Litigation Funding 2022- your updated guide to the developing law and practice of funding in Australia
The environment for litigation funding is increasingly complex with several recent judicial and legislative developments affecting the conduct of third-party litigation funding. The developments predominantly relate to funding of representative proceedings, with third-party litigation funding being subjected to a degree of scrutiny not previously seen.
There has been a recognisable decrease in funded class actions during 2021 which may be attributable to the regulations imposed on funders with the introduction of the Corporations Amendment (Litigation Funding) Regulations 2020 (Regulations). Further, measures implemented for the stated purpose of providing relief to businesses impacted by the covid-19 pandemic may have limited the opportunities for funded litigation. The Corporations (Coronavirus Economic Response) Determination (No. 4) 2020 provided that entities and their officers would only be liable for breaches of continuous disclosure obligations if there was knowledge, recklessness or negligence, a higher threshold for liability than previously imposed. What was introduced as a temporary covid response has now been made permanent with the passage of the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth).
The other observable trend in funded class action filings is that the percentage of shareholder lawsuits has fallen and there has been an increase in the number of consumer class actions (arising out of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry) and employment actions alleging underpayment of wages.