Vocus Settlement Raises Questions On Future of Lit Fin in Australia
A recent settlement involving Sydney telecom giant Vocus is raising questions about third-party funding arrangements. The debate between common fund orders (CFOs) versus funding equalization orders (FEOs) reached its apex, when Justice Moshinsky’s ruling resulted in a lower payout to litigation funder Woodsford. Global Legal Post reports that Vocus had been accused of making intentionally misleading statements regarding its potential profits. The claim was settled for $23MM. The problem? A common fund order was sought in the case, which would have extended the contractual funding agreement to all members of the class action—including those who did not sign on to the funding agreement. CFOs are popular, especially since a 2016 case involving Money Max v QBE. In this instance, however, an FEO was ordered instead. This ultimately means that the funder will receive a lower payout than they would have realized, had a CFO remained in place. Some assert that this ruling will make litigation funders more reticent to fund class action cases in Australia. Because Woodsford had a reasonable belief that the CFO would be granted, they relied on it when calculating its risks. If it remains unclear which type of funding arrangement will ultimately be imposed, this can impact who gets funding, as well as the specifics of future funding arrangements. Moving forward, it’s unclear whether Australian legal professionals will take steps to mitigate FEOs, in order to make CFOs standard practice in litigation funding cases. Surely, there’s a solution that enables funders to make informed decisions about risks and potential payouts, while not forcing potential claimants into agreements which they never signed up for.