A judgment handed down in the Federal Court this week requiring a litigation funder to provide security of costs is likely to have a significant impact on a number of other employment class action proceedings.
In granting security for costs against the UK litigation funder Augusta Ventures, Justice Michael Lee ruled that whilst section 570 of the Fair Work Act protects parties from the obligation to pay the other side's costs, it did not apply to litigation funders who make commercial profit from funding the litigation.
"Applications under the Fair Work Act are traditionally seen as a 'no cost jurisdiction', where parties must cover their own costs, commonly seen as an important protection of access to justice," said Paul O'Halloran, Colin Biggers & Paisley Employment and Safety Partner.
"In this case, Justice Lee has ruled that non-party funders who are using litigation to their perceived commercial advantage should not be afforded the same cost protections that would apply to an employee."
Justice Lee ordered UK-based Augusta Ventures, the litigation funder in the Chandler Macleod class action to pay more than $3 million in security for costs before proceeding.
This is the first time that security has been awarded directly against a litigation funder in Australia. This decision is likely to have major ramifications for a number of other employment class actions before the courts in Australia.
Michael Russell, head of the class action practice at Colin Biggers & Paisley, welcomed the decision.
"There are currently 10 other employment class actions that have been launched in the past two years alone, an unprecedented number - largely spurred by the historical success and enormous returns in investor class actions such as shareholder claims, and the investment attraction of the no costs jurisdiction of Fair Work claims," he said
"There is no doubt that the no costs jurisdiction has been attractive to entrepreneurial litigation funders. It will be interesting to see how this decision impacts funding in Australia for potential employment class actions moving forward."
Colin Biggers & Paisley's Class Action defence practice has more than two decades of experience acting in various capacities in leading class action disputes in Australia - including current class action defence roles for Chandler Macleod, Dick Smith, Spotless, Fairview Architecture and RCR Tomlinson.
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