Shareholders in Australia are increasingly turning to securities class actions when their investments in companies turn sour. The Sydney Morning Herald reports that there are presently such class actions ongoing against Australian companies such as the building group Multiplex, the property company Centro, wheat broker AWB, the broker Opes Prime, former directors of failed superannuation company AM Corporation and the finance company Westpoint. In addition, cases are being prepared against the directors of ABC Learning, Allco Finance Group, Octaviar MFS, Storm Financial, the property trust GPT and Oz Minerals.
The increased prevalence of securities class actions in Australia is due primarily to the availability of financing – litigation funding – through several private companies that work with plaintiffs and law firms on a commercial basis to bring these matters to court. The Herald reports that for years there was a view that what these groups did was a “perversion of the legal process but in 2006 the High Court found that ‘a speculative interest in another person’s litigation’ did not ‘warrant condemnation as being contrary to public policy or leading to an abuse of process.'” Litigation funders also provide indemnity against costs going against the plaintiffs.
Another key development that has spurred the rise of securities class actions in Australia is the High Court’s 2007 decision in Sons of Gwalia v Margaretic, in which the court overturned the convention that shareholders rank behind creditors in an insolvency. According to the Herald, the court ruled that “a shareholder in a failed company had the same right as an unsecured creditor to pursue a claim against the company in cases where the shareholder had suffered loss as a result of misleading and deceptive conduct by the company.”