By Anthony Lo Surdo SC -
Snapshot
- In the recent case of Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed (In liq) [2015] FCA 811, the Federal Court rejected a ‘common fund’ application brought shortly after the commencement of proceedings that sought to impose a funding arrangement on members of the class action who had not agreed to it.
- The making of such an order would have been advantageous to the litigation funder, as it would have obviated the need for contractual arrangements between a funder and a group member, thereby allowing for open class actions.
- The Court was concerned that making a common fund order at the commencement of proceedings was not ‘appropriate or necessary to ensure that justice is done in the proceeding’ and could lead to an increase in class actions.
In August 2013, Blairgowrie Trading Ltd and Alan and Chrystine Flitcroft (as trustees of the Te Coco Trust) (Applicants) commenced a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth). They claimed that Allco Finance Group Ltd (Receivers & Managers Appointed) (in liquidation) (AFG), Gary James Jones (as administrator ad litem of the estate of the late David Raymond Coe) and KPMG (Respondents) were liable to compensate them and the group members (on whose behalf they commenced the proceeding) for loss or damage that they suffered as a result of alleged contraventions by the Respondents of various provisions of the Corporations Act 2001 (Cth) (Corporations Act), the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), and the Fair Trading Act 1987 (NSW) (Fair Trading Act).
In short, the Applicants alleged that AFG made misleading or deceptive representations regarding its financial position and engaged in continuous disclosure breaches during the global financial crisis. It was claimed that the shares of Allco were inflated as a result, leading each member of the open class proceedings to suffer loss. The proceeding was funded by a litigation funder (International Litigation Funding Partners Pty (ILFP)), which had entered into funding agreements with two of the applicants. The agreements provided that:
- The Applicants would reimburse ILFP for any legal costs incurred, as consideration for ILFP funding their legal costs and indemnification in the event of an adverse costs order.
- ILFP would be paid a commission (some 32.5-35 per cent) on any sum ultimately recovered from Allco, calculated not only on the amounts recovered for the claims of the two applicants with whom ILFP had a funding agreement, but for the claims of all of the members (even those who had no agreement with ILFP).
