"This seems to be saying, when it comes to settlement, we’re prepared to make orders that make sure the burden of the cost is spread across all claimants, as a common fund order is intended to do," University of NSW law professor Michael Legg said.

"They're [the Federal Court] giving themselves maximum room to move in terms of how they frame the order and also what they rely on to make it."

He noted the High Court's decision dealt with only one legislative provision that concerned the Federal Court, which applies only to commencing class actions. This means the practice note does not contradict its judgment.

"The High Court may have been saying people have to get back in line [regarding funding arrangements], and it seems the Federal Court has accepted that guidance and is now looking for a solution."

The practice note requires that class actions are made aware of how they would likely be funded as early in the proceedings as possible, which Professor Legg said would probably be at the opt-out stage of open actions.

Uncertainty over fees

The note does not address fees, however, and nor does the High Court's judgment.

Litigation funders' fees are growing increasingly contentious. Federal Court Justice Michael Lee, for example, has hit out at some fees as prohibitive to fair and reasonable settlements for claimants.


"The thing that I think is still up in the air is not said in the practice note, and that is how the fee paid by the members is determined," Professor Legg said. "For example, does the percentage fee agreed by some members extend to all of them?"

He said funders should expect their fees to be under a spotlight in future.

"I think funders’ fees are going to go the same way [as legal costs] and we will see a lot more scrutiny.

"You may think this issue may become moot because you’re not going to get the order [from the court] if your fee is too much ... but what's a reasonable funding fee is a bit of an unknown."

Responding to a new reality

The Federal Court's practice note comes as judges, lawyers and claimants reel in the wake of the High Court's unexpected decision.

Justice Lee last week removed a common fund order in a shareholder class action against tech company GetSwift, following the High Court’s decision.

He pulled six more of his class actions that have common fund orders into court last Thursday, although the outcomes of some of those hearings are as yet unclear.

"I suspect what Justice Lee is doing, is going 'I’ve made this order and it’s forward-looking, and now I actually have to come back to it [in light of what] the High Court has said … and we can reconsider how payment for this class action should be addressed when we get to that,'" Professor Legg said.