The High Court of Australia, in Hunt Leather Pty Ltd v Transport for NSW [2025] HCA 53 (Hunt), has found that a litigation funder’s commission is not recoverable as damages for class action group members.
This decision is likely to be of significant interest to class action stakeholders. Not only had the recoverability of a litigation funder’s commission not yet been the subject of judicial determination in Australia; it comes at a time of ever-increasing focus and scrutiny on returns to litigation funders and group members in class actions.
Key takeaways
- The decision reinforces the fundamental principle that damages are generally only recoverable for losses caused by the defendant’s wrongful conduct.
- While the decision strictly concerns liability for private nuisance, it casts significant doubt on the recoverability of funders’ commissions for other types of claims as well.
- Litigation funding commissions will likely continue to be deducted from, rather than added to, any damages or settlement sums payable to group members.
Background
Hunt was an appeal in a class action brought on behalf of neighbouring landholders against Transport for NSW. The landholders’ claims were in private nuisance, on the basis of substantial interference with the use and enjoyment of their lands during the construction of the Sydney Light Rail.
As is typically the case, the legal costs and expenses of the class action were funded by a third-party commercial litigation funder. Pursuant to the funding agreement, the funder would be reimbursed those costs and expenses in the event that the action was successful. The funder would also receive a commission, calculated as between 25% and 40% of any settlement or judgment sum, for taking on the financial risks of the action.
The landholders succeeded in establishing liability for private nuisance at first instance, but the Court of Appeal overturned that finding. In both instances, they unsuccessfully argued that the funder’s commission was a reasonably foreseeable loss that they incurred as a result of the defendant’s private nuisance.1
The landholders appealed to the High Court of Australia.
Decision
The landholders’ arguments also did not find sway in the High Court, which unanimously confirmed the decisions below.
The High Court found that the funding commission was not the kind of damage that the defendant was under a duty to prevent. It was neither an injury to land nor a loss that was consequential upon the injury to land. It was not a reasonably foreseeable loss.
In summary, this is because:
- voluntary act – the plaintiffs did not incur the liability for the funding commission as a result of any actionable conduct on the part of the defendant. Rather, they incurred the liability as a result of their own voluntary act of entering into the funding agreement;
- crystallisation of liability – the funding commission could not be a consequence of injury to land in circumstances where the entitlement of the funder to its commission only crystallises upon settlement or entry of judgment;
- not a “loss” – the funding commission could not properly be characterised as a recoverable loss. It was an amount that the group members agreed to pay to the funder, in return for the funder meeting the costs and financial risks of the class action. It was, in other words, a cost of litigation. The law has long recognised that such costs are not recoverable in the form of damages.
Ultimately, therefore, the funder’s commission will not form part of the award of damages to the landholders.
Implications
Hunt will be welcomed by defendants. While strictly limited to claims for private nuisance, the decision could arguably apply to other claims as well, particularly those based in tort. This indicates that class action exposure generally will remain unaffected in the near future, on the basis that funding commissions will continue to be deducted from, rather than added to, the damages or settlement sums payable to group members.
However, the possibility of group members recovering litigation funding costs cannot be ruled out entirely. Myriad different types of claims can be and are the subject of class actions. Australian courts also have broad powers to make any procedural orders that are deemed necessary or appropriate in a class action. In reference to these broad powers, the Federal Court recently stated that it may be open to recover a litigation funding expense from an unsuccessful defendant, in an appropriate case.2 It follows that we may see further attempts from class action plaintiffs to recover funding commissions in class actions in the future.
[1] Hunt Leather Pty Ltd v Transport for NSW (No 4) [2024] NSWSC 140; Transport for NSW v Hunt Leather Pty Ltd (2024) 115 NSWLR 489 at [115]-[126].
[2] Gill v Ethicon Sarl (No 12) [2023] FCA 902 at [108].