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Consumer protection under review

Consumer protection under review

By Victorian Law Reform Commission

Consumer Law 

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Litigation funding has come under scrutiny after high profile cases saw successful plaintiffs ending up with nothing.

The Victorian Attorney-General Martin Pakula has asked the Victorian Law Reform Commission (VLRC) to review current regulation for litigation funding and to review state-funded financial assistance available to victims of family violence under the Victims of Crime Assistance Act 1996.

Litigation funding

Legal fees can be a barrier to people seeking to access justice. Class actions are no exception to this. Currently, individuals who are unable to meet legal costs for court proceedings have two options. First, they can approach “no win no fee” firms, where the plaintiff incurs no fees in the case of a loss, and in the case of success, the firm receives a payout. This is generally not an option in the case of class actions, due to the enormous costs associated with them, which firms are unwilling to take on. The alternative option for plaintiffs lacking the resources to pay the legal fees is litigation funding.

Litigation funding is the process whereby a third party agrees to pay the plaintiff’s legal fees in return for a percentage of the damages awarded. In practice the funder can take anywhere between 40 to 50 per cent of damages and their amount is usually the first cut, with the lawyers next in line. Litigation funding has come under understandable scrutiny after a number of high profile cases saw successful plaintiffs ending up with nothing. In 2016, a class action brought by workers at Empire Rubber settled for $4.5 million with all of the proceeds going towards legal fees and litigation funders while the workers received nothing.

Currently, the Corporations Amendment Regulation 2012 (No 6) (Cth) requires litigation funders to have adequate measures in place to prevent conflicts of interest from arising. Some critics have noted that the current conflict of interest standard provides a very low level of protection for consumers. The VLRC has been asked whether there is scope for regulation of litigation funders to be increased. In the UK, for example, the Code of Conduct for Litigation Funders (2011) provides greater protection to consumers.

Contingency fees

Contingency fees operate in the same way as litigation funders, except the funder is the law firm. In Australia, contingency fees are banned. The Attorney-General has asked VLRC to report on whether the introduction of contingency fees could mitigate the issues presented by the practice of litigation funding.

The VLRC will report on litigation funding by 30 March 2018 and will seek submissions in mid-2017. More details are available at www.lawrefom.vic.gov.au.

Barriers to access for victims of family violence

The Victims of Crime Tribunal Scheme is a state-funded scheme under the Victims of Crime Assistance Act 1996 (Vic) aiming to provide assistance to victims of crime. The scheme has two branches: Victims of Crime Assistance Tribunal (VOCAT) and Victims Assistance Program (VAP).

VOCAT has the power to award assistance for funerals and medical expenses, loss of earnings and clothing. It also has the power to award special financial assistance in the form of a lump sum payment.

Eligibility for the scheme requires an applicant to be a victim of an “act of violence”. Submissions to the Royal Commission into Family Violence (2016) highlighted that family violence behaviours such as property damage and economic isolation are not captured by such a definition and are thus precluded from eligibility. The Royal Commission highlighted the complexity of family violence matters.

Under the Act, related criminal acts are treated as one act of violence. In the context of family violence, where violence can occur over a long period of time at the hands of the same offender, victims may receive a lump sum payment that is not representative of the trauma they have undergone.

The Victims Assistance Program was also created under the Victims of Crime Assistance Act. Eligibility for the program is much the same as for VOCAT. The processes for applying for both programs are completely separate and suggestions have been made that they be made into one cohesive program as in NSW.

The VLRC has been asked to review and report on these schemes by 31 January 2018, considering matters including the eligibility test and whether it should be expanded, whether the quantum of awards reflects the cumulative impact of family violence, the requirement to notify perpetrators, and the matters giving rise to refusal of application.

Consultations for this reference will begin soon and interested parties can find further information at www.lawreform.vic.gov.au.


This column is contributed by the VLRC. For further information ph 8608 7800 or see www.lawreform.vic.gov.au.

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Disclaimer: Views expressed by commentators are not necessarily endorsed by the Law Institute of Victoria Ltd (LIV). No responsibility is accepted by the LIV for the accuracy of information contained in the comments and the LIV expressly disclaims any liability for, with respect to or arising from any such views.

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