VLRC Releases Consultation Paper on Class Action and Litigation Funding Reform

 “report on the following issues to ensure that litigants who are seeking to enforce their rights using the services of litigation funders and/or through group proceedings are not exposed to unfair risks or disproportionate cost burdens:

1. Whether there is scope for the supervisory powers of Victorian courts or Victorian regulatory bodies to be increased in respect of proceedings funded by litigation funders…
2. Whether removing the existing prohibition on law firms charging contingency fees (except in areas where contingency fees would be inappropriate, including personal injury, criminal and family law matters) would assist to mitigate the issues presented by the practice of litigation funding….
3. In respect of group proceedings commenced under the provisions of Part 4A of the Supreme Court Act 1986 and similar proceedings that involve a number of disputants being represented by an intermediary, whether there should be further regulation of such proceedings…”

“The services provided by litigation funders and the introduction of class actions in Victoria have enabled thousands of Victorians to obtain redress when otherwise legal action was beyond their reach. At the same time, there is concern within the judiciary, the legal profession and the wider community about the impact of these developments on the legal system, the role of the court, the interests of plaintiffs and the rights of defendants.

At the core of the concern are the conflicts of interest that arise in proceedings in which a litigation funder is involved. The litigation funder seeks to maximise its return on the investment and closely monitors the process; the lawyer has duties to the court and to the plaintiff but is being paid by the litigation funder; and the plaintiff is unlikely to be in a position to negotiate the terms of the agreement with the funder. In class actions, there is the added dimension of the divergent interests of class members, not all of whom have signed a funding agreement with the litigation funder or a legal retainer with the lawyer.”

• What changes, if any, need to be made to the class actions regime in Victoria to ensure that litigants are not exposed to unfair risks or disproportionate cost burdens?
• What changes, if any, need to be made to the regulation of proceedings in Victoria that are funded by litigation funders to ensure that litigants are not exposed to unfair risks or disproportionate cost burdens?
• Should different procedures apply to the supervision and management of class actions financed by litigation funders compared to those that are not?
• Is there a need for guidelines for lawyers on their responsibilities to multiple class members in class actions? If so, what form should they take?
• In funded class actions, should the plaintiff be required to disclose the funding agreement to the Court and/or other parties? If so, how should this requirement be conveyed and enforced?
• Should the existing threshold criteria for commencing a class action be increased? If so, which  … reforms are appropriate?
• How could the interests of unrepresented class members be better protected during settlement approval?
• Would lifting the ban on contingency fees mitigate the issues presented by the practice of litigation funding?