Supreme Court of Victoria. Photo: Nicholas Filshie via Wikimedia Commons

Victoria has become the first state in Australia to allow contingency fees—a change the government says will make bringing class actions easier.

New legislation passed by the Victorian Parliament this week allows the Victorian Supreme Court to order that plaintiffs lawyers in class actions receive a contingency fee—a fee that is calculated as a percentage of the settlement or damages.

"We are removing barriers to class actions to allow people with genuine claims—who may not be in a position to take on the financial risks of a case—to bring their class actions to the court," Attorney General Jill Hennessy said in a statement.

"We're improving access to justice for ordinary Victorians by making it easier to bring class actions for silicosis, wage theft, consumer harm and other forms of corporate wrongdoing."

The reforms came after recommendations from the Victorian Law Reform Commission (VLRC), which found the state's class action regime is underutilized, with an average of five or fewer class actions filed per year.

The VLRC found the risks associated with class actions could be reduced by allowing lawyers to receive a percentage of any amount recovered in the proceedings for their legal costs, in return for indemnifying the other side's costs.

The new law comes soon after the national Government introduced licensing requirements for litigation funders and began an inquiry into class actions and litigation funders in a bid to reduce the number of class actions.

Some plaintiff firms have been preparing to make use of the new regime and there is some expectation that more class actions will be filed in Victoria as a result of the legislation.