Which businesses face the biggest risk of class actions post-pandemic?

Which businesses face the biggest risk of class actions post-pandemic?

22 April 2020 By Jerome Doraisamy
Jaime McKenzie

Coronavirus is having a substantial impact upon all industries, and – if overseas trends are any indication – certain Australian businesses are more likely to face class actions moving forward.

To date, class actions related to the global coronavirus pandemic have targeted businesses that were already facing heightened class action risk, said Allens partner Jaime McKenzie.

In particular, she said, consumer-facing businesses remain at “highest risk”.

“We expect to see a consolidation of the consumer class action trend (fuelled by the issues raised by a range of royal commissions) and a steady increase in employment claims. Likely new frontiers include data breach claims and shareholder claims relating to alleged non-disclosure of major business risks (such as climate change),” she hypothesised.

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“The current uncertainties facing litigation funders may also have a significant impact on the shape of the class action landscape in the years to come; as does the likelihood of contingency fees being available in class actions in the Supreme Court of Victoria.”

There are lessons for class action risk in Australia that can be gleaned from developments overseas, Ms McKenzie explained.

“Despite the important differences between the two jurisdictions, class action activity in the United States remains a good indicator of the types of claims we can expect to see in Australia,” she identified.

“We are already seeing a wide variety of COVID-19-related class actions commenced and threatened in the US, which largely mirror existing areas of class action risk in Australia. These areas include consumer claims, employee claims and data privacy claims.”

The increased risk for consumer-facing businesses follows trends that were emerging earlier in the year, Ms McKenzie noted.

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In its “Class Action Risk 2020” report, Allens wrote that consumer class actions have overtaken such claims brought by shareholders as the most common form of new filling.

“The major contributors to this trend are the post-financial services royal commission class actions relating to financial products and services; as well as the product liability claims against manufacturers of cars and medical devices. Being a consumer-facing business is now the biggest indicator of class action risk. The banking/financial services and industrials sectors are the sectors most at risk,” the firm wrote at the time.

The “severe impacts” of the pandemic are being felt across every industry, Ms McKenzie outlined, and as a result, it is important that “we use lessons from other jurisdictions to help our clients manage these unexpected and difficult circumstances to protect their employees, shareholders and consumers and to ensure their businesses and the Australian economy can bounce back from this crisis”.

Ultimately, whatever the class action environment, “it is important to resist ‘knee-jerk’ reactions and to focus on objective assessments of risk”, Ms McKenzie concluded.

“For our clients, that means identifying the types of conduct that may give rise to class action risk for their businesses, putting in place measures to manage and control that risk and responding to risks that arise swiftly and appropriately,” she said.

The comments follow recent reporting by Lawyers Weekly on major predictions for the class actions space in the wake of COVID-19.

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Which businesses face the biggest risk of class actions post-pandemic?
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