There is greater awareness than there was five years ago of the opportunities for shareholder class actions, according to Slater & Gordon partner Lisa Nicols. “There are bodies who actively advance the interests of shareholders and raise awareness, such as the Australian Shareholders Association,” she said.

But Nicols rejected the predictions of some analysts that there will be a flood of litigation, claiming that this is just “scare mongering”.

“I think that the disclosure provisions of the corporations law are there for a purpose and if shareholders take action to effectively enforce those, then that is completely consistent with the public policy of the corporations law. But actions will only be run when they are viable. These actions are expensive and challenging so it is wrong to think that just because some actions have been run on a non-disclosure basis there will be dozens or hundreds of them.

“It really will depend on whether companies are complying with their obligations and what happens as a result because, of course, some non-disclosures are not material,” Nicols said. “Sometimes they don’t affect the share price. I would say that the number of cases being brought is not likely to increase exponentially.”

The firm is investigating on behalf of former and current Multiplex shareholders who suffered significant losses when the company’s share price plunged this year. “Late last year, Multiplex was still indicating publicly that the Wembley project was on track to return a large profit,” said Nicols. “But then in February Multiplex announced that the Wembley project would break even instead of making a profit and in May Multiplex announced that in fact the Wembley project would return a 45 million pound loss,” she said.

Nicols said it needs to be asked “what Multiplex management knew and when”. Allegations made publicly suggest Multiplex has some explaining to do, she added.

Shareholder actions are not a new concept in law, but there have not been a significant number in Australia. Slater & Gordon, along with other firms, regularly receives calls from shareholders when shares have plunged and they think there is a reason to be suspicious or that the company has not disclosed information.

Slater & Gordon is currently acting for about 1,500 shareholders, in the case of Ion. “That company has gone into administration so the process in that case is engaging in the filing of the proof of claim, rather than issuing proceedings, but it is a similar concept,” Nicols said.

“That has the legal issue of whether shareholders can recover as creditors. But, it is nevertheless similar to the Multiplex issue — the question is whether the company properly disclosed the things it ought to have disclosed under the corporations rules.”

This area of shareholder action against companies is about disclosure, said Nicols. “So it’s whether the companies comply with their continuous disclosure obligations, which means in essence that when there is something that has a material effect on a share price, and it comes to the company’s attention or should have been known by it, it must be disclosed.

“Those roles are refined somewhat when a company is issuing a prospectus and more generally there are a range of statutory prohibitions against misleading conduct. It is about what companies do say, and also what companies don’t say and should have said,” she said.