“We are delighted to have helped shareholders in Vocus achieve redress, while delivering another success for our growing global business,” Charlie Morris, Woodsford’s CIO said.

“While we are pleased that Justice Moshinsky recognised the importance of our funding, we are frustrated that, despite the fact that not one of the many thousands of group members objected to a common fund order, the judge refused to grant one.”

Mr Woodsford said that although the funder continues to be committed to the Australian jurisdiction, they suspect that this judgment “will have a chilling effect on some funders’ appetite to finance certain representative actions, particularly where the value of the claim is smaller or where bookbuilding might be more challenging.”

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There are signs common fund orders in class actions might not be completely dead, but just waiting in uncertainty with litigation funders now exploring fund equalisation orders (FEO) as an alternative.

On 2 April 2020, Justice Michael Lee of the Federal Court delivered an interlocutory judgment in one of the two class actions that the High Court considered in Brewster and in which the High Court had set aside a CFO.

Justice Lee was asked to approve the contents of a notice to be sent to claimants to inform them that the CFO had been set aside. 

Clayton Utz partner Greg Williams and special counsel Peter Sise said, however, the lead applicant’s draft notice also said that Justice Lee intended to seek an “expense sharing order” if a settlement was reached or judgment was given in his favour. 

“So, was this expense sharing order a CFO? It is not clear,” Mr Williams said.

However, Justice Lee described an expense sharing order as an order “to distribute the burden of costs, fees and all other expenses equitably among all persons who have benefitted from the class action”. 

Mr Sise said that “this reflects the language of the Federal Court’s post-Brewster class actions practice note.”

Justice Lee had previously hinted in a conference to Australian Litigation Funders Association earlier this year that broader equitable powers could make CFOs instead of pure statutory power.

Meanwhile, on 8 April 2020, Justice Jonathan Beach of the Federal Court published his reasons for approving the settlement of two shareholder class actions. His honour made funding equalisation orders, but said that if he had not taken that course, he “may have entertained making an expense sharing order in the nature of a common fund”.

This certainly has been the case with now a similar albeit different case in the recent Vocus approved settlement. 

But Mr Williams and Mr Sise noted that even if a CFO is forbidden as part of a settlement or following a judgment, litigation funders might modify an FEO to produce the same result as a CFO. 

Meanwhile, King & Wood Mallesons lawyers Moira Saville and Alexander Morris said that the decision approving the settlement of the Vocus class action was highly anticipated after the High Court Brewster v BMW ruling.

“It provides important guidance about the lengths to which a court may go, as a matter of discretion, in protecting the interests of litigation funders at the expense of litigants,” Ms Saville said.

Ms Saville and Mr Morris said that in the BMW case, the High Court considered whether the Federal Court had power to make a common fund order at an early stage of a proceeding under section 33ZF of the Federal Court Act. 

"Nevertheless, his Honour did not consider that the High Court had expressed a concluded view that there is no power under section 33V to make a common fund order," Ms Saville said.

"His Honour said that this indicated that their focus was on the issue of whether a common fund order could be made at an early stage," she said.

According to Mr Morris, Justice Moshinsky’s decision was because the plurality in the High Court contrasted the making of a common fund order at an early stage of the proceeding with the powers available at the end of a proceeding. 

“His honour said that this indicated that their focus was on the issue of whether a common fund order could be made at an early stage,” he said.

Justice Moshinsky’s decision demonstrates, however, that the court need not go beyond the minimum necessary in order to address the “free-rider” problem inherent in funding disparities within a group,” according to Ms Saville.

“Section 33V of the Federal Court Act does not give litigation funders licence to expect an undue reward at the expense of unfunded group members," she said.

Almost five months on from the BMW v Brewster decision, lawyers are still figuring out if a CFO is available at the settlement stage of a class action or judgment, although the recent remarks of Justice Beach indicate that they still may be. 

“To clear things up, we’ll need a decision of an appellate court or a change to legislation. Justice Beach said in his reasons that there should be legislative reform,” Mr Williams said.

The availability of CFOs directly affects the appeal of Australian class actions to litigation funders. 

“Australia already has an advantage because the legal requirements for class actions are less demanding than in other countries, particularly the USA, but against this weighs the fact there are many litigation funders operating in Australia which makes the environment competitive and more challenging for funders to earn a satisfactory return,” Mr Williams said.