Justice under sustained attack – Andrew Watson
Australia’s class action regime continues to come under attack from a Federal Government seemingly intent on doing whatever it can get away with in order to diminish Australia’s effective class action regime, and in turn provide a free pass for corporate wrongdoing.
The latest battlegrounds include further attempts to limit the options available to fund meritorious litigation, and proposed permanent changes to continuous disclosure laws that would have a deleterious effect on market integrity, ultimately providing a giant shield for corporate wrongdoers to hide behind.
For those concerned with curbing the damage corporate misconduct can inflict upon society, Australia has an enviable continuous disclosure regime and its prohibitions on misleading and deceptive conduct are longstanding safeguards of market integrity. Each are integral in ensuring that the market trades on accurate information and in so doing, promotes the efficient allocation of capital - a key plank in the regime of investor protection.
A little context demonstrates the vital nature of getting our market integrity and disclosure regime right. Australia has one of the highest rates of direct share ownership globally with approximately 35% of adult Australians holding on-exchange investments. An even greater number have an indirect interest in shares through their superannuation with approximately 16 million Australians or more than 80% of the adult population having investments in super, according to the ATO.
The proposed changes initially introduced under the cover of Covid – a time when the Government could instead have been preparing an effective vaccination rollout, proper quarantine hubs or any other number of more pressing matters – do nothing to address the core issue of corporate misconduct.
The real vice in the proposed changes is that they go far beyond the justification offered by proponents of the relaxed standards – they in fact dangerously open the door to providing a free pass for serious accounting misstatements and other forms of common corporate misconduct.
If a company publishes accounts which wrongly recognise revenue and therefore overstate profit by tens of millions of dollars, currently there is a contravention and shareholders would be able to recover their losses.
However, under the proposed new provisions the company will be able to say that it relied on its auditors and was not therefore negligent. The auditors will then be able to say they cannot be involved in a contravention by the company and avoid liability altogether.
In effect, the new provisions will create a huge shield for blame shifting companies and auditors to hide behind, and misled shareholders will go without redress for something as fundamental as a misstatement of profit – and this could well be true even where the company has actively misled the auditor.
A further unwelcome by-product, should the Bill become law, is a cottage industry of corporate lawyers signing off on disclosure safe in the knowledge that the combination of legal professional privilege and the new provisions will ensure an effective free pass from any scrutiny.
There is simply no good policy basis on which shareholders should be denied a remedy to recover their losses in circumstances of serious misstatement in financial accounts, yet that is the almost inevitable consequence of the proposed changes.
It can only be seen as part of a suite of measures where this government has sought in effect to give corporate Australia a free pass on misconduct – the wind back of responsible lending laws, the failure to implement the Hayne Royal commission recommendations, the various attempts to make class actions more difficult and the recent attack on proxy advisors, together with this attempted wind back of safeguards of market integrity are all deliberately designed to remove protections for investors and consumers and make life easier for corporate wrongdoers.
Stripped bare, the suite of changes including the watering down of disclosure laws is a gift to corporate malfeasance. None of the changes proposed or instituted by the Australian Government do anything to help participants of class actions access legal remedy where they deserve it, and certainly none of the proposed changes do anything to address the core issue that triggers legal action, namely corporate misconduct and mass wrongdoing.
That is plainly wrong.
Andrew WatsonNational Head of Class Actions, Class actions, Melbourne
"I'm an experienced litigator in class actions, particularly for shareholders who have been victims of corporate misconduct."
Ben SladeState Managing Principal, Office Leader, Class actions, Sydney
"I am driven to give a voice to those who would otherwise have to suffer because those who have done them wrong are all too powerful."
Kimi NishimuraPrincipal Lawyer, Class actions, Melbourne
"I'm committed to fighting for the rights of victims of corporate misconduct as well as pursuing compensation on behalf of my clients."
Rebecca GilsenanExecutive Director, Principal Lawyer, Class actions, Sydney
"I have extensive experience in running complex and novel litigation, including class actions in the areas of price fixing, failed investment schemes, product liability and securities."
Miranda NagyPrincipal Lawyer, Class actions, Sydney
"I have a strong conviction that the community should be able to expect our governments and the companies we deal with to comply with the law."
Julian SchimmelPrincipal Lawyer, Class actions, Sydney
"Class actions are a unique legal mechanism that have helped hundreds of thousands of people receive compensation after mistreatment at the hands of powerful companies, and it’s gratifying to help people get access to justice when otherwise it would’ve been difficult for them."
Vavaa MawuliPrincipal, Class actions, Brisbane
"The most rewarding thing about my work is the change in scale of what we are able to accomplish."