The review will look at unfair risks and disproportionate costs
“This review will consider how we can better protect Victorian consumers from unfair costs, while ensuring that law firms and litigation funders continue to support worthwhile claims,” said Attorney-General Martin Pakula.
He has asked the Victorian Law Reform Commission (VLRC) to review the rules covering litigation funders to prevent unfair conduct in civil proceedings, such as class actions.
The move comes after a legal win in Victoria last August which made headlines after plaintiffs were given a $5 million award only to have the award shared by lawyers and a Sydney-based litigation funder.
Law firm Piper Aldman was paid more than $1.7 million while LCM Litigation Funding was paid nearly $1.85 million for the case against New Zealand insurer CBL Insurance, an outcome Pakula said then was “staggering.”
“It is incredibly frustrating when a person wins a case, only to walk away almost empty-handed because the money has been soaked up by unfair legal fees,” he said. “The days of some litigation funders charging such excessive fees need to come to an end.”
According to the Attorney-General’s announcement, the review will “look at circumstances where a successful outcome may be unduly eroded by fees, leaving plaintiffs with virtually nothing despite successfully arguing their case.”
For funding part or all of costs, litigation funders get a share of awards to successful plaintiffs.
Pakula said that the review will also investigate whether some third parties are unfairly profiting from successful actions, denying Victorians access to justice.
“Consideration will also be given to the existing prohibition on law firms charging contingency fees and whether, and in what circumstances, that probation should be retained,” the announcement reads.
The Government of Victoria expects a report from the VLRC on 30 March 2018.
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