As the birthplace of third party litigation funding (TPLF), Australia has not only become a global center for TPLF, but it has also developed a model of funded, opt-out class actions for the rest of the world. According to a study conducted by NERA, TPLF’s rise is a significant contributor to the recent increase in class actions in Australia.

TPLF firms do not just fund class actions in Australia – they often launch and manage the cases as well. Unfortunately, this often leads to the funders profiting at the expense of the class members. An example is the 2012 settlement with the Centro retail chain. The initial lawsuit alleged AU$1 billion in economic damages. However, the case was eventually settled for AU$200 million, with more than 30 percent ($62 million) going to Bentham IMF Australia, the funder that financed and managed the lawsuit. After subtracting additional fees, the class members were left with $106 million – just over 10 percent of the $1 billion they claimed was owed to them.

There is also growing concern about the lack of proper oversight for TPLF. In 2017, the Victorian Attorney General Martin Pakula asked the Victorian Law Reform Commission (VLRC) to review the rules covering litigation funders to prevent unfair conduct in civil proceedings, including class actions. This request was prompted by a case where the majority of the plaintiffs' $5 million award was split by their lawyers and Sydney-based LCM Litigation Funding. The attorney general has requested VLRC answer several inquiries on TPLF.

There is also concern for oversight of funders at the federal level. In early 2018, the Australian Attorney General announced that he is launching a review of TPLF regulation by the Federal Australian Law Commission.

In addition to introducing oversight of TPLF, reforms must also be made to Australia’s class action system. A  2014 report released by ILR found that TPLF is intertwined with Australia’s class action system and certain reforms to class action procedures and rules could restrain the use of TPLF in class actions and reduce conflicts of interest and ethical concerns.

More information about third party litigation funding can be found here.