Increased focus on regulatory reform and directors’ liability for 2020

Regulatory reform, climate change, class actions and directors’ risk and liability will be the key focus of the litigation and regulation scene in 2020, predicts MinterEllisonRuddWatts’ leading dispute resolution team in its latest Litigation Forecast.

The trend towards greater personal responsibility for directors shows no signs of slowing, says Partner Andrew Horne.

“Historically, directors were largely insulated from liability for the conduct of the company, with few duties owed in their personal capacity and barriers to litigation against them. However, this is changing,” says Andrew Horne.

“Cases like Mainzeal (where directors were found liable for insolvent trading) and the increasing number of third-party litigation funders and ‘class’ actions highlight the increasing scrutiny and risk faced by the governance community.”

Continuing focus upon the financial and insurance sectors is expected following inquiries into the culture and conduct of financial institutions in Australia and New Zealand. These sectors are increasingly conscious of the need to continue taking steps to put good customer outcomes at the heart of their businesses.

“Regulators are well-resourced and on the look-out to bring proceedings against financial institutions where harm is caused to customers. This focus on conduct shows no sign of abating with the recent introduction of the Financial Markets (Conduct of Institutions) Amendment Bill which, if passed into law, will require certain financial institutions to establish fair conduct programmes to ensure that their policies, systems and controls are fair to customers,” says Partner Jane Standage.

“While the focus to date has been on the financial services and insurance sectors, it may be only a matter of time before other industries come under similar scrutiny.”

Seven predictions for 2020:

  • After much discussion about climate change litigation risks for companies and directors, 2020 is the year in which these issues will begin to be litigated in the New Zealand courts.
  • Directors’ risk of liability continues to increase while at the same time their options for insuring against risk are diminishing.
  • The Directors and Officers insurance market will face further pressure from securities class action risks, regulatory risks, climate change risks and legislation restrictions.
  • Insolvent trading risk should be on the minds of directors who may be liable for breach of duties when a company experiences financial difficulties – some key decisions on this are expected from the courts in 2020.
  • The Commerce Commission will, in addition to its enduring priorities, focus increasingly upon substantiation claims (ensuring that companies can substantiate representations they have made), environmental claims (e.g. “biodegradable”, “compostable”), privacy and responsible lending.
  • Further clarification around ‘opt-out’ class actions – which are easier to bring as all potential claimants are automatically included in a claim unless they opt out – is expected. We also expect a decision on ‘common fund’ orders which will impact litigation funding.

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Read the full Litigation Forecast