Under the new section, a principal plaintiff (representative party) may apply to the court for legal fees to be paid to the plaintiff`s legal representative in the form of contingency fees and for those costs to be shared between the plaintiff and all class members (known as a class cost order). The Group Fees Ordinance also sets the percentage of the proceeds of the dispute to which lawyers are entitled. The Court may make such an order if it is satisfied that it is appropriate or necessary to ensure that justice is done in the proceedings. The court is required to exercise additional oversight over class actions and those who bring and fund such actions. 3.70 The Canadian experience provides guidance on the introduction and control of contingency fees in class actions. When the class action system was introduced in Ontario, contingency fees were introduced to overcome the financial risks of losing a class action. Previously, contingency fees were prohibited. The ban on contingency fees in other areas of activity was subsequently lifted, with the exception of family and criminal cases (where the ban remains in force). However, the distinction between class actions and other litigation will continue to be recognized.

Will Victoria become a privileged state for class actions? Are the plaintiff law firms on an equal footing with the litigation financiers or do they now have a clear economic advantage? Will the new s33ZDA give the Supreme Court of Victoria a procedural advantage over New South Wales and the federal courts? Is contingency fees the new CFO? This article explores some of the likely consequences and impacts of this significant and historic change that allows Australian class action lawyers to collect contingency fees. Prior to this development, there was a general prohibition for lawyers to charge contingency fees in all Australian jurisdictions. This is a big shift in the way Australian lawyers work and move towards a model that has long been used in “free” legal systems, primarily in the United States. 3.56 Lifting the prohibition on lawyers charging contingency fees could alleviate the problems arising from the practice of litigation financing, but would not necessarily be a solution to access to justice and cost issues. Competitive pressures could reduce the cost of large commercial claims and class actions, although few law firms would have access to sufficient capital to support the risks of financing litigation at this end of the market. Claims that are too small or risky to be a viable investment for a litigation financier, and where the plaintiff is unable or unwilling to bear the risk of loss (even if it is reduced by a law firm that charges on a “no gain, no fees” basis) can be sued. The introduction of contingency fees is a significant and controversial change in the way lawyers are allowed to charge their fees. The Victorian government has been criticised for bowing to the trade union enterprises. However, Victoria is often at the forefront of reforms, and this disruptive change is no different. While we didn`t expect a flood of claims to occur, this reform has changed the landscape of class actions forever. The Supreme Court of Victoria refused to allow contingency fees in the first decision under the new regime in Victoria this week: Fox v Westpac [2021] VSC 573 3.73 The proposed mechanism by which contingency fees would be approved and monitored by the court in class actions in Australia is a joint fund order.

The Federal Supreme Court ordered the Common Fund to share the cost of financing the disputes among all members of the group, including those who did not enter into an agreement with the funder. The percentage of the amount received by the donor is subject to approval or modification by the court. The appointments of mutual funds are discussed in Chapter 5. Slater and Gordon suggested that law firms would be more willing to bear the risk of pursuing lower-value claims if risk exposure could be spread across a range of differently funded cases, including cases where contingency fees are charged, but also cases calculated on a “no-win basis, free of charge” or financed by a litigation financier. [3] Maurice Blackburn sought class cost orders, which provided for a contingency fee of 25%. The applications were heard and decided jointly by Justice Nichols because they raised similar issues. Second, while we expect plaintiff law firms to initially charge success fees similar to current litigation financiers` fees to reflect the risks they take, it is likely that there will be competition between law firms and litigation financiers for class actions. We have recently seen “auctions” of class action lawsuits between funders competing with each other on funding rates.

In Victoria, the prohibition is contained in the Uniform Law of the Law of the Legal Act 2014 (Vic) sch 1 (Uniform Law of the Legal Profession) s 183. It prohibits a law firm from entering into a legal fee agreement under which contingency fees are payable. Class expense orders also include the requirement that all class members represented in the class action be liable for the payment of a portion of those success fees from their share of the proceeds of the litigation. 3.35 Whether lifting the prohibition on contingency fees would reduce costs for litigants depends on the size of the law firm and the amount of the claim. A law firm that has access to the substantial amount of capital needed could compete with litigation financiers to invest in large, high-quality commercial claims and class actions. Even if the performance-based fees it charges were not lower than its competitors` financing costs, the cost to the customer would be lower because there would be only one deduction from the settlement amount. In proceedings funded by a litigation financier, legal fees are charged to the client in addition to financing costs. In the case of the Victoria class action plan, in which litigation financiers rarely participate, the impact of increased competition at this end of the market would be less than in federal class actions.

While there is significant competition in the litigation finance market, the financing fees offered by Australian financiers are not much different, and LCM argues that the financing economy over the life of the litigation finance industry has driven lenders` prices to their current prices. It is unrealistic to expect that lawyers` financial considerations will not push their contingency rates into a range similar to that of litigation funding commissions. 3.5 In order to mitigate litigation funding issues, the lifting of the prohibition on lawyers charging contingency fees should do the following: For example, in cases of bodily injury at the Supreme Court of Victoria in 2009 and 2010 with recoveries of more than $1 million, attorneys` fees represented approximately 5% of the amount recovered: Submission 9 (Professor Simone Degeling, Michael Legg Associate Professor, Dr. James Metzger). The mandate excludes bodily injury from litigation for which contingency fees could potentially be charged. Contingency fees have been allowed in South Africa since 1997, as explained by K.G. Druker in The law of contingency fees in South Africa. [11] Contingency fees are not enforceable under Russian law. They are not defined by law, but the Constitutional Court has ruled that fees for services provided cannot be subordinated to decisions that may be made in the future by the government or the courts, including the amount of compensation awarded following a hearing.

[9] For this reason, the European Court of Human Rights does not grant legal fees to the applicants under a contingency fee agreement under Russian law in proceedings against Russia. [10] 3.58 The likely impact of lifting the prohibition on lawyers charging contingency fees is uncertain, as it would change the basis of business decisions in a changing market. The combination of prohibition, the cost transfer rule and the relatively rare use of “post-event” insurance has facilitated the growth of the litigation finance industry in Australia. [45] Lifting the ban would affect the other two characteristics of the legal landscape in which lawyers, litigation financiers and insurers make business decisions. 3.90 The need for comprehensive disclosure requirements was raised as an important issue in the notices and discussions[63] and recognized by the Productivity Commission in its recommendation to lift the prohibition on contingency fees. [64] The adoption of a common fund concept for class actions does not necessarily have to coincide with the legalization of contingency fees in general. The class action lawsuit is subject to close judicial administration and requires judicial approval of important milestones such as providing notice and approving settlements. Extending this approach to the fees of litigation lawyers and/or financiers would (a) facilitate class actions in achieving its original objectives of access to justice and efficiency, and (b) provide substantial oversight of a key element 3.19 Increasing the availability of funding for lower-value claims would accelerate an already evident trend in the litigation funding industry. There is some confidence that litigation financiers will fund a more diverse selection of claims, whether or not the prohibition on contingency fees is lifted. Slater and Gordon stated that the current tendency of litigation financiers to invest in shareholder-investor class actions is the product of the relative childhood of the class action plan and the acceptance of litigation by third parties. She said the trend towards diversification of funding would continue.

[16] MFI Bentham also claimed that the market was changing. It indicates that lenders, and in particular some new entrants, are increasingly looking to finance smaller claims. [17] A contingency fee agreement allows access to the courts for those who cannot afford to pay lawyers` fees and civil litigation costs […].