Click here for class action: litigation funding under fire

THE litigation funding industry has been accused of signing up clients for class actions by using ‘click the button’ websites.

THE litigation funding industry has been accused of signing up clients for class actions by using “click the button” websites aimed at promoting class actions instead of informing consumers of legal services.

Clayton Utz partner Stuart Clark, who helped draw up the latest plan to reform the litigation funding industry, said the scheme provided an appropriate balance between the interests of litigation funders and consumers.

“It’s hard to see how a reputable litigation funder could object to the proposal,” he said.

“Making sure that litigation funders have adequate capital reserves, make meaningful disclosures to their clients and put the interests of their clients first is hardly revolutionary.

“Despite what some litigation funders may say their directors’ primary duties are to their shareholders, not their clients.

“The proposed regulatory framework will ensure that litigation funders act in the best interests of their clients; place the best interests of their clients ahead of their own and, when conflicts arise as they inevitably will, put the interests of their clients first.

“The litigation funding industry is now signing consumers up to litigation funding and lawyers’ cost agreements by way of online ‘click the button’ websites that are focused on promoting the class action rather than informing consumers.”

Mr Clark said rising numbers of new litigation funders were moving into the market “with operations that are built around a $2 company, a glitzy website and a mobile phone number”.

“There is a desperate need to ensure proper disclosure to clients — it is simply unacceptable for a litigation funder to be able to bind mums and dads who don’t have the benefit of independent legal advice to a contract which may require them to give up 40 per cent of any verdict or settlement simply by clicking a button on a website promoting the class action,” Mr Clark said.