A landmark year
2017 marked the 25th anniversary
of the federal class action regime in
Australia and saw the 500th class
action filed. In this Review we reflect
on activity in Australian class actions
and what the future may hold.
The rise of the securities class action
(2016/17: 16) and the size of settlements
that have resulted from actions taken by
shareholders, is something that few would
have envisaged 25 years ago, when the
focus was more on righting consumer
wrongs arising from product liability,
misleading or deceptive conduct and
negligence claims. It is now essential that
listed entities factor in class action risk as
part of their business planning.
Another major contributor to the increasing
level of class action activity in Australia is the
use of third party litigation funding to finance
cases, which has increased significantly
over the last five years. While only a small
number of the funders active in Australia are
listed on the ASX, their published returns
show it to be a lucrative business for those
entities and their shareholders. With 58%
of class actions filed in 2016/17 supported
by litigation funding (66% 2017/18 YTD),
the appropriate level of regulation for
litigation funders remains a topic of debate
in Australia and is currently the subject of
two inquiries.
The higher level of class action activity is
also rightly a concern for directors and
officers. While only a proportion of securities
class actions involve claims against directors
(2016/17: 18%) and tend to be limited to
companies in distress as shareholders look
for alternate deep pockets, some reports
note that the cost of D&O insurance has
increased more than 200% in the last 12
to 18 months as the D&O premium pool
struggles to cover the number of securities
class actions filed each year.
Download The Review: Class Actions in Australia 2016/2017 to find out more.