Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd

What happened?

After Ha v New South Wales held state tobacco licence fees invalid, retailers could in certain circumstances recover from their wholesaler identifiable licence-fee components that had been passed on but never remitted to the taxing authority — the route Roxborough had established. Individual claims were small, one as little as $657.47, but the total ran to many millions. A litigation funder, Firmstones, signed up 2,100 retailers, arranged and controlled the proceedings, and was to take one third of any recovery. The wholesalers argued the proceedings did not comply with the representative-proceeding rules and, alternatively, were an abuse of process.

What did the Court decide?

The appeals were allowed 5–2, so the proceedings could not continue as framed: they did not comply with the Rules. But the challenge to the funding arrangement itself failed — the majority rejected the argument that a funder controlling litigation and taking a share made the proceedings contrary to public policy or an abuse of process.

Why does this case matter?

An entire industry rests on it. Australia's litigation funding market, and much of its class action practice, dates from the certainty this decision provided — which is why a case the funders lost is the one they cite.

Note the shape of it, because it is a useful example in its own right: the appellants won, and the part of the reasoning that endured is the part they lost. A case's importance and its outcome are different questions, and confusing them is a common way to misread authority.

Read the limits with the holding. The Court did not decide the position in jurisdictions that still retain maintenance and champerty as crimes or torts, and it left open whether particular funding agreements might be unenforceable on other grounds. Parliament and the courts have since layered a great deal on top — common fund orders, disclosure of funding agreements, a period of regulation under the managed investment scheme regime — so this is the foundation rather than the current state of the law.

Exam and application relevance

Separate the two questions the wholesalers ran together. Whether proceedings comply with the representative-proceeding rules is a procedural question answered by the rules; whether a funding arrangement offends public policy is a different one, and this case answers it in the funder's favour. An answer that treats "the funder controls the case" as itself establishing abuse of process has not engaged with the decision.

Check your understanding

The wholesalers won this appeal. Why is Fostif nonetheless the case litigation funders rely on?