With the two Law Reform Commission inquiries into class actions and litigation funders, the highly publicised class actions such as GetSwift, and the growing presence of litigation funders in Australia, it’s almost impossible to avoid the discussions about Australia’s class action landscape –
And you can bet that the spotlight on class actions will only grow brighter over the coming months.
In this two-part blog series, we:
(1) provide a Q&A to separate the facts and myths surrounding class actions in Australia, and
(2) discuss the implications of the growth of shareholder class actions for the local D&O market.
Q: Has there been an explosion in class action litigation in Australia?
A: No. There is no empirical data supporting the claim of any “uncontrollable proliferation” of class action litigation in Australia. Nor is Australia a “target” country, second to the United States, where companies and businesses are most likely to be slapped with a class action claim.
Professor Vince Morabito has reported in his latest empirical study dated 11 July 2018 “An evidence based approach to class action reform in Australia: Competing class actions and comparative perspectives on the volume of class action litigation in Australia” that in the 26 years leading to up 31 May 2018, a total of only 563 class actions have been filed in the Federal Court and the Supreme Courts of Victoria, New South Wales and Queensland for a population of about 24.8 million. This equates to approximately 21.4 class actions per year since the Part IVA regime under the Federal Court of Australia Act 1976 came into operation in March 1992.
Yes, the volume of class actions in Australia is growing – there’s no denying that upward trend. But the volume of class actions filed pales in comparison to other jurisdictions, such as Ontario, Quebec and Israel, as the graph below illustrates.
Comparison of annual average of class actions in Australia and other jurisdictions
Q: Are the majority of the actions filed in the Federal Court class actions?
A: No. The number of class actions filed in the Federal Court is only a small percentage of the total number of claims filed in the Federal Court. This is consistent over the years, at about an average of 0.50%, although the percentage has increased very slightly since 2013-2014.
Comparison of number of causes of action and class actions filed in the Federal Court
Q: Which types of class actions are filed in the Federal Court?
A: The graph below summarises the types of class actions filed in the Federal Court and the number of those funded. Shareholder class actions are clearly the most prevalent.
Types of class actions
Q: How many class actions are funded?
A: The number of filed class actions that are funded by third-party litigation funders have increased over time. From 2013 to 2018, the percentage of funded class actions grew from 14.7% (March 1992 to March 2013) to 63.9% with 77.7% of all class actions filed in the Federal Court between March 2017 and March 2018 being funded.
Within this, a majority of the funded claims are shareholder claims, with all shareholder claims in the last five years being funded.
Litigation funders are also generally more active in the Federal Court, NSW, and Queensland, in comparison to Victoria. It appears the Victorian class action regime has not been particularly attractive to litigation funders. Out of the 85 class actions filed in the Supreme Court of Victoria since the class action regime commenced, litigation funders have only funded 10 class actions. Four of those were eventually transferred to the Federal Court. Within those 10 funded class actions, six were shareholder class actions and two were investor class actions.
Q: Who are the litigation funders in the Australian market?
A: The diagram below shows the local and offshore funders which have funded class actions in Australia. IMF Bentham Limited is the leading litigation funder in Australia.
Q: Who are the plaintiff law firms bringing class actions?
A: The top five players in the market are Maurice Blackburn, Slater & Gordon, Macpherson Kelley, Maddens Lawyers and Piper Alderman as they are involved in the most number of class actions. Other firms include Squire Patton Boggs, ACA Lawyers and Phi Finney-McDonald.
In summary, the above snapshot of the key statistics of class actions in Australia demonstrates that there has been growth in the number of class actions both on a federal and state level. The figures however certainly do not indicate that the volume of class actions in Australia is at the level of other countries such as the US and Israel on a per capita basis.
In the second part of this blog series, we will discuss shareholder class actions and their impact on the D&O market.