The pace of change in the Australian class action environment has accelerated in recent years and we expect this will continue, with the regime facing potential legislative reform.
Corrs’ class actions team has identified 10 significant developments it expects to see this year.
1. Legislative reforms in the balance
If there is no change in government at the next Federal election, class action reform will remain on the Government’s agenda. If pursued, the success of the controversial class action reforms proposed by the Morrison Government, which sets a rebuttable presumption that group members receive 70% of any judgment or settlement from a class action, will depend on the balance of control in the Senate and/or the attitude of the cross benchers.
Even if the legislation is passed, it may well face constitutional challenge.
If there is a change in government, the ALP has flagged that it won't be making changes to class action law unless it is satisfied that it is in the best interests of plaintiffs seeking justice.
2. If proposed reforms are passed and withstand any challenge, they still may not achieve their stated objectives
One objective of the mooted legislation is ensuring that group members get a fair proportion of judgments or settlements.
If the reforms pass and withstand challenge, the changes are likely to see a tightening of the market, a return to book-building, and a focus on higher value class actions or class actions in respect of well-established territory. This would be at the expense of class actions that carry less value or are ‘novel’.
If funders decline to fund certain cases either because the upside is not good enough, or because the prospects are marginal, group members won’t have the opportunity to secure any judgment or settlement and a debate about proportions will be a redundant one.
3. Rise in technology and climate-related class actions
We will see growth in technology and climate-related class actions in Australia. We have already seen some growth in those areas over the past six months and we expect that trend to continue, as it has in the US and the UK.
Technological advancements and increased investment in the digital asset industry will present new risks, and we would not be surprised to see filings in connection with cybersecurity, data privacy and cryptocurrency.
The heightened interest in ethical and sustainable investments means these areas will be more closely scrutinised by investors and advocates, and we expect to see fillings in connection with the accuracy of disclosure documents and financial reporting.
4. The use of class actions other than for the recovery of damages
We will see an increase in socially, environmentally and politically motivated ESG class actions directed at changing corporate behaviour and decision-making of governments and public authorities.
Investors are paying close attention to the practices of disclosing entities and will use litigation to hold companies accountable for representations they have made and practices they adopt.
For example, the class action against REST relating to its handling of climate change risk settled and REST agreed to align its investments with net-zero emissions by 2050 as well as disclose its holdings.
Citizens are likely to scrutinise decisions which have the potential to affect climate change (e.g. project approvals) and, as we explain below, steps taken - or not taken - to protect communities will be a key focus. If damages are sought, they are unlikely to be the primary motivation for such actions.
5. COVID-19 related class actions will continue to be commenced
As governments and companies establish ‘living with COVID-19’ policies and protocols, we will see an increase in disputes related to mandatory vaccination. Some of these disputes will be pursued as class actions.
At the time of publishing, a potential class action against Telstra on this very issue has been announced.
6. Government will be a key target
We expect that government will surpass financial service entities and disclosing entities as the most sued class action defendant.
Governments are exposed to claims in relation to a much broader range of subject matters – whether in connection with immigration matters; policy decisions relating to agricultural and food production; the use of chemicals at defence bases; management of prisons and detention centres; lack of disclosure in relation to investment decisions which have climate change risks; the protection of communities from the negative effects of climate change; and property developments such as Opal Towers.
Governments will likely face more class actions than any corporate defendant because they make decisions which are capable of impinging on civil liberties and commercial options.
7. Class action defendants in financial distress will find creative ways to limit their liability
As we see increased inflationary and interest rate stress in the economy, there will be an increase in the number of entities experiencing financial distress. As this unfolds, we expect that corporate defendants in financial distress will explore ways to limit their class action liability in an effort to continue as a going concern.
Options considered will include schemes of arrangement, deeds of company arrangement and redomiciling operations offshore.
8. Group-wide damages will be pursued with increased vigour
Over the last 30 years there have been very few attempts at group-wide damages relief in class actions. During the past 24 months, we have seen a number of claims in which group-wide damages have been sought. Those claims will be subject to decisions in the next 12 months.
If courts are willing to accommodate group-wide claims, we will see an increase in class actions involving large numbers of group members with relatively modest individual damages, such as in relation to defective consumer products.
9. More shareholder class actions will be defended.
No shareholder class action went to judgment in the first 28 years of the class action regime in Australia. However, in the past two years, we have seen three shareholder class actions that have gone to judgment – Myer, Worley, and Iluka – with the corporate defendant successful in two out of three actions.
Those decisions have set out the anatomy of a shareholder class action when it comes to the assessment of liability, market-based causation and loss.
The decisions may result in more shareholder class actions being defended through to final judgment and litigation funders and plaintiff law firms adopting a more cautious approach to the selection and pleading of such actions.
10. The role of the contradictor will have continued prominence
Banksia showed how effective the role of a contradictor can be in testing whether settlements are fair and reasonable.
With legislative reform delayed, we expect to see contradictors have a broader role in various stages of a class action, including multiplicity hearings, group costs orders and settlement approval applications. The focus will be on maximising recoveries to group members through scrutiny of legal costs and/or funding commissions.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.