Power, Funding and Fairness: When Class Actions Meet Professional Conduct Rules

Home › Case Studies › Commercial & Business Cases › Class Action › Kain v R&B Investments Pty Ltd; Ernst & Young (a firm) v R&B Investments Pty Ltd; Shand v R&B Investments Pty Ltd [2025] HCA 28 (6 August 2025)

Published: 19 November 2025 | Reviewed: 19 November 2025
(3-minute read)

Many clients worry that in large, multi-party disputes, funding arrangements may shift in ways they cannot see. It is a common and understandable concern, the structure of a class action often feels remote from day-to-day commercial decision-making. This case shows why that feeling matters for a decision you may one day face about cost risk and pathway choice.

Case Summary

In Kain v R&B Investments Pty Ltd; Ernst & Young (a firm) v R&B Investments Pty Ltd; Shand v R&B Investments Pty Ltd [2025] HCA 28, the High Court was asked whether the Federal Court can, at settlement or judgment, make a solicitors’ common fund order, a percentage-based payment to the representative party’s solicitors, calculated from the class action recovery.

The Court affirmed that common fund orders in favour of litigation funders are permissible, but drew a bright statutory line around solicitors regulated by the Legal Profession Uniform Law (NSW). The Court quoted s 183, which bars any costs agreement

“under which the amount payable to the law practice … is calculated by reference to the amount of any award or settlement”.

The Court held that a solicitors’ CFO would necessarily breach that prohibition.

As Gageler CJ put it, an order is not “just” under ss 33V(2) or 33Z(1)(g) if giving effect to it “would involve a contravention of the Legal Profession Uniform Law”. The joint judgment agreed: the Federal Court cannot structure remuneration for lawyers in a way state law expressly forbids.

Risk Classification

In-litigation risk — specifically, cost-incentive failure within representative proceedings.

Core Legal Risk Identification

The Court made clear that even where federal class-action powers are broad, they operate against the background of State-based professional regulation. For clients, the practical risk is that funding expectations, legal-cost structures and representative-party strategies can diverge mid-litigation, often without visibility. The Full Court’s approach would have allowed lawyers to obtain percentage-based remuneration; the High Court reinstated strict statutory boundaries.

This is a classic cost-incentive risk: when a legal team’s remuneration model becomes misaligned with the client’s preferred pathway, downstream decisions on timing, settlement strategy and risk exposure may be shaped by incentives the client cannot readily see.

Under your rules, when cost-incentive failure is the core risk, and independence or conflict is not the dominant theme, the required safeguard is cost-alignment (one-path funding).

Default Structural Context

Clients often describe early uncertainty about their options, timing windows, budget exposure and how litigation funding interacts with legal strategy. Structural clarity, showing options, identifying decision points, and presenting budget pathways, helps clients navigate uncertainty without implying that any particular dispute could have been resolved differently.

Why It Still Matters

This judgment reinforces a long-term trend: courts are increasingly attentive to the structural incentives within class actions. Even where sophisticated parties negotiate detailed protocols, the Court will prioritise statutory compliance and the broader integrity of the profession.

For modern litigants, the relevance is practical. Class actions often involve overlapping retainer terms, funder commissions, uplift structures and reimbursement procedures. If any part of the financial architecture is misaligned with professional-conduct rules, or with your own strategic preferences, the dispute can develop pressures that affect timing, settlement posture and risk appetite.

Understanding how the High Court treats these incentive structures helps clients anticipate what courts will allow, what they will reject, and where hidden cost exposure may sit.

How to Avoid the Same Trap

For this risk category, the selected safeguard is cost-alignment (one-path funding).

Two lawyers often cost less than one - because you fund one path, not both.

A safer structure is one where the courtroom lawyer manages the litigation lane and a separate client-side lawyer manages settlement strategy, budgeting and timing windows under escrow. Typical models charge for both litigation preparation and settlement negotiations simultaneously; the Clean Law structure separates those roles so clients fund only the path they actually take.

This avoids the incentive distortions highlighted in Kain: it ensures the cost structure is transparent, predictable and aligned to the client’s preferred resolution pathway - not shaped by percentage-based incentives, funding commissions or complex cost-sharing formulas.

The Practical Lesson

When the High Court draws a clear line around cost structures, it signals that clients must plan for funding mechanics early. The judgment shows that statutory rules, not commercial arrangements, set the final boundaries of what can be charged. Clients who structure their matter around a single funded pathway gain visibility and control before those boundaries start to tighten.

You can learn how one-path funding, escrow safeguards and role separation create cost-clarity in complex disputes on our Two-Lawyer Collaboration & Escrow Oversight page.

For insight into how independence is maintained, no referral fees, ACNC governance and annual trust-account audits, visit our Independence page or book a confidential discussion.

By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.

Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.