How Victoria’s Recently Passed Contingency Fee Bill Works

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On 18 June 2020, the Victorian Parliament passed the Justice Legislation Miscellaneous Amendments Bill 2019, a bill permitting contingency fees for class action proceedings in Victoria. The bill now awaits Royal Assent before becoming law.

The bill introduces new provisions into the Supreme Court Act 1986 (Vic) that enable the Supreme Court of Victoria to, on application by a plaintiff at any point during a group proceeding, make an order (known as a “group costs order”) that all members of the group are liable for the legal costs payable to the group’s lawyers. The group costs order empowers the Court to set the percentage of any award or settlement claimed by the group’s lawyers and the Court may revise that percentage over the course of the proceeding.

Under the new measures, the Court cannot make a group costs order in favour of a third party funder. If a group costs order is made, the group’s lawyers will be liable to meet any security for costs order and any adverse costs order made by the Court.

While the new measures give law firms greater fee flexibility, they also present new challenges for firms. Law firms running contingent-fee class actions will face decreased cash inflows until the proceeding resolves and employees can be shifted onto non-contingent fee matters. Law firms with smaller coffers may not be able to withstand such cash flow disruption unassisted. Other firms may not wish to take on all of the risk posed by a proceeding.  

Litigation funders can assist by providing, among other things:

  • the funding required for a security-for-costs order;
  • after-the-event costs protection; and
  • funding to supplement decreased cash inflows, meaning, in effect, the law firm can partially monetise its interest in the class action proceeding and mitigate the risk of a loss.

Lexvestor encourages law firms contemplating running class actions on a contingent-fee basis to get in contact to discuss funding solutions.