Filings down on 2021, but still high – While fewer class actions were filed in 2021 than the all-time high of 2020, the longer-term trend of elevated filings over the last five years has continued. Accordingly, class action risk remains high.
Resolving various uncertainties surrounding the commercial drivers for class action activity will determine how the risk profile develops over the coming years.
Funding environment more uncertain than ever before – Proposed funding reforms continue to create significant uncertainty for class action promoters. For most of 2021, that uncertainty acted as a brake on class action activity but drove a spike in filings in the last quarter, as promoters rushed to file claims before proposed legislation applying to new claims was passed. Now, however, it seems unlikely the reform agenda will be progressed in advance of the federal election – whether it is progressed at all, and how, will likely depending on the election outcome.
What are the biggest indicators of future risk? Undoubtedly, the biggest indicator of class action risk is being a consumer-facing business or government agency. The sectors most at risk in 2021 were government, healthcare, and financial services, followed by manufacturers and suppliers of consumer goods and services, particularly in the wake of a product recall or publicised service issue. Listed companies are still at risk from shareholder claims, but this is arguably changing in the wake of regulatory reform and a lack of success for plaintiffs in decided cases. Class actions arising from the response to COVID-19 are a feature of the current landscape but have not been a significant driver of risk.
What's on the horizon? In addition to consumer claims, the focus continues to be on the increasing scope for class actions concerning climate change issues and environmental damage. The Attorney-General's recently released paper proposing a direct right of action for breach of data privacy significantly increases the possibility of viable data breach class actions in the future.
Responding to class action risk – If a class action is commenced against your organisation, you are likely to face a period of difficult and sustained litigation (irrespective of the merits). Even in this entrepreneurial environment, it is important to resist knee jerk reactions and instead engage in an objective risk assessment from day one. As a preventative measure, it is important to be conscious of the types of conduct that may give rise to class action risk in your business and to put appropriate mitigatory systems in place. If something should go awry, adequate planning can help ensure the response is swift and based on an objective assessment of risk.