Corporate Accountability, Third Parties and Class Actions

Abstract:     
In its November 2005 discussion paper on corporate social responsibility, the Corporations and Markets Advisory Committee provided a salutary reminder of the fact that:

Companies are subject to a range of Federal, State and Territory laws of general application that are designed to protect various interest groups or public values, including environmental protection, occupational health and safety, workplace relations, consumer protection, anti-discrimination and anti-corruption statutes.

Directors cannot ignore or subordinate these corporate obligations because of any notion either that the financial or other interests of shareholders are paramount or that compliance with these laws may reduce shareholder returns.

Consequently, an important aspect of the corporate social responsibility debate, which is often overlooked by commentators and scholars, is the effectiveness of our legal system in dealing with breaches of the Corporations Act 2001 (Cth) and other laws committed by companies and their directors. There is little practical point in imposing legal obligations on companies and their directors - designed (a) to protect the interests of non-shareholder stakeholders and (b) to enhance corporate social responsibility - if those harmed by the illegal behaviour of corporations and/or their directors are not able to seek legal redress with respect to the losses caused by such corporate misconduct. Furthermore, as pointed out by Justice Kirby of the High Court, "we cannot be content with a legal system which prides itself on fair substantive laws, but laws which are not, in reality, available for enforcement by the ordinary citizen".

The first aim of this paper is to draw attention to the fact that the class action device has the potential to enable similarly situated victims of illegal corporate conduct (including non-shareholder stakeholders) to secure access to justice. The second aim of this paper is to demonstrate that this potential will only be totally fulfilled: (a) if major amendments are made to the legislative regimes that currently govern Australia's two class action regimes in the Federal Court and in the Victorian Supreme Court; and (b) if there is a significant change in the approach implemented by Australian judges when interpreting and applying such regimes.

Keywords: corporate accountability, third parties, class actions

Working Paper Series