RiskOperational RiskAustralian Companies Report More Securities Litigation

Australian Companies Report More Securities Litigation

Australian companies are being confronted with a new wave of securities litigation, which is now the single biggest factor contributing to the growth of class actions according to a report in local daily
The Australian
.

Securities claims accounted for more than half of the 27 class actions filed in the past 18 months in the Federal Court and the Supreme Courts of Victoria and New South Wales (NSW). The figure is well above the long-term average of just 14 class actions a year and has been described as evidence of a ‘second wave’ of class actions after the conclusion of most cases triggered by the 2008 global financial crisis.

It has been identified in a report by the law firm King & Wood Mallesons, that says the above-average level of claims in 2013 has been followed by a strong ‘pipeline’ of proposed class actions.

According to the report, securities class actions proposed or investigated in last financial year targeted companies that included QBE Insurance, Padbury Mining, Macmahon, Forge, Newcrest, Billabong, Mirabela Nickel and Iluka Resources.

“The strength of this pipeline of matters shows a re-emergence of securities class actions as well as a rise in consumer claims,” the report states. Fourteen securities class actions were filed last year – seven on behalf of shareholders and seven on behalf of investors in financial products.

In all, Australian companies have paid out a total of A$1.113bn to settle securities class actions in the 22 years in which this form of litigation has been available.

Yet despite the above-average level of new cases only one settlement was approved by the courts last year, down from 13 in 2012. One more settlement was approved in the six months to June 2014.

The review says the growing maturity of the market for class action litigation has given rise to increased competition between plaintiff law firms and greater litigation risk for business.

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