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Key Takeaways from LFJ’s Special Digital Event on Australia: The Evolution of a Litigation Finance Market

Litigation Finance News
June 17, 2021

Key Takeaways from LFJ’s Special Digital Event on Australia: The Evolution of a Litigation Finance Market

Litigation Finance News
On Tuesday June 15th, LFJ hosted a special digital event on Australia: The Evolution of a Litigation Finance Market. Moderator Ed Truant (ET), founder of Slingshot Capital, helmed a panel discussion  that covered a broad range of issues facing the Australian market. Panelists included Andrew Saker (AS), CEO of Omni Bridgeway, Stuart Price (SP), CEO of CASL, and Patrick Moloney (PM), CEO of Litigation Capital Management.  Below are some key takeaways from the event:  ET: From my perspective, and I have diligenced many managers on a global basis, the Australian fund managers seem to be the most successful and consistently performing fund managers in the world, can you offer any insight as to why that may be the case?  PM: The fact that the panelists here today have been around since the inception of the industry in Australia, it’s given us a long time to think long and hard about not only how we originate these opportunities for investment, but how we undertake the due diligence process, and how we manage those processes. AS: There’s a combination of factors. It’s partly to do with the strength of the legal system here in Australia, involving a sophisticated judiciary. As a second point, there’s historically been limited competition. As a consequence, litigation funders could afford to be more choosy—and cases were generally of higher quality. ET: Another difference in the Australian market is the concept of contingent fees for law firms. Can you comment about why that really doesn’t exist in the Australian market? Is that changing, and what effect may that have? SP: Contingency fees were introduced in 2020 in Victoria, where law firms were able to receive a return/reward of the settlement proceeds. This has really expanded the litigation funding market—providing different forms of litigation funding for plaintiffs—that should be a positive outcome. PM: There’s a strongly held perception in Australia that there’s a conflict of interest between lawyers participating, and having their fees tied to the outcome of a particular dispute resolution. I think that’s one of the reasons Australia has resisted the contingency fee type of charging that has been prevalent for many years in places like the US. ET: Do you find that people consider Australia a market leader in Litigation Finance in terms of innovation? Have you seen examples of Australian innovation cross-pollinating to other jurisdictions? PM: I’m not sure that Australia really has led a tremendous amount of innovation in our industry. Our greatest innovation is in taking this industry and turning it into a business. AS: Australia has been innovative in the evolution of the business, and its coupling with the conducive class action regime we have here in Australia. There are some very good minds around the world within our organization and elsewhere that are taking this industry in new directions. It’s still very much in its infancy, and the next steps for its evolution are going to be interesting and exciting to see. ET: As your business grew, what changes did you witness in terms of regulatory, legislative, etc. And how did those changes affect the market? AS: I’m a recent newcomer to the industry. I’ve been with Omni Bridgeway now for six years. During that period, we’ve seen the growth of the industry and its continued adoption outside the traditional uses of litigation funding. So that’s one of the more significant changes we’ve seen—adoption by corporates, for exploring ways to mitigate legal risk. The other significant issue is the growth of regulation and the industry of criticism that seems to be evolving toward litigation finance, which all started from a very noble social access to justice limb. I think it continues to have those characteristics. But for whatever reason, an ear has been gained for those who are critical of the industry—which will lead to a reassessment of how the industry is regulated and run. PM: I’ve been involved in this industry directly now for 18 years. The greatest shift I’ve observed has been that shift between those who use litigation finance for necessity to those who use it through choice. People who need finances in order to continue their dispute or go through the arbitral process. And the maturing of our industry has now brought it to larger corporates who use litigation finance as an incredibly efficient capital source to run their portfolio disputes and manage risk, and to also bring in an efficient way of managing disputes through to their conclusion. ET: Looking forward, in the insolvency market, there’s an expected tsunami of insolvency claims post-COVID, yet Australia as a country appears to have managed the economic impact perhaps better than the rest of the world. Is the tsunami coming? SP: Australia has done remarkably well on a global scale. Its economy is strong and it seems to have weathered the impact of COVID very well. I’ve been speaking with a number of insolvency practitioners, and they do not expect a tsunami. They certainly don’t expect a large wave—but out of any crisis will always come bad behavior and some insolvencies. So for people who are committed to the insolvency market, when you’re there consistently, you’ll have a relatively consistent stream of opportunities. There is unlikely to be a tsunami—but as ever there will be corporate misbehavior, which can lead to insolvencies.

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Litigation Funding Ethics: What Attorneys Must Weigh Before Saying Yes

By John Freund |

Third party litigation funding has evolved from a niche financing option into a mainstream tool for law firms seeking to manage risk and pursue complex or capital intensive cases. As funding becomes more accessible, attorneys are increasingly evaluating whether outside capital can support growth, extend runway, or enable representation of clients who might otherwise lack resources. However, the expansion of litigation finance has also brought renewed scrutiny to the ethical considerations lawyers must address before entering into funding arrangements.

An article in JD Supra outlines several critical issues attorneys should consider when evaluating third party funding. One of the most significant distinctions is between contingent funding arrangements and traditional non recourse loans. In contingent structures, funders receive a percentage of any recovery, which can raise concerns under long standing prohibitions against fee sharing with non lawyers and doctrines such as champerty. While a handful of jurisdictions have relaxed these rules, most states continue to prohibit arrangements that resemble equity participation in legal fees. Attorneys operating across jurisdictions must be particularly cautious to ensure compliance with applicable professional conduct rules.

Even traditional funding structures can present ethical challenges. Although non recourse loans are generally more widely accepted, conflicts can arise if a funder’s financial interests diverge from those of the client. For example, a lender may prefer an earlier settlement that ensures repayment, while a client may wish to pursue prolonged litigation in hopes of a larger recovery. The article emphasizes that lawyers must retain full independence in decision making and ensure that funding agreements do not give funders control over litigation strategy or settlement decisions.

Client consent and transparency are also central considerations. Attorneys should disclose funding arrangements where required, obtain informed client consent before sharing any information with funders, and remain mindful of evolving court disclosure requirements.

Announcements Case Developments Commercial

High Court Refuses BHP Permission to Appeal Landmark Mariana Liability Judgment 

By John Freund |

Pogust Goodhead welcomes the decision of Mrs Justice O’Farrell DBE refusing BHP’s application for permission to appeal the High Court’s judgment on liability in the Mariana disaster litigation. The ruling marks a major step forward in the pursuit of justice for over 620,000 Brazilian claimants affected by the worst environmental disaster in the country’s history. 

The refusal leaves the High Court’s findings undisturbed at first instance: that BHP is liable under Brazilian law for its role in the catastrophic collapse of the Fundão dam in 2015. In a landmark ruling handed down last November, the Court found the collapse was caused by BHP’s negligence, imprudence and/or lack of skill, confirmed that all claimants are in time and stated that municipalities can pursue their claims in England. 

In today’s ruling, following the consequentials hearing held last December, the court concluded that BHP’s proposed grounds of appeal have “no real prospect of success”. 

In her judgment, Mrs Justice O’Farrell stated:  “In summary, despite the clear and careful submissions of Ms Fatima KC, leading counsel for the defendants, the appeal has no real prospect of success. There is no other compelling reason for the appeal to be heard. Although the Judgment may be of interest to other parties in other jurisdictions, it is a decision on issues of Brazilian law established as fact in this jurisdiction, together with factual and expert evidence. For the above reasons, permission to appeal is refused”. 

At the December hearing, the claimants - represented by Pogust Goodhead - argued that BHP’s application was an attempt to overturn detailed findings of fact reached after an extensive five-month trial, by recasting its disagreement with the outcome as alleged procedural flaws. The claimants submitted that appellate courts do not re-try factual findings and that BHP’s approach was, in substance, an attempt to secure a retrial. 

Today’s judgment confirmed that the liability judgment involved findings of Brazilian law as fact, based on extensive expert and factual evidence, and rejected the defendants’ arguments, who now have 28 days to apply to the Court of Appeal.  

Jonathan Wheeler, Partner at Pogust Goodhead and lead of the Mariana litigation, said:  “This is a major step forward. Today’s decision reinforces the strength and robustness of the High Court’s findings and brings hundreds of thousands of claimants a step closer to redress for the immense harm they have suffered.” 

“BHP’s application for permission to appeal shows it continues to treat this as a case to be managed, not a humanitarian and environmental disaster that demands a just outcome. Every further procedural manoeuvre brings more delay, more cost and more harm for people who have already waited more than a decade for proper compensation.” 

Mônica dos Santos, a resident of Bento Rodrigues (a district in Mariana) whose house was buried by the avalanche of tailings, commented:  "This is an important victory. Ten years have passed since the crime, and more than 80 residents of Bento Rodrigues have died without receiving their new homes. Hundreds of us have not received fair compensation for what we have been through. It is unacceptable that, after so much suffering and so many lives interrupted, the company is still trying to delay the process to escape its responsibility." 

Legal costs 

The Court confirmed that the claimants were the successful party and ordered the defendants to pay 90% of the claimants’ Stage 1 Trial costs, subject to detailed assessment, and to make a £43 million payment on account. The Court also made clear that the order relates to Stage 1 Trial costs only; broader case costs will depend on the ultimate outcome of the proceedings. 

The costs award reflects the scale and complexity of the Mariana case and the way PG has conducted this litigation for more than seven years on a no-win, no-fee basis - funding an unprecedented claimant cohort and extensive client-facing infrastructure in Brazil without charging clients. This recovery is separate from any damages award and does not reduce, replace or affect the compensation clients may ultimately receive. 

Case Developments Commercial

Homebuyers Prepare Competition Claims Against Major UK Housebuilders

By John Freund |

A group of UK homebuyers is preparing to bring competition law claims against some of the country’s largest housebuilders, alleging anti competitive conduct that inflated new home prices. The prospective litigation represents another significant test of collective redress mechanisms in the UK and is expected to rely heavily on third party funding to move forward.

An announcement from Hausfeld outlines plans for claims alleging that leading residential developers exchanged commercially sensitive information and coordinated conduct in a way that restricted competition in the housing market. The proposed claims follow an investigation by the UK competition regulator, which raised concerns about how housebuilders may have shared data on pricing, sales rates, and incentives through industry platforms. According to the claimant lawyers, this conduct may have reduced competitive pressure and led to higher prices for consumers.

The claims are being framed as follow on damages actions, allowing homebuyers to rely on regulatory findings as a foundation for civil recovery. The litigation is expected to target multiple large developers and could involve tens of thousands of affected purchasers, given the scale of the UK new build market during the relevant period. While damages per claimant may be relatively modest, the aggregate exposure could be substantial.

From a procedural perspective, the case highlights the continued evolution of collective competition claims in the UK. Bringing complex, multi defendant actions on behalf of large consumer groups requires significant upfront investment, both financially and operationally. Litigation funding is therefore likely to be central, covering legal fees, expert economic analysis, and the administration required to manage large claimant cohorts.