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Commercial Regulatory Issues

Looks Dubious – The Third Ground to Restrain a Lawyer from Acting

April 5, 2023

Looks Dubious – The Third Ground to Restrain a Lawyer from Acting

The following piece was contributed by Valerie Blacker, commercial litigator focusing on funded litigation, and Amelia Atkinson, litigation and dispute resolution lawyer at Piper Alderman. Strata Voting Pty Ltd (In Liq) v Axios IT Pty Ltd and Anor[1] is a funded single plaintiff action. It involved a recent examination of the Court’s power to prevent a lawyer from acting in proceedings for a conflict of interest. The authors represented Strata Voting in its successful defense of the restraint application. The Third Ground Less frequently invoked than the first and second grounds (misuse of confidential information and breach of fiduciary duty), the third category upon which to restrain a lawyer in a position of conflict from acting in a matter is known as the “inherent jurisdiction” ground. The Court can restrain lawyers from acting in a particular case as an incident of its inherent jurisdiction over its officers and control of its processes.[2] The jurisdiction is enlivened where there is an objective perception that a lawyer lacks independence such that the Court is compelled to interfere and remove the lawyer from acting in the matter. In other words, the position of the lawyer makes the Court uneasy. The test for intervention is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice, including the appearance of justice, requires that a legal practitioner should be prevented from acting.[3] Axios’ failed application The jurisdiction to enjoin a solicitor from acting is to be regarded as exceptional, and to be exercised by the court with caution. That was the basis on which his Honour Judge Dart of the South Australian Supreme Court dismissed the application brought to restrain Piper Alderman from acting for the liquidators. Here, Piper Alderman is acting for the company in relation to a dispute which was in existence before the winding up commenced.  The liquidator retained Piper Alderman to continue acting for the company for the purpose of the litigation, the subject of the existing dispute. The supposed conflict was said to have arisen from a proof of debt which Piper Alderman lodged for about $47,000 in fees incurred prior to the administration. The argument was that Piper Alderman’s impartiality was impaired by the fact that unless the litigation is successful, Piper Alderman will not be paid its outstanding fees because there will be no funds in the winding up to do so. Axios contended that “the conduct of the solicitor was so offensive to common notions of fairness and justice that they should, as officers of the Court, be restrained from acting”. However, his Honour considered the firm’s status as creditor to be unremarkable. Even in a case where a substantial sum (over $830,000) was owed to lawyers by their insolvent client,[4] there was no risk to the proper administration of justice. As everyone knows, solicitors routinely act in matters where they are owed money including conditional costs agreements, risk share arrangements, contingency fee arrangements and agreements that include uplift fees, to name a few. The restraint application in Strata Voting was unsurprisingly and swiftly[5] dismissed with costs. Conclusion If an opposing party asserts that a lawyer should be restrained from acting for the opponent, it is necessary for a clear case to be made that the lawyer is in a position where he is fixed with an interest of such a nature that he may fail in his overriding duty to the court. It requires proof of facts, and not mere speculation as to motive. The risk to the due administration of justice has to be a real one. Otherwise, a litigant ought not to be deprived of the lawyer of his choice. — About the Authors: Valerie Blacker is a commercial litigator focusing on funded litigation. Valerie has been with Piper Alderman for over 12 years. With a background in class actions, Valerie also prosecutes funded commercial litigation claims. Amelia Atkinson is a litigation and dispute resolution lawyer at Piper Alderman with a primary focus on corporate and commercial disputes. Amelia is involved in a number of large, complex matters in jurisdictions across Australia. For queries or comments in relation to this article please contact Amelia Atkinson | T: +61 7 3220 7767 | E:  aatkinson@piperalderman.com.au [1] Unreported, Supreme Court of South Australia, Dart J, 23 January 2023 (Strata Voting). [2] Kallinicos & Anor v Hunt [2005] NSWSC 118 at [76] (Kallinicos). [3] Ibid. [4] Naczek & Dowler [2011] FamCAFC 179, [84]. [5] In a 5-page judgment.

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Commercial Regulatory Issues

Senate Bill Targets Litigation Funding Transparency With Non-Profit Exemption

By John Freund |

U.S. lawmakers are seeking to impose new transparency requirements on third-party litigation financing in major lawsuits, while carving out protections for nonprofit legal organizations that receive funding to provide free legal services.

An article in Reuters reports that a group of Senate Republicans led by Judiciary Committee Chair Chuck Grassley has introduced the Litigation Funding Transparency Act. The bill would require disclosure of third-party financing in class actions and mass tort litigation, a narrower scope than past proposals aimed at all civil cases. Importantly for the legal funding market, the legislation includes an exemption for nonprofit legal groups funded by U.S. donors that provide pro bono representation, protecting those organizations from having to disclose their backers.

Supporters of the measure frame it as a move toward greater openness about who is financing high-stakes litigation, arguing that visibility into funding sources is essential to ensure fairness and guard against undue influence. The bill would also bar third-party funders from influencing litigation strategy, settlement negotiations, or accessing confidential documents. However, critics—including the International Legal Finance Association, an industry body—contend that imposing disclosure rules could chill litigation finance and potentially limit access to justice for plaintiffs who rely on third-party capital to pursue claims. Conservative advocacy groups have also weighed in against the bill, fearing that disclosure mandates could expose donors to political scrutiny despite the nonprofit carveout.

The bill’s introduction builds on a history of legislative efforts by Grassley to regulate litigation funding transparency, though previous versions have stalled in the House amid bipartisan opposition.

For the legal funding industry, this legislation raises crucial questions about regulatory risk and disclosure expectations in the U.S. If enacted, the bill could reshape how funders participate in large-scale litigation and how transparency requirements are balanced against concerns over client privacy, fundraising, and the broader access-to-justice mission.

Commercial Deals

UK Funder Makes Fresh Pitch After Liquidating Core Fund

By John Freund |

A UK-based litigation funder is seeking to reset its strategy and reassure investors after liquidating one of its key funds, underscoring the mounting pressures facing capital providers in an increasingly competitive and scrutinized funding market.

An article in Bloomberg reports that Katch Investment Group wound down a flagship vehicle and returned capital to investors, following a period of underperformance and portfolio challenges. The move marks a significant inflection point for the firm, which is now presenting a revised investment strategy aimed at regaining investor confidence and stabilizing its platform.

According to the report, the funder’s leadership has framed the liquidation as a proactive step designed to preserve value and recalibrate its approach in light of shifting market dynamics. The litigation finance sector has faced headwinds in recent years, including longer case durations, delayed resolutions, and increased regulatory and judicial scrutiny—particularly in collective proceedings. These factors have complicated return profiles and made capital raising more challenging, especially for publicly listed or institutionally backed funders under pressure to demonstrate consistent performance.

The firm is now pitching a refined model that emphasizes disciplined case selection, portfolio diversification, and closer alignment with investor expectations. The reset comes at a time when several UK-based funders are reassessing their exposure to large, high-risk group actions and exploring alternative structures, including co-investment arrangements and bespoke mandates.

Case Developments Commercial

Law Firm in J&J Baby Powder Cases Sues Litigation Funders

By John Freund |

A dispute emerging from the long-running talc litigation against Johnson & Johnson has spilled into a new front, as a plaintiffs’ law firm has filed suit against its own litigation funders in a high-stakes funding battle tied to the baby powder cases.

An article in Reuters reports that the firm, which represents claimants alleging that Johnson & Johnson’s baby powder products caused cancer, has sued multiple litigation funders over the terms and enforcement of its funding agreements. The complaint centers on allegations that the funders are seeking repayment amounts the firm contends are excessive or otherwise improper under the governing contracts. The lawsuit underscores the financial strain and complex capital structures underpinning mass tort litigation, particularly in sprawling, multi-year proceedings like the talc cases.

According to the report, the firm argues that the funders’ demands threaten its financial stability and ability to continue representing clients in the ongoing litigation. The case reflects the high-risk, high-reward nature of funding large portfolios of mass tort claims, where returns can hinge on bankruptcy proceedings, global settlements, or appellate outcomes. Johnson & Johnson’s use of bankruptcy maneuvers to resolve talc liabilities has already added further uncertainty and delay, complicating recovery timelines for plaintiffs’ firms and their capital providers.

The dispute highlights the intricate dynamics between law firms and funders in contingency-heavy practices. Funding arrangements in mass torts often involve layered investments, staged drawdowns, and complex priority waterfalls. When case timelines stretch or resolution values shift, tensions over repayment multiples and control rights can quickly surface.