An imminent High Court decision on the way litigation funding is initiated and revenue collected will have major implications for the conduct of class actions, according to a leading lawyer.

Shine Lawyers Special Counsel Joshua Aylward says the court has already heard arguments in the case, which looks at whether “common fund orders” are constitutional.

Such orders enable litigation funders to recover costs from all class action members’ settlements. They also allow actions to be started more easily without a traditional “book-build” process where participants are individually signed up.

“Common fund orders dramatically reduce the cost of class actions and improve access to justice,” Mr Aylward said today. 

The High Court action, Westpac Banking Corporation & Anor v. Lenthall & Ors, appeals orders by lower courts allowing common funding.

Mr Aylward says the book-build process for the Westpac case would have involved contacting more than 80,000 group members.

The first common fund order was made by the Full Federal Court in late 2016 and access to justice has since dramatically improved, he says.

Increased litigation funding of class actions has been blamed by insurers for a surge in premiums for related directors’ and officers’ cover.

Recent court decisions could also result in court-ordered disclosures of insurance cover for class actions becoming more common, and have the potential for communications with insurers to be revealed along with policies.

Mr Aylward says defendants’ lawyers should tell company officers to watch correspondence with their insurers. “There are bound to be emails that will be harmful,” he said.

Insurers typically argue that disclosures about policy details are not relevant to the issues being contested in class actions.

Mr Aylward will be speaking during the Australian Insurance Law Association’s national conference in Hobart, which takes place on October 31-November 1.

Details of the High Court case can be found here.