Research conducted by the US Sabin Center for Climate Change Law revealed a consistent increase in the filing of “climate change litigation” cases, including a growing diversity in the nature and types of claims being submitted. It is often the case that trends in Australia will follow those in the US (and England), especially in the class action space.

2023 was a pivotal year for climate law and environmental, social and governance (ESG) reform, both in Australia and globally. Both the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) have highlighted “greenwashing” as an enforcement and surveillance priority. The ACCC has defined greenwashing as the making of “environmental claims that are false or misleading … that mak[e] a product, service or business seem better or less harmful for the environment than it really is”.

In 2023, ASIC launched its first of three legal actions, including one against the investment arm of Vanguard and another against Active Super, which allegedly falsely claimed it had eliminated investments that posed a great risk to the environment.

ASIC has received additional funding to continue its greenwashing surveillance and enforcement over the next year, specifically in the superannuation industry and wholesale green bonds market.

On 12 January 2024, the Australian government released the Climate-related Financial Disclosure: exposure draft bill that proposes to introduce phased mandatory, internationally aligned, climate-related financial disclosures from this financial year. Larger entities may be required to publish their first disclosures for the financial year beginning on or after 1 July 2024.

If this draft bill passes as expected, we anticipate, as a natural corollary of increased regulation and mandatory requirements, a continued rise in ESG-related claims in both the regulatory and civil context. Anecdotally, we understand that there are several litigation funders – who are often the facilitator (and sometimes, finder) of class action claims – to be actively seeking out potential class actions based on false or misleading environmental claims, especially involving investors who have lost money.

In-house counsel and businesses should pay close attention to their ESG responsibilities and representations – educating all those relevant personnel in their respective businesses as to what amounts to misleading and deceptive conduct and how to stay on the right side of the thin line.

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Misleading advertising

Outside of pure ESG-related matters, the ACCC continues its crackdown on the publication of misleading and deceptive information generally, including in the realm of social media influencers and “fake review” business practices.

In December 2023, the ACCC published two separate reports outlining details of its findings following an internet sweep of 118 social media influencers and 137 businesses across seven sectors on Instagram, TikTok, Snapchat, YouTube, Facebook, and Twitch.

Under the Australian Consumer Law (ACL), businesses, including influencers engaging in trade or commerce, must not deceive consumers. Worryingly, the report found that 81 per cent of the social media influencers examined in the sweep were found to be making posts that raised concerns under the ACL for potentially misleading advertising. The fashion sector showed the highest rate of concerning conduct, with 96 per cent of influencers failing to adequately disclose brand relationships.

The most common concerns identified in the report were influencers failing to disclose brand relationships in their posts, false or misleading statements on product use and benefits, multi-level marketing schemes, and subscription traps.

The second report found that 37 per cent of the businesses reviewed in the sweep had engaged in concerning conduct in respect of fake or misleading online reviews.

The sweep found that businesses appeared to be manipulating reviews in a variety of ways, including the use of third-party professional reviewers and review removalists, unclear disclosure of incentivised reviews and encouraging inflated reviews, and suppressing genuine feedback.

The ACCC will soon release guidance for influencers and businesses to educate and remind them of their various obligations under ACL. The ACCC will continue to prioritise consumer and fair-trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy. We, therefore, expect a rise in enforcement actions for those repeatedly engaging in such practices.

Misleading and deceptive conduct can arise beyond consumer claims (and regulatory action), for example, in the employment, investment and merger and acquisition context. As disruption to global markets continues, interest rate volatility remains and insolvency continues to rise, we expect to see a rise in misleading and deceptive conduct claims across the board (including in the fraud context). This is, therefore, an area where in-house counsel and businesses will want to take active steps to mitigate the risk of being a defendant to such claims.

Cyber security and data breaches

In recent years, data breaches have come to the forefront of the courts’ attention, with class action lawsuits being filed against large corporations. In September 2022, Optus announced that it had suffered a large-scale data breach that exposed the personal information of approximately 10 million customers. There were several other high-profile cyber incidents, including one against a prominent law firm.

Recently, the Federal Court rejected Optus’ claim of legal professional privilege over an expert forensic investigation report relating to the cyber attack. In addition to the class action seeking access to the report, the company is facing an investigation by the Office of the Australian Information Commissioner (OAIC) and a separate class action lawsuit. This provides a useful reminder for businesses to carefully ensure that, where desired, any external reports, communications, and documents, more generally, benefit from legal professional privilege. Bad documents, ignorantly created or taken out of context, can be the nail in the proverbial coffin.

Regrettably, the omnipresent threat of cyber attacks has become increasingly common in recent times, with the detrimental effect of such attacks impacting both corporations and civilians alike.

In late 2023, the federal government released the 2023–2030 Australian Cyber Security Strategy and Action Plan to make Australia one of the most cyber secure nations in the world by 2030.

Allocating an additional $586 million on top of the $2.3 billion already being spent on cyber security, the strategy outlines a range of ways Australia can protect its people, businesses, and organisations. It seeks to harden defences over the next decade against our “fastest-growing threat” of cyber attacks and data breaches. The strategy notes that ransomware stands as one of the most disruptive cyber threats globally, causing estimated annual damages of $3 billion to Australia’s economy. The government plans to develop a “ransomware playbook” aimed at assisting businesses in effectively responding to and recovering from cyber extortion incidents. Within this playbook, the government expresses its intent to collaborate with the industry to co-design a mandatory, no-fault, and no-liability reporting obligation for businesses to report ransomware incidents and payments. Nevertheless, we expect to see a continued increase in privacy and data breach-related civil claims and regulatory action this year.

Fraud and scams

If the volume of inquiries Ironbridge Legal receives each week from victims of scams is anything to go by, there has been a notable uptick in the discovery of fraud and the perpetration of financial scams. As I have previously said, in the good times – fraud is perpetrated, and in the bad times – fraud is discovered. The discovery in the bad times arises because businesses and insolvency practitioners (where a company has entered a formal insolvency procedure – the volume of which is expected to increase this year) pay closer attention to the books and records of the company.

The increase in the detection of fraud will lead to more applications to court for freezing orders (and other orders in the fraud litigator’s toolkit), and claims against third parties – such as directors for breach of duty and auditors.

In relation to scams, the victims are most often individuals (although companies do often fall victim, too). The ACCC’s Targeting Scams report last year revealed that Australians lost a record $3.1 billion to scams in 2022, an 80 per cent increase from the year prior, demonstrating an alarming trend that persisted throughout 2023. We expect this trend to continue to rise, especially with the fast-paced development of artificial intelligence (AI) and technology, which can be exploited to perpetrate scams.

Australian businesses and individuals are increasingly vulnerable to APP (authorised push payment) scams, causing financial losses, significant distress, and potential insolvency/bankruptcy. These scams involve deceptive tactics, leading victims to transfer funds to the fraudsters’ accounts under the guise of legitimate transactions. While the legal framework evolves to combat these scams, proactive measures and enhanced due diligence are crucial.

Last year saw the UK Supreme Court hand down its judgment in Philipp v Barclays Bank UK PLC [2023] UKSC 25 (Philipp), finding that the Quincecare duty for banks does not (in our view, necessarily) extend to transactions authorised by the customer. In layman’s summary, the Quincecare duty is owed by a bank to its customer to refuse to authorise a customer’s payment instruction where the bank is put on inquiry that an agent of the customer is attempting to defraud the customer. However, in Philipp, the Supreme Court held that the Quincecare duty does not extend to situations where the customer itself made the payment instruction.

That said, while Philipp will no doubt be persuasive in Australia, there are potential avenues in Australia for victims of scams to recover their losses from their banks. This will very much depend on the facts of each case and what the bank knew about both the customer and destination account holder and account. We therefore expect to see increased litigation (in correspondence and in court) against banks, and complaints made to the Australian Financial Complaints Authority (AFCA).

In terms of legal reform in this area, last year, the UK introduced new powers for the Payment Systems Regulator as well as mandatory reimbursement for victims of fraud through the Financial Services and Markets Act. That said, this only applies to those using the UK’s faster payments system. The Australian Financial Services Minister Stephen Jones has indicated that Australia may bring in similar laws.

Insolvency and liquidation

Last year saw a steady increase in the volume of corporate formal insolvency appointments. This increase is expected to continue this year, given the continued increase in global raw materials prices (notably affecting the construction industry, which often uses fixed-price contracts), continued disruption to the supply chain (especially with global conflict continuing), higher interest rates, and (among other things) a cutback in consumer spending.

Insolvency appointments inevitably lead to an increase in litigation against directors for breach of director duties and insolvent trading, claims around voidable transactions (especially against unsecured creditors who have received payment for their goods or services), and shareholder and bondholder litigation. Such litigation can be expected to rise this year.

In terms of personal Insolvency, the Australian Financial Security Authority (AFSA) released its report on The State of the Personal Insolvency System in December 2023. Despite reports of historically low levels of personal insolvency in the 2022–23 financial year, these volumes are expected to rise by 23 per cent in 2023–24 and by a further 20 per cent in 2024–25. During and following COVID-19 periods, AFSA saw a higher share of debtors with very small savings buffers entering insolvency. In the face of prospective economic downturns, households are also grappling with soaring costs of living and diminishing savings. This is highlighted by the current savings ratio dropping below the pre-COVID-19 average and constrained consumption growth over recent years, signalling low consumer confidence. Although inflation has been on a downward trend, the Reserve Bank of Australia (RBA) projects that it will not return to a normal range until 2025, indicating that the cost of living will continue its upward trajectory, as well as higher levels of personal insolvency.

We therefore expect to see an increase in bankruptcy and bankruptcy-related litigation, especially by bankruptcy trustees whose job is to identify and call in the assets of the bankrupt.

Conclusion

In many ways, these predictions are a product of past events and inevitably involve a certain degree of “tea-leaf reading”, but by ensuring that we learn from the lessons of previous trends and prepare for these predictions, we can better equip ourselves for what lies ahead. Whether my predictions come to pass, one thing is for sure: the disputes market will see more activity in 2024 than in recent years.