Contingency fees allowed for class actions in Victoria

Victoria will become the first state in Australia to allow contingency fees—a change the government says will make bringing class actions easier.

New legislation passed by the Victorian Parliament allows the Victorian Supreme Court to order that plaintiffs lawyers in class actions receive a contingency fee—a fee that is calculated as a percentage of the settlement or damages.

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The contingency fee model allows a litigation funder and soon plaintiff lawyers, to charge their fees on a percentage of their client’s recovery in the litigation. The rewards for lawyers under the contingency fee model can potentially be much higher – rather than charging for what legal fees it actually billed plus an uplift, lawyers can now pick a percentage of their own choice (potentially well above what has been incurred) to be applied to the amount recovered on behalf of the client (subject to the court agreeing it is appropriate to do so).

These changes may make the Victorian Supreme Court the preferred jurisdiction for class action proceedings and it is likely that we will see interstate law firms and funders partake in jurisdiction shopping in the short to medium term pending contingency fees being enacted in other states which pessimistically is predicted.

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