By: Amanda Beattie and Zoe Jones

At a glance

  • At present, Victoria remains the only Australian jurisdiction where contingency arrangements are available to plaintiff law firms through the Group Costs Order (GCO) regime, but that may change in light of NSW considering reforms.
  • We take a look at the current position in NSW, the reforms under discussion (including the potential introduction of a GCO-equivalent regime in NSW), and the relevant implications of such changes in the class actions landscape upon businesses, insurers, and other interested parties in the event those changes are realised.

The current position in NSW

Under section 183 of the Legal Profession Uniform Law (NSW), law practices are prohibited from entering into costs agreements that calculate fees by reference to the amount of any award or settlement. In Victoria, by contrast, section 33ZDA of the Supreme Court Act 1986 (Vic) permits the Court to make a Group Costs Order (GCO), allowing plaintiff lawyers to charge a fixed percentage of any recovery in exchange for bearing the financial risk of the litigation. The GCO regime has been operational since mid-2020 and has driven a measurable increase in class action filings in the Victorian Supreme Court.

This jurisdictional difference was confirmed in August 2025 in Kain v R&B Investments (Blue Sky) [2025] HCA 28. In its unanimous decision, the High Court confirmed that the Federal Court has the power to make a Common Fund Order (CFO), being an order requiring all group members to pay a proportionate share of any recovery to the litigation funder, regardless of whether they entered into a funding agreement.

However, the High Court held that this power does not extend to making a “Solicitors’ CFO” in NSW. Under a solicitors’ CFO plaintiff lawyers, rather than a litigation funder, receive a percentage of the recovery. The Court reasoned that such an order would effectively give effect to a contingency fee arrangement, contravening section 183 of the Legal Profession Uniform Law (NSW), and therefore could not be considered “just”.

Further, in Bogan v Smedley [2025] HCA 7, the High Court held that a GCO made in a class action commenced in the Supreme Court of Victoria would not remain in force if the proceeding were transferred to the Supreme Court of New South Wales. Accordingly, the High Court held that the proceeding could not be transferred, effectively anchoring GCO-funded proceedings to Victoria.

These key decisions were discussed in our previous article.

The push for reform

The Blue Sky and Smedley decisions, as well as the emergence of forum-shopping and declining class action filings in NSW, have intensified discussion about whether NSW should legislate its own CFO or GCO-equivalent regime.

On 9 March 2026, the Association of Litigation Funders of Australia (AALF) lodged a submission to the NSW Attorney-General, the Hon. Michael Daley, proposing seven targeted reforms to the Civil Procedure Act 2005 (NSW) and the Supreme Court’s Practice Note SC GEN 17. These included:

  1. a statutory power for CFOs and funding equalisation orders at any stage of proceedings;
  2. reform of the security for costs regime to remove the automatic presumption in favour of security;
  3. a narrow discretion to award litigation funding costs against defendants in exceptional circumstances;
  4. mandatory disclosure of both plaintiff-side funding and defence-side insurance interests;
  5. standardised costs-budget disclosure;
  6. early disclosure of critical documents; and
  7. a power for the Court to deal with undistributed aggregate damages.

Notably, the AALF took no position on whether NSW should adopt a GCO regime, but instead proposed these complementary reforms to restore NSW’s competitiveness as a class action forum, regardless of whether a GCO framework is introduced.

Speaking at the AALF conference held on 15 June 2026, Justice Ian Pike of the NSW Supreme Court publicly commented that the market is currently skewed towards Victoria because solicitors can take contingency fees in the form of GCOs. Justice Pike noted that the NSW Supreme Court had recently appointed several judges with class action expertise, including himself and Justice Peter Brereton, and expressed a desire for NSW to attract that work back. His Honour also spoke in support of the AALF’s proposal to allow the Court to award litigation funding costs against a defendant in exceptional circumstances, noting that proactive judicial case management could address concerns about attritional defence strategies.

Speaking at the same event, Monash University Professor Michael Duffy endorsed the case for uniform legislation on class actions across all states, saying it could promote competition. Professor Duffy identified a possible compromise where Victoria could only make GCOs at a later stage of proceedings (similar to the current CFO position at settlement or judgment), or alternatively, that GCOs could be introduced in other states to achieve regulatory neutrality.

We note that these proposals remain at the discussion stage, and that no legislation has been introduced at the time of writing.

Key implications

Should NSW adopt some or all of these proposed reforms, businesses and their insurers should be aware of the following potential implications:

  1. If NSW introduces a GCO regime, it is likely to attract more class action filings to the NSW Supreme Court, reversing the recent trend of declining filings in that jurisdiction. Businesses should factor this into their litigation risk planning.
  2. The GCO model gives plaintiff firms a stronger economic incentive to self-fund claims, potentially broadening the types of class actions brought and reducing reliance on external litigation funders.
  3. The AALF’s proposed mandatory disclosure of defence-side insurance interests may also have practical implications for defendants and their insurers. If implemented, defendants would be required to disclose relevant insurance policies to the Court on a confidential basis, which may influence settlement dynamics and litigation strategy.

While these developments remain at an early stage, the potential significance means they are worth being aware of and watching We will continue to provide updates as any formal consultation or legislative process progresses. Should you wish to discuss the implications of these developments for your organisation, please contact our team.

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