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Litigation funding fight heats up

The Senate Parliamentary Joint Committee, Corporations and Financial Services looking into litigation funding and the regulation of the class action industry sparked a heated debate today.

Menzies Research Centre chief of staff James Mathias was questioned on the Menzies Research Centre's submission to the committee.

A report by the centre titled 'Litigation Nation' claimed that Australia has become a very desirable destination for litigation funders looking to profit from class actions.

"The percentages paid to the very victims that are being vindicated by class actions are decreasing," Mathias said during the hearing.

He also accused the Australian Labor Party of creating a desirable legislative environment for litigation funders to operate.

Mathias said since 1999 Maurice Blackburn has donated approximately $1.64 million to the Australian Labor Party, while Slater and Gordon also donated over $600,000.

His argument hinged on his accusation that victims in class actions only receive about 39% of the total awards in class actions. This claim was disputed by Labor Senator Deborah O'Neil.

Mathias claimed the figure came from Herbert Smith Freehills, but Herbert Smith Freehills did not include the 39% figure in its own submission to the committee. Omni Bridgeway also disputes this figure. He had to take the request to provide the data underlying the 39% number on notice.

O'Neil accused Mathias of making a submission containing factual errors, of "misquoting" a Federal Court judge and "discrediting himself by his submission". She added that it may be worth considering whether Mathias' submission was "contemptuous".

Chair of the committee Senator James Paterson said O'Neil was acting in a disorderly manner and not allowing Mathias to answer questions without interruption.

"This submission has been found very wanting," O'Neil said.

Paterson accused her of "badgering the witness".

On Friday Australia's largest litigation funder, Omni Bridgeway, reported to the ASX that the Federal Court had outlined why a 25% funding commission for the litigation funder which produced a 502% return on invested capital was fair and reasonable.

The returns in questions came from a Slater and Gordon class action against members of the Murray Goulburn group of companies. The key allegations were that Murray Goulburn, an ASX-listed company, engaged in misleading and deceptive conduct about its financial forecasts resulting in disadvantage to shareholders.

Read more: Herbert Smith FreehillsMenzies Research CentreMurray GoulburnOmni BridgewayJames MathiasLabor Senator Deborah O'NeilLitigation NationMaurice BlackburnSenator James Paterson
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