“The sectors at risk are expanding, competing claims are on the rise and new areas of risk are coming to the fore. When these developments are coupled with a largely unregulated and highly competitive funding environment, there is added complexity and risk associated with navigating a claim,” the report noted.

The report showed that consumer claims continued to dominate the space in 2023, accounting for 40 per cent of filings, up from 32 per cent last year, while shareholder claims dropped to 20 per cent from 29 per cent and employee claims remained stable at 15 per cent.

All sectors face class action risk, with heightened risk for businesses operating in retail and hospitality, banks and financial services and industrials, Allens partner Belinda Thompson said.

VIEW ALL

“In 2023 we saw class actions pick up pace after a lull in 2022. Filings were driven by a few factors including consumer claims relating to alleged motor vehicle defects, data breaches and a number of competing shareholder claims,” she said.

“Employee claims related to underpayments and rest breaks remain a feature of our class action landscape.”

In 2023, one quarter of class actions claims filed related to the retail, hospitality and leisure sector, after a number of class actions were brought on behalf of employees for alleged underpayment or rest break issues – such as the competing class actions filed against KFC.

The financial sector was the second highest target for class action filings in 2023, although the report noted that for the second year in a row, there were no class actions filed against the major banks. The third biggest target was the industrials sector, primarily driven by the ongoing trend of claims against auto manufacturers like Hyundai and Kia, which were hit with multiple class actions last year.

This came after a string of class actions were filed against motor companies over the previous 12 months, with Hino Motors facing three separate class actions, “one of the biggest claims in Australia’s legal history” filed against Toyota for the alleged tampering with emissions control systems to improve the performance of diesel engines, and class actions filed against the respective parent companies of Mercedes-Benz Australia/Pacific and BMW Australia for the alleged installation of “cheat devices”.

All signs also point to cyber class action claims being “here to stay”, according to the report, which noted that new reforms in the works will make these easier to pursue and therefore could result in escalation in claims moving forward.

“The last 12 months have seen a significant increase in class action risk associated with cyber incidents for Australian companies, accompanied by unprecedented scrutiny from government, regulators and consumers,” the report stated.

“A clear pattern of data breach class actions has emerged, including both consumer and shareholder claims.”

This comes after 2024 was predicted to be “another big year for cyber”, with numerous class actions filed against Medibank following its cyber breach, after “potentially the most serious privacy breach in Australian history” (at the time), whereby millions of Optus customers had their names, dates of birth, phone numbers and email addresses stolen by cyber criminals.

BigLaw firm HWL Ebsworth was also the victim of an attack in May of last year, which has since resulted in an OAIC investigation into the firm’s personal information handling practices.

IP services group IPH Limited also had to halt trading after it detected unauthorised access to a portion of its IT environment in mid-March last year – which was later revealed to have cost the firm $2.8 million.

Looking ahead

In light of these increased risks, the report made note of the potential for more crypto class actions, as well as ESG matters featuring in proceedings.

“With a proposed regulatory framework for digital asset platforms in the pipeline and ASIC challenging the positions of crypto issuers in the courts, it may be only a matter of time until there are developments in the legal landscape that provide ammunition to plaintiff law firms assessing the viability of these claims,” the report stated.

Further, the firms said they expect the “trend of ever-expanding ESG class actions to keep pace with developments abroad”.

Legislative reforms in greenwashing and other ESG matters are also likely to fuel class action risk, with the report urging Australian corporates to “remain vigilant of the class action risks that might follow any regulatory prosecutions or shareholder activism in this space”.

“With a range of developments on the horizon, class action risk is expected to become more complex in the years ahead. Businesses need to remain vigilant and prepare for the impacts of changes to class action funding, and emerging risks such as data privacy, digital asset platforms and climate change,” Thompson added.

“We expect class action risk to remain high throughout 2024, with heightened risk for consumer facing and listed entities. Cyber, defective products – particularly in the auto sector – and employment claims seem likely to join shareholder class actions as mainstays of our class action environment.

“With the real risk of a class action, or potentially multiple class actions, following any corporate misstep, it is important for companies to proactively manage their class action risk.”