Back to the future on class actions

When the federal government made its move on litigation funders last week, it took business back to much happier times.

In October 2009, the full Federal Court brought the burgeoning class actions industry to a halt. Every funded class action in Australia was effectively stayed after the appeal court held that a funder was operating an unlawful, unregistered managed investment scheme (MIS).

The decision in the Multiplex case was seismic. Plaintiff lawyers and litigation funders scrambled to register shareholder class actions with ASIC.

The following May, the Labor government announced that existing class actions would be ­excluded from the MIS regime.

Regulations were later put in place which exempted funders from the Corporations Act – and having to take out an Australian Financial Services Licence.

The Morrison government now wants to reverse that decision, a move business hopes will act as a brake on class actions. Maybe not.

Within 12 months of the Multiplex decision, the claim – over disclosure failures during the construction of Wembley Stadium in London – was settled with the approval of the Federal Court for $100 million, plus $10 million in legal costs.

The cut of the funder – Singapore-based International Litigation Funding, which started the claim with Maurice Blackburn on behalf of 120 Multiplex shareholders – was 30 per cent.

It explains why class action lawyers were more sanguine about last week's announcement than the business lobby.