Welcome to the first issue of Class Action for 2011.
Earlier this month, Mallesons released Directions 2011, a report focused on the challenges and issues facing directors of Australian companies. The results of the survey show that managing class action risk was occupying serious management and board time. This was particularly the case in the area of shareholder class actions. This concern may be justified given the number of new shareholder class actions (or press releases threatening actions) in the last three months. The results also clearly suggest that many companies are taking a proactive approach to the risks posed by class actions and are identifying those issues which might give rise to a claim against them.
Concerns revealed by the survey are certainly legitimate and the prospect of personal liability for directors no doubt puts this issue high on the board agenda.
Following the global financial crisis, investors looked to apportion blame for their losses. A number of claims have been launched in Australia with respect to misleading or deceptive statements about risks of financial products, and the recent Charles Schwab case in the US highlights the potential seriousness of such claims. Moira Saville and Jim Boynton examine this case in this issue and the steps that can be taken to mitigate the risk of such claims.
This need for careful assessment of risk is also being borne out by a growing trend to agree penalties for anti-competitive conduct under the Trade Practices Act (1974), the now Competition and Consumer Act (2010). The link between regulatory investigations and follow on private proceedings, including class actions, is well entrenched in the US, especially in the competition/antitrust area, and is now a feature of the Australian legal landscape. With private enforcement action on the rise in Australia, there is an incentive to negotiate admissions and penalties with the ACCC so as that a large volume of evidence is generated and publicly available for use by those who may promote or participated in follow-on civil proceedings. Trish Henry and Peta Stevenson explore this trend in some detail in their review of penalties for anti-competitive conduct in 2010.
The ACCC is not the only regulator with oversight of unfair conduct, and Caroline Coops explores an emerging issue around rate variation rights in variable interest loans, and the possibility that ASIC might bring a test case in this area. Given the recent focus on competition in Australia's banking sector, and media coverage of rate rises at the end of 2010, we may see the national unfair terms laws enforced in this very public area.
As we track the evolution of Australia's class action regime, other major commercial centres in the region are considering adopting the class action procedure as concerns regarding consumer/investor protection get on the political agenda. Hong Kong was one of the first jurisdictions out of the blocks but after initial enthusiasm the pace of change has been slow, with proposals stalled and overshadowed by other political and legislative priorities. Hong Kong partner Denis Brock gives an update on the progress of these proposals. Our team will track developments in the region as they occur, and will continue to look to more developed class action jurisdictions to identify possible trends and assess future risks.
We hope you find this issue helpful and interesting, and we would welcome any feedback you may have on issues that you would like us to cover in the future.
Best wishes,
Roger Forbes