Legg comments that
The unregulated status of the litigation funding industry in Australia ended with the Corporations Amendment Regulation 2012 (No. 6) dated 12 July 2012. The effectiveness of this 'light touch' regime is likely to impact the protections that exist for consumers who are expected to avail themselves of class actions in seeking access to justice and the volume of litigation commenced against Australian businesses, especially listed corporations who are the target of shareholder class actions.He goes on to note that
The Full Federal court in Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd (2009) 260 ALR 643 found that funded class action litigation was a managed investment scheme (MIS) subject to Chapter 5C of the Corporations Act. The New South Wales Court of Appeal in International Litigation Partners Pte Ltd v Chameleon Mining Ltd [2011] NSWCA 50 found that a litigation funder of commercial litigation was required to hold an Australian Financial Services Licence (AFSL). The Chameleon Mining case has been granted special leave by the High Court. The Federal Government initially instructed the Australian Securities and Investments Commission to grant interim class order relief to compliance with the AFSL and MIS regimes.
The Corporations Amendment Regulation 2012 (No. 6) excludes litigation funding in relation to class actions or insolvency proceedings from the MIS and AFSL regime but imposes requirements on litigation funders to manage conflicts of interest. Pre-existing consumer protection laws such as prohibitions on misleading conduct, unfair contract terms and unconscionable conduct continue. However, two important regulatory pillars, capital adequacy and licensing, are omitted.
