Angie Bell (Moncrieff, Liberal National Party) Share this | Hansard source

I am going to continue my speech from a few days ago and outline a few key points around this amendment. The Investment Funds Legislation Amendment Bill 2021 gives rise to a range of regulatory impacts on businesses, as set out in the PJCCFS and ALRC reports. The PJCCFS and ALRC reports have been certified as independent reviews which involved process and analysis equivalent to a regulation impact statement.

To address the gap in PJCCFS and the ALRC inquiries and the government's consideration of options for class action and litigation funding reform, supplementary analysis on the costs, benefits and risks associated with the new measures was prepared consistent with the Australian Government Guide to Regulatory Impact Analysis.

A number of key impacts were identified. Litigation funders will experience greater barriers to charging unfair and disproportionate fees and commissions in class actions, reducing the availability of windfall profitmaking. Litigation funders may be incentivised to undertake greater book building to inform their decision to support a class action, which entails identifying, communicating with and enrolling class members to the action. Litigation funders will gain certainty and clarity about court powers to intervene in litigation funding agreements and how courts will assess a proposed distribution of claim proceeds under a class-action-litigation funding scheme.

Litigation funders may experience greater uncertainty about the enforceability of some litigation funding agreements and their returns in class action proceedings, although this uncertainty is likely to abate over time with the development of precedent. Litigation funders may also experience a reduced funding appetite, especially in respect of cases in which they would previously have received a windfall return. Litigation funders may be subject to additional administrative and compliance costs to comply with the new regulatory requirements.

The government is ensuring fair and reasonable compensation for class action claimants and appropriate regulation of litigation funders and lawyers. It is crucial that Australia's class action system and litigation funding regime be conducted with impartiality and fairness so as to provide equitable outcomes for all Australians.

The reforms respond to a range of recommendations by the Parliamentary Joint Committee on Corporations and Financial Services and the Australian Law Reform Commission in their respective inquiries into litigation funding and class actions. The government introduced these measures because action was needed to address what the joint committee found was systemic and inappropriate skewing of proceeds away from class members to litigation funders.

The Morrison government—our government—is taking action to ensure that if you participate in a class action case your benefit and outcome is beneficial directly to you, as it should be. Individuals participating in class actions are seeing more than 50 per cent of compensation awarded by Australia's judicial system go directly into the wallet of lawyers and litigation funders before claimants see a cent. I don't think that's right. That's why the government has acted in this way. There are five key elements to the reforms in the bill: enhanced protection of the right of class action plaintiffs to choose whether to join a class action litigation funding scheme, a type of managed investment scheme under the Corporations Act 2001; court powers to approve or vary the distribution of the proceeds of the funded class action to ensure it is fair and reasonable; a rebuttable presumption that a distribution of over 30 per cent in total of the proceeds of the scheme to nonmembers of the scheme is not fair and reasonable; a requirement for courts to consider the advice of certain independent experts, if any are appointed, to assist in determining the fairness and reasonableness of a proposed distribution; and disincentives to funders from seeking common fund orders to extend their commissions to nonmembers. Together the changes form a comprehensive package of reforms to promote a fair and reasonable distribution of class action proceeds to claimants who are member of a class action litigation funding scheme. They also continue the government's work to enhance oversight of the litigation funding industry, and I commend the committee on its work.

I will finish with a short summary and go back to where I started on the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021 and speak to the House on how it began. On 28 October 2021, the House referred an inquiry into the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021 to the Parliamentary Joint Committee on Corporations and Financial Services, of which I am a government member. Just a little bit about class actions: they enable a representative plaintiff—

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