INSIGHT

Class action risk in 2021.

Class Actions

Trends shaping the class action landscape

Australia’s class action landscape remains dynamic and complex. 2020 was characterised by an increase in filings, continuing uncertainty around the impact of COVID-19 and a consistently high level of consumer claims.

Managing class action risk and creating better long-term commercial outcomes calls for a deep understanding of the key trends shaping the class actions landscape.

Class Action Risk 2021 presents a holistic assessment of the broader class action landscape in Australia. It provides practical guidance to those responsible for assessing and managing class action risk. In this edition we have provided an overview of the indicators and drivers of class action risk, with a particular focus on how class actions have changed over the course of 2020 and what this means for 2021 and beyond.

Key points

  • Class actions filings continue to rise: More class actions were filed in 2020 than in any prior year. This reflects a consistent trend of markedly increased filings since 2017. While we are not inclined to draw conclusions about class action risk based on any single year, this longer-term trend is indicative of a rise in class action risk.
  • Consumer claims currently dominate the landscape: For the second consecutive year, consumer claims have dominated the class action landscape – supplanting shareholder class actions as the most common type of claim. The trend was largely driven by the long tail of consumer filings against banks, superannuation trustees and insurers following the Financial Services Royal Commission. There has also been an increase in work-related claims (primarily for alleged underpayments) and product liability claims.
  • Banking & financial services sector most at risk: The financial services sector has been most at risk for some time, but it has become an even bigger target in recent years – now accounting for roughly one third of all filings (up from a longer-term trend of roughly one quarter). The increase in work-related claims has also resulted in the retail, hospitality and leisure sector becoming a more frequent target.
  • COVID dimension: COVID-19 claims are a new feature of our class action environment, but there has not been a deluge – five were filed in 2020, four of which relate to the escape of the virus from hotel quarantine in Victoria. The uncertain economic implications of COVID-19 may lead to work-related claims in the future. However, perhaps the key issue to watch is the potential emergence of business interruption class actions against insurers.
  • A big year for regulatory change: 2020 saw regulatory reform in respect of the continuous disclosure regime (which is directly relevant to shareholder class actions), the licencing arrangements for litigation funders and the availability of contingency fees for class actions in the Victorian Supreme Court. The full impact of these (and other) changes is yet to be seen beyond a distinct increase in filings in the Victorian Supreme Court. We will continue to closely follow developments and advocate for change in the interest of our clients.
  • What to expect in 2021: In 2021 we expect to see a continuation of the current risk environment, with a continued dominance of consumer class actions followed by securities class actions (notwithstanding recent disclosure reforms). The financial services, retail, hospitality and leisure, and industrials sectors will continue to face significant class action risk. 
  • New horizons: Emerging areas for class action risk include climate change and data breach/privacy. The most fertile ground for climate change is likely to relate to the management and/or non-disclosure of climate change risks. While there are significant obstacles to bringing financially viable data breach or privacy claims, we are seeing a growing number of claims being initiated and expect that trend to continue.