A Singapore-based litigation funder is going to get another chance to argue that it does not provide a financial product and as such does not need an Australian Financial Services License ("AFSL"). On 28 October 2011, the High Court of Australia granted leave to International Litigation Partners Pty Ltd to appeal the NSW Court of Appeal’s decision, which found that litigation funders require an AFSL because they are in the business of managing financial risk.
The background to the case was that when the funder sought to enforce the funding agreement to obtain the funding fee and an early termination fee, the other party argued that as the funder was an unlicensed provider of financial services, the agreement was void and unenforceable. Hammerschlag J of the Supreme Court decided in favour of the funder, finding that litigation funding was not a financial product. The Court of Appeal, by majority, overturned Hammerschlag J’s decision.
In granting leave, Gummow J of the High Court noted that "this question of licensing litigation funders has to be an important one". One issue that will occupy the judges will be how to characterise the main object of the funding itself – is it to manage financial risk or is to allow the litigation to go forward? See International Litigation Partners Pte Ltd v Chameleon Mining NL & Ors  HCATrans296. Watch this space, I will report on the case as it progresses.
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