In the decision of Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147, the Full Federal Court, in a 2-1 majority, found that a litigation funding arrangement for a class action against two Brookfield Multiplex parties constituted an unregistered managed investment scheme, contrary to the provisions of the Corporations Act 2001. At the time of writing final orders had not been given, but Brookfield is seeking an injunction to put a stop to the class action.

The action is being taken on behalf of Brookfield Multiplex shareholders by Maurice Blackburn, and is being funded through an arrangement with International Litigation Funding Partners. It relates to Brookfield Multiplex's alleged failure to disclose cost blowouts in the construction of Wembley Stadium in London.

Speaking to Lawyers Weekly today, Maurice Blackburn partner Andrew Watson said that he was disappointed by the court's finding, and that the firm was currently reviewing its options, including a High Court appeal. "Over view in relation to the judgment is a disappointing one. Until we get orders we can't institute any appeal, but we are actively considering a special leave application [to the High Court]," he said. "We are also considering what, if any, steps we ought to take to ensure the class action can proceed in the meantime."

Watson explained that the firm is considering three potential courses of action to keep the class action on foot.

Firstly, he said, there is a possibility under the Corporations Act of getting an exemption from ASIC. The second option would be to actually set up the proper architecture for a valid managed investment scheme, however he admitted this wasn't a preferable course of action.

"That's not a particularly attractive option because you end up with this enormous architecture of a responsible entity and a constitution and all of that, all just for the sake of dealing with the funding arrangements for a particular proceeding," he explained.

"And in circumstances where we're subject to the supervision of the court - and class actions themselves are already subject to extensive legislative and court regulation - it just seems like frankly overkill to do all of that."

The final option would be to reconfigure the funding arrangement so it would fall out of the scope of an unregistered managed investment scheme.

"There are a variety of options for reconfiguration, but probably the easiest is just to continue the funding arrangements for those persons who are not within the meaning of the Corporations Act [definition] of 'retail clients'," he said.

He emphasised that if this option was pursued, retail clients would still have their action pursued; they just wouldn't be subject to the litigation funding arrangement. "They would continue to have a class action on foot, they just wouldn't have the funding," he said.

Watson added that he believed the outcome of the case would likely have implications for other class actions the firm is running. "Each funding arrangement will differ, but I think it's fair to say that on the broadest reading of what the [majority] judges have said in this case, there are likely to be implications for other actions," he said.

- Zoe Lyon