Law Commission Review Reveals Conflict Between Funders & Corporates

It stands to reason that litigation funders and big corporations would be at odds over class actions. After all, it’s often funding that makes pursuing these cases possible. Third-party funding provides the tools needed for people harmed by companies or governments to seek restitution. These large entities, and those who insure them, may not be used to this kind of accountability–and blame funders for increasing access to justice.

Newsroom NZ details that the problem is that in some jurisdictions, the rich end of town may get their way. Ironic, since that only supports the need for accountability.

It’s been suggested that caps on what funders can charge for their services would prevent funders from seizing the lion’s share of an award in a successful case. Funders counter by saying that they endure significant risks that are only worthwhile financially if the payout is large.

Jonathan Woodhams, director of LPF, expressed alarm at the intensity of negative commentary against third-party funding. He went on to say that assertions of excessive funder profits at the expense of claimants and a glut of opportunistic litigation are both false and offensive. LPF’s numbers show that it made about 6% profit during the last ten years, with claimants receiving slightly less than 50% of awards and settlements.

Adjacent to the call for fee caps is a suggestion that judges should vet and approve funding agreements before cases begin. This would likely require additional study for judges and additional time. The complexities of fee structures and funding agreements may warrant individual scrutiny on a case-by-case basis, but would make more sense if only applied in cases where there’s a potentially oppressive agreement in place.

The Law Commission is expected to produce its final report along with recommendations in May 2022.