Why Qld Supreme Court decision on litigation funding is so significant

By Hannah Kay and Vavaa Mawuli|09 October 2019

A recent decision of the Supreme Court of Queensland has confirmed the legality of litigation funding for class actions in Queensland and brings Queensland in line with the class actions regimes in other Australian jurisdictions.

Background

The case of Murphy Operator & Ors v Gladstone Ports Corporation & Anor (No 4) [2019] QSC 228 saw a class action bought by a group of plaintiffs who ran commercial fishing operations and claimed to have suffered loss and damage as a result of dredging operations by the defendant, GPC, who managed the Port of Gladstone. In particular, the class action claimed that the dredged soil was not stored properly and the acidity of the exposed soil caused seafood species in waters proximate to the Gladstone Harbour to become depleted.

The class action initially had some difficulties securing funding, but sometime after filing the proceeding, secured the assistance of litigation funder LCM. LCM contracted to provide the financial resources to fund the proceeding in exchange for a share of the settlement or judgment if the case was successful. These kinds of arrangements are common in representative proceedings, and are a key source of funding for complex and usually risky claims, which require substantial financial backing to seek redress for class members against well-resourced defendants.

Issues

The defendants sought to have the funding agreement with LCM declared unenforceable by reasons of maintenance, champerty or public policy, and to demonstrate that the agreement with LCM was not valid or enforceable if the funder had control over the proceeding.

Maintenance and champerty

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Maintenance and champerty are ancient torts which arose from a concern that wealthy, powerful nobles and officers would use the law as a tool of oppression. Maintenance has been described by the Court as “the assistance or encouragement of a party to an action in which the maintainor had no interest” and champerty as “a species of maintenance, on terms that the maintainor and the plaintiff would share in the outcome of the action.”

These torts have been extinguished in many Australian states including NSW, Victoria and South Australia. Notably, questions about the enforceability of funding arrangements due to maintenance and champerty were dispelled by the High Court in the leading Australian authority, Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd, in part, because of the abolishment of the torts in most Australian jurisdictions.

However, despite the archaic origins, maintenance and champerty were not expressly abolished in Queensland, so there remained some ambiguity about whether they remained actionable torts in this jurisdiction, which fostered some doubt about the enforceability of litigation funding arrangements.

The plaintiffs and LCM sought to have these torts declared no longer in existence and given “a decent common law burial”. The defendants submitted that the failure of the Queensland parliament to extinguish the crimes of maintenance and champerty supported the view that there is a public policy against commercial litigation funding contracts which “may distort the curial process”. The Court gave detailed consideration of the development of the law of maintenance and champerty in England and Australia, but declined to declare the torts obsolete or offer the torts a burial, because it was not necessary on the application before it. It went on to consider whether the funding agreement was illegal or contrary to public policy.

Public Policy

Part 13A of the Civil Proceedings Act 2011 (Qld) sets out the provisions of the Queensland class actions regime. The class actions regime in Queensland, recently came into force early in 2017 and so far has underpinned approximately seven filed class actions. Other class action regimes in Australia however are not new. The federal regime was enacted in 1992 and has largely provided the framework for similar or near identical regimes to be enacted in other Australian states.

All Australian class actions regimes give courts significant case management powers which are deployed to ensure that class actions are in the best interests of group members and are not conducted solely for the benefit of litigation funders. In this case, the Court recognised this and also observed that the act does not define litigation funding or provide guidance on the control a litigation funder is entitled in a proceeding.

However, it noted that the Queensland framework was closely modelled on the NSW regime, which specifically identifies that it is not inappropriate for group members to be “aggregated together for a particular purpose” including a litigation funding agreement. The Court acknowledged that in this way, the Queensland legislature expressly and unambiguously recognised the presence of litigation funding in class actions.

Decision

The Court held that the partial assignment of future proceeds by way of a litigation funding agreement was not against public policy, but in fact was permitted by the class actions regime. His honour concluded, “the funding agreements… do not involve unlawful conduct or purpose and are not prejudicial to the administration of justice…. to the contrary, they accord with the public policy of Part 13A” of the act.

It is well recognised that litigation funding arrangements are critical to providing access to justice through class actions. This decision is significant as it confirms that victims of misconduct are able to seek redress through the Queensland class actions regime with the support of a litigation funder, without fear that the torts of maintenance or champerty will render the funding agreements unenforceable or be contrary to public policy.

Hannah Kay and Vavaa Mawuli are lawyers in the Maurice Blackburn class actions team.

Why Qld Supreme Court decision on litigation funding is so significant
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