Litigation funding agreements have been the subject of heated debate recently with the decisions of Hall v Poolman  NSWCA 64 http://www.austlii.edu.au/au/cases/nsw/NSWCA/2009/64.html and Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (No.3)  FCA 450 (Brookfield Multiplex) http://www.austlii.edu.au/au/cases/cth/federal_ct/2009/450.html. The latter case involved an attempt by Brookfield Multiplex Ltd and Brookfield Multiplex Funds Management Ltd (Multiplex) to restrain a litigation funder and the solicitors on the record in two representative class actions against Multiplex, from taking any further steps in proceedings on the basis that the litigation funding in place was a managed investment scheme that was required to be registered but was not.
The Brookfield Multiplex decision is a part of the broader litigation whereby numerous Multiplex shareholders (Shareholders) are seeking damages or compensation based on the alleged failure by Multiplex to disclose information that would have a material effect on the price or value of Multiplex securities in contravention of the Corporations Act 2001 (Act). The Shareholders have retained solicitors and have each entered into a funding agreement with International Litigation Funding Partners Pte Ltd (ILF) whereby (in simple terms) ILF will finance the action in exchange for a portion of any settlement or verdict sum.
In reaching his conclusions, Justice Finkelstein assessed the arrangements constituted by the funding agreement in light of the definition of a managed investments scheme set out in section 9 of the Act which provides that a management investment scheme includes:
'a scheme that has the following features:
In concluding that the arrangements constituted by the funding agreement did not satisfy all the features of a managed investment scheme, Justice Finkelstein held that:
In his judgment, Justice Finkelstein commented that the issues raised were not easy for him resolve. It may well be the subject of an appeal.
If you have any queries in relation to this matter or any other insolvency matters, please do not hesitate to contact Alison Robertson on 9288 6872 or Simon Majteles on 9288 6763.