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. 

There are also concerns for oversight of funders at the federal level. In early 2018, the Australian Attorney General commissioned the Australian Law Reform Commission (ALRC) to review the federal class action rules and the practice of third party litigation funding. In January 2019, ALRC published a final report “Integrity, Fairness and Efficiency — An Inquiry into Class Action Proceedings and Third Party Litigation Funding (ALRC Report 134).

Following the release of the ALRC report, and the subsequent public outcry regarding the rapid growth of funded class actions and the excessive fees charged by litigation funders, Attorney General Christian Porter announced in early 2020 that the federal government will consider federal legislation to regulate the litigation funding industry.

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