The Morrison Government has today introduced legislation into Parliament to improve outcomes for litigation funding participants by promoting a fair and reasonable distribution of class action proceeds.
The Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021 addresses key recommendations of the Parliamentary Joint Committee on Corporations and Financial Services report on litigation funding and the regulation of the class action industry, including recommendations 7, 11, 12, 13, 16 and 18.
The Bill will enhance court oversight of the distribution of class action proceeds between the litigation funder and members of a class action litigation funding scheme. Courts will be empowered to approve or vary the method for distributing claim proceeds to non-members of the scheme, to ensure the distribution is fair and reasonable in light of the interests of scheme members.
To further protect class members, the Bill will establish a rebuttable presumption that the distribution of claim proceeds is not fair and reasonable if more than 30 per cent is to be paid to entities who are not scheme members, including funders and lawyers.
In addition, the Bill will require plaintiffs to consent to become members of a class action litigation funding scheme before funders can impose their fees or commission on them. This will encourage 'book building' and ensure that actions involving litigation funders are commenced with the genuine support of plaintiffs.
By enhancing the role of independent experts, the Morrison Government will also protect class members against the kinds of misconduct highlighted by the recent Banksia class action. These experts will support the courts in assessing proposed litigation funding fees and ensure that the interests of class members are properly represented.
These reforms, together with previous changes to require litigation funders to hold an Australian Financial Services Licence and comply with the managed investment scheme regime, demonstrate the Morrison Government's commitment to ensuring that when it comes to class actions, the interests of class members come first.
