First proposed in the late 1970s, it was not until 1992 that the Federal Court of Australia Act 1976 (Cth) was amended to introduce a statutory class action regime. Initially, plaintiffs were slow to adopt the new procedure. However, class actions are now commonplace in the Australian legal environment. Dispute Resolution Senior Associate, Florian Ammer, and Dispute Resolution Lawyer, Stephen Morrissey, discuss.

Class Actions are a prominent feature of the Australian legal landscape. A regime of rules facilitating class actions was first proposed in Australia in the late 1970’s. However it was not until 1992, through the introduction of Part IVA of the Federal Court of Australia Act 1976 (Cth) (Act), that a uniform statutory regime was implemented.

As at October 2009, 242 class actions had been commenced under Part IVA of the Act since its inception in 1992. Product liability and securities (or investor) claims comprise just under half of the class actions to date, with investor class actions comprising approximately 75% of recent annual claims filed.

Outside of the United States, Australia is now the place where a corporation is most likely to find itself defending a class action. According to some commentators, this is unsurprising because the Australian class action regime is more plaintifffriendly than that in the US. Two main differences between the Australian system and the system in the United States are cited in support of this view:

  • Under the Australian system, there is no initial certification procedure that requires the court to be satisfied that the proceedings are appropriately brought in class action form.
  • Under the Australian system, there is no requirement that common issues among group members predominate over the individual issues (referred to in the United States as the “predominance requirement”). In contrast, the Australian system merely requires that there be at least one substantial common issue of law or fact.

In the majority of cases, where the Australian system deviates substantially from the system in the United States, it does so to the benefit of plaintiffs. One commentator has gone as far as to say that upon seeing the differences between the two systems, a plaintiff’s lawyer from the United States might think that he or she had died and gone to heaven.

Certification

Certification is required in the United States but is not required in Australia. To obtain certification in the US, the prospective representative plaintiff of the class action must show that there are common issues of law or fact, the claims of the class representative are typical of the claims of all class members, the class representative is an adequate representative of the class, the class is so numerous that joinder of individual claims is not feasible, the class action is superior to other methods of resolving the controversy and that the common issues amongst class members predominate over the individual issues.

Class Actions are a prominent feature of the Australian legal landscape. A regime of rules facilitating class actions was first proposed in Australia in the late 1970’s. However it was not until 1992, through the introduction of Part IVA of the Federal Court of Australia Act 1976 (Cth) (Act), that a uniform statutory regime was implemented.

As at October 2009, 242 class actions had been commenced under Part IVA of the Act since its inception in 1992. Product liability and securities (or investor) claims comprise just under half of the class actions to date, with investor class actions comprising approximately 75% of recent annual claims filed.

Outside of the United States, Australia is now the place where a corporation is most likely to find itself defending a class action. According to some commentators, this is unsurprising because the Australian class action regime is more plaintifffriendly than that in the US. Two main differences between the Australian system and the system in the United States are cited in support of this view:

  • Under the Australian system, there is no initial certification procedure that requires the court to be satisfied that the proceedings are appropriately brought in class action form.  
  • Under the Australian system, there is no requirement that common issues among group members predominate over the individual issues (referred to in the United States as the “predominance requirement”). In contrast, the Australian system merely requires that there be at least one substantial common issue of law or fact.

In the majority of cases, where the Australian system deviates substantially from the system in the United States, it does so to the benefit of plaintiffs. One commentator has gone as far as to say that upon seeing the differences between the two systems, a plaintiff’s lawyer from the United States might think that he or she had died and gone to heaven.

Certification

Certification is required in the United States but is not required in Australia. To obtain certification in the US, the prospective representative plaintiff of the class action must show that there are common issues of law or fact, the claims of the class representative are typical of the claims of all class members, the class representative is an adequate representative of the class, the class is so numerous that joinder of individual claims is not feasible, the class action is superior to other methods of resolving the controversy and that the common issues amongst class members predominate over the individual issues.

By comparison, an Australian representative plaintiff may commence a representative action if:

  • 7 or more persons have claims against the same person; and
  • the claims of all of those persons are in respect of, or arise out of, the same, similar or related circumstances; and
  • the claims of all those persons give rise to a common issue of law or fact.

Thus whilst the certification procedure in the United States places the onus on the representative plaintiff to satisfy the court that the class action has been properly brought, the Australian regime assumes that the class action has been properly brought unless the defendant proves otherwise.

Despite the absence of a certification requirement in Australia, defendants may apply for an order from the court under section 33N of the Act, that a proceeding no longer continue as a class action in situations where it would be against the interests of justice to do so (e.g. where the cost of the class action is likely to exceed the cost of separate proceedings by each class member).

Predominance

There is no requirement in Australia that the common issues amongst class members predominate in number over their individual issues. It is argued that the predominance requirement in the United States makes it extremely difficult for mass tort and shareholder actions to proceed in class action form, as there are usually too many factual issues unique to individual class members to enable this requirement to be satisfied.

The American experience in asbestos exposure cases is illustrative. There are hundreds of thousands of Americans who have been exposed to asbestos and as a consequence have suffered injuries. However, because every such person will have had different levels of exposure, in different places, at different times, in different environmental conditions, with different levels of pre-existing medical conditions resulting in different injuries, the United States Supreme Court has ruled that such cases cannot be certified as class actions.

In contrast, without the predominance requirement, plaintiffs in Australia can bring class actions even where liability will ultimately turn on factors unique to each individual. However, section 33N of the Act also allows a defendant to seek an order from the court that the proceedings no longer continue as a class action on the basis that the class action mechanism is not an efficient or effective means of dealing with the claims of each of the class members.

Class Actions and Piper Alderman

Piper Alderman has a well-established team of lawyers experienced in prosecuting and defending class actions. In defending class actions, Piper Alderman has acted for a number of major international insurers including QBE, AIG and HIH.

The class actions in which Piper Alderman is currently acting include the following:

  • Acting on behalf of investors who acquired synthetic collateralised debt obligations through Lehman Brothers Australia Limited (LBA). The substance of the investors’ claims are that LBA breached its fiduciary duties, breached its contractual obligations, was negligent and engaged in misleading and deceptive conduct. The value of the claims is in excess of $600 million.
  • Acting on behalf of investors who acquired “constant proportion debt obligations” from Local Government Financial Services Pty Limited (LGFS). The investors allege that LGFS gave financial product advice and dealt in this financial product without a licence to do so. The investors allege further that LGFS breached its fiduciary duties to them, breached its contractual obligations, was negligent and engaged in misleading and deceptive conduct. The value of the claims is in excess of $30 million.
  • Acting on behalf of an Australian publicly listed company in defence of a class action. The allegations made against the company include an alleged breach of continuous disclosure requirements under the Corporations Act 2001 (Cth) and ASX Listing Rules, as well as misleading and deceptive conduct alleged to have resulted in the inflation the company’s share price. The proceedings give rise to a number of complex issues including the appropriate measure of damage in cases involving loss of share value and market efficiencies. The value of the claims is in excess of $15 million.

Conclusion

The plaintiff-friendly nature of the Australian class action regime has unsurprisingly brought class actions to the forefront of the Australian legal landscape. With Australia now regarded as the place, outside of the United States, where a corporation will most likely find itself defending a class action, expertise and experience in the Australian class action system is now a more valuable commodity than ever.