In the House of Representative standing committee on economics, Labor MP Andrew Leigh quizzed Commonwealth Bank chief executive Matt Comyn and deputy CEO David Cohen on their views around class actions and litigation funding.

It comes just after legal firm Piper Alderman had served a class action against former CBA-aligned advice business Count Financial around conflicts of interest, fees for no service and commissions. 

The CBA chief acknowledged the Piper Alderman claim, commenting there has been a “significant increase in the number of class actions more recently”. 

But Mr Cohen also weighed in, saying while there was a place for class actions as a channel for consumer reparations, there could be consequences for companies’ recruitment across their leadership and are shaping executive hiring. 

He pointed to the fact there had been “a reduction in capacity in the market” for directors and officers (D&O) liability insurance, which is used to provide executives personal liability and financial loss protection from alleged wrongful acts committed in their capacity as corporate officers.

“As a result, it is getting harder for directors and officers to take out insurance,” Mr Cohen said.

“That seems very much [related] to the proliferation of class actions, particularly around securities class actions and non-disclosure to the market. It certainly is a downside.

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“That’s not to say class actions don’t have their place. But I think we’ve just got to be conscious of some of the impacts that are having an effect elsewhere.”

This aligns with the stances of prominent groups AICD and the AI Group which strongly attributed the problem of director liability as a major issue during the litigation funding inquiry.

Dr Leigh fired back, saying that he wasn’t sure that many customers would be sympathetic if the cost of insurance was rising because people were receiving the money to which they were entitled.

But Mr Cohen said it was a “broader issue”. 

“There is the cost of course, which ultimately is a cost that the company bears and therefore shareholders bear, but the other aspect that I think is a longer-term issue for us all, is that if D&O insurance is not available, then good talent won’t be attracted to boardrooms,” he said.

“That in the long-term can’t be a good thing.”

But the deputy CEO stated class actions shouldn’t be banned, commenting it was more a case of ensuring the cases are launched for a purpose without unintended consequences.

“Would you agree that a litigation-funded class action can often be an appropriate way of ensuring proper restitution for wronged customers?” Dr Leigh asked.

“I think we’ve seen circumstances where that has happened, I guess,” Mr Cohen stated.

“The issue with funding more broadly, is whether the amount actually received by customers who have been wronged, is the appropriate amount when you compare it to the proportion received by the funder.”

CBA is facing a range of class actions. As detailed in its 2020 annual results report, it is facing two shareholder actions regarding its anti-money laundering and counterterrorism financing breaches from 2014 to 2017, as well as defending against four claims in relation to its superannuation products.