Australia: Class Actions in Australia: Surveying the Landscape

Insurance Update (Australia)
Last Updated: 15 April 2013
Article by Kerry Hogan-Ross

Class actions have been long established in the litigation landscape of Australia. We are experiencing a steady rise in the number of class actions brought, the complexity of the claims, the amount of media attention given to them and the value in dollar terms. While there has been a notable rise in class actions concerning securities and financial services, there remains a strong focus on medical misadventure (transplants and drugs). We are also seeing claims being brought by those who suffered losses in natural catastrophes such as the Victorian bushfires and the Queensland floods.

The increase has also put the litigation funding industry under the spotlight, though it has emerged relatively unscathed and mostly unregulated.

In this article we examine some of the cases that have recently resolved, class actions currently afoot and those that are in the pipeline.


Class actions are no different to other types of litigation in the sense that far more settle rather than proceed to judgment. However, last year, two landmark decisions were delivered in class actions in relation to complex investment vehicles.

On 21 September 2012, judgment was delivered in favour of Wingecarribee Shire Council and other New South Wales councils that invested in complex investment products that ultimately led to large losses. The councils alleged that the investments should never have been recommended to them by the financial adviser, and the court agreed.

Another group of councils similarly complained that complex investment products should not have been recommended to them. However, they also joined the ratings agency, Standard & Poors (S&P), in relation to S&P's AAA rating of the investment product. Judgment was delivered in favour of Bathurst Regional Council in November 2012. The decision against S&P was a world-first.

Both of these decisions are dealt with in detail on pages 56 and 58.

In July 2012, the distributors of thalidomide in Australia settled with the lead plaintiff, paving the way for further settlements. Thalidomide, used in the late 1950s and early 1960s to inhibit morning sickness, caused congenital defects, which were often profound.

A class action was commenced in the Supreme Court of Victoria in 2011 against the German manufacturer and the British distributor. The lead plaintiff, Ms Lynette Rowe, who was born without arms and legs caused by thalidomide, settled with the distributor, which also agreed to negotiate with the other members of the representative action. No settlement has been reached with the manufacturer. Ms Rowe therefore remains the lead plaintiff in the litigation, which has been adjourned to allow group members to negotiate with the distributor.

A class action was launched in the Federal Court in 2010 against DePuy and Johnson & Johnson in relation to the alleged failure of knee implants. The class action settled on 29 August 2012.

The deadly 2009 Victorian bushfires have so far been the subject of three class actions. The fires were widespread and the cause of the destruction varied from place to place. The Beechworth and Mudgegonga fire class action involved a claim against SPI Electricity and others, alleging that fire started when a tree fell across a powerline. That class action settled in May 2012 for AU$32.5 million.

Aggrieved shareholders in agricultural company Nufarm Limited commenced a class action in relation to, amongst other things, alleged misleading and deceptive profit forecast. The class action settlement was approved by the Federal Court on 28 November 2012 for AU$46.6 million.

The near collapse of the Centro group following the Global Financial Crisis has been the subject of a lot of legal activity. In 2011, the Australian Securities and Investments Commission successfully prosecuted the Centro directors for their role in approving the company's 2007 financial accounts. Given the bona fides of that board, the prosecution has been widely questioned. When Centro share prices plummeted, shareholders commenced a class action in 2008. That action settled for AU$200 million on 19 June 2012.

Another shareholder action, against Sigma Pharmaceuticals, was settled on 19 December 2012 for AU$57.5 million. Shareholders in Sigma alleged misleading and deceptive conduct relating to a profit guidance issued to investors prior to a 2009 capital raising.

The global experience of class actions against Merck Sharp & Dohme (Merck) in connection with the arthritis drug Vioxx has varied widely. The company withdrew the big-selling drug from the market in 2004 after a study showed it increased the risk of heart attacks and strokes. What followed was a mountain of litigation.

In the US, 16 cases have gone to trial, with Merck winning 11 of those cases. In response to the unpredictable court decisions and the risk of huge jury awards, Merck set up a US$950 million settlement fund. It also pleaded guilty to a criminal misdemeanor charge to resolve US Government allegations that the company illegally promoted its former painkiller Vioxx and deceived the Government about the drug's safety.

In Australia, the class action against Merck was ultimately unsuccessful, leaving legal firm Slater & Gordon with a large loss on its books, thanks to approximately AU$10 million in unpaid fees. Last year its full-year profit fell by 11% because of its loss in the Vioxx class action.

In that action, the lead applicant, Mr Peterson was successful at first instance. He suffered a heart attack while taking Vioxx and brought proceedings against Merck, alleging that his consumption of Vioxx contributed to his heart attack. On appeal the Full Court found that it was not proven that but for the taking of Vioxx, Mr Peterson would have suffered a heart attack. The Full Court concluded that Vioxx was amongst a mix of factors that may have caused the heart attack, but it had not been shown that Vioxx was a necessary condition for the heart attack occurring.

Interestingly, the court found that Vioxx did have a defect within the meaning of s 75AC Trade Practices Act 1975 (Cth) – a defect that affected some people, not all. It was found that Vioxx increased the risk of myocardial infarction and that the product information contained no advice or warning about this effect. Nevertheless, the state of scientific or technical knowledge at the time when the goods were supplied by Merck was not such as to enable that defect to be discovered.

As such, even if Mr Peterson could have established causation, Merck would not have been found liable, thereby sealing the fate of the rest of the class.


A pharmaceutical class action has been commenced in the Federal Court of Australia against Aspen Pharmacare Australia Pty Ltd and Eli Lilly Australia Pty Limited. The proceeding arises out of the alleged side effects of changed and abnormal behaviour, being compulsive gambling, compulsive spending, compulsive eating and hyper-sexuality following the consumption of the drug Permax. The drug is used in the treatment of Parkinson's Disease, restless legs syndrome and pituitary tumours.

With similar cases successful in the UK and Canada, 200 former Australian users are now suing the manufacturers of Permax and a similar drug, Casabar, alleging that the uncontrollable and compulsive behaviour causes significant financial and emotional damage.

Although these drugs have helped thousands of patients who have suffered none of these strange side effects, studies indicate up to a quarter of users may have been affected by odd compulsions.

Since 2008, the drugs' product information leaflets have contained mandatory warnings about possible side effects.

Prior to December 2009, Bonsoy soy milk was sold widely in most supermarkets as well as health food shops and cafes. However in that month, Bonsoy's distributor, Spiral Foods voluntarily withdrew the product from the Australian market when it was discovered that it contained extremely high levels of iodine, which could lead to serious health problems such as hyperthyroidism and hypothyroidism.

A class action of affected persons has been commenced in the Victorian Supreme Court against Spiral Foods and two Japanese companies that manufactured and exported Bonsoy.

In late 2012, a class action was commenced by a group of women against Johnson & Johnson in relation to a product called a transvaginal mesh. The mesh is said to have been widely implanted in women who have suffered organ prolapse, however it is alleged to cause extreme pain, discomfort and injury in some women.

Poor lending decisions are at the heart of the class action against some of the directors and officers of City Pacific Ltd (in liq) (City Pacific). Approximately 10,000 "mum and dad" unitholders in City Pacific lost their investments as a result of loans to property developers and are claiming losses of around AU$60 million. Trilogy Funds Management Limited, now the responsible entity for City Pacific, is bringing the claim on behalf of the unitholders.

Victorian bushfires

In the Murrindindi-Marysville bushfire class action, the lead plaintiff alleges that SP AusNet, a power utility company, was negligent in (amongst other things) failing to detect that a power line (which broke and caused the fire) was too close to an earthed stay wire. Claims are also brought against the Victorian Government, the Country Fire Authority and the Department of Sustainability and Environment in relation to the failure to issue timely and appropriate warning about the approaching bushfire.

Likewise, those affected by the Kilmore East-Kinglake fire have commenced proceedings against a power company, SPI Electricity and also government authorities responsible for land clearing and fire warnings.


Equine influenza

A class action is being prepared against the Commonwealth in relation to the equine influenza outbreak in 2007. It will be alleged that the Commonwealth failed to prevent the escape of the equine influenza virus and also failed to control dangerous activities at its Eastern Creek Quarantine Station. The evidence and findings of the Commonwealth's own Equine Influenza Inquiry will encourage the action.

Poly Implant Prothese (PIP)

The French brand of silicone breast implant PIP received massive worldwide publicity when it was found to be highly prone to rupture. The silicon used in the implants was of an inferior grade. An estimated 400,000 women worldwide have had the implants, with many reporting problems. The French Government ordered all women with PIP implants to have them removed (and replaced). However, as we go to print it appears that the contemplated class actions will not proceed.

South East Queensland floods

Seqwater, the operator of the Wivenhoe and Somerset Dams in South East Queensland, is the likely target of the proposed class action to be brought on behalf those who suffered loss and damage as a result of the floods. Again, the evidence and findings of the Queensland Floods Commission of Inquiry, which found that the Wivenhoe Dam was mismanaged, will encourage the action.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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