Ignore the business elite's tall tales – class actions give all Australians access to justice
Australians who hold money in superannuation, have jobs or buy products – that is, all of us – should pay close attention to the business elite who want to shirk their responsibilities by taking away our rights to take legal action against them when they do us wrong.
And we should closely watch the federal government, which is planning to do just that, announcing new ways to shield big companies from accountability to shareholders, employees and consumers, including this week’s announcement to water down continuous disclosure rules.
According to the Ai Group, the Australian Institute of Company Directors and the Business Council of Australia, the most urgent political issue of the day is the “exponential rise” of class actions. Supported by increasingly febrile commentary in the Australian Financial Review and the Australian newspapers, they have convinced themselves that class actions are out of control and that the government needs to do something.
This is post-truth politics infecting our business elite.
There has been no exponential rise: the number of class actions in Australia has been remarkably stable and remarkably small. In 2019 there were 44 class actions filed, compared with 55 the year before. In 2010 there were 30. Accounting for cases where multiple filings are made in relation to the same dispute, the numbers have hovered between the mid-teens to low-40s over the last decade.
Whether the number sits at the higher end or lower end of that range depends on corporate behaviour. For example, in 2019 many of the new filings related to the shocking findings of the banking royal commission. Understandably, on learning that they had been systematically ripped off by banks, many consumers were keen to recover their money.
To put these numbers in perspective, they are dwarfed by the amount of other commercial litigation. In 2019 the federal court received 2,800 filings for cases involving companies. Similar numbers can be found in state and territory supreme courts.
The business lobbies and the rightwing press do not care at all that thousands of companies sue each other every year. But when a few groups of employees, consumers or shareholders sue them, they think the sky has fallen in.
This is an argument about who gets to use the justice system.
Class actions join similar claims into a single action that the court only has to hear once, and the defendant only has to fight once. Importantly, they let claimants share legal costs they could never afford alone.
Without class actions, there is little accountability for companies that mis
lead their investors, underpay their workers or injure or defraud their customers.
The only other sources of accountability for corporate wrongdoing are taxpayer-funded regulators like the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission. Given their limited resources, it is no surprise those agencies have consistently supported class actions as a means to lighten their load without letting bad behaviour off the hook.
Similarly, every government study on the subject has found that Australia’s class action system functions well and provides necessary access to the justice system. This has been the finding of the Productivity Commission, the Victorian Law Reform Commission and the Australian Law Reform Commission. Indeed, those studies recommended reforms to make class actions moreaccessible.
It is obvious why the business elite are so ready to embrace post-truth politics: because the truth is against them. They bridle at the notion that their members have to be accountable for their mistakes and invent tall tales to hide their self-interest.
Take the Ai Group, which represents large employers. It kicked off the current class action scare campaign when class actions were used to recover unpaid wages. After decades of getting away with it, large employers’ complaint boils down to little more than being caught in the act.
Most disappointing is the Australian Institute of Company Directors. It should be the leading voice for corporate governance but has become a leading advocate for zero accountability. I know of no other professional association whose primary purpose is to protect its members from accountability for their conduct or performance. Doctors, lawyers and builders all understand that if you fall short of your professional standards you have to pay for the consequences. According to the AICD, company directors – often paid handsomely for their services – are different only in their adamant belief that they are not responsible for their actions.
In a sense, self-serving falsehoods spread by special interests is nothing new.
The concerning thing is that they seem now to have the ear of a government that should be focused on more urgent matters.
The government is yet to respond to the recommendations of the Australian Law Reform Commission report, but has nonetheless started another inquiry, presumably to get recommendations closer to those the special interests seek.
Now the treasurer, who has an economic crisis on his plate, found time on Friday to increase regulation on litigation funders who help to pay for class actions. And he found yet more time on Monday to suspend continuous disclosure rules which keep companies accountable to shareholders.
These are not a boring or technical law reform issues Australians can afford to ignore. This is about how our justice system works and for whom. Are courts just a taxpayer-funded forum in which companies resolve disputes between themselves? Or are they also a place where citizens find a fighting chance to hold those companies to account for their wrongs?
Jacob Varghese in the chief executive officer at Maurice Blackburn Lawyers