It is, however, important to consider this trend in context. Filings in this sector have been significantly affected (and distorted) by cluster claims – such as the 11 bank fees class actions and the eight class actions against Standard & Poor's.
It remains to be seen whether filings in this sector are sustained in the years to come, particularly as the limitation periods in respect of global financial crisis-related losses expire. Indeed, financial services class action filings have fallen (as a percentage of overall filings) in the past 18 months.
While financial services class actions can be very significant and high-profile, this is the sector most likely to face smaller class actions in terms of the number of group members, amounts claimed and public interest.
The vast majority of class actions are settled, but almost one-third are dismissed or otherwise discontinued with no money changing hands. This suggests so-called ‘blackmail settlements’ (companies paying to settle unmeritorious claims) are not as common as some suggest.
AUSTRALIA IS A REGIONAL OUTLIER
Class action activity in Australia has not been mirrored in other parts of the region or the rest of the world. Indeed, it is often said Australia has become the jurisdiction outside the United States in which a company is most likely to face a class action
Representative and group actions (in various forms) are slowly gaining traction in New Zealand, Hong Kong, China and Singapore – often without the benefit of a formal class actions regime. In Japan, class actions are limited to claims brought by registered consumer organisations (as is the case in many European jurisdictions).
Class actions in those jurisdictions are not currently seen as presenting the same business opportunities for lawyers and funders as in Australia. The most likely places for that to change in the medium term are Hong Kong and New Zealand.
COMMON FUND – A POTENTIAL GAME CHANGER
Looking ahead, the biggest potential agent for change is the possibility courts will permit third party funders to be remunerated on a 'common fund' basis. This would see funders receive a commission from the total amount recovered in a class action and not just from the class members who have signed funding agreements.
If permitted, this would encourage a race to file class actions and significantly increase the amount required to settle class actions. The legality of the 'common fund' approach is currently before the Full Federal Court (sitting as a court of first instance) in the shareholder class action against QBE.
Jenny Campbell & Belinda Thompson are Partners at Allens
For further details and analysis read Allens’ Class Action Risk 2016 report.