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Why are class action filings in Australia declining?
According to a recent KWM report, class action filings have plummeted to their lowest levels in recent years. Here, a partner at that global law firm examines the underlying reasons for this trend and considers the potential implications for the legal landscape in the future.
Grace Robbie
Speaking on a recent episode of The Lawyers Weekly Show, Eleanor Atkins, a partner at King & Wood Mallesons (KWM), addressed the significant decline in class action filings found in KWM’s recently released report, The Review: Class Actions in Australia, which showed that such filings reached their lowest levels in seven years. She also explored the reasons contributing to this decrease and what the reduced volume of filings indicates about the current state of the Australian market.
While many observers may interpret the decline as a sign of a cooling market, Atkins suggests that we are witnessing a process of “normalisation” following a period of intensified and heightened activity.
“I’m not sure whether it’s fair to say it’s a decline so much as a normalisation because the Hayne banking royal commission, which was six years ago now, there were quite a few class actions that were filed off the back of that,
“We could just kind of be seeing those class actions work their way through the courts and then working our way through that backlog,” she said.
Atkins also identified the implementation of the group costs order regime in Victoria as a significant factor, as it allowed law firms in class actions to receive their legal fees as a percentage of the total award or settlement from the proceedings.
“It might also have to do with the group cost order regime in Victoria; there might have been a spike that was attributable to that in the past few years,” she said.
Additionally, the broader market environment plays a crucial role, with Atkins describing the current legal landscape as “relatively benign”.
However, she underscored that the current developments observed in the class action space reflect its inherently cyclical nature.
“What we do tend to see is a cycle where a particular industry or segment of the market is given particular emphasis, either as an enforcement priority or through things like Senate inquiries, and then we see those regulatory actions flow through to class actions a little bit after that,” she said.
“If you’re looking at trying to guess what’s on the horizon, the regulatory enforcement priorities and kind of what’s being given focus both in the media and in Parliament is generally a pretty good guide.”
In light of the recent decline in class action filings, Atkins indicated that the current reduction should be interpreted as a “levelling out” rather than a permanent decrease in the market.
