Since our last edition we have seen the launch of the first class action claim against a major bank in relation to dishonour, late payment and other “exception fees” following a blaze of publicity about the proposed action earlier this year. Does this herald an increased focus by class action promoters on the financial services industry?
In this edition we look at the potential exposure of managed investment schemes (REITs) to class action claims and the impact of the new “responsible lending” and unfair contract terms regimes which have particular significance for the financial services sector. We also examine the increasing tendency of claimants to target individual company directors and other officers when pursuing claims.
The volume of class action claims is directly proportional to the availability of funding to support them. As we reported in our last edition, the funding tap was quickly turned off following the decision in the Multiplex litigation that the funding arrangement employed in that case was unlawful as an unregistered managed investment scheme. However, the funding tap was quickly turned back on when the Government elected not to regulate the sector and ASIC granted regulatory relief to litigation funders, which was recently extended. Following the recent Chameleon Mining litigation considerable doubt remains as to whether litigation funders are required to hold an Australian financial services licence to offer certain funding arrangements. In light of this, regulation of litigation funders remains a live issue.
On the topic of regulating litigation funding, it has been interesting to observe from afar the unfolding debate in the US about the efficacy of such arrangements. We have tended to view the US as the class action capital of the world. What it invents, we adopt. In that jurisdiction class actions have traditionally been funded by contingency fee arrangements offered by the plaintiff’s bar. The need for independent funding has been less acute.
On the other hand, contingency fee arrangements are generally outlawed in Australia and so independent funders have emerged. No doubt prompted by a threat to their funding monopoly and generous contingency fees, some parts of the US legal profession have opposed the emergence of independent litigation funders. There have been calls for such funders to be banned or closely regulated and subject to the same ethical requirements as lawyers. Corresponding sections of the Australian legal profession have tended to be supporters of litigation funding and opponents of regulation. The economic incentives in the two jurisdictions are very different!
We hope you find this edition of Class Action valuable. It is our intention to provoke debate and discussion about this important emerging area of the law and its implications for Australian business.
Best wishes,Roger Forbes
Roger Forbes presents a summary of this edition.
A number of recent developments both locally and overseas are evidence of increasing competition between jurisdictions to become the preferred locus for class actions.
Author: Moira Saville, Peta Stevenson | Read more
With securities class actions against listed companies now a familiar feature of the Australian legal and commercial landscape, concerns may arise about such claims being launched against Managed Investment Schemes and their Responsible Entities.
Author: Roger Forbes | Read more
Although the impact of the GFC on the Australian economy is reported to be comparatively minor, shareholder actions are set to continue as a feature of the Australian legal landscape as the effects of the GFC, and subsequent market volatility, continue to play out.
Author: Caroline Cook | Read more