The move came as the Treasurer defended his decision to water down laws requiring companies and directors to keep the market informed about important changes in their businesses against attacks by investors, who are concerned that the move will make Australia a less safe place to buy shares.

UNSW Professor Michael Legg said that the Boral action adds to the government’s case that shareholder class actions are a driving force behind their decision to regulate litigation funders and amend the continuous disclosure regime. 

“This is because of the increasing prevalence of this type of class action and the substantial payouts which frequently enrich the funders and lawyers to a greater extent that any shareholder,” Professor Legg said.

“Equally, continuous disclosure is key to market integrity and shareholders who suffer loss because of breaches of the law must be able to access the courts to obtain compensation.”

But the Treasurer’s re-engineering of Australian corporate law could be short-lived, with Labor, which has expressed concerns about the move.

Opposition to this new action is considering asking Parliament to knock down the determination that brought the change into force.

Lawyers Weekly understands that on a speech in Wednesday night, the head of the prudential regulator, Wayne Byres, also stressed the importance of transparency in the stock market, saying it would be a mistake to “switch the lights off in the mistaken view that it’d be better for everyone to operate in the dark”.

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Professor Legg said that while reform is very much needed, the current piecemeal approach risks having unforeseen ramifications.

For example, shareholder class actions may continue as negligent disclosure is still caught by the amended laws, the prohibitions on misleading conduct still apply and do not require any fault or intent, but the greater regulatory costs may see litigation funders charge more.

Lawyers Weekly had reported that plaintiff firms blasted the announcement of the amendments to continuous disclosure agreements telling Lawyers Weekly that Australian companies have nothing to fear from continuous disclosure laws if they do right by investors and customers.

With plaintiff firms not backing down, Professor Legg said that from a political perspective it is interesting that plaintiff law firms are not seeking to lessen the profile of shareholder class actions. 

“Rather they are putting fuel on the fire,” he said.

Maurice Blackburn’s lawsuit, to be filed in the Federal Court on Thursday, accuses Boral of making misleading or deceptive statements to the market about financial irregularities in its US windows business.

Boral’s share price fell in December and again in February when the company told the ASX that finance workers in the US windows division had artificially pumped up the unit’s profits.

However, Maurice Blackburn said the company knew about the irregularities more than two years earlier – the end of August 2017 – and should have told the market about them then.

The case has been mounted under the continuous disclosure regime that was in force on Monday, before Treasurer Frydenberg suddenly changed the law.