Law firms are seeing a big increase in class actions, with many of their major clients alert to the risks of potential suit, a litigation partner has said.
"From a substantive perspective, class actions have unquestionably grown into the fastest-growing species of litigation in Australia in the last decade," Jason Betts, a commercial litigation partner at Herbert Smith Freehills, told Lawyers Weekly.
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Having acted in the majority of Australia’s largest shareholder class actions, Mr Betts believes big clients are more mindful of a landscape where the risk of class actions is real.
"I have no hesitation in saying that class action risks, in all of its forms, are one of the top three issues that boards concern themselves with, prepare for, discuss and address," Mr Betts said.
"This is no longer a worst-case scenario, this is a business reality in Australia and it needs to be practically considered as part of the operations of any company."
This growth was triggered by the "seminal" 2006 High Court decision in Campbells Cash and Carry Pty Limited v Fostif Pty Ltd, which legitimised third-party funding litigation in Australia.
By majority decision, the court said that litigation funding was not an abuse of process or contrary to public policy.
Mr Betts acted for the Metcash parties in the case at first instance. In his view, Australia’s class action system was under-utilised prior to the Fostif ruling.
"Australia’s class actions system was fairly under-utilised because the economic incentives just didn’t add up," Mr Betts said.
"[Previously] a lawyer couldn’t take the risk of prosecuting the action in the promise of any recovery at the end of the day. A funder emerged to fill this lacuna in the economic equation for class actions and as a result we’ve seen – I’d say exponential – but at the very least, steady growth."
Mr Betts points to three other important factors that have contributed to the growth of class action "mega litigation" in Australia.
He cites more players in the funding market, new and expanding plaintiff law practices as well the developing desire to discover new ground as major factors.
According to Mr Betts, it is those promoters, funders and plaintiffs pushing "new horizons" in class action litigation who are shaping the new landscape.
"Over the last 10 years leading case structure has been shareholder class action litigation against listed corporate entities in respect to corporate governance issues," Mr Betts said.
"But we've seen a number of other areas explored – cartel conduct; large product liability; and consumer class actions like the bank-fees-type litigation. I also see a possible class action litigation trend emerging in respect of environmental toxic torts."
Herbert Smith Freehills recently hosted panel events in Sydney and Melbourne which offered insights into class action lifecycles and an outlook for the future.
Jason Betts holds the title of Lawyers Weekly Dispute Resolution and Litigation Partner of the Year for 2016.