"Class actions have a genuine role to play in ensuring that where a large number of parties have suffered common harm or damage they are properly compensated. However, the current poorly regulated system is allowing litigation funders to take a disproportionate share of the proceeds of class actions. A recent Australian Law Reform Commission report on class actions proceedings and third-party litigation funders reported that in cases involving litigation funders, the median return to plaintiffs was only 51 per cent of the amount awarded, while in cases not involving litigation funders, the median return to plaintiffs was 85 per cent.¹

"Ai Group supports a statutory minimum return of 70% of the gross proceeds of a class action to class members, however, in some contexts, a 70% return would be excessive. Therefore, Ai Group’s submission proposes the following statutory criteria to guide the Court in determining whether the minimum 70% gross return to class members is appropriate in a particular case or whether, for example, an 80% or 90% return to class members is appropriate:

• The complexity of the litigation;
• The duration of the litigation;
• The risks to which the litigation funder was exposed;
• The risks to which class members were exposed; 
• The size of the amount awarded by the Court or of the settlement; and
• The financial and other resources that the litigation funder has devoted to the litigation.

"Any return to a litigation funder at the finalisation of proceedings should be proportionate to the cost and risk undertaken, and should avoid the potential for profits which have been described in various Court judgments as ‘stratospheric’, ‘arguably excessive’ and ‘not fair and reasonable',"² Mr Willox said.

Ai Group submission

Further media enquiries

Tony Melville – 0419 190 347

Footnotes: 

¹ Australian Law Reform Commission, Integrity, Fairness and Efficiency—An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (Final Report), December 2018. Published in Parliament on 24 January 2019.
² Tredrea v KPMG Financial Advisory Services (Australia) Pty Ltd (No 3) [2019] NSWSC 871, [89], [94]; Endeavour River Pty Ltd v MG Responsible Entity Limited [2019] FCA 1719.