Terms of Reference

Inquiry into Class Action Proceedings and Third Party Litigation Funders

I, Senator the Hon George Brandis QC, Attorney-General of Australia, having regard to:

• the increased prevalence of class action proceedings in courts throughout Australia, and the important role they play in securing access to justice;
• the importance of ensuring that the costs of such proceedings are appropriate and proportionate;
• the importance of ensuring that the interests of plaintiffs and class members are protected, in particular in the distribution of settlements and damages awards;
• the role that third party funding entities play in enabling the commencement and maintenance of class action proceedings;
• the role of third party funding entities in enabling the commencement of other classes of legal proceedings, including but not limited to arbitral proceedings
• the potential for conflicts of interest between the professional obligations of lawyers and the commercial imperatives of third party funding entities;
• the fact that third party funding entities are not bound by professional ethical obligations, such as a lawyer’s duties to the court and the client;
• the absence of a requirement that third party funding entities (or, where the entity is a corporate entity, its officers) satisfy character requirements or meet other antecedent criteria before being permitted to act as third party litigation funders; and
• the absence of comprehensive Commonwealth or State and Territory regulation to address the structure, operation and terms on which third party funding entities participate in the Australian legal system.

REFER to the Australian Law Reform Commission (ALRC), pursuant to s 20(1) of the Australian Law Reform Commission Act 1996 (Cth), consideration of whether and to what extent class action proceedings and third party litigation funders should be subject to Commonwealth regulation, and in particular whether there is adequate regulation of the following matters:  

• conflicts of interest between lawyer and litigation funder;
• conflicts of interest between litigation funder and plaintiffs;
• prudential requirements, including minimum levels of capital;
• distribution of proceeds of litigation including the desirability of statutory caps on the proportion of settlements or damages awards that may be retained by lawyers and litigation funders;
• character requirements and fitness to be a litigation funder;
• the relationship between a litigation funder and a legal practice;
• the costs charged by solicitors in funded litigation, including but not limited to class action proceedings; and
• any other matters related to these Terms of Reference

I further ask the ALRC to consider what changes, if any, should be made to Commonwealth legislation to implement its recommendations. 

Consultation

The ALRC should consult widely with institutions and individuals with experience of the conduct of litigation, class action proceedings and access to justice issues including the legal profession, courts and tribunals, litigation funding entities and the academic community.  

Timeframe

The ALRC should provide its report to the Attorney-General by 21 December 2018.