Shareholder Class Action Update Australia Vs United States Of America

The number of securities class actions filed in Australia and in the United States of America remains steady, but it is still rare for these class actions to proceed to hearings in both jurisdictions. We explore high level differences in this update, although we anticipate that there will be further law reform in Australia after 2018 given various Law Reform Commission reviews due to report this year.

Securities class actions in Australia and the United States: A snapshot

It has been 26 years since the class action regime was introduced by the Federal Court of Australia, with similar regimes in New South Wales, Victoria and Queensland. Businesses in Australia are most likely to face class action litigation, outside of the United States.

New litigation funders are routinely entering the Australian market, with empirical studies suggesting that there have been 22 new players as class applicant or plaintiff firms in the past three years. The same studies report that more than 500 class actions have been filed since the regime was introduced, with approximately 80 of those being shareholder class actions - the vast majority of which have settled.1

Anywhere from 10-15 new, actual or threatened shareholder class actions are announced each year in Australia, which is dwarfed in comparison to the United States where, in 2017, there were 432 new federal securities class actions filed. This naturally reflects the claims activity in that market (relative to its value and size), but, as is the case in Australia, it remains constant that almost all US cases are either dismissed or settled. In October last year, it was reported that since 1995 only 21 out of over 5000 securities class actions have gone to trial in the US which is less than 1 percent of claims.2 We explore why below.

Key features: Motions to dismiss in the United States but not in Australia?

Whilst there have been many Court approved settlements of shareholder class actions in Australia, the threshold is low to bring a class action claim: there must be seven or more persons with claims against the same defendant; the claims must be in respect of, or arise out of, the same, similar or related circumstances; and the claims must give rise to at least one substantial common issue of law and fact.3

Given the low threshold, it is rare for securities class actions to be dismissed or discontinued in Australia on an interlocutory basis. This compares with the US where commentators report that in...