What are class action lawsuits and are they common in Australia?

After the US, Australia is one of the biggest markets in the world for class actions with well over 130 representative proceedings before the courts.

For corporations, it also makes it one of the most likely places to be sued.

Class actions, more formally known as representative proceedings, are designed to bring together large numbers of claims for people affected by similar alleged misdeeds, rather than requiring each individual to pursue their own legal course.

While the number of new class actions dropped significantly last year, the preceding years were particularly busy.

The main reason for that flurry stemmed from the banking royal commission, which found widespread misconduct when it reported its findings in early 2019.

Some companies, such as AMP, are still defending multiple cases linked to issues revealed at the inquiry.

There have been class actions in Australia since 1992 when favourable laws were drawn up, prompting an array of litigation.

Originating in the US, Australia was an early adopter of the type of representative litigation that is now catching on around the world.

Australia has historically had many shareholder actions, whereby investors allege that a company failed to disclose relevant facts or misinformed the market amid a fall in the value of its share price.

The milk company says it complied with its disclosure obligations at all times and will vigorously defend the proceedings.

There has been a growing number of consumer and product liability cases, related to alleged physical and financial harm from medical devices and financial products, while climate class actions are also gaining a foothold in Australia.

Following the lead from the US, Australian law firms expect an increase in claims linked to environmental damage and failings by companies and governments to address threats of climate change.

Several law firms have started or are weighing up actions against Optus and Medibank over massive data breaches that exposed the personal details of customers.

A claim is typically brought by a representative plaintiff on behalf of a wider group.

Someone may opt out, for example, if they want to pursue their own litigation. Those who partake may also disagree with the settlement and/or course of legal action, but have little recourse.

This is one of the most contentious areas of class actions.

Law firms may bring in a litigation funder for bigger and more complex cases, with the funder covering legal costs and taking on the financial risk that the action is unsuccessful. In return, the litigation funder will generally take between 25% and 35% of the final compensation, eroding the return to affected members of the class action.

Sometimes the reported big payouts that companies pay may turn out to be a trickle when it reaches a class action member, depending on the type of case.

In one example involving a class action prompted by the robodebt scandal, a single mother-of-four received 96 cents.

While many cases settle, some are unsuccessful, such as a large case mounted over excessive bank fees that went all the way to the high court.

Class action representatives typically argue that while the costs can be high, they are often the only way to receive compensation that would otherwise be too costly for someone to pursue.

For example, it would have been difficult for an individual Australian driver to take on Volkswagen over its emissions scandal, in which the carmaker manipulated tests. But class actions around the world, including one headed by Maurice Blackburn in Australia, have delivered compensation to owners of affected cars.

Slater and Gordon cites an upcoming trial on behalf of women who claim to have suffered debilitating physical injuries from the Essure contraceptive device as an example of a case that would be difficult to pursue alone.