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Australia – Potential Introduction Of Contingency Fee Agreements In New South Wales.

11 September, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Dispute Resolution

 

With the rise in class actions and increasing prevalence of third party litigation funding, there has been growing demand for contingency fee agreements. The Law Society of New South Wales issued a report in June this year recommending the introduction of contingency fees in NSW. A contingency fee agreement allows lawyers, in the event of a successful outcome, to receive a percentage of the settlement or judgment amount. Contingency fee agreements are currently prohibited in NSW and the rest of Australia.

 

If contingency fee agreements are permitted in NSW, there may be greater incentives to pursue claims, including class actions, which may in turn lead to a rise in the volume of litigation in NSW. There may be competition with litigation funders and class action funding models could potentially change.

 

In Australia, class actions are currently run on an opt-out basis, meaning that any person who meets the class description is a member of the class unless s/he elects to opt out of proceedings. The problem for litigation funders funding class actions has been ‘free-riders’; individuals who obtain the benefit of the resolution of the class action, but who do not contribute to legal costs. To combat this problem, litigation funders have often used ‘closed classes’, whereby the class action is commenced on behalf of a specific group of people who all enter into a litigation funding agreement.

 

 

 

For further information, please contact:

 

Damian Grave, Partner, Herbert Smith Freehills
damian.grave@hsf.com

 

Jason Betts, Partner, Herbert Smith Freehills
jason.betts@hsf.com

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