A couple of specific points of interest for Securities Docket readers from an article by Clayton Utz lawyers entitled, “Australia: Top 10 Developments In Commercial Litigation In 2008:”
2. The rise and rise of litigation funding
2008 was a bumper year for litigation funders. The Aristocrat class action was settled for a record $145 million and agreements were signed to fund class actions against Centro, ABC Learning, Octaviar and Pan Pharmaceuticals, just to name a few.
Those companies, which fund class actions in exchange for a share of any settlement or damages award, are having a dramatic impact on commercial litigation. Working with plaintiff lawyers, they have essentially developed a new type of litigation: the financial sector class action. Boardrooms are now on notice that it is not just the regulators who are scrutinising their company announcements, financial statements and share price movements. Litigation funders are constantly on the look out for their next class action.
4. Sub-prime litigation
The fallout from the sub-prime crisis triggered an explosion of litigation in the USA in 2008. We saw a similar spike in litigation after the dot com bust in 2000. What is different this time around is the range of parties that are being sued. Actions have been brought against essentially every participant in the securitisation process from mortgage originators and real estate agents, to ratings agencies, issuers of sub-prime backed bonds and accounting firms.
Sub-prime litigation in Australia has been more confined. Actions have been brought against companies caught out by the liquidity freeze and at least one arranger of structured finance products. Recently, there has also been talk of actions being launched against ratings agencies.
10. An emboldened regulator?
After enduring accusations over the years of being too conservative in its approach to prosecuting corporate misfeasance, the Australian Securities and Investments Commission took the bold move of launching a $200 million action against KPMG over its auditing of various Westpoint entities. Some commentators have suggested that this marks the emergence of a more emboldened regulator. On the whole, 2008 was a litigious year for ASIC. The corporate regulator’s prosecution of former directors of James Hardie went to trial in September and it has 16 actions relating to the Westpoint collapse on foot.