A 30 per cent success fee sought by the company funding the class action against the Banksia finance company is about average, a finance consumer advocate says.
Banking and Finance Consumer Support Association president Denise Brailey said any Banksia investor who had concerns about paying the fee could opt out of the legal action.
Ms Brailey made the comments as the public company funding the class action, BSL Litigation Partners Limited (BSLLP), seeks agreement from Banksia investors to the funding arrangements ahead of mediation talks next week.
Ms Brailey, a Western Australian-based award-winning consumer advocate, said she was an enthusiastic supporter of fully-funded class actions because they enabled people to seek justice when they would otherwise not be able to.
Class actions were a legitimate way for people who had suffered in company failures to get some money back, she said.
She said people who did not want to pay the success fee could go to court themselves and take the risk of incurring substantial legal fees.
The Melbourne solicitor co-ordinating the class action, Mark Elliott, said forms recently sent to investors asking them to sign a litigation fund agreement did not require them to pay any money.
The class action is seeking up to $150 million for funds that 16,000 investors lost when Banksia collapsed in October 2012. The Banksia investors include many hundreds in the south-west. Mr Elliott said he was acting for the investors on a “no win/no fee basis so I only get paid if we win and then I will get paid by the other side”.
He said if the class action was successful, “the litigation funder will be entitled to up to 30 per cent of the damages awarded as compensation for the risk they have taken and reimbursement for the significant expenses that they have incurred”.
Such an arrangement will mean that if the class action was awarded $100 million in damages, the litigation funding company might get $30 million.
Earlier this year, Mr Elliott, who had previously been funding the class action himself, arranged for a group of investors to subscribe for shares in a new public company, BSL Litigation Partners Limited (BSLLP), that will continue to fund the class action.
A company associated with Mr Elliott’s family is a significant investor and he is one of the three directors of BSLLP.
Mr Elliott has encouraged investors to obtain their own independent advice about the funding agreements.
Asked if investors would still be part of the class action if they did not sign the funding agreement, Mr Elliott would only reply that if all or at least the vast majority of the investors did not not sign the funding agreement, there might not be a class action.
The move to hold mediation talks this week on the class action has raised hopes of an early settlement that could avoid the need for a lengthy hearing in the Victorian Supreme Court, which is scheduled for next year.