This article is from the Australian Property Journal archive
THE corporate regulator is set to grant relief to class action funders following an attempt by Brookfield Multiplex in October last year to throw out an investors’ law suit on technicality.
The Australian Securities and Investments Commission will grant interim class order relief to lawyers and funders involved in legal proceedings structured as funded representative proceedings and funding claims lodged with liquidators to prove in the winding up of an insolvent company.
The relief, which will apply until 30 September 2010, is from the requirements that would otherwise apply to funded representative proceedings and funded proof of debt arrangements as ‘managed investment schemes’ under Chapter 5C and Chapter 7 of the Corporations Act 2001 (the Corporations Act).
In October last year, the Full Court of the Federal Court handed down its decision in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147.
The Full Court held that a funded representative action being maintained against Brookfield Multiplex was a ‘managed investment scheme’ within the meaning of s9 of the Corporations Act.
Since then, ASIC has granted transitional relief to lawyers and litigation funders, on a case-by-case basis, involved in legal proceedings structured as funded class actions
This interim relief means that current funded representative proceedings and proof of debt arrangements can progress, and new funded representative proceedings and proof of debt arrangements can be commenced without needing to comply with specific requirements, including:
· registering the scheme with ASIC;
· adopting a complying constitution and compliance plan for the scheme;
· appointing an AFS licensed public company as ‘responsible entity’;
· preparing a Product Disclosure Statement; and
· providing ongoing disclosure to members of the scheme.
ASIC said the move will give it time to implement new legislative and policy regime for these representative proceedings and proof of debt arrangements in the future.
The Federal Government has said it is considering providing an exemption from the licensing and other requirements in Chapter 7 of the Corporations Act, subject to appropriate arrangements being put in place to manage conflicts of interest. To supplement the proposed regulations and provide clarity for industry participants, ASIC may produce a regulatory guide about managing the conflicts of interest that may arise, following a public consultation process.
Australian Property Journal
