Legal Services providers are increasingly focusing on Australia’s legal market to explore opportunities to push forward global expansion efforts amid a positive, changing legal landscape. There are several reasons for such optimism, as noted in Thomson Reuters 2022 Australia - State of the Legal Market report, that includes sections that explore underlying driving forces of digital transformation that have led to an increase in tech investment, as well as findings that corporate in-house counsels are turning towards technology and law firm advisors for support with identifying cost cutting measures.
Solid fundamentals and changing trends are driving revenue growth in legal market
Fundamentals of the Australian legal market are solid, with record rate growth pushing revenue growth to 10.0% for the 2022 financial year, which partly helps explain the increased interest. There are also two additional developments that may accelerate current projected growth, one which includes the likelihood Australia will follow the U.S. trend of granting higher damage awards. This potential trend adoption was reported in this article and includes commentary from Martin Jones, Australia client executive for Xceedance, an insurtech, who pointed to a recent decision within the Australia High Court – Tapp v Australian Bushmen’s Campdraft and Rodeo Association Ltd – that overturned lower court rulings and granted A$6.75 million (US$4.6 million) in damages to a lady severely injured in a horse-riding competition. This ruling rejected the “obvious risk” argument for dangerous recreational activities. Litigation awards in the court system have set the bar high and raised claimants’ expectations about what they consider they are entitled to,” said Jones. Insurers’ own litigation models may also be to blame, he said, since these are not always conducive to early settlements, which can reduce costs for all parties.
Class action cases are expected to increase in Australia after government change
The other recent development involves plans by Australia’s recently elected Labor government to wind back regulations on litigation funding that could lead to an upswing in class action funding. The previous government introduced tougher regulation of litigation funders in a bid to curb the number of class actions commencing in Australia, following complaints from business groups that companies were facing too many shareholder class actions. A key part of the tougher regulation instituted by the previous government categorized class actions as ‘managed investment schemes’. Once class actions were considered managed investment schemes, they became subject to investment industry regulation, which proponents claim was unfit and created unnecessary costs for no additional public benefit. This information was first reported here on 9/8/22, and further states once the new Albanese government passes regulation that unwinds the previous government’s treatment of class action plaintiffs, it will enshrine in law a Federal Court decision from August (2022) that regulating them as managed investments schemes was “plainly wrong”.