There were a number of key class action litigation developments in Australia during 2014, according to a recent memo from the Jones Day law firm. Among other things, there were significant developments in particular in the securities class action litigation arena, according to the memo. The memo, which is entitled “Class Actions in Australia: 2014 in Review,” can be found here.
According to the memo, the largest class action settlement in Australia history took place in the 2014, in the Kilmore East-Kinglake bushfire class action. The case arise out of a 2009 fire in the state of Victoria in which 119 people died and many others were injured and over 1,800 homes and other properties were destroyed. The class action lawsuit was brought against the owner and operator of a power line, the company responsible for inspecting and maintaining the power line, and various entities of the State of Victoria responsible for managing forest lands, on behalf of those killed or injured or who suffered property damage in the fire. Following a 208-day trial, the case settled for A$494 million (including fees).
With respect to securities class action litigation, the memo states that “it remains clear that shareholder claims are very strong, with new entrants and established plaintiffs’ law firms and funders attempting to build class actions against a number of corporations.” The memo notes that “the first half of 2014 saw a spike in shareholder class actions, with a number of new entrants threatening or commencing proceedings, mainly around alleged continuous disclosure breaches.” In total during the year, nine actions were threatened and four were commenced.
The memo also discusses the A$69.45 million settlement of the Leighton Holdings Ltd. securities class action litigation. The claim was a follow-on lawsuit from a regulatory action taken by the Australian Securities Investment Commission which had resulted in A$300,000 in fines. The class action settlement amount is inclusive of A$3.9 for the applicant’s legal costs. The memo’s authors note that the Leighton class action provides “yet another example of regulatory action acting as a class action compass for plaintiffs law firms and litigation funders.” The settlement, the memo notes, was noteworthy for a number of reasons, including in particular “the speed of the settlement” – the case had been subject to mediation within five months of commencement and the settlement had been reached within seven months of commencement.
As I have noted in the past, litigation funding is an important part of the class action litigation landscape in Australia. During 2014, there were a number of decisions from the Supreme Court of Victoria on the question of the roles that lawyers can take in funding class action litigation.
In the Treasury Wine Estates Limited litigation, a solicitor acting for the representative party that had commenced the shareholder litigation was also the representative party’s sole director and shareholder. The court found that in these circumstances there was a real risk that the solicitor could not give detached, independent and impartial advice, taking into account both the interests of the representative party and of the interests of group members. The trial court order that the solicitor be restrained from acting as solicitor for the class and that the proceedings be stayed while the individual acted in tandem as solicitor and shareholder.
The trial court declined to permanently stay the proceeding as an abuse of process. However, the Court of Appeal ruled that because the litigation had been commenced for the purpose of generating legal fees rather than vindicating legal rights, it did represent an abuse of process and the action was permanently stayed.
In the Banksia Securities Class Action, the court was asked to consider whether a solicitor may properly act on behalf of representative party where the solicitor was the secretary and a director of the litigation funder. (The specific solicitor involved in the Banksia case was the same individual that had tried to act on behalf of the representative party in the Treasury Wine Estates Limited litigation.) The court held that a solicitor with a pecuniary interest in the outcome of the case, beyond their legal fees, should be retrained from acting for the lead plaintiff. The court found that the arrangement impinged – or had the appearance of impinging – on the integrity of the judicial process.
The authors note that in neither of these two cases did the courts find that the solicitor involved had actually violated a law or professional duty. Rather, the authors note, “the risk or appearance of a conflict was sufficient to require the lawyers to be restrained to protect the integrity of the judicial process.”
The memo suggests that “the debate over the funding of litigation, by both lawyers and third parties, will continue in 2015.”