Australian Federal Court strikes down the government regulations on class action litigation financing

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Litigation funding decision in Australia

In the year 2020, the coalition government in Australia imposed a costly regulatory burden on litigation funding companies. The regulation declared that lawsuit financing companies fall in the ambit of managed investment schemes, and they will be subject to the requirements provided in law to monitor the conduct of investment scheme entities. 

The decision of the government received nationwide criticism.

Major law firms and litigation funders, including Slater and Gordon, Shine and Maurice Blackburn, and others, declared the government’s decision prejudicial to the interests of meritorious claimants and for the administration of justice in Australia. 

Law firms and litigation funding firms formed the Keep Corporations Honest campaign and started advocating against the ramifications of the decision of the government regarding legal finance companies. They employed different means to create awareness about the consequences of the government’s decision on claimants and class action claims. 

The opponents of the government decision argue that their restrictions will limit future class actions due to a lack of financing. As a result, many claimants with a legitimate claim may not be able to pursue it in a court of law due to financial burden and may succumb to the pressure of the big businesses. 

The head of class action of Slater and Gordon, Ben Hardwick, argues that the restriction imposed by the government on litigation finance companies protects the interest of the business lobby. As litigation finance provides efficient means of protecting litigations from risk, protecting the taxpayers from litigation expense, and keeping a check on businesses for violations of law. 

In other words, giant corporations oppose litigation funding since they never put forward an alternate source of class action financing because they want to protect their interest at the expense of meritorious claimants. Therefore, the restrictions imposed on litigation funders have been supported by powerful corporations, including insurance companies, and they have used their clout to influence government decisions.

A full bench of the federal court struck down the Australian government’s decision. 

The court held that funded class actions could not be termed as managed investment schemes, and they do not fall in the regulatory scheme of Australian corporate law. Hence, the requisite provided in the Australian corporate law regarding managed investment actions will not be applicable to class action finance. 

The decision of the federal court questions the legitimacy of the government’s new regulation, which ultimately imposes restrictions on lawsuit funding.

Law firms, litigation funders, and other stakeholders have welcomed the decision of the federal court, saying that litigation finance and class action litigation play an imperative role in ensuring the availability of justice to ordinary Australians who have been wronged by power government entities and multi-billionaire corporations. 

Dreyfus and the assistant treasurer, Stephen Jones, have declared the federal court’s decision is a win for ordinary Australians and the administration of justice in the country. 

The minister has also announced that the incumbent government will consider the full implications of the federal court decision and ensure its complete implementation.

The decision of the Federal Court to strike down government decisions in favor of class action indicates the significance of class action and litigation funding provided by lawsuit funding companies. This decision will encourage lawsuit funding in Australia, and it will ensure more protection for class action and legal funding. It will also encourage claimants with meritorious claims to pursue their legitimate cases against big businesses. 

The decision of the court has received greater appreciation from all relevant stakeholders in the country.

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At Baker Street Funding, we give you the inside scoop on pre-settlement funding by covering a variety of ... lawsuit financing and legal topics to help you made the best financial decision for you and for your case. Our experts break down complex ideas in a way that's easy to understand so you can stay informed on current trends as well as tips and fact checked information by the CEO and founder, Daniel Digiaimo. Furthermore, Despite its name, consumer legal funding is not a loan. If you don't win your case, no payment needs to be made back. To avoid confusion and simplify matters on, we'll use the word "loan" throughout this article.

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