Federal Judges bar lawyers from obtaining Chief Financial Officers' (CFOs) information during Federal Court class action litigations.

Federal Judges bar lawyers from obtaining Chief Financial Officers' (CFOs) information during Federal Court class action litigations.

High Court of Australia Ruling Limits Contingency Fees for Law Firms in Class Actions

In a landmark decision, the High Court of Australia has ruled that law firms cannot receive contingency-style remuneration through common fund orders (CFOs) in class actions, effectively prohibiting solicitors from entering into costs agreements that would contravene state-based contingency fee bans.

The case, Kain v R&B Investments Pty Ltd [2025] HCA 28, was a significant ruling that has implications for law firms and litigation funders under the Legal Profession Uniform Law (LPUL) of New South Wales.

Implications for Law Firms

The judgment upholds the ban on contingency fee agreements in New South Wales, as reflected in the Legal Profession Uniform Law. CFOs function like contingency fees by providing solicitors with a percentage of the damages or settlement as a reward for bearing risk and expenses. The Court found that allowing Solicitors’ CFOs would contravene these state-based prohibitions, thereby eliminating the prospect of law firms securing contingent financial returns through CFOs in class actions registered in NSW or other jurisdictions with similar rules.

Implications for Litigation Funders

The High Court confirmed that litigation funders are outside the scope of the Legal Profession Uniform Law and its contingency fee restrictions because they are not law firms. As such, the Federal Court retains the power to make CFOs or funding equalization orders (FEOs) in favour of funders at settlement or judgment. This provides certainty to litigation funders that they can continue to operate on a common fund commission basis, which is often critical to funding collective proceedings.

The Differences Between Law Firms and Litigation Funders

The ruling differentiates the legal treatment of law firms and litigation funders in Australian class actions:

• Law Firms: Cannot profit via CFOs; must rely on traditional billing.
• Litigation Funders: CFO provides funding return mechanism.

The Practical Effect

The practical effect of the decision is that firms wishing to operate on a contingency-style basis in representative proceedings may need to litigate in the Supreme Court of Victoria, which does not have the same contingency fee restrictions as the Federal Court.

The High Court's decision prevents law firms under the LPUL from using Federal Court CFOs as a substitute for group costs orders in Victoria. The Court also distinguished solicitor-funded class actions from those backed by commercial funders, which are not subject to the LPUL.

Key Points

• The High Court of Australia's recent decision in Kain v R&B Investments Pty Ltd [2025] HCA 28 prohibits solicitors from receiving contingency-style remuneration through CFOs in class actions.
• The Court confirmed that CFOs can still be made in favour of third-party litigation funders.
• The ruling upholds the ban on contingency fee agreements in New South Wales under the Legal Profession Uniform Law.
• The practical effect of the decision is that firms wishing to operate on a contingency-style basis in representative proceedings may need to litigate in the Supreme Court of Victoria.

[1] [https://www.austlii.edu.au/au/cases/cth/HCA/2025/28.html] [2] [https://www.austlii.edu.au/au/legis/nsw/consol_act/lpul2004423/s183.html] [3] [https://www.omnichambers.com/news-and-events/news/omnia-chambers-instructed-in-landmark-class-action-ruling] [4] [https://www.corrs.com.au/insights/australian-class-actions-update-high-court-of-australia-confirms-power-to-make-common-fund-orders] [5] [https://www.shine.com.au/news/shine-lawyers-welcomes-high-court-ruling-on-class-action-funding]

1. The High Court's ruling in Kain v R&B Investments Pty Ltd [2025] HCA 28 has significant implications for businesses involved in class actions, as it prohibits law firms from receiving contingency-style remuneration through common fund orders (CFOs) in such cases.
2. Despite the restrictions on CFOs for law firms, the decision allows litigation funders to continue operating on a common fund commission basis, which is essential for funding collective proceedings in the business world.

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