The virus could spark a surge in class action law suits as legal firms and litigation funders rake in easy profits.

Treasury Wines woes predate the real impact of the coronavirus, of course. The lawsuits are centred on its surprise profit downgrade of late January, alleging breach of continuous disclosure obligations due to the companys knowledge of the effects of a wine glut in California. The company rejects this.
The uncertainty about the virus makes it almost impossible to provide guidance that could not be challenged later.
But Australian corporates, already concerned about the rapid rise of shareholder class actions, now fear the COVID-19 crisis will lead to a further upsurge just when they are most vulnerable.
The uncertainty about the virus makes it almost impossible to provide guidance that could not be challenged later particularly given the financial rewards on offer.
The ASX advice for companies to limit their disclosures due to the uncertainty of the outlook is considered a short term fix at best.
Analysts are not only beginning to make guesses in the absence of information which may need to be corrected but corporates need to attract investors. Staying silent is hardly the best way to do so.
Its why groups like the Australian Institute of Company Directors and the Business Council of Australia are asking for immediate action from the government to provide a temporary safe harbour from potential class action suits related to COVID-19.
According to the AICDs proposal, that risk is a preoccupation for boards when their focus should be on business continuity and crisis management.
The circumstances generate a significant risk of opportunistic securities class actions, creating another significant board and company distraction in the current environment, it says.
Business groups insist they are not seeking to water down continuous disclosure obligations but to ensure any ability to bring a class action suit about forward looking guidance is limited to the Australian Securities and Investments Commission over this six-month period.
Christian Porter wants to refer the extraordinary returns to litigation funders to a parliamentary committee. SMH
The aim is to eliminate the commercial interest of lawyers and litigation funders in taking advantage of the extreme business conditions.
Attorney General Christian Porter had already flagged he wants a parliamentary committee to examine the extraordinary profits being made by the booming litigation funding industry.
But his planned referral in March was delayed due to the rush ahead of the Senate rising and then overwhelmed by COVID-19.
He will try again when parliament sits next week, adding a new COVID-19 clause to the terms of reference.
“We also recognise the potential for profit-motivated litigation funders to try and exploit the current pandemic, putting further pressure on struggling businesses as we seek to regrow the economy,” he said on Thursday.
But companies also want Treasurer, Josh Frydenberg, to urgently amend the Corporations Law at least temporarily given the risks of future litigation facing them right now. COVID-19 litigation has already taken off in the US.
The AICD says companies would still need to disclose information to update the market on issues like debt covenants or the loss of material contracts and that forward-looking information would need to be made in good faith. The BCA wants the law to be amended to ensure due diligence is permitted as a defence.
Business groups remain hopeful the government will move on changes in the next few weeks, given the immediate risks.
But even a six-month reprieve, while welcome, wont resolve the broader issue of the massive increase in shareholder class actions. This has also made directors and officers insurance prohibitively expensive if it is even available.
Although, so few of these shareholder class actions actually make it to a court judgment with most insurers and companies preferring to settle to avoid the protracted distraction and legal risk.
The shareholder action against Myer, finally dismissed by the Federal Court this week with parties ordered to pay their own costs, was the first to get to judgment.
But despite the results for Myer plaintiffs, its unlikely to deter more shareholder class actions, particularly given the propensity to settle beforehand.
Just under half of the total number of shareholder actions ever initiated are only now in the pipeline, according to the AICD.
Most litigation funders active in Australia are based overseas but Omni Bridgeway (previously IMF Bentham) has established a highly lucrative position as an ASX listed company, backed by foreign capital.
Its results filed last week show the two funds it set up for class actions in Australia in 2017 have delivered a return on invested capital of 302 per cent and an internal rate of return of 924 per cent, multiples higher than its funds in the US.
Another group, UK based Balance Capital, raised a $100 million fund in March, mainly for Australia. Right now, getting a good return on that money looks one of the safest business bets around.