Revelations from the banking royal commission prove Australia’s class action laws have “never been more needed”, according to some of the country’s largest legal firms, as big business leaders push for new regulations to curb litigation.
Michael Porter, the president of the Group of 100, a peak body for company chief financial officers, told the Australian Financial Review on Monday that insurance premiums for company directors had increased dramatically because of an “explosion” of class actions.
“We have been told by our insurers that it is a direct result of class actions, so there is a cost to shareholders as well as on the company’s and directors’ time,” Porter told the AFR.
The comments follow an Australian Law Reform Commission report that recommended changes to disclosure laws in class action cases and regulation of litigation funders.
The attorney general, Christian Porter, has already indicated support for “sensible” licensing for litigation funders.
Vicki Antzoulatos from Shine Lawyers, the special counsel running a class action against financial services company AMP, said she thought the idea that class action lawsuits had increased and were problematic “was a bit of a beat up”.
“That’s just not the case ... there’s definitely no explosion of class actions,” Antzoulatos said.
“Revelations in the banking royal commission show that we need strong laws in place in Australia and companies and the people who run them need to be held to account. These laws serve an important public purpose.
“Never have they been more needed than now, with all the instances of corporate misconduct we’ve seen coming out of the banking royal commission.
“If companies are doing the right thing, they won’t face a class action. If companies are following best practice and have good corporate governance, then there’s nothing they need to worry about.”
Antzoulatos said it was wrong to suggest litigation funders needed to be reined in or were backing cases that lacked legal merit.
“I don’t think funders that are operating to best practice guidelines would have an issue with legislative regulation,” she said.
“But it’s just a myth to say that funders are backing unmeritorious claims because it’s their money that’s on the line at the end of the day.”
Andrew Watson, the national head of class actions at the law firm Maurice Blackburn, said they provided an “important check and balance on the misconduct of a few” and that could only be of benefit to the majority of law-abiding companies.
“What remains clear is that a minuscule proportion of ASX-listed companies find themselves facing a shareholder class action in any given year,” Watson said.
“Policy reform in this area should not be driven by exaggerated and misleading claims regarding the number of class actions, the level of settlements or the costs of directors’ and officers’ insurance.”
Watson said the banking royal commission had demonstrated a need to increase and enhance transparency from large and listed companies to ensure they were held accountable for breaches of the law.