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Necessity is the Mother of Invention: The Adoption of Third-Party Litigation Funding and the Closed Class in Australian Class Actions

2009; SAGE Publishing; Volume: 38; Issue: 3 Linguagem: Inglês

10.1350/clwr.2009.38.3.0189

1740-5556

Michael Legg, Louisa Travers,

Legal principles and applications

Australian class actions have recently undergone a revolution in relation to the financing of litigation and group definition. Australia has historically banned contingency fees and adopted an opt-out class action. However, the law now allows for third-party litigation funding where non-lawyers may finance class actions in return for a share of the recovery and for the class action to be defined as a closed class that only includes those group members who have entered into a litigation funding agreement. These developments have important ramifications for class action practice. Litigation funding filled the financing gap in Australian class actions and consequently facilitated access to justice. However, the need for a contractual relationship to allow for the quasi-contingency fee to be recovered led to the employment of a closed class. The closed class dissuaded ‘free-riding’ but also undermined the Australian class action objectives of access to justice and efficient resolution of disputes.