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The Funding Agreement Explained

Information Memorandum on Aveo Class Action re: Litigation Funding

1. You do not need to pay anything from money that you currently have, under any circumstances – even if Aveo wins 

The Class Action against Aveo Group is a No-Win, No-Fee Class Action, fully funded by a third-party litigation funder, who pays all legal costs upfront, and indemnifies you for Cost Orders (in the event Aveo wins), as well as lodging Security for Costs with the Court.

2. If the action succeeds, the funder is reimbursed for legal costs and takes an additional 35% of the settlement or verdict monies payable to the group

 Costs are paid by the losing party, which we hope will be Aveo. The effect of a Court order for costs against Aveo would be to substantially offset the costs outlaid by the Funder in which event, the Funder only recovers the difference out of the settlement or verdict monies.

Please note: If Aveo wins, you will not be liable to pay for any legal costs – as per 1 above, the Funder pays all legal costs upfront and has also lodged Security for Costs with the Court.

If we are successful in the Class Action, by either negotiating a settlement or obtaining compensation through a judgment or verdict, then the Funder will be entitled to reimburse itself for the costs it has outlaid.

65% of the settlement or verdict monies, apart from costs, will be distributed amongst group members, with the balance going to the Funder.

3. “Deferred Sums” and the Restoration of Residents’ Rights

For those who have not yet sold their interest in an Aveo Village, it is possible that Aveo will offer to compensate you by restoring your rights to the original “pre-Aveo Way” terms. That could mean that you had the right to transfer the capital gain entitlement restored to you, which should cause your property to go back up in value.

In these circumstances, when it eventually comes the time for you to sell, 25% of the value of that benefit, as determined by an independent valuer, would be shared with the funder.

This future 25% contribution to the funder is called the “Deferred Sum” or “Deferred Benefit” and would carry an interest in arrears at the rate of 2%, maxing out at 10%.

By way of example, if your unit is currently worth $200,000.00 but with the right to retain and pass on the capital gain restored to you it would be worth $250,000.00, then the valuer would recognize the value of the restored right to transmit your capital gain entitlement at $50,000.00.  You would then have to pay the funder just twelve thousand, five hundred dollars ($12,500.00) of that deferred fifty thousand dollars ($50,000.00) benefit when you ultimately came to sell and, depending on how long it took to sell, there could be a maximum of 10% interest on that $12,500.00 (accruing at the rate of 2% per annum for a maximum of five (5) years, namely $1,250.00 in total) – even if you were only to sell your unit after ten (10) years.

We think that the case is more likely to settle for a cash sum or be the subject of a monetary verdict, which means the notion of the Deferred Sum or Benefit, will probably not come into play.

We hope that we have provided an adequate explanation of the funding terms and if you have any queries, please do not hesitate to email or call us.

4. While it is possible to participate in the Class Action without signing a Funding Agreement, such “free-loading” would threaten the economic rationale for the Funder to continue to fund the action. Further, the Court can still make a Funding Equalisation Order, requiring you to contribute proportionately to the costs of the proceedings, even if you do not sign a Funding Agreement.

With Compliments,

Stewart A Levitt

Senior Partner