Key points
- The funder pays all legal costs — solicitor fees, counsel fees, court filing, expert reports — during the proceeding.
- If the case is lost, group members owe the funder nothing (subject to funding agreement terms).
- The funder takes a percentage of the net settlement or judgment, typically between 20–40%.
- Australian litigation funders are regulated and must hold an Australian Financial Services Licence (AFSL).
- Courts must approve funding arrangements and may reduce a funder’s commission if it is unreasonable.
Who are the major Australian litigation funders?
Several well-capitalised funders operate in Australia, including IMF Bentham (now Omni Bridgeway), Burford Capital, and Harbour Litigation Funding. These entities underwrite the financial risk of complex class actions and work closely with specialist plaintiff law firms. Some law firms also self-fund proceedings using conditional fee arrangements rather than external funders.
What does the funder’s percentage cover?
The commission the funder receives from settlement proceeds must cover:
- All legal costs paid throughout the proceeding
- The cost of any ATE insurance to protect the lead applicant from adverse costs
- The funder’s required return on the capital deployed
After deductions, the net proceeds are distributed to group members based on the approved distribution methodology.
AFSL requirement
Following regulatory reform, litigation funders managing class action funding schemes are required to hold an Australian Financial Services Licence and comply with obligations under the Corporations Act 2001 (Cth). This provides group members with additional regulatory protection compared to earlier years when the sector was largely unregulated.
This article is general information only and does not constitute legal advice. ClassActions.com.au is an independent information service and is not a law firm. If you believe you may have a legal claim, consult a qualified Australian legal practitioner.