‘Unprecedented’ storm of class action litigation predicted

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A top tier law firm is warning clients over an 'unprecedented' wave of class actions, as Australia achieves prominence among the world's most pro-plaintiff jurisdictions.

With six class action trials due to occur in 2014 and another five potential actions being promoted by major funders or plaintiffs’ firms, law firm Herbert Smith Freehills has moved to brief clients on the strong growth in class action litigation expected this year.

"Australian corporations now face an unprecedented number of large class action proceedings commenced in Australian courts," a report from Herbert Smith Freehills said.

The firm said that the 'spectre' of class action litigation continued to be a major topic in Australian boardrooms. 

The last two years have resulted in close to $900 million in class action settlements in Australia.

Law firm Maurice Blackburn recently welcomed a Federal Court ruling dealing with ANZ Bank’s late payment fees which the firm said is likely to change the banking landscape in Australia.

In February, Federal Court Justice Michelle Gordon determined that late payment fees charged by ANZ Bank were excessive and constituted penalties for customers.

Justice Gordon found that ANZ's late fees of $20 and $35 exceeded the bank's true costs of dealing with late payments, sometimes by up to 7,000 per cent.

Andrew Watson, who heads Maurice Blackburn’s class action practice, said more than 185,000 people around Australia had been waiting four years for the decision.

Maurice Blackburn handled the ANZ Bank case for a group of 43,500 members, and is expected to reap a windfall in legal fees as a result of the decision.

The judgment also gives the green light for lawyers to pursue seven other major Australian banks and lenders that have similar customer class actions awaiting them.

Justice Michelle Gordon ruled in favour of customers regarding late payment fees, but upheld the bank's arguments on honour, dishonour and over-limit fees.

The class actions are funded by Bentham IMF (Australia), on a no-win no-fee basis, with Bentham IMF Investment Manager, James Middleweek, welcoming the ruling.

“ANZ and other banks will now have to repay most of the amount wherever and whenever it has been charged to their customers in the past six years or more, plus all the interest each customer has missed out on," Middleweek said.

"We note the Court did not find in our clients' favour in the matter of other exception fees - this is disappointing but we will review this part of the judgment carefully and consider our options,” he added.

Herbert Smith Freehills argues third-party litigation funding will only drive further growth in class actions, and that Australia is very attractive for these groups.

“Funders see Australia as an attractive opportunity because we’ve got a low regulation environment, a very strict product liability and financial disclosure regime as well as contingency fee restrictions on lawyers,” partner Jason Betts told Australasian Lawyer.

The firm says several US commentators have identified Australia as a pro-plaintiff legal environment that is emerging as the most attractive forum for class actions after the US.

Shareholder class action claims based on alleged breaches of the continuous disclosure regime under the Corporations Act 2001 are tipped to remain dominant in the sector.

The firm says of the seven class actions commenced in 2013, five were related to allegations of corporate non-disclosure. 

"This underscores the need for corporate Australia to continue to be pro-active in managing continuous disclosure risk in the context of an ever-volatile market," the report said.

However, Herbert Smith Freehills has warned clients over a series of 'new horizons' within the class action and funding industries that will increase risk of litigation this year.

Renewed interest in 'mass consumer claims' is expected, spurred on by actions like the bank fees class actions funded by Bentham IMF which resulted in a recent win against ANZ Bank.

The firm also flagged increases in large scale product liability class actions, particularly in the medical and pharmaceutical products area, as well as financial class action litigation, primarily in relation to failed investment schemes.

Class action filings in the US have actually been down on historical averages over the last two years. Cornerstone Research figures show that in 2013 there were 166 new federal class action securities cases in the US, which was up 14 on  2012 figures but down 13% on the historical average of 191 filings a year between 1997 and 2012.

Australia’s bank class actions: Estimated claim size
Bank Group Members Range of fees charged  
 
ANZ 43,500 $25 - $45  
BankSA 1,500 $30 - $45  
Bankwest 7,200 $25 - $50  
Citibank * 12,900 $10 - $40  
Commonwealth 48,000 $20 - $35  
NAB 30,700 $20 - $60  
St George 10,000 $30 - $45  
Westpac 31,500 $25 - $50  
TOTAL 185,300    
* Citibank includes 1,900 BOQ and Suncorp credit card customers for whom it is the actual credit provider



 
  • Terry Dwyer on 4/03/2014 11:28:49 PM

    I welcome it. In my humble opinion, having had a life policy cancelled without notice after a life office cut surrender values in the GFC while (it seems) still paying dividends its parent bank, having complained to the Financial Ombudsman and being told the company does not have to show me the accounts of the life fund, I really wonder about dubious systemic financial practices and whether regulators exist to protect financial institutions against the public to maintain "confidence" rather than to enforce statutory or legal obligations.

    Given the stonewalling I seem to have experienced I would prefer a few life offices or banks got hit or even collapsed (even if I lost money in the process) to see such arrogance humbled.

    I would be happy to give a fat file to a litigation funder.

    Dr Terry Dwyer
    Dwyer Lawyers
    www.dwyerlawyers.com.au

  • TopOfTheClass on 4/03/2014 12:29:08 PM

    There is no doubt class actions are on the rise and that they are becoming important considerations for executives and boards. The era of corporate responsibility is coming.

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