Federal Parliament Committee releases mammoth report on Litigation Funding and Regulation of the Class Action Industry

The Parliamentary Joint Committee on Corporations and Financial Services yesterday released to the public its 450 page report on Litigation funding and the regulation of the class action industry. This followed an extensive consultation period which saw the Committee receive 101 written submissions from a range of industry, government and other participants, and five days of public hearings in July and August 2020 (Clayton Utz provided a detailed submission to the Parliamentary Joint Committee which was extensively referred to in the report).

The report makes 31 Recommendations for legislative and procedural reform to address a range of topics such as:

• to address multiple class actions making the same allegations against the same defendants, the introduction of a 90 day "standstill" after the filing of the first class action to allow any other class actions to be filed and then a "selection hearing" where the Court selects the class action(s) that will continue.  In addition to this, an express power for the Court to resolve competing or multiple class actions at an early stage of proceedings (Recommendations 2 and 3)
• improvement to transparency and management of potential conflicts of interest between group members, litigation funders and legal representatives - including the appointment of contradictors to act on behalf of group members in the settlement process and the imposition of a statutory requirement that funders act in accordance with the overarching purpose of the class action legislation (Recommendations 17, 18, 19, 22 and 23 to 26)
• proportionality of costs incurred in litigating a class action, considering factors such as potential return to group members, impacts on court resources, regulatory outcomes and the public interest (Recommendations 1 and 20)
• legislation to address the ongoing uncertainty in relation to common fund orders (Recommendations 6 and 7)
• increased regulation, direct Court supervision (and where warranted, Court intervention) of litigation funding and contingency fee arrangements, including a presumption that litigation funders provide security for costs and complete protection for lead plaintiffs against adverse costs orders (Recommendations 8 to 16, 20, 21 and 28)
• greater uniformity and clarity across jurisdictions, including in relation to express class closure powers in the Federal Court (Recommendations 4, 5, 30 and 31)
• continuation of the relaxed continuous disclosure laws introduced by the Corporations (Coronavirus Economic Response) Determination (No. 2) 2020 as a measure to curb commencement of unmeritorious shareholder class actions (Recommendation 29)

Given the size and scope of the Report and its recommendations, we will be breaking them down over the coming weeks and helping you to understand the proposed recommendations and what they could mean for your business or industry.