to what extent class action proceedings and third-party litigation funders should be subject to Commonwealth regulation, and whether there is adequate regulation of: conflicts of interest between third-party litigation funders, lawyers and class members; prudential requirements and character requirements of funders; and the proportion of settlement available to be retained by lawyers and litigation funders in class action proceedings.

The ALRC was asked to have regard to the increased prevalence of class action proceedings; the importance that costs in these matters are appropriate and proportionate; and the need to protect the interest of plaintiffs and class members.

The majority of class action proceedings that are filed in the Federal Court of Australia receive funding from third-party litigation funders. In the last five years, 64% of class action proceedings filed in the Federal Court received funding. All shareholder class action proceedings—which are the most likely type of class action proceeding—filed in the Federal Court during that time were funded.

The Discussion Paper provides 16 proposals and asks 11 questions that focus on the introduction of regulation appropriate for third-party litigation funders and strengthening the role of the Federal Court to further supervise funded class action proceedings.

The Discussion Paper asks whether the introduction of contingency fee billing for solicitors acting in class actions would provide better protection for class members than the current system where both lawyers and funders receive a proportion of settlement. It also proposes a system for regulatory collective redress, enabling potential class members to recover damages without going through the statutory class action regime.

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ALRC Discussion Paper 48