Key Points: Litigation funders must now be very cautious in proceeding
with any funding schemes they currently are operating.
Potential defendants may have some breathing space after the
Full Federal Court's decision in Brookfield Multiplex Limited v
International Litigation Funding Partners Pte Ltd  FCAFC
The Court held that the litigation funding scheme and
solicitors' retainers involving International Litigation
Funding Partners and Maurice Blackburn was a managed investment
scheme which required either registration with, or an exemption
from, ASIC. A critical feature of the proceedings (as is common to
the funding schemes used by litigation funders in the last few
years) is that the class of claimants is limited to those who have
signed up to the litigation funding scheme and solicitors'
Litigation funding in Australia involves calculated investments
in uncertain legal outcomes. There is a balance struck between risk
and return with an acknowledged risk of failure but, equally, the
prospect of rewards for the funder and funded alike. Sounds a lot
like an investment scheme. Yet, to date, Australian governments
have not specifically regulated this market. This Federal Court
decision has now brought the industry within the jurisdiction of
the Corporations Act and ASIC.
What does this mean for the future of class actions and
It's premature to declare litigation funding dead and buried
In the short term, the decision does cause some difficulties for
litigation funders and solicitors for class members using them.
Penalties under the Corporations Act for operating an unregistered
managed investment scheme can potentially be very grave, and so
anyone who continues operating a litigation funding scheme from
this point on is risking a lot.
In the long term, however, it is likely that litigation funding
will continue to play a significant role in the maintaining
Australia's reputation as one of the most class-action friendly
countries in the world. The lawyers for the class members, Maurice
Blackburn, have stated that they are currently considering whether
to seek special leave to appeal to the High Court, and are also
considering restructuring the current arrangements.
Either way, this problem for litigation funders will ultimately
be resolved, whether that be by a successful appeal to the High
Court, restructuring their arrangements, or seeking registration or
So what happens now?
For International Litigation Funding Partners and other funders,
this decision means that they must now be very cautious in
proceeding with any funding schemes they currently are
For defendants, this decision means they should carefully
consider pursuing a similar strategy to that of Brookfield
Multiplex. The provisions relating to managed investment schemes in
the Corporations Act are technical and litigation funding
arrangements are evolving all the time, so this may require careful
analysis of the funding arrangements.
From a broader perspective, if nothing else this decision should
reignite a healthy debate about the need for regulated litigation
funding in this country and the form which any regulation of such
an industry should take.
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.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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