One of their complaints is the lack of any specific regulator of litigation funders. One in Sydney, Richard Hill, was banned as an auditor for 12 months and owed $319,000 in taxes, according to records cited by Mr Falinski, who then asked a representative of the corporate regulator, Daniel Crennan, "if Bernie Madoff was still alive, could he be running a litigation funder in Australia?"

Liberal senator James Paterson is chairing the inquiry into litigation funding.Ben Rushton

"Not from jail," Mr Crennan said.

"I should say for the record that I think Bernie Madoff is still alive," Senator Paterson said.

If they can convince the government and Parliament to impose restrictions on litigation funders, possibly similar to managed investment schemes, Mr Falinski and Senator Paterson could become heroes to the business community.

First they will have to get through Senator Deborah O'Neill, a battle-hardened veteran of Labor politics. In public hearings this week, Senator O'Neill, who faces internal competition for her seat, asked questions and made comments designed to bolster the case for leaving the industry untouched.

When Mr Falinski questioned the credibility of one of her witnesses, a legal academic, she complained to Senator Paterson, who as chairman of the committee is theoretically meant to be neutral.

"You might be advised to ask one of your colleagues on the committee to make points of order that you yourself have not recently breached in this committee," he replied. "At least then you won't open yourself up to accusations of hypocrisy."

Jason Falinski in the House of Representatives in 2018.Alex Ellinghausen

"I don't care if you call me a hypocrite," she said.

As five industry representatives there to give evidence watched, mute, Mr Falinski interjected: "But you didn't tell the truth."

Mr Falinski was referring to an insinuation by Senator O'Neill and labour law firm Slater & Gordon that the Liberals are operating on behalf of the US Chamber of Commerce.

As if there wasn't enough tension during the session, loud noises that sounded like construction burst over the broadcast. No one knew where they originated from until Louise Pratt, a Labor senator from Perth, apologised for leaving her microphone on and said they came from a neighbour's property. Senator O'Neill burst out laughing.

Independent sources of funding to pay the dozens of lawyers, experts and others needed to conduct complex civil litigation emerged in 2001, driving the popularity of class actions for victims who had few other options.

As the new industry developed, a striking economic trend emerged. The people on whose behalf lawsuits are filed got 51 per cent of the financial settlements (almost none of the lawsuits are ruled on) when the cases were funded externally. When they weren't, they got 85 per cent, according to the Australian Law Reform Commission.

Unaware that he had been cited in the hearings until told by this journalist, Richard Hill said that litigation funders expect to receive about 2 times the value of their investments, which is not a big return given the risk of losing all their money.

"That's similar to other industries such as property development returns based on a rezoning of land," he said.

He said his temporary ban as an auditor and tax bill were misunderstandings about arcane areas of the law that had been resolved many years ago.

The latest class action is against Carnival Cruises over a COVID-19 outbreak on the Ruby Princess cruise ship, which infected 700 people, according to Shine Lawyers.

Slater & Gordon, Maurice Blackburn, Shine and 11 other companies recently launched an advertising campaign called "Keep Corporations Honest" to mobilise public opinion against any measures that would make class actions less lucrative. The campaign cites a lawsuit against US company Johnson & Johnson's faulty pelvic mesh, which was designed to stop urinary incontinence.

Shine Lawyers won the case in the Federal Court last year on behalf of thousands of Australian women. (Johnson & Johnson is appealing.) On Monday, the firm's head of litigation and loss recovery, Jan Saddler, made an impassioned speech about the threat to future victims of corporate malpractice from changes to the system.

"I really don't want us to tinker with a system that works well and have unintended consequences that (mean that) cases like the pelvic mesh case can't be run, won't be run, will be stymied in their prosecution in the future," she said.

"I understand that," Mr Falinski said. "I just want to ask: is that case funded by a litigation funder?"

Ms Saddler replied: "No."

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Rising Liberals jockey for position in fight over class actions - The Australian Financial Review