Filings are down but the risk remains real
Class action risk is evolving. While filings are down, the risk remains real. Consumer and shareholder claims, across a broad range of industry sectors, accounted for the majority of filings in 2022. Third party funding was at its lowest level in many years, amid the uncertainty of a changing regulatory environment.
Thirty years after the introduction of Australia's class action regime, the class action landscape continues to adapt to changing market conditions and remains a core feature of the risk of doing business.
This year's edition of Class Action Risk is an update on the current indicators and drivers of class action risk, with a particular focus on how that risk changed during 2022.
Key trends
Filings down, but risk remains real
Class action filings were down in 2022 compared with the peaks of recent years, for a range of reasons – some enduring, some temporary. However, the risk for corporate Australia remains real and, for some sectors, is hitting new highs.
Changing funding environment
The changing regulatory environment for third party funders is a factor in the reduced filings. The change of Federal Government in mid-2022 has, however, led to the resolution of some of that uncertainty and a reduced regulatory burden for funders. Anecdotally, there are clear indicators that the funding industry remains active and more funded claims are likely in 2023.
Who is most at risk?
For many years, it was retail banks – but in a paradigm shift, no class actions were filed against the banks in 2022. While the trends in 2022 are less obvious, the risk has shifted towards consumer-facing businesses (particularly in the wake of a product recall or publicised service (or data) issue) and/or a listed company.
What's on the horizon?
The spotlight is on data security, following the various high-profile breaches in 2022, and the first class action filed against Medibank in early 2023. There is also a focus on the increasing scope for class actions concerning environmental and broader ESG issues, and a wider range of issues giving rise to shareholder class actions.
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 its merits). 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 also important to be conscious of the types of conduct that may give rise to class action risk and to put appropriate mitigatory systems in place.