Class actions: what to expect in 2013

A new report predicts interesting times ahead in 2013, with some of the largest natural disaster and public liability class actions yet seen due for trial in 2013 and rulings expected on the ability of companies and directors to have recourse to directors' and officers' (D&O) insurance proceeds ahead of class action claimants.

The report, Class Actions in Australia – The Year in Review 2012, compiled by King & Wood Mallesons (KWM), also predicts that the number of mass tort and product liability and other consumer class actions will rise again in 2013 and that financial product class action claims will continue throughout the year.

"Moving forward, we can also expect to see further diversification in the types of class actions that are being launched," says Moira Saville, a KWM partner and co-author of the report.

The report notes that awareness of the challenges posed by class actions are clearly increasing. For example, in KWM's 2012 survey of company directors, 30 per cent of respondents considered class actions to be a significant or increasing threat. That is a stark contrast to the findings of the 2011 survey, where no respondents considered class actions to be such a threat.

2012 proved to be a watershed year for class actions, with the record $200 million settlement in the Centro class actions bringing the total value of securities class action settlements over the past 20 years to more than $1 billion. 2012 also saw more settlements than any other year in the history of Australia's class action regimes, with a total of 13 class actions settled, the report notes.

In addition, class actions in 2012 reaffirmed that insurance policies remain a key factor in determining whether litigation is started and also influence how proceedings are run and settled. For example, when announcing the start of the Maryville Black Saturday bushfire class action in August 2012, Maurice Blackburn stated: "Insurance will be a very substantial contributor to any outcome of this case." Similarly, it was also reported that the viability of any class action in relation to the Hastie Group (for alleged breaches of disclosure requirements in relation to forecast downgrades) would depend on whether there were any funds remaining within the collapsed group, or if the company had paid-up D&O liability insurance.

The report also notes that some recent developments have also created uncertainty as to whether D&O insurance may be used to fund defence costs. Of significance in 2012 was the New Zealand Court of Appeal's unanimous decision in proceedings relating to the failed New Zealand finance company, Bridgecorp. This decision overturned an earlier ruling which prevented Bridgecorp's directors and officers from accessing their D&O defence costs in circumstances where the third party claims were likely to exceed the available limit.

"The practical effect of the first instance decision was that a statutory charge existed on the available limit of the D&O cover, which had to be quarantined for a potential liability judgment and was not available to fund defence costs. If the insurer advanced defence costs in these circumstances, it would potentially do so as a volunteer without any reduction to the policy limit," notes the report.

"New Zealand decisions are not binding in Australia, but they may be considered persuasive in Australian jurisdictions. Accordingly, insurers have sought to have the position regarding defence costs clarified in Australia."

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