An intention to grant transitional relief to lawyers and litigation funders involved in legal proceedings structured as funded class actions has been announced by ASIC. This has taken place after the recent Federal Court ruling (Brookfield Multiplex Ltd v International Litigation Funding Partners) that stated funded class-actions are ‘managed investment schemes’ and thus regulated under the Corporations Act 2001.
ASIC said the ruling of the full Federal Court had the potential “to disrupt the conduct of a number of class actions currently underway”. Relief will apply until 30 June 2010, and will absolve those litigation funds from obligations applying under Chapter 5C and Chapter 7 of the Act, including:
• appointing an AFS licensed public company as 'responsible entity' to operate the scheme;
• adopting a complying constitution and compliance plan for the scheme;
• registering the scheme with ASIC;
• preparing a Product Disclosure Statement for the scheme;
• providing ongoing disclosure to members of the scheme.
The transitional conditions have been granted to avoid any disruption that could adversely impact plaintiffs in court actions, or interfere with the timely and efficient conduct of litigation that is under way. “The relief will allow time for government and ASIC to consider and consult on how funded class actions should be regulated under the Act in future,” a statement from the regulator said. “Depending on the outcome of that process, existing class actions may need to be restructured to meet the requirements of the Act by the end of the relief period.”
The regulator said that relief will generally be granted, on individual applications, to lawyers and litigation funders involved in the conduct of class actions that were commenced before 4 November 2009. Applications in respect of class actions to be commenced after that date will be considered separately, with ASIC assessing whether or not (and on what terms) it will grant transitional relief to those matters.
Applications for relief must be prepared in accordance with ASIC Regulatory Guide 51 and lodged through applications@asic.gov.au.
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