Class actions are on the rise in Australia after the Royal Commission into misconduct in the financial sector, but also with more ‘litigation funding action’.
The first half of 2018 saw 29 class actions filed in Australia, 35 in the second half and a further 18 for the first half of 2019, according to figures released by Monash Law Professor Vince Morabito.
While the figures may not be large in themselves, they do stand in sharp relief to what went before, namely an average of 22 actions annually since 1992.
“Class actions are very active in this market in comparison to three or five years ago,” said Michael Mills, a founding partner of the U.S.-firm Quinn Emanuel Urquhart & Sullivan’s Australian office. “There are many more actions around,” Law.com reported.
The number of such cases filed against banks and investment fund is up, the figures show, along with the number of employment class actions alleging underpayment of workers and shareholder class actions related to adequate disclosure of market-sensitive information.
Litigation funders are becoming excited by the prospect of a wealth of suits – and settlements – flowing from the findings of impropriety in the financial sector.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry report included such litigation-fuelled issues of financial institutions charging clients for financial advice they did not receive, including charging dead customers; lending to customers without verifying their ability to repay; and charging commissions without informing customers.
“The Royal Commission has certainly exposed information which can be used as a road map to bring some of these claims,” said John Emmerig, (right) partner-in-charge at Jones Day’s Sydney office and the co-chair of the class actions committee of the Law Council of Australia.
William Roberts Lawyers is drawing on evidence uncovered by the Royal Commission to allege that superannuation holders were “wrongfully stripped of hard-earned monies used for the payment of commissions and other fees to financial advisers” in a class action backed by the Litigation Capital Management, while National Australia Bank and Westpac face almost certain class action.
Slater & Gordon and Maurice Blackburn have both commenced class actions against AMP.
“There is a lot more activity by litigation funders in the marketplace and they drive the market because the cases are expensive to run,” Emmerig said.
The fly in the ointment for class action funders and lawyers however could be the Australia High Court decision due later this year on the issue of common fund orders that oblige all group members in a class action to pay a share of a litigation funder’s commission out of the proceeds, regardless of whether or not they have signed an agreement directly with the funder, which have been commonplace since the Federal Court held in 2016 that it had the power to grant common fund orders.
Without a common fund order, litigation funders and plaintiff firms previously had to go through the expensive exercise of a “book build”—signing up enough plaintiffs to ensure they have a viable case.
The High Court is to examine the legality of common fund orders in a class action against Westpac bank over allegations of overcharging for life insurance, and in another class action against BMW Australia by customers whose cars were fitted with faulty airbags.
For the funders and the lawyers currently there may be some uncertainty, but in the meantime it’s ‘game on’.