Expert report debunks myth of Australian class action boom
Exclusive July 12, 2018 6:16 pm By Christine Caulfield | Melbourne

Australia is not the haven for class actions that critics have claimed, according to a new report that shoots down the notion that the country is just behind litigation-happy US when it comes to targeting corporations in court.

The report, released Thursday by Monash Business School Professor Vince Morabito, also criticises reform proposals that would force Australian judges to pick a single winner among competing class actions and make the Federal Court the exclusive venue for shareholder class actions.

Morabito, Australia’s class action expert, says the empirical report is the first in a 12-month series aimed at providing perspective in the face of claims that the volume of class actions filed every year is “out of control” and needs to be drastically reduced.

He said he the 2010 observation of Herbert Smith Freehills’ partners Ken Adams and Damian Grave that the “hysteria surrounding class actions in Australia” had lead to serious misconceptions was “even more accurate today”.

Just 563 class actions have been brought in Australia since the federal class action regime was introduced in 1992, amounting to a yearly average of 21.4 class actions, according to the report.

While the last four years have seen an increase in the average number of class actions filed in Federal Court, the jump follows a 53 percent drop in the number of class actions after a relative surge in the late 90s.

“It has taken 12 years for the level of federal class action activity to go back to (and indeed surpass) the volume of litigation seen in the June 1998 – May 2002 period,” the report said. “And … in a country with a population of over 24 million people, an annual average of 24 class actions filed over the last four years in the country’s national court, cannot rationally be viewed as excessive.”

The report compares class action rates in different countries, and notes that almost 6,000 class actions were filed in Israel between 2007 to 2015, ten times the number filed in Australian in the past 26 years.

In Canada’s Ontario, 1,459 class actions were filed between 1993 and 2017, an average of 54 cases a year in a province where the population is half of Australia’s population. In Quebec, the numbers are similar; 1,306 class actions were filed since 1993. Eight million people, or a third of Australia’s population, live in Quebec, according to the report.

And in Poland, where the class action regime restricts representative proceedings to only certain civil cases, 195 class actions were filed in the six years since January 2010. Over the same period, 180 class actions were filed in Australia.

The numbers, Morabito says, “are sufficient to debunk the myth that Australia is (outside of the US) the place to be if you act for class members and the place to avoid if you do not wish to be on the receiving end of one or more class actions”.

The report examines competing class actions in Australia and how courts are dealing with the overlap. At the end of June there were 28 cases of overlapping class actions. In 15 of those matters, all the competing actions were filed in the Federal Court; in 10 cases — including the high profile AMP matter — the overlapping actions were filed across state and federal jurisdictions. The vast majority of overlapping cases are shareholder disputes.

How judges have approached the problem of overlapping actions has varied almost case-by-case, according to the report, with some judges consolidating proceedings, other judges doing some combination of staying, declassing, discontinuing and consolidating actions, still others letting the cases proceed jointly or separately.

Courts facing cross-jurisdictional overlap have, in four cases, made transfer orders. In another case, the two actions proceeded in different courts.

The report criticises the approach proposed by the Australian Law Reform Commission to force trial judges to choose one among multiple competing class actions “unless the court is satisfied that it would be inefficient or otherwise antithetical to the interest of justice to do so”.

“The ALRC’s proposal that federal trial judges must choose between competing class actions represents a clear statement on the part of the ALRC – and by the Commonwealth Government and Parliament, if they implement this recommendation – that they are not happy with or disagree with the Federal Court’s “case-dependent approach”. Before implementing such a significant change law-makers must be confident that the “one size fits all” approach represents a superior approach in all circumstances,” Morabito said.

“With respect, what is the point of “imposing” on our federal class action judges a
requirement that they choose between competing class actions but, at the same time,
allowing them to disregard this directive if such a step is in the interests of justice?”

This “compromise” will result in no significant change to how court’s rule, but “uncertainty” among courts and practitioners for many years, Morabito said.

The Full Federal Court, which will hear appeals next month of Justice Michael Lee’s recent ruling staying two of the three competing class actions against logistics tech startup GetSwift, should be heard first, at any rate, he said.

“We have waited over 26 years for an appeal court to provide detailed guidance as to the most appropriate approach to adopt by trial judges when confronted with competing class actions. We should wait a little longer and see how the law in this area unfolds following the Full Federal Court’s ruling (and possibly the High Court’s ruling), before we contemplate legislative intervention.”

The report also attacks the ALRC’s suggestion in its May discussion paper that follow-on class actions face a deadline for filing, imposing, it says “a more restrictive time requirement for subsequent competing class actions, than what is provided for in statutes of limitation”.

“And the starting point for this deadline is likely to be, in many cases, the filing of poorly-drafted pleadings by solicitors who are keen to be the first firm to file their pleadings,” Morabito says.

As to what to do with competing class actions across jurisdictions, the report favours the Victoria Law Reform Commission’s recommendation in its report last month to establish a cross-vesting judicial panel over the ALRC’s “drastic” proposal to make the Federal Court the exclusive venue for the bulk of class actions, filed under the Corporations Act.

The jurisdictional battle over competing AMP class actions – in which NSW Supreme Court Justice James Stevenson this week threatened to put the brakes on four Federal Court class actions that refuse to move to his court –shows something may need to be done, however.

“This is not the place to explore whether Justice Stevenson has the power to issue an anti-suit injunction against the class representatives in the four federal AMP class actions. But attention must be drawn to the potential adverse consequences that may be caused by this type of judicial approach. One such negative consequence is generating tensions, if not conflicts, between Australia’s class actions courts,” Morabito says.

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Christine Caulfield

Christine Caulfield has been a journalist for 18 years. She was most recently the Co-Managing Editor at US legal news publication Law360. Prior to that she worked as the County Court reporter for The Herald Sun. She is Co-Founder and Editor of Lawyerly.