LAWYERS working on funded class actions have been granted temporary relief from those legal proceedings being classified as managed investment schemes.
The Australian Securities and Investments Commission decision to grant the transitional relief to lawyers and litigation funders was announced yesterday, and will apply until 30 June 2010 for any class actions that were commenced before 4 November this year.
The relief is from the requirement that would otherwise apply to funded class actions as managed investment schemes under Chapter 5C and Chapter 7 of the Corporations Act 2001.
The decision comes after a recent Federal Court decision around the Brookfield Multiplex Limited case, which found that litigation funding arrangements and solicitors’ retainer for representative proceedings constitute an unregistered managed investment scheme.
While ASIC’s decision yesterday means those class actions currently underway can proceed, it does little to reassure litigation funders and lawyers working in this area.
ASIC said it would grant the transitional relief to avoid any disruption that could adversely impact plaintiffs in current actions, or interfere with the timely and efficient conduct of the subject litigation.
ASIC said applications in respect of class actions to be commenced from today will be considered separately and ASIC would assess whether or not and on what terms it would grant transitional relief.
The temporary relief will allow time for ASIC and the government to consider and consult on how funded class actions should be regulated under the Act in future.
As the Federal Court decision was handed down in October, legal experts said the decision effectively stopped the burgeoning litigation funding in its tracks.
Stephen Meade, partner in law firm Middletons' Melbourne office, told The New Lawyer that the implications of the decision were far reaching for litigation funding and class actions in Australia.
The judgement is another reminder in respect of representative proceedings that there is a need for the role of litigation funders to be clarified and for there to be further regulation, said Meade.
In 2006 the Standing Committee of Attorneys General released a discussion paper considering regulation for litigation funding, but since then nothing has changed, said Meade.
"Litigation funders' status has plodded along, but there need to be greater certainty around what their role is."