High court rules on class funding
A recent High Court decision is creating uncertainty about some significant class actions.
The High Court has made a ruling on the use of common fund orders, which lawyers and litigation funders use to obtain their fees for a class action.
While it seems like a small legal technicality, these orders have a big impact on whether a litigation funder, which bears upfront costs, decides to invest in a particular class action.
These orders give lawyers and litigation funders confidence that they can take their fees from the total settlement from a class action, regardless of other funding agreements.
Without them, there is little motivation to sign up big numbers of people to class actions to ensure they proceed.
The decision has created uncertainty for the PFAS class action by Shine Lawyers, which could be Australia's biggest ever, involving eight allegedly contaminated sites.
Shine now has to reassure its litigation funder LCM that the action is financially viable.
Shine wants as many people as possible to sign two agreements, one that appoints Shine Lawyers as their legal representative, and another committing them to paying a percentage of any successful settlement to the litigation funder.
“The High Court decision does not impact the merit of this PFAS class action and we will continue to fight for compensation on behalf of residents whose property prices have plummeted as a result of environmental contamination,” Shine's head of class actions Jan Saddler said.
The new pressure to sign people up to class actions to ensure funding means that plaintiffs will have to make a decision to commit at an earlier stage, potentially before they are convinced it would be successful.