Australia: Common fund order made in QBE class action

Last Updated: 7 December 2016
Article by Paul Bannon

In brief - Court's order may encourage open class proceedings

In the matter of Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited [2016] FCAFC 148 (QBE class action), a Full Court of the Federal Court was prepared to make orders requiring all class members to pay the same pro rata share of legal costs and the funding commission from the common fund of any amounts they receive in settlement or judgment in the case. The Court required the funder, the applicant and the applicant's solicitors to undertake to agree to be bound by the litigation funding terms the Court annexed to its judgment before making the orders.

In other words, in a proceeding where the applicant (Money Max) had already agreed with a funder, International Litigation Funding Partners (ILFP) and its solicitor regarding terms on which litigation funding would be provided, the applicant sought orders which in essence would have the effect of applying litigation funding terms to all class members (not just the funded class members) and varying the rate of commission it had agreed with that funder.

The funder has been given the choice as to whether or not it wishes to proceed to fund the case where a common fund would be established but the rate of commission payable to it would be determined by the Court at a later time in the proceedings - probably at settlement approval or distribution of any judgment sum.

Allco class action case in 2015 saw Court decline common fund order

In our article of 13 August 2015 "Common Fund" application dismissed by Federal Court in Allco class action, we wrote on the reasoning of His Honour Justice Wigney of the Federal Court in the case of Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers and Managers Appointed) (in Liq) [2015] FCA 811 where His Honour dealt with an application to impose obligations on group members to pay the litigation funder even though they had not entered into a funding agreement. Only the applicants in that case had entered into a funding agreement with ILFP.

Justice Wigney did express the view that many of the issues raised by the applicants in their submissions in support of an order made out "a fairly compelling case for reform" of litigation funding, including possible introduction of Court approval of funding agreements.

As reported, Justice Wigney was concerned about the far reaching operation and effect of the proposed orders. The Court was being asked to declare the reasonableness of what were, at that stage of the proceeding, indeterminable or inestimable amounts. His Honour declined to make the order imposing the funder on the group.

Money Max brings open class action proceedings against QBE

When QBE made an ASX announcement on 9 December 2013 (which the applicant calls a corrective disclosure), QBE's share price declined $4.63 per share over that and the following day.

The proceeding brought by the applicant is an "open class" action. That is, the applicant brings the class action on its own behalf and on behalf of all persons who acquired an interest in QBE shares in the defined period and who claim to have suffered loss as a result of QBE's conduct.

The QBE class action is also funded by ILFP. Not all class members had entered into a funding agreement.

Interlocutory application for a common fund order

The Court, comprising Murphy, Gleeson and Beach JJ, stated (at [1]-[2]) that:

  • At the date of hearing of the interlocutory application for a common fund to be imposed upon the class, the applicant and 1,290 class members had each entered into a litigation funding agreement with ILFP. The balance of the class members had not.
  • The funded class members had agreed to reimburse ILFP the legal costs paid and also to pay ILFP a percentage commission of either 32.5% or 35% (depending on how many QBE shares they acquired in the defined period).
  • Accordingly, it was the funded class members who were collectively bearing the cost of the action against QBE as they had agreed to pay a funding commission and to reimburse the legal costs paid by the funder, out of any settlement or judgment.

Money Max's expert evidence estimated unfunded class members had a shareholding falling in the range of approximately 53% to 75% of shares acquired during the relevant period and held at the close of the period. Those unfunded class members would benefit from the commercial arrangements undertaken by the funded class members unless an order was subsequently made at the time of settlement approval or judgment, in the nature of a "funding equalisation order" in respect of those who did not opt out.

Such an order allows deductions from settlement amounts payable to unfunded class members of amounts equivalent to the funding commission that would otherwise have been payable by them had they entered into a funding agreement, and such amounts are then distributed pro rata across all class members. In this way both funded and unfunded class members receive the same proportion of the settlement or judgment amount. Thus, while unfunded class members under such a regime would not pay a funding commission to the funder, equality of treatment is achieved between class members because the unfunded class members do not receive any more "in the hand" than funded class members.

In the common fund proposed in the QBE class action, application was made to apply litigation funding terms to all class members at a reduced rate of 30%, from the common fund of any settlement or judgment in favour of the class.

Funding commission rate considered too high by some objectors to the order

All class members were notified of the application.

There were only two active objectors when the application was heard and both objections were on the basis that the funding commission rate of 30% was too high, especially when legal costs were required to be paid on top of the funding commission. Those objectors were minor participants in the proceeding given one only acquired ten shares in the relevant period and the other thirty shares.

Their objections to the commission rate were said (at [44]) to be of little significance to the Court's decision as under the Court's proposal, they would have the opportunity to be heard at a later stage when the Court approved a reasonable funding commission rate.

Common fund order includes three safeguards

A common fund order was made.

It was a little like the curate's egg for ILFP. If it wishes to continue to fund the action on the basis of a common fund, it has the expected commercial advantage of having a funding rate applied to the whole settlement or judgment amount and not just to the proportion due to its clients who had signed funding agreements. It has the disadvantage of not knowing the rate until the Court approves it, most likely at the settlement approval stage.

Accordingly, when a settlement is being negotiated, the funder will not know the rate that will apply.

Indeed, in making a common fund order, the Court stated (at [11]) that it had included three safeguards, namely:

  1. It did not approve the funding commission at the rate of 30% as the applicant sought or indeed at any percentage rate.
  2. Court approval of a reasonable funding commission rate was to be left to a later stage when more probative and complete information would be available to the Court - probably at the stage of settlement approval or the distribution of damages.

    The Court made no attempt to bind the court hearing the relevant application at a later time as to the appropriate rate of funding commission but did state it was highly likely that the funding commission would be approved at a rate lower than 32.5% or 35%.

    The absence of a cap on the aggregate funding commission that funded class members may be contractually obliged to pay could have a consequence that the funder is entitled to an excessive or disproportionate amount in the event of a very large settlement. Under the Court's proposed orders, that consequence would be significantly ameliorated if not avoided - because the commission rate is set when the settlement or judgment amount is known.

    Unfunded class members faced the prospect through a funding equalisation order (absent a common fund) that they would be saddled with a deduction from any settlement or judgment of an amount equivalent to the funding commission rate charged to funded class members as fixed in the funding agreement. Now, they and the funded class members would have the protection inherent in judicial approval of the rate of commission.

    Indeed, the Court stated that judicial oversight of the funding commission charged by the funder is central to its decision.

  1. The Court's proposed orders contained a floor condition that no class member could be worse off under the orders than he or she would be if such orders were not made.
  2. It is contemplated that before class members are required to choose whether or not to opt out, they would be informed of the proposed orders and the fact that they would have deducted from any settlement or judgment a reasonable funding commission at a Court approved rate. The rate may not have been approved at that stage, but the group member knows judicial approval of the rate is required.

Common fund approach and open class proceedings consistent with Part IV(A) of Federal Court of Australia Act

The Court observed that a common fund approach to litigation funding charges and legal costs was consistent with the aims of Part IV(A) of the Federal Court of Australia Act 1976 which deals with representative proceedings.

The Court saw a common fund approach as enhancing access to justice by encouraging "open class" representative proceedings as a practical alternative to the "closed class" representative proceedings which are prevalent in funded shareholder class actions. Open class proceedings were seen as more consistent with the opt out representative procedure envisaged by the legislature in enacting Part IV(A).

Finally, the Court said that by encouraging open class proceedings, a common fund approach may reduce the prospects of overlapping or competing class actions and reduce the multiplicity of actions that sometimes occurs with class actions.

The Court considered it appropriate that it supervise litigation funding charges.

What will be the effect of encouraging open class proceedings?

The trade-off in encouraging open class proceedings will be whether it leads to a race to file.

Due diligence in relation to prospective claims prior to filing may suffer. However, plaintiff solicitors will argue that there is still required the Genuine Steps Statement under rule 8.02 of the Federal Court Rules 2011 (Cth), a proper basis certification under section 42 of the Civil Procedure Act 2010 (Vic) or verification of certain pleadings by Part 14 Rule 23 of the Uniform Civil Procedure Rules 2005 (NSW).

The setting of funding commission rates

The Court's expectation is that courts will approve funding commission rates that:

  • avoid excessive or disproportionate charges to class members
  • still recognise the important role of litigation funding in providing access to justice
  • are commercially realistic
  • properly reflect the costs and risks taken by the funder
  • avoid hindsight bias

A court is likely to approve commission rates which produce a figure that is not excessive or disproportionate to the risk taken by the funder. A court may cap the aggregate funding commission. A court may adopt a sliding scale which decreases as the judgment or settlement amount increases.

Whilst it was stated that the Court had no real difficulty in accepting that a 30% funding commission rate is within the range of rates commonly offered, it will be interesting to see if an approved rate of say 10% for a common fund by one court will set the floor or the ceiling for rates considered by others. As is often the case, it is likely to depend on the circumstances.

Paul Bannon
Insurance and reinsurance
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Paul Bannon
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions