It has been another active year for class action and mass tort litigation in Australia, with seemingly very few industries or sectors immune, even the legal industry upon which this burgeoning area of the law has been built. We saw a variety of new suits filed, large settlements approved, and little sign that this growth in activity will wane in 2016 and beyond. According to the Class Actions and Litigation Funding – What’s all the talk about? article in Finity 2013, with the average class action in Australia taking about four years to settle, and with an average settlement cost of AU$45 million, the legal cost, disruption to business cost and reputational cost of a class action should remain firmly on the radar of corporates and insurers alike.
Class action activity is certainly not on the wane, with 20 odd class actions commenced throughout 2015. The second half of last year saw a raft of class action suits filed, with securities class actions filed against infrastructure giant WorleyParsons and mining and construction firm Macmahon Holdings. Interestingly, franchisees are becoming increasingly aggressive in this area, with Eagle Boys, Pizza Hut and 7-Eleven all subject to actual or threatened class actions. Franchisors are now on notice.
Hardly surprising given all the global publicity, class actions have also been mooted against vehicle manufacturers Volkswagen and Audi. The close of 2015 also saw media reports of proposed class actions against poker machine designers and operators, financial services provider IOOF, the Department of Defence, Bayer and several pharmaceutical companies, including Nurofen manufacturer, Reckitt Benckiser. As alluded to above, plaintiff law firm Maurice Blackburn announced it was investigating commencing a class action against its market-share rival Slater and Gordon, after Slaters sustained significant drops in its share price as per the article in The Sydney Morning Herald on 23 December 20151.
KEY DECISIONS AND SETTLEMENTS FOR 2015
The Federal Court’s decision in Paciocco v Australia and New Zealand Banking Group Limited (ANZ) saw a significant setback for “would be” plaintiffs in the consumer class action space. In overturning a decision of a single judge of the Federal Court, the Full Federal Court upheld ANZ’s entitlement to charge various fees, including late payment fees. The original decision held that a number of ANZ’s customer fees were penalties, and therefore not permissible. The matter is now before the High Court. Whilst the outcome was not plaintiff friendly, and will certainly have an impact on other similar claims still on foot against banks and telcos, this is not the last we will see of high volume consumer class actions, particularly in light of new technological advances: see Paciocco v ANZ  FCAFC 50.
Last year we saw the High Court unequivocally reject a special leave application in Treasury Wine Estates, and in doing so emphasized that lawyers with seemingly too close a personal stake cannot wear multiple hats as litigant, solicitor on the record and litigation funder. In the 2014 decision that the High Court refused to revisit, the Victorian Court of Appeal derailed the lead plaintiff’s case (also solicitor on the record). The Court was also quick to point out that the plaintiff, Melbourne City Investments, had been incorporated solely to help Mr Elliott generate legal fees for his benefit: see Treasury Wine Estates Limited v Melbourne City Investments Pty Ltd  VSCA 351.
The Federal Court’s decision in Babcock & Brown is also worth noting, in which Perram J commented that a plaintiff may be able to recover damages without providing a direct causal link between the non-disclosure and the decision to invest (the “reliance” test). How this thinking develops going forward could have significant ramifications in terms of litigation volume: see Grant-Taylor v Babcock & Brown Limited (In Liquidation)  FCA 149.
Whilst not a class action per se, the judgment of Macaulay J in Amaca v CSR & Anor is an interesting (albeit 280 page long) mass tort judgment on the rights of partners and joint tortfeasors to claim equitable contribution. The mechanics of the trial is also an interesting procedural template: 8 out of 204 claims being put up as “test cases” for the balance of the claims. The judgment is now on appeal: see Amaca Pty Ltd v CSR & Anor  VSC 582.
Many class actions issued against manufacturers (across many sectors including food and beverage and life sciences), corporates and financial institutions settled, but the most significant settlement was the Black Saturday bushfire class actions, with total payouts across all claims nearing AU$800 million. As another hot Australian summer resulted in significant bushfires igniting in Victoria and Western Australia, this is a litigation stream which seems to be here to stay, with subrogated claims playing a key role in how these class actions are founded and possibly funded.
LITIGATION FUNDING AND CONTINGENCY FEES
Litigation funders have continued to entrench their importance in the Australian legal services market, and remain the predominant means for class action funding in Australia. Despite the Productivity Commission’s 2014 recommendations that there be greater regulation of third party litigation funding, and a potential removal of the ban on contingency fees, we are yet to see greater regulation of litigation funders eventuate, and litigation funders are still exempt from the requirement to obtain a Australian Financial Services Licence. The Federal Government’s stance on both greater regulation of litigation funders and removing the ban on contingency fees remains unclear. Notably in July, NSW’s prohibition on lawyers charging uplift fees was removed.
We also saw Maurice Blackburn make a second attempt to introduce a “common fund” funding model in conjunction with International Litigation Funding Partners. However, on 7 August 2015, the Federal Court dismissed Maurice Blackburn’s application. Interestingly, Wigney J noted that the Court had the power to make such an application, but that it was not appropriate at that time. It was also noted that the group members did not appear to be the beneficiaries of the proposed arrangement: see Blairgowrie Trading Ltd v Allco Finance Group Ltd  FCA 811.
We expect to see continued class action activity in product liability, securities, financial services and bushfire/ environmental litigation. The rise of cyber-attacks and increasingly onerous privacy obligations are also likely to be emerging areas of activity: data privacy breaches are a potential flashpoint for companies holding personal, financial or medical information. However, the dominant change will no doubt be innovation driven by technological advances, with entrepreneurial plaintiff laws firms and litigation funders in the driver’s seat. We are also likely to see more high volume class action activity. The challenge for insurers, their customers and defence lawyers is to stay nimble or risk being left behind.