Australia Map (Credit: Miceking/Shutterstock.com)
For all the differences between Australia's system for trying securities class action cases and the way we do things here in the U.S., this much we share in common: Securities class actions rarely go to trial.
Perhaps that's why a story filed by my Law.com International colleague Christopher Niesche on a defense win at trial last week for Australian engineering firm Worley caught my eye. In just the second securities class action case to ever go to trial Down Under, Worley's lawyers at Herbert Smith Freehills convinced Justice Jacqueline Gleeson that the company hadn't run afoul of the country's continuous disclosure laws, which require companies to keep investors ever up-to-date on potential market-moving information. The ruling potentially puts the plaintiffs on the hook for Worley's defense fees and costs, but their counsel at Shine Lawyers (great name, by the way!) have said they're considering their clients' options, which include appealing the decision.
Now there's quite a bit to unpack in that last paragraph in terms of the distinction between the U.S. securities class action system and Australia's. So let's take a second to digest a few of the biggest differences. For one, in the U.S. the parties bear their own costs and plaintiff's counsel can work on contingency. In Australia, the losing side is customarily hit with an award to pay the costs of the winners. As to the class certification process, which can be a real hurdle for plaintiffs in the U.S., there is no corollary in Australia. Seven or more plaintiffs filing suit against the same defendant can bring a "representative proceeding" in Australia if their claims arise out of similar circumstances.
With that primer out of the way, let's get back to the defense victory in the Worley case. Herbert Smith's Jason Betts, who handled the Worley case alongside partner Christine Tran, said that more defendants and insurers in Australia are looking to take cases with viable defenses to trial.
"This is inevitable, given that the insurance market is under pressure from the large number of shareholder class actions and the settlement size of those actions," he said. "For that reason, we are likely to see more class actions defended through to a full trial."
The Worley case, it's worth noting, went to trial before Justice Gleeson late last year and, therefore, was not impacted by the global pandemic. It was just the second Australian class action to go to trial and reach a judgment. Shareholders won a ruling just about a year ago finding that retailer Myer engaged in misleading or deceptive conduct following a 2014 profit forecast. But the judge in that case did not find evidence that investors had suffered a loss as a result.
So, what can securities litigators in the U.S. take from what they're seeing in Australia? Scott Musoff, the co-deputy head of the securities litigation practice Skadden, Arps, Slate, Meagher & Flom, pointed out that the loser pays system in Australia provides an extra reason for defendants there to take things to trial.
"I think that does incentivize people to take things to the end and see if they can get their attorney's fees paid," Musoff said.
He also pointed out that bench trials like the one that just wrapped in Australia have different dynamics than jury trials that defendants face in the U.S. On that front, Musoff said he and his colleagues at Skadden tap the expertise of an in-house trial consulting group at the firm very early in a case to help shape their defense to ultimately present the defense to a jury.
"You have to be prepared to take a case all the way to trial if you want to have any sort of successful resolution pretrial," he said.
Ross Todd
Ross Todd is the Editor/columnist for the Am Law Litigation Daily. He writes about litigation of all sorts. Previously, Ross was the Bureau Chief of The Recorder, ALM's California affiliate. Contact Ross at [email protected]. On Twitter: @Ross_Todd.