Blog: Class actions: Labor unwinds Coalition reforms – The Australian Financial Review

In the LCM case, the appeal court overturned the funding in Brookfield Multiplex (2010) that class actions backed by litigation funders were MISs for the purposes of corporations law.

Mr Jones said it was “regulation gone mad”,

“The proposed new regulations are instead drafted to facilitate access to justice rather than the previous Treasurer’s cynical efforts to hamper Australians’ access to funding for class actions which he ushered through under the cover of COVID-19,” he said.

The explanatory statement for the draft bill hints at further reform in saying “the regulatory regime in the [Corporations] Act for regulating litigation funding schemes is not fit for purpose”.

“Specifically, the MIS and ASFL regimes were not designed or intended to regulate the litigation funding industry…

“The regulations bring arrangements for liigation funding schemes in line with arrangements for other types of litigation funding schemes (i.e. insolvency litigation funding schemes) or litigation funding arrangements defined in the Corporations Regulations, which are already exempt from the Act’s MIS regime, AFSL requirements, Part 7.9 product disclosure requirements [in the Corporations Act] and anti-hawking provisions.“

Mr Jones and Mr Dreyfus said the government was actively considering the Australian Law Reform Commission’s report on litigation funding, tabled in 2019, which made 24 recommendations including contingency fees, common fund orders and enhanced powers for the courts.

Commonwealth legislation giving law firms the right to charge contingency fees would help the Federal Court stem the flow of class action filings to the Supreme Court of Victoria since it introduced contingency fees in 2020.

Under the current rules for all other jurisdictions, a law firm can only recover its professional fees and disbursements. In Victoria, they can now seek an alternative order for a percentage of the payout, a path that allows bigger firms such as Maurice Blackburn outfits to compete with funders and run claims.

Shadow attorney-general Julian Leeser said the new regulation followed a pattern.

“Labor’s three biggest donors are the unions, the industry super funds and class action law firms,” Mr Leeser said.

“The first actions of the Albanese Government has been to reduce accountability and transparency in relation to each.

“Despite its virtue signalling, this is another example that shows Labor has no integrity on integrity.“

Class actions lawyer Jason Betts, of Herbert Smith Freehills, said the 2020 changes were “a step towards reasonable prudential requirements, appropriate limits on control of the litigation and breach reporting requirements to ASIC”.

“That would hardly be something anyone could object to in our highly regulated economy. What’s needed is basic financial regulation with a bespoke licensing system.”

Maurice Blackburn’s head of class actions, Andrew Watson, said repealing the Coalition regulations would “promote access to justice without detrimentally affecting protections for class members, whose interests will be jealously guarded by the courts”.

“We also particularly welcome the government’s indication of a comprehensive response to the ALRC report rather than approach of the Morrison government which consisted of a sustained attack on access to justice in the interests of corporate wrongdoers.”

Veteran funder John Walker, of CAL, said the new regulations would “decrease the barriers put in place by the former Government to diminish access to justice” and that the Law Reform Commission’s report “has for too long sat on the shelf”.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s