Federal Register of Legislation - Australian Government

Primary content

A Bill for an Act to amend the Corporations Act 2001, and for related purposes
Administered by: Treasury
For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.
Registered 27 Oct 2021
Introduced HR 27 Oct 2021
Table of contents.

2019‑2020‑2021

 

The Parliament of the

Commonwealth of Australia

 

HOUSE OF REPRESENTATIVES

 

 

 

 

Presented and read a first time

 

 

 

 

Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021

 

No.      , 2021

 

(Treasury)

 

 

 

A Bill for an Act to amend the Corporations Act 2001, and for related purposes

  

  


Contents

1............ Short title............................................................................................. 1

2............ Commencement................................................................................... 1

3............ Schedules............................................................................................ 2

Schedule 1—Litigation funders                                                                                     3

Corporations Act 2001                                                                                               3

 

 


A Bill for an Act to amend the Corporations Act 2001, and for related purposes

The Parliament of Australia enacts:

1  Short title

                   This Act is the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Act 2021.

2  Commencement

             (1)  Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

 

Commencement information

Column 1

Column 2

Column 3

Provisions

Commencement

Date/Details

1.  The whole of this Act

The day after this Act receives the Royal Assent.

 

Note:          This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.

             (2)  Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

3  Schedules

                   Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1Litigation funders

  

Corporations Act 2001

1  Section 9

Insert:

claim proceeds, for a class action litigation funding scheme, means the sum of:

                     (a)  the total remedies obtained for one or more of the scheme’s members as a result of a judgment made by a Court, or a settlement agreed, in relation to class action proceedings for the scheme; and

                     (b)  each award of legal costs by the Court, and each agreement to pay legal costs, (if any) in favour of the members in relation to such proceedings.

Note:          Paragraph (a) is referring to the total (gross) remedies obtained for the scheme’s members before any reductions for the costs for the proceedings.

claim proceeds distribution method, for a class action litigation funding scheme, has the meaning given by subparagraph 601GA(5)(a)(ii).

class action litigation funding scheme has the meaning given by subsections 9AAA(1) and (2).

class action proceedings, for a class action litigation funding scheme, means legal proceedings in a Court to seek remedies for each of the scheme’s members, whether or not remedies are also sought in the proceedings for one or more other persons.

common fund order has the meaning given by paragraph 601LF(2)(c) as affected by subsection 601LF(6).

funder, for a class action litigation funding scheme, means a person mentioned in paragraph 9AAA(1)(c).

funding agreement, for a class action litigation funding scheme, means an agreement mentioned in paragraph 9AAA(1)(c).

legal costs, for class action proceedings for a class action litigation funding scheme, means the legal costs (including any disbursements) for the proceedings incurred by:

                     (a)  one or more parties to the proceedings; or

                     (b)  any other entity on behalf of any of those parties.

2  Section 9 (after paragraph (a) of the definition of managed investment scheme)

Insert:

                    (aa)  a class action litigation funding scheme; or

3  Section 9 (paragraph (a) of the definition of member)

After “managed investment scheme”, insert “(other than a class action litigation funding scheme that is a managed investment scheme)”.

4  Section 9 (after paragraph (a) of the definition of member)

Insert:

                     (b)  in relation to a class action litigation funding scheme that is a managed investment scheme—means a person who holds an interest in the scheme as a claimant mentioned in paragraph 9AAA(1)(a) for the scheme and who agrees in writing to:

                              (i)  be a member of the scheme; and

                             (ii)  be bound by the terms of the scheme’s constitution; or

5  After section 9

Insert:

9AAA  Meaning of class action litigation funding scheme

Class action litigation funding scheme

             (1)  A scheme that has all of the following features is a class action litigation funding scheme:

                     (a)  the dominant purpose of the scheme is to seek remedies to which 7 or more persons (the claimants) may be legally entitled arising out of:

                              (i)  the same, similar or related transactions or circumstances that give rise to a common issue of law or fact; or

                             (ii)  different transactions or circumstances but the claims of the claimants can be appropriately dealt with together;

                     (b)  the steps taken to seek remedies for each of the claimants include one or more lawyers providing services in relation to:

                              (i)  making a demand for payment in relation to a claim; or

                             (ii)  lodging a proof of debt; or

                            (iii)  commencing or undertaking legal proceedings; or

                            (iv)  investigating a potential or actual claim; or

                             (v)  negotiating a settlement of a claim; or

                            (vi)  administering a deed of settlement or scheme of settlement in relation to a claim;

                     (c)  a person (the funder) provides funds or indemnities, or both, under an agreement (the funding agreement) (including an agreement under which no fee is payable to the funder or lawyers if the scheme is not successful in seeking remedies) to enable the claimants to seek remedies;

                     (d)  the funder is none of the following:

                              (i)  a lawyer or legal practice that provides a service for which some or all of the legal fees or disbursements, or both, are payable only on success;

                             (ii)  a general insurer (within the meaning of the Insurance Act 1973) that is acting in the course of carrying on an insurance business (within the meaning of that Act);

                            (iii)  a life company (within the meaning of the Life Insurance Act 1995) that is acting in the course of carrying on a life insurance business (within the meaning of that Act).

Note:          A class action litigation funding scheme will not be a managed investment scheme if it is a scheme of a kind declared by the regulations not to be a managed investment scheme (see paragraph (n) of the definition of managed investment scheme in section 9).

Anti‑avoidance

             (2)  If:

                     (a)  one or more persons enter into, begin to carry out or carry out a plan; and

                     (b)  it would be concluded that the person, or any of the persons, who entered into, began to carry out or carried out the plan or any part of the plan did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of avoiding the application of:

                              (i)  subsection (1) to a scheme; or

                             (ii)  subsection 601GA(5), or any provision of Part 5C.7A, in relation to a scheme; and

                     (c)  the plan or the part of the plan has achieved, or apart from this subsection would achieve, that purpose; and

                     (d)  apart from the plan, or the part of the plan, the scheme would be a class action litigation funding scheme;

both of the following apply:

                     (e)  a person mentioned in paragraph (a) contravenes this subsection;

                      (f)  the scheme is a class action litigation funding scheme.

Note:          This subsection is a civil penalty provision (see section 1317E).

             (3)  However, subsection (2) does not apply to a plan to the extent that the operation of subsection (2) would result in an acquisition of property from a person otherwise than on just terms.

Definitions

             (4)  In this section:

acquisition of property has the same meaning as in paragraph 51(xxxi) of the Constitution.

just terms has the same meaning as in paragraph 51(xxxi) of the Constitution.

plan includes any of the following:

                     (a)  any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable (or intended to be enforceable) by legal proceedings;

                     (b)  any scheme, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

6  At the end of section 601GA

Add:

             (5)  For a class action litigation funding scheme that is a managed investment scheme:

                     (a)  the scheme’s constitution must include words to the effect that:

                              (i)  each funding agreement for the scheme must be in writing; and

                             (ii)  each funding agreement for the scheme must include the same method (the claim proceeds distribution method) for determining the amount of any claim proceeds for the scheme that is to be paid or distributed to entities who are not members of the scheme; and

                            (iii)  if any claim proceeds for the scheme are to be paid or distributed under the claim proceeds distribution method for the scheme to an entity who is not a member of the scheme—the entity must be a party to a funding agreement for the scheme; and

                            (iv)  any claim proceeds for the scheme must not be paid or distributed unless the claim proceeds distribution method for the scheme has been approved or varied by a Court as described in paragraph 601LF(2)(b), (3)(c) or (4)(c); and

                             (v)  each funding agreement for the scheme must require the funder for the scheme to pay the reasonable costs of a person mentioned in subsection (6) of this section for any class action proceedings for the scheme in a Court, unless the Court orders otherwise; and

                     (b)  the scheme’s constitution must include words to the effect that each funding agreement must provide:

                              (i)  that the funding agreement is subject to the law in force in a particular State or Territory; and

                             (ii)  that the only courts in which the funding agreement can be enforced are the courts of the Commonwealth or the courts of a particular State or Territory; and

                     (c)  any other agreement, or arrangement, relating to the scheme is not enforceable and has no effect to the extent that it is contrary to a matter mentioned in paragraph (a) or (b) of this subsection.

Note 1:       For the claim proceeds distribution method, see also sections 601LF (enforceability of the method) and 601LG (power of a Court to approve or vary the method).

Note 2:       Subparagraph (a)(iii) does not prevent payments or distributions flowing to a person through another person that is a party to a funding agreement for the scheme (for example, to a forensic accountant engaged by the funder for the scheme).

Note 3:       The extent to which any costs, for class action proceedings for a scheme incurred by the funder, are reasonable is a factor a Court must consider in approving or varying the claim proceeds distribution method (see subsection 601LG(3)).

             (6)  For the purposes of subparagraph (5)(a)(v) the persons are as follows:

                     (a)  any person to whom the Court refers each funding agreement for the scheme for inquiry and report in relation to the remuneration (however described) that the funder for the scheme will be entitled to receive under the funding agreements;

                     (b)  any person appointed by the Court to assist the Court, as a contradictor by representing the interests of the scheme’s members, in deciding to make any order to approve or vary the scheme’s claim proceeds distribution method.

7  After Part 5C.7

Insert:

Part 5C.7AClass action litigation funding schemes

  

601LF  Enforceable funding agreements etc.

Funding agreements

             (1)  If class action proceedings for a class action litigation funding scheme that is a managed investment scheme are commenced in a Court, each funding agreement for the scheme is not enforceable and has no effect to the extent that it relates to the scheme’s claim proceeds distribution method, unless subsection (2), (3) or (4) applies to the proceedings.

             (2)  This subsection applies to the proceedings if:

                     (a)  the Court is a federal court; and

                     (b)  in the proceedings, the Court approves or varies, under section 601LG, the scheme’s claim proceeds distribution method; and

                     (c)  in, or in relation to, the proceedings, the Court does not make an order (a common fund order) for the purposes of:

                              (i)  fixing the remuneration (however described) of the funder for the scheme; and

                             (ii)  requiring one or more persons who are claimants mentioned in paragraph 9AAA(1)(a) for the scheme, but who are not members of the scheme, to contribute to the funder’s remuneration.

Note:          The remuneration of the funder does not include reimbursement for the payment of legal costs for the proceedings (see subsection (6)).

             (3)  This subsection applies to the proceedings if:

                     (a)  the Court is a court of a State or Territory; and

                     (b)  in the proceedings, the Court is exercising federal jurisdiction; and

                     (c)  in the proceedings, the Court approves or varies, under section 601LG, the scheme’s claim proceeds distribution method; and

                     (d)  in, or in relation to, the proceedings, the Court does not make a common fund order.

             (4)  This subsection applies to the proceedings if:

                     (a)  the Court is a court of a State or Territory; and

                     (b)  in the proceedings, the Court is not exercising federal jurisdiction; and

                     (c)  in the proceedings, the Court approves or varies the scheme’s claim proceeds distribution method under any powers or procedures of the Court that are substantially similar to those in section 601LG; and

                     (d)  in, or in relation to, the proceedings, the Court does not make a common fund order.

Other related agreements or arrangements

             (5)  Any other agreement, or arrangement, relating to the scheme is not enforceable and has no effect to the extent that it is contrary to the scheme’s claim proceeds distribution method so approved or varied by a Court as described in subsection (2), (3) or (4).

Common fund orders

             (6)  For the purposes of paragraph (2)(c), the remuneration of the funder does not include reimbursement for the payment of legal costs for the proceedings.

             (7)  To avoid doubt, nothing in this section implies that a Court has the power to make a common fund order.

601LG  Approval or variation of claim proceeds distribution method for a class action litigation funding scheme

Order to approve or vary claim proceeds distribution method

             (1)  The Court may, in class action proceedings for a class action litigation funding scheme that is a managed investment scheme, make an order to:

                     (a)  approve the scheme’s claim proceeds distribution method (by approving each of the funding agreements for the scheme) if that method is fair and reasonable when considering the interests of the scheme’s members as a whole; or

                     (b)  vary that method (by varying each of the funding agreements for the scheme) to ensure that that method is fair and reasonable when considering the interests of the scheme’s members as a whole;

if subsection (2) applies to the proceedings.

             (2)  This subsection applies to the proceedings if:

                     (a)  the Court:

                              (i)  is a federal court; or

                             (ii)  is a court of a State or Territory that, in the proceedings, is exercising federal jurisdiction; and

                     (b)  the proceedings are sufficiently progressed to enable the Court to determine whether that claim proceeds distribution method, or any variation of that method, is so fair and reasonable.

Fair and reasonable test

             (3)  For the purposes of subsection (1), in considering whether the scheme’s claim proceeds distribution method, or any variation of that method, is fair and reasonable when considering the interests of the scheme’s members as a whole, the Court must only have regard to the following factors:

                     (a)  in relation to the proceedings, the following:

                              (i)  the amount, or expected amount, of claim proceeds for the scheme;

                             (ii)  whether the proceedings have been managed in the best interests of the members to minimise the costs for the proceedings incurred by, or on behalf of, the members;

                            (iii)  the complexity and duration of the proceedings;

                            (iv)  the legal costs for the proceedings incurred by, or on behalf of, the members, and the extent to which those legal costs are reasonable;

                             (v)  the costs (other than legal costs) for the proceedings incurred by the funder for the scheme, and the extent to which those costs are reasonable;

                            (vi)  the costs (other than legal costs) for the proceedings incurred by the parties to each of the funding agreements (other than the funder for the scheme), and the extent to which those costs are reasonable;

                           (vii)  the extent of the commercial return to the funder for the scheme in comparison to the reasonable costs for the proceedings incurred by the funder;

                     (b)  the costs for the scheme incurred by the responsible entity of the scheme, and the extent to which those costs are reasonable;

                     (c)  the risks accepted by the parties to each of the funding agreements for the scheme by becoming parties to the funding agreement;

                     (d)  any other compensation or remedies obtained by any of the members in relation to the transactions or circumstances referred to paragraph 9AAA(1)(a);

                     (e)  any amounts that the members have contributed towards paying the costs for the scheme incurred by the parties to any of the funding agreements for the scheme;

                      (f)  any other factors prescribed by regulations made for the purposes of this paragraph.

             (4)  Regulations made for the purposes of this subsection may provide that this section applies as if subsection (3) were omitted, modified or varied as specified in the regulations.

             (5)  A rebuttable presumption that the scheme’s claim proceeds distribution method is not so fair and reasonable arises if more than 30% of the claim proceeds for the scheme is to be paid or distributed to entities who are not members of the scheme, considering those entities as a whole.

Referee report and representations by contradictor

             (6)  Before the Court makes an order under subsection (1), in relation to each of the funding agreements for a class action litigation funding scheme, the Court must:

                     (a)  receive and consider a report from a person to whom the Court has referred each of the funding agreements for inquiry and report in relation to the remuneration (however described) that the funder for the scheme will be entitled to receive under the funding agreements; and

                     (b)  consider the representations made by a person appointed by the Court to assist the Court, as a contradictor by representing the interests of the scheme’s members, in deciding to make any order to approve or vary the scheme’s claim proceeds distribution method;

unless it is not in the interests of justice to do so.

Effect of variation

             (7)  If the Court makes an order under subsection (1) to vary the scheme’s claim proceeds distribution method by varying each of the funding agreements for the scheme, the Court may declare a funding agreement for the scheme to have had effect, as so varied, at and after the time when the agreement was made, or at and after a specified later time.

Application to the Court

             (8)  The Court may make an order under subsection (1) in relation to each of the funding agreements for a class action litigation funding scheme that is a managed investment scheme:

                     (a)  on its own initiative; or

                     (b)  on the application of:

                              (i)  a member of the scheme; or

                             (ii)  a party to any of those funding agreements; or

                            (iii)  the responsible entity of the managed investment scheme.

8  In the appropriate position in subsection 1317E(3) (table)

Insert:

 

subsection 9AAA(2)

anti‑avoidance for class action litigation funding schemes

corporation/scheme

9  In the appropriate position in Chapter 10

Insert:

Part 10.61Transitional provisions relating to the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Act 2021

  

1688  Application of amendments relating to class action litigation funding schemes

             (1)  The amendments made by the amending Act apply in relation to a class action litigation funding scheme that is a managed investment scheme if:

                     (a)  to the extent that the amendments relate to a funding agreement for the scheme—the funding agreement is entered into on or after the commencement of that Act; and

                     (b)  the managed investment scheme becomes a class action litigation funding scheme on or after the commencement of that Act, whether the managed investment scheme comes into existence before or after that commencement; and

                     (c)  in the case where class action proceedings for the scheme are commenced in a Court—those proceedings are commenced in the Court on or after the commencement of that Act.

Note:          The amendments made by the amending Act do not apply in relation to a managed investment scheme that becomes a class action litigation funding scheme before the commencement of that Act.

             (2)  In this section:

amending Act means the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Act 2021.