Class action risk 2025: key areas of focus

Class action risk 2025

A surge amid economic pressures

In line with recent years, 2024 again saw consumer claims dominate the class action landscape—comprising over 40% of new filings. While perhaps unsurprising given the numbers, consumer claims spanned sectors and industries, suggesting this form of class action risk should be a clear focal point for companies across the market.

Pricing / discounts claims

A major theme emerging from the 2024 data is activity against retailers and financial services providers, typically relating to pricing promises, discounting practices and warranties sold on consumer goods, centred on allegations of misleading or deceptive conduct and unconscionability.

These claims align with ongoing regulatory enforcement priorities, with the cost of living crisis putting a spotlight on everyday items and consumer value. We expect this regulatory focus will continue to generate opportunities for entrepreneurial class action promoters in the year ahead.

Product liability claims

While a constant presence in previous years, another noticeable trend in 2024 was the resurgence of 'conventional' product liability claims. Many of these claims involved allegations of the sale of unsafe or defective medical or pharmaceutical products, such as those concerning talcum powder, cold and flu medications, earplugs and breast implants. These claims typically followed in the wake of similar activity in the United States.

Automotive claims

Unlike in previous years, where claims against automotive manufacturers and suppliers were a standout in the filings data, automotive activity in 2024 was far more subdued. We foreshadowed this possibility in last year's Class Action Risk Report, where we flagged the potential for class action promoters to adopt a 'wait and see' approach pending the High Court's determination of two key appeals in class actions against Toyota and Ford.

These appeals were finally resolved in November 2024. In its reasons for judgment, the High Court gave important guidance on the availability of 'reduction in value' damages for breach of the acceptable quality guarantee under the ACL. This form of damages has been central to the significant damages awards obtained by plaintiffs in previous claims, and we consider this an important driver of new filings.

As reported previously, the High Court decision was a 'middle of the road' outcome in which the Court held that:

this form of damages is a 'performance-based remedy' and reflects the monetary difference between the value of what the consumer bargained for and what they ultimately received;
the assessment of damages is to be undertaken having regard to all that is known at the time of trial about the ‘state and condition of the goods’ at the time of supply; and
in doing so, the court is to have regard to the nature of the defect and the likely availability, timing, effectiveness and cost of any repairs.

The High Court's judgment gave welcome relief to automakers that 'field actions' (such as repairs / replacements) should be taken into account in assessing damages. However, it also means such steps are unlikely to provide a complete answer to a claim for damages. Further, where the defect is serious and/or takes a long time to repair, the potential exposure to damages may be considerable.

It will be interesting to see how plaintiff law firms respond to this development, but there may be some reason to think automotive class action filings will rebound. Likewise other class actions affecting manufacturers of popular and high-value goods. This may be why, in keeping with this trend, just prior to the end of 2024 we saw the commencement of a new class action against an automaker. This remains an area to watch.

Late-year filings and future risks

Shareholder class actions represented a significantly smaller proportion of class action filings in 2024 than in previous years, with no filings over the first eight months of the year. The reluctance to pursue these claims was likely due, at least in part, to the dismissal of three proceedings in late 2023 and early 2024. However, signs of life returned with several late-year filings.

Due to the small sample size, it is difficult to discern any trends in shareholder class action activity across 2024, other than to observe that class action promoters are perhaps becoming more selective with their choice of shareholder claims. We anticipate the following matters will impact shareholder class action risk over the year ahead and otherwise warrant monitoring:

Several key judgments that are expected (at both first instance and appellate level) which are set to provide further clarity on what is required to establish causation and loss in shareholder claims and will likely impact the way in which these claims are advanced moving forward.
Given the difficulties in proving loss, plaintiffs have expressed a preference to seek separate trials on liability and loss—with the trial on the question of loss informed by the liability findings. However, given the intersection between the evidence concerning the assessment of liability and loss, there will be challenges in bifurcating shareholder class actions in this fashion.
The heightened standard of proof for continuous disclosure breaches, established through reforms in 2021, has been considered for the first time in an ASIC proceeding.¹ This increased standard has not yet been tested in the class action context, but the impact of the reforms will be clarified as more claims make their way through the courts.

Sector-specific targets and diversification of claim types

In 2024, employee claims remained the third-most common type of class action faced by Australian corporates. The proportion of employment class action filings has remained fairly steady for the six years since 2019, at about 15% of class action filings each year.

Notable trends in employment class action risk in 2024 include:

The healthcare, government, mining, and oil & gas sectors have been the key targets of employment class actions. Although there were no new filings in 2024 in the retail & hospitality sector, this sector has been a target in previous years, and we have already seen one filing in that sector this year.
Consistent with recent years, the new claims mostly involved allegations of underpayment and/or breach of employment terms. The healthcare sector has been a particular target for this type of claim, with three new underpayment cases filed in relation to the healthcare sector in 2024. These cases follow a 2023 decision which held that authorisation to work overtime is capable of being given impliedly, such as where the overtime work is necessary to do what is specifically required by the employer. A clear pattern in these cases is where employees are required to complete preparatory work before, or handover work after, their rostered shifts, even if this requirement is not express.
Class action promoters are diversifying in the types of employment class action claims they pursue. In December 2024, we saw two new claims filed based on vicarious liability allegations for alleged sexual assault and harassment and sex-based discrimination.² These claims follow the introduction of a positive duty on employers to eliminate workplace sexual harassment in December 2022 (see our previous Insight).

Employment class actions are now a consistent and core part of class action risk in Australia. As new positive duties are introduced on employers in areas such as sexual harassment, discrimination and psychological safety, we expect to see continued diversification from class action promoters into new types of employment class action claims.

Cyber incidents, legislative reform and regulatory focus heighten class action risk

While there haven't been any new data breach or privacy class actions over the last twelve months, class action risk in this space remains high due to the continued prevalence and severity of cyber incidents, combined with the proliferation of cyber incident notification regimes and regulatory enforcement action—all of which are increasing visibility into cybersecurity and data-handling practices in Australia.

A number of recent and potential regulatory developments may affect data breach and privacy class action risk over the year ahead, particularly in connection with the ongoing reforms of the Privacy Act.

The most significant recent development was the introduction of a statutory tort for serious invasions of privacy. This new cause of action (which will take effect later this year) formed part of the first tranche of Privacy Act reforms announced in late 2024. Subsequent tranches of Privacy Act reforms are expected to follow the upcoming federal election.

While the introduction of the new tort is a key development, we do not expect it to increase class action risk as the tort only applies to serious invasions of privacy that are intentional or reckless (not merely negligent), creating a very high threshold that we do not expect to be established in most (if not all) data breach scenarios.

The most significant development remains on the horizon, with the Government agreeing in principle to a recommendation that would afford individuals a direct right of action for contraventions of the Privacy Act. The introduction of a direct right of action has been seen as a significant precursor to the potential expansion of privacy-related class actions in Australia. It would provide greater certainty to class action promoters about the availability of consumer redress for data breach claims, and may expressly allow damages for emotional distress (which is presently uncertain). Importantly, if combined with the anticipated (though as yet unconfirmed) removal of the employee records exemption in the Privacy Act, a direct right of action would significantly increase the privacy risk profile of many organisations—particularly non-consumer facing organisations with large, highly unionised workforces.

Class action promoters are also closely watching the myriad high-profile regulatory enforcement action being undertaken by the OAIC, ACMA and ASIC in relation to various cyber incidents that have occurred over recent years. Depending on their outcomes, these enforcement proceedings could provide guidance on several important aspects of Australian privacy law and fuel further class action activity in this space.

High Court decisions likely to shape future models

The class action funding landscape has continued to evolve over the past twelve months as a number of proceedings head to the High Court to resolve questions about the availability and form of class action funding models. The funding developments to watch for broadly follow three key themes.

Common Fund Orders (including Solicitors' Common Fund Orders)

In Kain v R&B Investments Pty Ltd, the High Court has been asked to resolve two important questions concerning CFOs; can the Federal Court make a CFO upon settlement or judgment of a class action, and if so, can it make a CFO in favour of solicitors (ie, a SFCO)?

While the High Court previously held in BMW v Brewster that CFOs could not be made at an early stage of a class action, there has been a steady trend of Federal Court decisions endorsing the making of CFOs on settlement of class action proceedings. In Kain, the High Court has granted special leave to determine the Federal Court's power to make CFOs upon settlement or judgment in a class action proceeding. The Court has also been invited to reopen and overturn Brewster. Accordingly, Kain presents the High Court with the opportunity to decide whether CFOs are ever available in class action proceedings, at least in the Federal Court.

The High Court in Kain is also considering whether the Federal Court has power to make SCFOs. Last year, the Full Federal Court held that an SCFO did not contravene the prohibition on contingency fee arrangements, because a payment to a solicitor under an SCFO would not be made pursuant to the terms of the solicitor's client retainer, but rather pursuant to the court's order.

If the High Court finds that the Federal Court does have the power to make CFOs and SFCOs, we can expect the Federal Court to remain the jurisdiction of choice for class action promoters in the future, although it will be interesting to see if the High Court provides any guidance for the circumstances in which SCFOs can be made and how they will operate.

'Travelling' Group Cost Orders

In Bogan v Smedley, the High Court has been asked to determine whether the existence of a Group Costs Order (GCO) made in the Supreme Court of Victoria is relevant to an application to transfer a class action proceeding to another jurisdiction and, if so, whether the GCO will 'travel' with the proceeding, such that the transferee court must proceed as if it had made the GCO.

The appeal is from a late 2023 decision of the Victorian Court of Appeal, which declined to transfer a class action proceeding to NSW because of the existence of a GCO, notwithstanding that NSW was otherwise the more appropriate forum. The High Court appeal was heard in November 2024, and we await a judgment.

Footnotes

Australian Securities and Investments Commission v Holista Colltech Ltd [2024] FCA 244.
https://portal.omnibridgeway.com/cases/register/rtiodiscrim-class-action-overview

Key areas of focus

Consumer claims