Can Plaintiffs Recover Litigation Funding Damages from Defendants in Class Action in Australia?
The Australian High Court has endorsed the views of lower courts and held that litigation funding fees are not recoverable as damages, thereby preventing funding costs being transferred to defendants, in nuisance claims.
On 17 December 2025, the High Court of Australia delivered its judgment in a class action brought on behalf of persons allegedly affected by the construction of the Sydney Light Rail: Hunt Leather Pty Ltd v Transport for NSW [2025] HCA 53. The plaintiffs were successful in seeking damages for private nuisance at common law from the public authority, Transport for NSW ("TfNSW"), with the High Court overturning (in part) the decision of the NSW Court of Appeal.
Interestingly, in seeking damages, the plaintiffs also claimed that damages include reasonable litigation funding costs. For plaintiffs and group members who entered into a litigation funding agreement in connection with the proceedings, the funder financially supported their claims by paying legal costs and disbursements, providing security for costs and undertaking to meet any adverse costs orders. In exchange, the plaintiffs and group members agreed to reimburse the funder for its costs and to pay a commission. In the plaintiffs' case, the commission was 40% of any settlement or judgment sum, which they sought to claim as damages.
It was argued that the plaintiffs suffered loss by incurring the funding commission to vindicate their claims—that 40% commission was a loss that: (i) they would not have incurred but for the private nuisance of the defendants; and (ii) was reasonably foreseeable.
The High Court unanimously rejected this argument.
Gordon and Edelman JJ explained that the funding commission was not "the kind of damage … which [TfNSW was] under a duty to prevent." The tort of private nuisance, as a tort against land, permits recovery of damages which reflect the decreased value of land and any losses that are "consequential upon the injury to the land." The 40% commission is neither an injury to land nor a loss that is consequential upon the injury to land.
