December 31, 1969

The Dark Side Of Class Actions In Australia

A recent op-ed by a senior executive at an ASX top 20 company in the Australian Financial Review discusses the darker side of class actions that has emerged as a result of changes to the country’s Corporations Act in 2001. The change removed a requirement that a breach of continuous disclosure of market-sensitive information must be intentional, reckless or negligent. This change has led to a 325 percent increase in class actions in Australia over the past decade.

When Michaela Healey’s company faced a class action lawsuit in 2012, she discovered the litigation was backed by a Canadian law firm looking to optimize returns for its partners. “When it was time to settle, the funder didn’t care about justice for small shareholders. This was just an investment.

Healey points out that while supporters of continuous disclosure-related class actions argue that they create a culture where regulators and class actions work together to ensure companies are held accountable, the evidence does not support this argument. To make this worthwhile, the statement of claim has to be issued with $100 million-plus up front so only companies of a certain size are worth pursuing.

She writes that those companies, “in turn, make purely commercial decisions to settle because the financial and organisational cost of producing documents and preparing evidence is large, and the reputational shadow hanging over the share price even larger. They get settled not because of right and wrong, but for purely pragmatic reasons.”

“These kinds of class actions have become a kind of shakedown, a cynical exploitation of a law so lax that investors around the world flock to Australia to get a cut.”

Australia Blog Proposed Class Action Reforms In Australia Cause Funders And Lawyers To Race To File Cases International Initiatives, Third Party Litigation Funding (TPLF) Podcasts EPISODE 21: Summit XXI: Litigation Line of Sight: Class and Mass Action Trends in Europe Class Action Litigation, Data Privacy, International Initiatives, Other Issues Image of the UK Supreme Court Blog No Injury, No Damages: UK Supreme Court Answers Foundational Class Action Question Class Action Litigation, Data Privacy, International Initiatives Podcasts Episode 19: Survey Says: European Consumers Want TPLF Safeguards International Initiatives, Third Party Litigation Funding (TPLF) Blog Voices Around the World Call for Safeguards on Litigation Finance International Initiatives, Third Party Litigation Funding (TPLF)
We Use Cookies to Make your Experience Better

What do we use cookies for?

We use cookies and similar technologies to recognize your repeat visits and preferences, as well as to measure the effectiveness of campaigns and analyze traffic. To learn more about cookies, including how to disable them, view our Cookie Policy. By clicking "I Accept" or "X" on this banner, or using our site, you consent to the use of cookies unless you have disabled them.