The global health pandemic brought on by COVID-19 has devastated economies around the world. Directors and officers are in an incredibly challenging position right now. The current environment of lock-downs, travel bans and quarantines means that many companies are in financial difficulties or will run into financial difficulties very soon. Prime considerations are business contingency planning, supply chains, and relationships with shareholders, trade creditors and secured lenders.
Whilst COVID-19 related securities class actions have been announced in the USA, as we detail below, none have been announced in Australia. There may be rich material for plaintiff lawyers and litigation funding to mine. Between 1 December 2019 and 9 March 2020, 596 announcements referencing Coronavirus or COVID-19 were made by 326 ASX-listed entities (out of a total of 1,800).1 Recent statements from the Former Law Council president Stuart Clark suggested that COVID-19 class actions were "spreading like a virus in the US and they are now infecting Australia". With limitations not presently being in issue, it is probably going to be a little time before we start seeing cases being filed. The risks of a shareholder class action arising from the current situation should be on the minds of directors and officers (and their insurers). However the degree to which we will see a huge surge of securities filings is still uncertain.
In this article, we consider the likely trends for securities class actions in the next 6 to 18 months as Australia emerges from its COVID-19 lockdown. We will consider the impact of the reforms to the continuous disclosure rules. We also look to whether the securities class actions already filed in the USA, as well the historical experience during the Global Financial Crisis (GFC), may provide some guidance in determining the current trends. Finally we will review some of the recent developments in class action procedure such as common fund orders and the fallout from the recent settlement of the Myer claim to see the effects these are likely to have on how securities claims are likely to be brought.
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* The authors would like to thank Olivia Kiss (Associate) and Himisha Hewage (Law Graduate) for their assistance in preparing this update.
Footnote
1. Morningstar Data Analysis (data retrieved 9 March 2020).
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