A Parliamentary Committee will be asked to examine the profits being made by the litigation funding industry to determine whether Australians are receiving their fair share of class action settlements.
Attorney-General, Christian Porter said the Parliamentary Joint Committee on Corporations and Financial Services would be given broad terms of reference to inquire into all aspects of the class action system, including whether further regulation of litigation funders was needed to improve justice outcomes.
“To quote judges who have presided over cases involving litigation funders, the profits they make have been variously described as ‘stratospheric’, ‘arguably excessive’ and ‘not fair and reasonable’,” Mr Porter said.
“In fact, the Australian Law Reform Commission (ALRC) found that when litigation funders were involved in a class action, the median return to plaintiffs was just 51 per cent, compared to 85 per cent when a funder was not involved,” he said.
“There is something clearly wrong with this situation because the mums and dads who are members of class actions are ultimately the ones who are missing out.”
The committee will also be asked to review the broader impact of the increase in class actions on the Australian economy, as well as the potential impact of a move by the Victorian Government to abolish the long-held prohibition on lawyers being paid on a contingency basis, where lawyers claim costs as a percentage of their clients’ damages.
“The Government is concerned that allowing contingency fees will create conflicts of interest,” Mr Porter said.
He said the Joint Committee would be asked to report back to Parliament on 9 November.
