Class actions have become a major source of litigation and expense for corporations in Australia. In particular, the shareholder class action has extracted significant payouts from corporate Australia. However, the types of class actions being brought are becoming more diverse. Recent developments around climate change and privacy are creating opportunities for litigation.
Public spotlights on potential legal contraventions through royal commissions, particularly in relation to financial services, are also giving rise to claims for compensation. Further, the number of litigation funders and plaintiff law firms active in the Australian market has proliferated with even some traditional ‘defendant’ firms crossing over to the plaintiff side. Without new class actions, the desired financial returns for the funders and plaintiff lawyers will not be realised. Consequently, a new wave of class actions is set to break over corporate Australia in the near future. This article discusses the sources of future class action trends.
There are a range of climate change risks that could impact corporate performance and share price, which securities laws may require to be disclosed. For example, the risks of extreme weather conditions that damage infrastructure or access to a key input needed for the operation of the business. There are also political or regulatory risks where changes to laws and regulations in relation to the environment arguably should have been foreseen and guarded against. There may also be reputational risks that arise from not responding to environmental concerns. Indeed, the last year has seen growing pressure on companies from institutional investors, including superannuation funds, to minimise and offset their carbon footprint and provide transparency to investors of the environmental impact of operations.
Notably, in a recent landmark decision, Gloucester Resources Limited v Minister for Planning1, the Chief Justice of the New South Wales Land and Environment Court, ruled against the development of an open cut, 2.5 million tonne per year, coking coalmine. One of the reasons cited for the decision was that the mine’s greenhouse gas emissions would be contrary to the urgent need for a significant decrease in such emissions in order for climate targets to be met. The court’s recognition of the impact of the proposed mine on greenhouse gas emissions and, in turn, the ability to meet climate targets, is likely to have implications for future mining, resources and energy projects throughout Australia. This in turn may impact the statutory accounting and disclosure requirements that corporations must comply with.
The possibility of class action litigation is illustrated by Commonwealth Bank shareholders who commenced proceedings against the bank for failing to disclose climate change risks in its annual reports (Abrahams v Commonwealth Bank of Australia). The bank subsequently included an acknowledgement of climate change risks in its 2017 annual report resulting in the discontinuation of the proceedings. Nonetheless, the case illustrates how climate change litigation might be pursued as a shareholder class action.
In addition to shareholder class actions based on non-disclosure, it is anticipated that a second type of climate change-related class action might also be brought in Australia whereby the claimants seek damages for loss suffered as a result of alleged climate impacts caused by the conduct of the defendant(s). In the United States, claimants have sought to rely on causes of action in negligence and nuisance. The prospective defendants to such actions may include companies in the mining, resources, energy, transport and manufacturing industries, which are vulnerable to claims that they have caused or contributed to climate change through their carbon outputs. Such actions involve a number of challenges for claimants including proof of causation, and in particular, attribution among multiple defendants.
Australia’s distinctive circumstances have also seen novel mass tort claims in relation to bushfires and floods.
Advancements in technology have improved businesses’ ability to collect, record, store, analyse and share personal data, and deploy that data for valuable commercial purposes. Almost everyone uses products and services which record personal data. Personal data now represents a significant information asset, but it also poses new risks for businesses. In particular, the widespread prevalence of personal data has resulted in increasing concerns over data security and privacy, compliance costs and the potential for data breach.
Data breach class actions have been brought overseas but have not gained a lot of momentum in Australia. This may be due the lack of a specific actionable right dealing with privacy and providing for compensation. Nonetheless, a class action was filed in the Supreme Court of NSW against NSW Ambulance on behalf of ambulance employees and contractors whose sensitive health and personal information was the subject of a mass data breach in 2013. The claimants allege that NSW Ambulance is liable for breach of confidence, breach of contract, misleading and deceptive conduct and invasion of privacy, as a result of its failure to protect adequately the personal records of its employees. The class action has reportedly settled and but court approval is yet to be obtained.
Privacy breaches can lead to very large class actions. For example, a complaint against Facebook was lodged with the Office of the Australian Information Commissioner (OAIC) in relation to the Cambridge Analytica scandal alleging breaches of the Australian Privacy Principles in the Privacy Act 1988. The data of some 300,000 Australians is thought to have been used improperly. The OAIC complaint is thought to be part of preliminary steps to see if a class action was warranted.
Banking royal commission
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was conducted throughout 2018 with the Commissioner’s Final Report tabled in Parliament on 4 February 2019. A number of class actions in connection with the Royal Commission have been commenced already. Consumer class actions have been brought on behalf of customers who suffered loss due to, for example, the alleged breach by financial institutions of responsible lending laws; or who were sold insurance policies that they were ineligible to claim under.
Superannuation claims are also likely to rise. Slater and Gordon, as part of its ‘Get Your Super Back’ campaign, filed a class action against the Commonwealth Bank and Colonial First State. It is alleged that Colonial First State invested the retirement savings of its members with its parent bank, the Commonwealth Bank, where it received uncompetitive bank interest rates. In doing this, it is alleged that Colonial First State, as a superannuation fund trustee, did not act in the best interests of its members. In 2019 Maurice Blackburn and Slater & Gordon launched class actions against AMP claiming that fees on superannuation accounts had been incorrectly charged to customers.
Reports of misconduct from the Royal Commission have also been repackaged as shareholder class actions for breach of continuous disclosure obligations. For example, five class actions were filed against AMP Limited alleging that it failed to disclose to the market that it knowingly had been charging clients fees for no service in various contexts; and that it misled the Australian corporate regulator, ASIC, in relation to such conduct.
Further royal commissions
More recently, Royal Commissions have been established into Aged Care Quality and Safety (in October 2018); and Violence, Abuse, Neglect and Exploitation of People with a Disability (in April 2019). The public hearings and final reports relating to those royal commissions may well provide fertile ground for further class actions, including consumer class actions for negligent care, inadequate systems of safety and supervision and regulatory failures.
New mass tort and product liability claims
Product liability claims have a long history in Australian class actions as products with a global reach become the subject of overseas class actions and then copycat proceedings are launched domestically. Claims have been brought in relation to a wide array of products and incidents, including medical devices (eg pacemakers), pharmaceutical products (such as diet drugs and anti-inflammatory drugs) and consumer goods such as cars. The US experience with opioids is being monitored by plaintiff lawyers. Australia’s distinctive environmental circumstances and class action regime have also seen novel mass tort claims in relation to bushfires and floods.
While the category of product liability and mass tort class actions is well known, the next product or disaster that can create an avalanche of claims often is not. In February 2019 and June 2019, product liability class actions were commenced in the Federal Court of Australia in relation to combustible cladding. High profile fires such as the Grenfell Tower in London in 2017 and the Lacrosse Building in Melbourne in 2014 have identified a risk of cladding used on the exterior of buildings being unsafe and requiring remediation. The class action turns a regulatory and customer issue into large-scale litigation.
Return of cartel class actions
Cartel class actions have not been commenced for a number of years due to their complexity, cost and inability of private plaintiffs to access documents from the Australian Competition and Consumer Commission (ACCC) containing protected cartel information. In 2019, however, a foreign exchange cartel class action was commenced against several global banks. The claimants allege that the banks colluded to manipulate foreign exchange rates over several years — inflating the cost of certain currencies and decreasing the price received when selling certain other currencies.
However, there have been a number of developments which may reinvigorate cartel class actions. Section 83 of the Competition and Consumer Act 2010 previously allowed for the proving of a fact in subsequent litigation where there was a finding of fact by a court and was interpreted as only applying to a judgment. This section has been expanded to apply to an admission of any fact, which could include civil penalty settlements and criminal pleas of guilt. When this is coupled with the ACCC’s increased pursuit of criminal action for cartel contraventions then the possibility of follow-on compensation claims may increase. In his 2019 Compliance and Enforcement Policy speech, the Chairman of the ACCC, Rod Sims, announced that the ACCC expected ‘to have two to three criminal cartel investigations come to conclusion and prosecutions commence each year’. The more actions brought by the ACCC that lead to settlements or judgments, the greater the pool of possible class action claims.
The adaptability of the class action procedure allows it to be employed in relation to a multitude of causes of action. The number of class actions brought in Australia will continue to rise steadily due to the highly lucrative returns that can be achieved by funders and plaintiff firms alike. Climate change, privacy, financial services, mass tort and cartel claims are among the likely candidates for class actions in Australia.
Jennifer Chambers can be contacted on (02) 8272 0706 or by email at email@example.com and John Emmerig can be contacted on (02) 8272 0506 or by email at firstname.lastname@example.org and Michael Legg can be contacted on (02) 8272 0720 or by email at email@example.com.