New Opinion in Australia on Registrations for Litigation Funding and Class Actions
Courtesy of Mondaq and Google, I encountered this article from AU law firm Middelton’s regarding a new appellate opinion in Australia on litigation funding. The appellate court opinion arises in the context of funding for a class action. The Middelton’s article kindly included a link to the opinion, which is here. The upshot seems to be that there are more required registrations than had been perceived for litigation funding in Australia for class actions.
The entire article and opinion need to be viewed. But, here’s the short summary from the article:
There are numerous shareholder or investor class actions currently before the courts or that are anticipated and many of those are backed by litigation funding on terms similar to those present in this case. The Full Court’s decision means that those class actions should probably have been registered as Managed Investment Schemes.
Running a Managed Investment Scheme entails a wide range of commercial, legal and compliance issues, including the requirement to hold an Australian Financial Services Licence (AFSL). Whilst such issues are not insurmountable for the litigation funder, obtaining the AFSL and registration of the scheme is a complex process that ordinarily takes many months. Where the litigation funder is a foreign entity (as is the case with ILF), that process is likely to be further complicated.
In the Brookfield Multiplex case, the Full Court stated that the defendant in a representative proceeding is entitled to have confidence in its dealings with the solicitors, for the claimants that they are properly authorized to act, and that the proceedings will not, in the future, be disrupted or delayed by any intervention by ASIC or a disgruntled group member, asserting an irregularity of the nature identified here. Those comments call into question the status of other class actions currently before the courts and may present an obstacle for claims in contemplation unless suitable arrangements are put in place.
The other consequence of the judgment may be that litigation funders and solicitors running representative proceedings shy away from class actions that involve retail investors (ie the “mums and dads” of the investment community) as an investment scheme involving large or institutional investors will not require registration (but the manager of that scheme will still need an AFSL).
To view the citation to the judgment please click here.