Litigation funders have welcomed the inquiry but addressed the key issues highlighted in the submission arguing that funders have been greatly misrepresented and that ultimately access to justice would be significantly impacted.

John Walker, chairman of the Association of Litigation Funders and founder of Investor Claim Partners said that in this inquiry, there isn’t a clear understanding of the objectives sought to be achieved other than to enable the development of “policies that will ensure the interests of Australians are better protected.”

“As a result, the [committee] will receive submissions from the defendants’ side of our adversarial civil justice system that they require “better protection” which, by definition, will be at the expense of plaintiffs,” Mr Walker said.

“The plaintiff’s side will primarily be seeking “no less protection” and hoping any benefits will exceed implementation costs.”

Mr Walker said it was ironic that the preponderance of stated concerns about the fees of funders comes from the defendants’ camp.

In terms of claims that funders are using class actions as “money-making machines”, Balance Legal, Augusta Ventures and Woodsford Litigation said that funding class actions was a serious matter that required careful due diligence in funding meritorious claims.

Augusta managing director Neill Brennan said the press coverage routinely ignores the considerable risks involved in litigation funding. 

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“It appears the motivation for this type of hyperbole is for big business interest groups to focus the inquiry on litigation funding returns and distract from the economic and social benefits provided by litigation funders to assist ordinary Australians seek recompense at the expense of business enterprises when they have broken the law,” Mr Brennan wrote.

Balance said that litigation funder profits are exaggerated and misunderstood.

Therium Capital also said that without litigation funding, many if not most of the class actions that have been funded to date would not have been pursued.

In terms of the recent Treasurer's decision for the need to hold an Australian Financial Services Licence (AFSL), other funders have also voiced their proposals.

Premier Litigation Funding Management said that the requirement to hold an Australian Financial Services Licence (“AFSL”) to undertake litigation funding will only add to compliance costs. 

Southern Cross Litigation that does not fund class actions but are subject to the AFSL said they are comfortable with the proposal to require litigation funders to have an AFSL provided that the following considerations are addressed including the requirements are consistent with commercial parties’ rights to freely negotiate and enter into contracts on terms that they agree.

Litigation Capital Management that believes they are the first to hold an AFSL and had supported this change however has advocated against application of an incongruent managed investment scheme regulatory regime without significant legislative adaptation. 

Meanwhile, Woodsford Litigation echoed a strong view on the claims that there was an increasing prevalence of class actions in Australia.

“If class actions are increasingly prevalent in Australia (which appears uncertain based on the research carried out recently by professor Vince Morabito), we consider that to be a sign of claimants having increased access to justice (in part through increased access to funding), which allows claimants to bring defendants that misconduct themselves to account,” Steven Friel, Woodsford Litigation CEO wrote.

Mr Friel said that if any class actions are unmeritorious (and funded actions rarely are given that funders only receive a return in the event of success), the Court acts as a safeguard by denying the claim and ensuring that a defendant is suitably protected and compensated in respect of the costs it may incur in defending such a claim.

The inquiry submissions also wanted to delve on the impacts from litigation funding on the Australian economy.

Litigation Lending Services believes that class actions have a positive net impact upon the Australian economy, but also considers that the task of measuring the actual economic impact of class actions is a highly complex and specialist one. 

Litigation Capital Management also shared the same view that class actions have the benefit of holding big entities to account where there is an imbalance between the parties referring to notable comments from the courts including Justice Michael Lee.

The discussion in the inquiry also extended to the controversial common fund order (CFO) and contingency fee systems.

Augusta Ventures said that in terms of CFOs being implemented, they have played an important part in encouraging competition in funding and materially reducing funding fees. 

“As the Victorian Law Reform Commission suggests, [CFOs] are a useful way to ensure the court can control litigation funder fees,” Mr Brennan said.

Harbour Litigation also said that if Australia wants to facilitate consumer class actions, which typically involve large numbers of “mum-and-dad” plaintiffs with individually small claims, then early common fund orders or a suitable equivalent are required.

For contingency fees, Therium Capital views that the tripartite relationship between the lawyers, funders and group members in class action cases remains the most appropriate model for this type of litigation.  

“As mentioned above, without a [funder’s] oversight, [lawyer’s] file work and commensurate billings can go unchecked. In this regard, [funders] play a vital and important role,” Therium wrote.

However, Premier Litigation Funding Management disagreed saying that lawyer contingency fees would create more issues than currently presented by the practice of litigation funding. 

“Contingency fees fundamentally change the relationship between the client and lawyer with the lawyer having a direct financial interest in the outcome,” PLFM wrote.

“It is difficult to see how the fiduciary relationship between client and lawyer would operate.”