2019 may be watershed year for class actions

Recent developments may have primed the space for a “perfect storm”

2019 may be watershed year for class actions

This year may be a watershed year for class actions in Australia, Corrs Chambers Westgarth’s class-actions group says.

Chris Pagent, who heads the team, said that some observers say a “perfect storm” may be coming due to several factors, including royal commissions, the release of the Australian Law Reform Commission report that has proposals for legislative changes, increased competition in litigation funding, and confirmation that courts can make common-fund orders in open class actions.

The independent firm shared its predictions for the class-actions space this year. One is that there will be fewer competing class actions despite common-fund orders being upheld. The GetSwift decision will likely temper appetite among funders to support open class actions due to risk of actions to be stayed.

The risk from competing open class actions may lead to funders and lawyers moving away from claims of securities fraud, Corrs said. To avoid the risk of a result similar to the GetSwift case, where several class actions backed by litigation funders were stayed, funders will likely focus more on book-building and supporting closed class actions.

However, the move away from securities-linked claims will not mean the space will have a dearth of claims. Corrs said that open class actions will still be present in the securities space, but institutional book-building will be a challenge.

Parties that are involved in open class actions are expected to strive to file cases quickly, despite courts discouraging a “race to the court” approach. The first-mover advantage will likely discourage competing claims, Corrs said.

Courts as also expected to take a more interventionist stance in settlement approvals to ensure fairness between legal fees and net returns to funders and net returns to group members.

The independent firm also predicts that there will be a spate of employment misclassification claims, which it described as seemingly the “flavour of the month” in the class-actions industry. Similarly, there may be an uptick in claims against aged-care service providers, depending on the result of the Royal Commission into Aged Care Quality and Safety. Short sellers will come under the microscope, Corrs said.

The “floodgates will not open” even as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry will “catalyse some claims,” Corrs said.

There are too many natural constraints on the number of claims as a result of the banking royal commission, including the capacity of plaintiff law firms capable of prosecuting major class actions, the historic conservatism of funders, the expense associated with prosecuting major claims and securing costs, and adverse-costs exposure, Corrs said.

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