Australian class actions ‘bounce back’ after lull in 2022

Australian businesses faced the second ever highest number of class actions in 2023 and the sectors at risk are expanding, competing claims are on the rise and new areas of risk are coming to the fore.

When these developments are coupled with a largely unregulated and highly competitive funding environment, there is added complexity and risk associated with navigating a claim, warns leading Australian law firm Allens.

In the latest edition of Allen’s annual Class Action Risk report, the law firm says that the “light touch” approach to regulating litigation funders and a “magnet-like” attraction to the contingency fee regime in the state of Victoria, is fuelling a range of increasingly innovative funding models and a high degree of competition in financing claims.

Consumer claims were a standout once again in 2023, accounting for roughly 40% of class action filings in Australia. The biggest drivers of these claims involved proceedings alleging defects in motor vehicles and the sale and promotion of allegedly high-risk or unsuitable financial products, said Allens.

The first significant wave of data breach class actions were filed last year following several high-profile cybersecurity incidents. “With some reform in the works that will make these claims easier to pursue, all signs point to a potential escalation in these claims moving forward,” said Allens.

The number of employment class action filings almost doubled in 2023. Most of these claims involved allegations of underpayments and breach of employment terms – in particular in connection with unpaid overtime and loadings, or failure to provide rest breaks. “We expect filings to increase with misclassification claims coming back to the fore,” predicted the law firm.

Shareholder class actions continue to account for a significant proportion of filings, and the subject matter driving these claims continues to expand.

ESG-related claims are high on the agenda too. “The continued regulatory focus on greenwashing and bluewashing, and the proposed introduction of mandatory climate and modern slavery reporting requirements, are likely to serve as the catalyst for future class action risk,” said Allens.

Potential class actions involving digital asset platforms also loom large on the horizon as an emerging area of risk, added the law firm.

Overall, Allens concluded that the headline trend is class action filings bounced back last year to reflect longer-term trends after a marked downturn in 2022.

“Filings in 2023 were in a similar ballpark to filing levels over the last five years (save for the anomaly of 2022). For that reason, we do not view this as an escalation in class action risk and… it may not necessarily mean abandoning any hope that class action risk might be subsiding,” said the law firm.

A core factor in the 2023 filings is the relatively high number of competing class actions, it added.

“Our analysis indicates that competing claims account for roughly one-quarter of total filings – the largest proportion in at least the last decade. While competing claims have typically been seen in the shareholder class action context, in 2023 the competing claims were comprised of roughly one-third shareholder claims, one-third consumer claims and the balance being made up with various other types of claims,” explained Allens.