2024 saw large shifts in the Australian class actions landscape, with judgments delivered in landmark cases and an increased regulatory scrutiny on Australian companies. With several important decisions still awaiting judgment (which will influence the way class actions are run in the future), we set out our 6 key areas to watch in 2025:

1. The outcome of the Worley and CBA class action appeals will have a significant impact on the future of Australian shareholder class actions.
2. The number of new Federal Court class actions may increase if contingency fees are permitted in the Federal Court.
3. The outcome of the Lendlease class action appeal will influence the likelihood of settlement in class actions.
4. Class action risks for product manufacturers may have increased, in the wake of the High Court's decisions in the Toyota and Ford class actions.
5. ESG claims will likely remain on the rise.
6. A new statutory tort for serious invasions of privacy may increase the risk of class actions.

We expand on each of those topics below.

1. Worley and CBA appeals to be crucial in determining the pace of future shareholder class actions

To date, the Federal Court has dismissed five shareholder class actions (three at the liability stage, and two at the loss and damage stage). No shareholder class action has successfully obtained an award of damages by an Australian Court. These factors have materially contributed to the steady decline of new shareholder class action filings since 2019.

Shareholder class action stakeholders are actively awaiting the outcome of two appeals – being Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited (No 5) [2024] FCA 477 (CBA) and Crowley v Worley Ltd (No 2) [2023] FCA 1613 (Worley). Both CBA and Worley allege that the respondent companies made misleading and deceptive statements and/or breached their continuous disclosure obligations, albeit for different reasons. The CBA appeal will require the Full Federal Court to rule, and provide guidance, on issues relating to establishing liability, whereas the Worley appeal will require the Full Federal Court to rule, and provide guidance on, causation and the quantification of loss and damage. On one hand, while an unfavourable outcome for the Applicants in these appeals may result in a further decline in new shareholder class action filings, a successful outcome in either or both of these cases may embolden class action promoters to "clear their backlog" and in doing so, arrest the declining trend of new shareholder class action filings. Regardless, we expect that both appeals will provide further clarity regarding the manner in which the typical allegations in class actions, and the evidence to support (or resist) them, are advanced.

The Worley appeal is listed for hearing before the Full Federal Court from 19 - 21 March 2025. The CBA appeal was heard before the Full Federal Court on 21 November 2024, with judgment currently reserved.

2. Risk equals reward? Common Fund Orders may get the 'green light' in the Federal Court

Since 2020, the Supreme Court of Victoria has increasingly become the forum of choice for new class action filings – taking the title away from the Federal Court which is where the majority of class actions were filed prior to 2020. This is likely due to two reasons:

• In 2020, legislation was introduced in Victoria which expressly granted the Supreme Court of Victoria the power to order that lawyers representing the plaintiff in a class action could 'self-fund' the class action and in doing so, be allowed to recover a contingency fee (also known as a Group Costs Order); and
• In 2019, the High Court's decision in BMW Australia Ltd v Brewster (2019) 269 CLR 574 (Brewster) held that the Federal Court does not have the power to make a Common Fund Order (CFO) at an early stage of a class action – CFO being an order that requires all group members in a class action to contribute to the commission payable to a litigation funder in exchange for the funder taking on the risks of funding the case, regardless of whether or not those group members signed a funding agreement with the litigation funder.

Despite the general prohibitions against the charging of contingency fees by solicitors (commonly referred to as a 'Solicitor's CFO') in the Federal jurisdiction, two recent Federal Court judgments held that CFOs may be made with respect to third-party litigation funders at the settlement approval stage of a class action (as opposed to at an early stage).

In deciding those cases, however, the Federal Court was not required to engage directly with the question of whether this power extended to the making of Solicitor's CFOs. That question came to a head in July 2024, when the Full Federal Court considered and answered the question in the affirmative in R&B Investments Pty Ltd (Trustee) v Blue Sky (Reserved Question) [2024] FCAFC 89. The High Court granted three special leave applications to appeal the Full Federal Court's decision (but has not yet set a hearing date). While the applicants each filed separate applications for special leave, the substance of the appeals centred around broadly the same questions – namely:

• whether the Federal Court has power under the Federal Court Act to make CFOs at the time of settlement or judgment in representative proceedings; and
• if so, whether the Federal Court has power to make a Solicitor's CFO.

If the High Court upholds the Full Federal Court's findings, we anticipate it will be one of many factors that may cause class action promoters (where they are also law firms) to reconsider where to file new class actions. Conversely, if the appeals are dismissed, Victoria will likely remain the forum of choice.

Those plaintiff law firms who are willing to finance class actions themselves are also starting to deal with a new challenge – namely the requirement to demonstrate that they have the financial ability to ultimately satisfy an adverse costs order against them should they be unsuccessful at trial. In the recent Macquarie Leasing (car loans) class action, a Judge ordered Maurice Blackburn to pay $5.4M as security for Macquarie's costs of defending the class action because, the Court agreed with Macquarie's submission that there was a real risk Maurice Blackburn would not be able to meet an adverse costs order given its new business model of self-funding class actions. This decision may cause plaintiff law firms to be more cautious about the number of class actions they self-fund, and their associated risks, this year and beyond.

3. Opt-in or opt-out? High Court to weigh in on 'class closure' debate

In class action proceedings, parties may seek a 'class closure' order usually before mediation – which is an order that requires potential group members to take a positive step by 'registering' their interest to participate in the class action before a certain date. Such orders are typically sought to facilitate the potential settlement of class actions involving an 'open class' by minimising the uncertainties surrounding the number of group members and the purported value of their claims. A consequence of 'class closure' orders is that potential group members who fail to register their interest by the date stipulated will, generally, be bound by the settlement outcome (so they cannot commence proceedings on their own) but cannot receive compensation (unless leave is granted).

It is not disputed that in approving a settlement, the Court has broad powers, including the power to 'close' the class. That said, conflicting views exist between the jurisprudence in the Federal Court and in the Supreme Court of NSW as to whether a court has the power to make orders ahead of a mediation notifying group members of the parties' intention to seek a 'class closure' order at the settlement approval stage. The effect of this order is to require group members to take an active step of registering their interest ahead of a mediation.

A live debate exists as to whether this order, practically, converts the Federal Court's and NSW Supreme Court's 'opt-out' regime into an 'opt-in' regime. At present, the NSW Court of Appeal and the Full Federal Court are directly at odds on this question – with each court favouring a different interpretation of the analogous legislation in both jurisdictions. On 5 November 2024, the High Court heard an appeal on this issue in Lendlease v Pallas S108 of 2024 (Lendlease). It is expected that the outcome of the Lendlease appeal will clarify, and make consistent, the position across Australian jurisdictions.

If the High Court finds that there is power to make orders notifying group members of an intention to seek a 'class closure' order at the settlement approval stage, we expect to see:

• greater certainty for class action participants in negotiating and assessing what is a fair and reasonable settlement by providing clarity on the collective value of potential claims ahead of a mediation; and
• certainty for parties that requiring group members to register ahead of mediation is not inconsistent with the 'opt-out' regime in Australia.

If the High Court decides instead that no such power exists, we expect to see:

• an increase in the number of new class actions filed in the Victorian Supreme Court (where 'class closure orders' are expressly permitted by statute), thereby solidifying Victoria as the forum of choice for class actions;
• a shift in how settlements are negotiated, with proposed settlements potentially needing to consider group members who have not 'registered' but who may come forward once a settlement is reached (including by making allowances for uplifts in negotiated settlement amounts for late registrant group members); and
• where it is not possible to adequately assess a respondent's exposure at mediation – an increase in the number of cases proceeding to a contested trial.

It is anticipated that judgment will be delivered by the High Court in the coming months.

4. Guidance on assessing loss and damage in product liability class actions – Toyota and Ford

On 6 November 2024, the High Court delivered judgment in Williams v Toyota Motor Corporation Australia Limited [2024] HCA 38 (Toyota) and Capic v Ford Motor Company of Australia Pty Ltd [2024] HCA 39 (Ford), providing clear guidance on how to assess loss and damage in respect of breaches of the "acceptable quality" guarantee under section 54 of Australian Consumer Law (ACL).

The High Court made a number of important findings:

'Reduction in value' damages assessed under section 272(1)(a) of the ACL are to be assessed at the time of supply, as opposed to the time of the hearing. In conducting the assessment, the relevant inquiry is (put simply), what would a hypothetical reasonable consumer, armed with the knowledge of the state and condition of the goods as at the time of trial (including any hidden defects, and the availability, cost, and inconvenience of any post-supply repairs) have paid for the good(s) at the time of supply?

• Proving actual loss or damage is not required to claim 'reduction in value' damages. In other words, an award of 'reduction in value' damages is not contingent upon whether the consequences of the defects materialised, resulting in actual loss or damage to the claimant.
• Reduction in value runs with the title holder, however 'consequential loss' (being those damages assessed under section 272(1)(b) of the ACL) does not. This means that while only the current title holder of the goods can claim 'reduction in value' damages, 'consequential loss damages' can be claimed by anyone who suffered loss as a result of the goods.

While Toyota and Ford have now been remitted to their respective primary judges to reassess loss and damage in light of the High Court's findings, the High Court's guidance is likely to impact the running, and increase the volume, of these types of cases. Key takeaways for manufacturers include:

• If manufacturers discover a defect in their products, they should endeavour to find and propose solutions to remedy the defect as soon as possible. This is because while a subsequent remedy may not be a complete defence to a 'reduction in value' damages claim, the introduction of effective, convenient and timely 'fixes' to the defect is a relevant factor in the assessment of that loss and damage, and so doing so may mitigate manufacturers' potential exposure.
• A manufacturer may be liable to multiple consumers for a defect in a single product. This is because, while the right to claim 'reduction in value' damages travels with whoever holds title to the goods, the right to claim 'consequential loss' damages does not.
• The High Court's comments provide certainty for consumers, in that they can claim 'reduction in value' damages from manufacturers, without having to establish that the defective good caused them actual loss or damage. This potentially increases class action risk for manufacturers, as it may give rise to the filing of more product liability class actions going forward.

5. Environmental, social and governance risks on the rise

As environmental, social and governance (ESG) considerations continue to find footing at the core of corporate decision-making, so too has the role of climate-related litigation against the Government, and companies operating in Australia.

In 2024, ASIC brought three actions against corporations for alleged 'greenwashing'. Two such actions (being those against Mercer Superannuation (Australia) and Vanguard Investments Australia) related to misleading 'nature positive' statements in respect of the companies' investment products, and resulted in landmark pecuniary penalties of $12.9M and $11.3M respectively. The third case, which found that superannuation company, Active Super, had made misleading statements about its ESG credentials, is awaiting a further hearing to determine the amount of the penalty to be imposed.

Regulatory actions against Australian companies for alleged greenwashing practices can have significant implications for those organisations, including increased shareholder class action risk if a listed company's share price declines significantly once the alleged misconduct is disclosed to the market, further scrutiny from other Australian regulators, and/or allegations being made against directors of those companies for breaches of their directors' duties.

On the increased class action risk, the inherent uncertainty in quantifying loss and damage arising from alleged misleading environmental statements is likely to give class action promoters some pause before commencing these types of class actions. Absent a clearly recognised methodology for assessing loss and damage (i.e., in assessing whether economic or financial loss has actually been suffered by group members as a result of the allegedly misleading environmental statements), it may be that class action promoters adopt a wait and see approach until the Court provides further guidance, or legislation is introduced to give rise to direct causes of action, before supporting these cases.

Another key case to watch this year is the ongoing Pabai & Anor v Commonwealth of Australia [2022] FCA 836 (Pabai) class action. Commenced in 2021 by the Applicants on behalf of all peoples from the Torres Strait, the Applicants are seeking damages from the Commonwealth, on the basis that the Commonwealth owed a duty of care to take reasonable steps to protect Torres Strait Islanders, their environment, and traditional way of life, from climate-related harm (whether current or anticipated). While the Court is yet to deliver judgment in Pabai, a finding that such a climate-related duty exists would represent a major shift in how parties consider climate-related harm for the purpose of litigation.

6. New statutory tort for serious invasions of privacy

The secure management of personal data is a growing risk for Australian businesses as they may experience cybercriminal attacks or inadvertent data breaches. The risks associated with cyber incidents now include not only action from the regulator, but also private litigation in the form of class actions.

A series of cyber incidents in the early 2020s led to the relatively recent rise in privacy and data breach-related class actions. For example, consumer class actions were filed against Medibank Private Ltd and SingTel Optus Pty Ltd (trading as Optus) on behalf of customers whose personal data was compromised. Out of the same incident, Medibank is also facing a separate shareholder class action alleging misleading or deceptive conduct and breaches of continuous disclosure obligations by failing to disclose deficiencies in its cybersecurity systems. It is claimed the failure to disclose this information artificially inflated Medibank’s share price beyond its true value, or its market value, had the information been disclosed earlier.

Finally, data privacy remains an ongoing and significant focus for the Australian Government:

• In 2019, the Government launched a comprehensive review of the Privacy Act 1988 (Cth) (Privacy Act).
• On 12 September 2024, the Privacy and Other Legislation Amendment Bill 2024 (Cth) (the Bill) was introduced – marking a 'significant step forward for Australian privacy law'.[2] In his second reading speech, the Attorney General stated that the Bill 'begins the much-needed work of updating privacy laws to be fit-for-purpose in the digital age'.[3] Among its provisions, the Bill establishes a new statutory tort of privacy, allowing individuals to sue for serious invasions of privacy.
• On 29 November 2024, the Bill was passed by both houses of parliament.
• On 10 December 2024, the Bill received royal assent.

While the new legislation provides, for the first time, an individual’s personal right to privacy and the ability to sue to enforce it, the potential impact of this new tort (and in particular, what is meant by, and required to establish “a serious invasion”), particularly in the context of increased cybersecurity related class actions, remains uncertain.