Quantum Litigation Funding has hit back at claims they are behind an increase in class actions and are in need of further regulation. “There is no evidence that the number of class actions has increased since 2000. If anything, the Federal Court has seen a reduction in class actions,” said Greg Tilse, managing director at Quantum Litigation Funding. “We have been waiting for the regulatory regime to emerge. We welcome regulation, particularly, from the point of view that it will promote consumer confidence in the industry.”

Federal Court Chief Justice Patrick Keane told Fairfax Media litigation funders could potentially abuse the system by bringing low-quality claims. He said he was aware of some cases which would not have been run were it not for litigation funding and called for the government to regulate the industry. Tilse said there was no evidence that the industry needed to change its behaviour. “If you look at the conduct of the industry, what you have is a small number of responsible players acting professionally. There has to be some balance in the debate about litigation funding. Litigation funders play an important role in providing access to justice and the Law Council of Australia and the High Court recognise this,” he said. The High Court upheld the legality of litigation funders in the 2006 case of Campbells Cash and Carry Pty Limited v Fostif.

Tilse added: “There are a number of applications we get where the economics of the case don’t make sense. Funders are very rigorous about what cases to accept. We reject about 95% of applications we receive.” Chief Justice Keane also criticised the profit aspect of litigation funding, which can be up to 40% of the recovery, which he called “unseemly”. However, Tilse says this amount is rarely received by funders and is more commonly closer to 35% and is sometimes as low as 20% because the percentage decreases if the matter settles early. “The price reflects the risk involved in running a class action or litigation case,” he said. “Part of the risk relates to the delays involved in such cases because the longer they go on, the more expensive they become. It also relates to the adverse cost orders we are liable for if the case does not succeed.”

He said the only way to decrease the fees charged by litigation funders would be to reduce the cost and delays of the legal system. “At present the focus is on class actions, but where we see the growth is in the single plaintiff matters and small-to-medium sized businesses that generally have difficulty in accessing the legal system,” said Tilse. Quantum was the most recent entrant into the market, following IMF Australia and Litigation Lending Services. Tilse said it was likely that more would enter the market eventually but that the credit crunch and uncertain regulatory frame work was holding some interested parties back.

The firm last year released a ‘Code of Conduct’ which outlines its obligations and aims as a business. Fellow funder Litigation Lending Services established its own 'Code of Conduct' in 2000 and while there are no current government regulations regarding funding of litigation and class actions, Litigation Lending Services is in the process of obtaining a full Australian Financial Services Licence in anticipation of future regulation. The third funder in the market, IMF Australia is an ASX registered business and holds a Australian Financial Services Licence.