In what is being seen as a win for shareholders, on Thursday, June 18, 2020, Victoria’s lawmakers passed a bill that lifts the ban on contingency fees allowing lawyers to take a percentage of the amount recovered in a class action (like in the U.S.), as opposed to the time-costed billing model.
Those in favor of the bill
The bill was introduced by Victoria’s Attorney General, Jill Hennessy who argued that it would remove “barrier to class actions to allow people with genuine claims – who may not be in a position to take on the financial risk of a case – to bring their class actions to the court.” Hennessy said the legislation would allow for more class actions that in the past would have been rejected by litigation funders or plaintiffs firms as too risky. “The reform ensures that plaintiff lawyers indemnify the lead plaintiff for any adverse costs orders,” said Hennessy.
Those against the bill
Victoria’s Liberal MP, Edward O’Donohue, and other critics claimed the bill would solely benefit plaintiff firms. It was also noted that these included two of the largest Labor-party donors, Maurice Blackburn and Slater and Gordon. Critics also voiced concerns that smaller firms would be left out due to the risks and costs involved.
What does this mean?
As Mike Lange, Senior Vice President of Worldwide Litigation at FRT highlighted last month in our May webinar, What’s Driving Changes in the Australian Shareholder Class Action Landscape, a shift of contingency fee economics from funders to lawyers has been on the horizon for some time.
While the market is in a period of flux, from the investors’ perspective, as long as open classes remain, things should still look the same. This ruling will most likely keep the AU market (in Victoria) in an open class environment and we may even see rates decline if fewer participants need to be paid.
- FRT’s May Webinar: What’s Driving Changes in the Australian Shareholder Class Action Landscape
- Victoria passes hotly contested contingency fee bill, A. Eveleigh, Lawyerly, June 18, 2020
- Victoria becomes the 1st Australian State to Introduce Contingency Fees, C. Niesche, Law.com, June 19, 2020
- [Blog] What’s Driving Changes in the Australian Shareholder Class Action Landscape
- [Blog] 5 Ways Loss Estimation Comes Into Play in Non-U.S. Securities Litigation
- [Blog] Financial Recovery Technologies Partners with Citco to Empower Their Clients with Industry-leading Shareholder Litigation Monitoring & Governance Solutions
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