The associated costs of a complex and time-consuming legal matter can quickly escalate. As such, for people with limited financial means, accessing the legal system can be challenging. In recent years there has been a rise in the popularity of crowdfunding, using platforms such as Kickstarter or GoFundMe. Crowdfunding involves soliciting contributions, usually from large groups of people, and could be a valid and valuable funding source to cover legal costs.
Donors and funding recipients must be aware of regulatory frameworks and legal implications. These safeguards ensure that donations are managed and expended as intended, and not subject to unconscionable conduct, undue influence or illegal acts.
Third-party litigation funding involves funders with no direct interest in the proceeding, agreeing to fund all or part of a party’s legal costs in return for a share of any proceeds of the litigation. In this case, funders are subject to various regulatory requirements under the consumer protection provisions in the ASIC Act and the Corporations Law. Operators of litigation funding schemes will generally need to hold an AFS licence and be registered. Additionally, litigation funders operating under a trust structure must also comply with the relevant State or Territory laws and common law. For matters before the Federal Court, third-party funding arrangements must also be submitted to the court for review.
In accordance with the Family Law Act 1975, limitations are placed on parties seeking crowdfunding for family law proceedings, as it is prohibited to publish the identity of parties to such proceedings.
Lawyers are subject to legislative and professional obligations designed to promote the highest standards of professional conduct. In a crowdfunding context, practitioners must avoid any compromise to their integrity and professional independence; be aware of potential fraud, money laundering or other criminal activities; ensure clients engaged in crowdfunding do not disclose confidential or privileged information about their case; and be attuned to potential misrepresentations regarding the use of funds.
If your legal matter is destined for the courts, speak with your lawyer about funding options.
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