Litigation funders and contingency fees under the spotlight in Victoria

On Monday, it was announced that the Victorian Attorney-General, the Hon Martin Pakula MP, has asked the Victorian Law Reform Commission (VLRC) to review the rules covering litigation funders to prevent unfair conduct in civil proceedings, such as class actions.

The review by the VLRC will consider issues such as:

  • circumstances where a successful outcome is eroded by fees, leaving plaintiffs with nothing (or next to nothing), despite winning;
  • whether some third parties are unfairly profiting from successful actions;
  • the existing prohibition on law firms charging contingency fees and whether that prohibition should be retained.

In announcing the review, the Attorney-General commented, ‘It is incredibly frustrating when a person wins a case, only to walk away almost empty-handed because the money has been soaked up by unfair legal fees. …. The days of some litigation funders charging such excessive fees need to come to an end.

The VLRC is required to provide its report to the Government by 30 March 2018. As part of its review, the VLRC will consider submissions from interested parties. Actions funded by litigation funders can have a significant impact on many parties, particularly insurers, and insurers are therefore encouraged to have their voice heard by making submissions to the VLRC.