Corrs Chambers Westgarth head of class actions Chris Pagent said if passed, firms might well have an opportunity to garner a greater profit, but the lawyers were taking on far greater risks because they would bear the exposure rather than the client.
“If the litigation is unsuccessful, the law firm will have to bear the claimant’s costs as well as the defendant’s and additionally, they will have to give security for those costs during the litigation,” Mr Pagent said.
Australian Law Alliance Victorian president Jeremy King said the change would protect clients.
“It will clearly benefit vulnerable and disadvantaged individuals who may otherwise be unable to pursue a claim because of the cost,” Mr King said.
At the moment, litigation funders often pay the legal costs and expenses of clients in exchange for a cut of the result plus commission.
Typically, the commissions were in the order of 15 to 25 per cent, Mr Pagent said, which could provide a reference point when lawyers ask judges to decide their contingency fee under the new arrangement.
“Law firms who seek to take advantage of a contingency fee arrangement will compete in the same market as the litigation funders…it will increase the level of competition and that may have a downward impact on commissions which are charged to claimants,” he said.
But contingency fees could affect a lawyer’s incentive to give impartial advice, and being liable for costs could lead to earlier settlements that aren’t in the interest of clients.
“Lawyers all of a sudden will have far more skin in the game,” Mr Pagent said.
“Do they want the best outcome possible or do they want the best outcome for themselves?”
Former Law Council of Australia president Stuart Clark said the funding system was “very much contrary to the interests of clients” and leaves lawyers hopelessly conflicted.
“The legal profession is moving away from being a profession and becoming a business…it’s all about making money now rather than delivering justice,” Mr Clark said.
“The only thing standing between US-style class litigation and Australia is the absence of contingency fees.”
Mr Pagent said he didn’t expect the number of class actions to increase, but instead change the way the cases were run.
Tammy Mills is a Crime Reporter for The Age.