The 2009 decision of the Full Court of the Federal Court in
Brookfield Multiplex Ltd v International Litigation Funding Pty Ltd
has cast some doubt about the role and regulation of litigation
funding in class actions in Australia. The decision has the
potential to affect the availability of litigation funding for
class actions, such as those sometimes mooted by disgruntled
In Brookfield Multiplex it was held that the litigation funding
arrangements (which are largely replicated in other funded class
actions) constituted an unregistered managed investment scheme in
breach of the Corporations Act (the Act).
Under the Act, operators of managed investment schemes must hold
an Australian Financial Services Licence (AFSL) and are subject to
stringent prudential and reporting obligations. Only one litigation
funder in Australia has an AFSL and if such a level of regulation
was now to be introduced that might have an impact of the
availability of funding in the future.
ASIC has now advised that it will grant temporary relief from
the consequences of the judgment in Brookfield Multiplex to all
class actions commenced before 4 November 2009 until the end of the
current financial year.
ASIC will assess whether or not and on what terms it will grant
transitional relief to class actions commenced after 4 November
2009. The identity of the potential claimants in those class
actions (ie whether they are "retail" or
"institutional" claimants) may affect ASIC's
determination of whether the prudential and reporting obligations
associated with managed investment schemes should apply.
Despite the potential for an increased regulatory burden on
litigation funders, the Brookfield Multiplex decision does not
affect the power of the ACCC to bring class actions on behalf of
persons under s 87(1B) of the Trade Practices Act. A recent example
is the class action brought by the ACCC alleging misleading and
deceptive conduct against Allphones Retail Pty Ltd (and current and
former directors and executives of that company) on behalf of
certain current and former franchisees.
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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