Director seeks light on funding

FOR nearly ten years Expectation managing director Hugh McLernon has been thumbing his nose at two ancient laws to help people fund litigation actions.

The former Crown Prosecutor, Barrister and Clayton Utz litigation partner told the recent Australian Institute of Credit Management state congress two centuries-old English laws prevented people from seeking funding to help them sue those who had wronged them.

Often that wrong has left the person or company without funds to pay for court proceedings.

Mr McLernon said an example was a company that had geared up to meet a contract, only to have that contract fall through, perhaps at the deliberate action of the other contract party.

While the company has been illegally wronged, it no longer has the funds to pay for a costly litigation action.

Yet it is not allowed to seek funding for litigation from a third party. A third party’s would usually fund litigation in return for a percentage of the payout.

The two laws, Champerty and Maintenance, grew from a turf war between the English church and secular courts. The laws make it illegal for any person to encourage or fund another person’s legal action.

Mr McLernon said in most states – except WA – laws had been passed to remove Maintenance and Champerty as civil wrongs.

“If people are not allowed to maintain litigation, then how can lawyers exist? And what about Legal Aid?” Mr McLernon asked.

Since 1989, Mr McLernon has been a leader in litigation funding.

While changes to Corporations Law in 1993 allowing liquidators to sell litigation actions has made his cause easier, the two laws still cause problems. Mr McLernon’s litigation funding activities are still technically illegal in some cases.

Furthermore, the successful applicant in a litigation case not covered by the Corporations Law funding provisions can still refuse to pay the payout percentage, saying the action is unenforceable.

Since the change to the Corp-orations Law, many companies have entered the litigation funding arena, including a recent move by Rene Rivkin.

Mr McLernon said the only reason these laws have stayed is because most people don’t know they exist.

“We need to get to where companies can have their litigation funded whether they are insolvent or not.”

He said the courts were already showing signs they did not like the laws but it was up to government to change them.

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