Class Actions and Litigation Funding

23 Feb, 2021

In December of 2020, the Law Commission published an issues paper regarding class actions and litigation funding. They say the crucial question is whether the potential benefits of class actions and litigation funding in terms of promoting access to civil justice can be realised in a way that manages the risks and outweighs any disadvantages they may give rise to.

We will be focusing on the litigation funding aspects of the report, as that is the industry in which Tempest operates.

The fundamental principle underpinning litigation funding is access to justice, and the primary objection to its use is to prevent speculation in litigation. If allowed to speculate in litigation, vexatious and frivolous claims will be bolstered by the additional funding and it will create an imbalance in the fairness between the parties, where one party has funding and where one does not.

The unfortunate truth behind our civil (and criminal) justice system is that you get what you pay for and that cheap is cheap. Ordinarily, the greatest winners in civil litigation will often be the lawyers, after a long slog between the parties in which both spend thousands (or millions) in legal fees, which provides unsatisfactory results and a hole in your pockets.

Lord Neuberger, the president of the UK Supreme Court said in 2013 that “access to the courts is a right and the State should not stand in the way of individuals availing themselves of that right”. The overseas approach in Commonwealth countries seems to be that there is a cautiously permissive approach to litigation funding, and that draconian and unconscionable funding deeds will be struck down, but not regulated.

The Law Commission seems concerned there is no regulation around excessive profits in the industry and implicitly that regulation would be beneficial. However, they themselves provide ample examples, why regulation would be detrimental to the industry. Why the need to regulate everything?

Whatever decision the Law Commission makes, it should be cognisant of the implications of the funders themselves (we are one of them) and how it may affect the future of civil litigation in a developing and multicultural society.

Submissions on the Law Commission’s issues paper are due on 11 March 2021.