CLASS ACTION SERIES Part 1 - Class actions damages: The big picture

Not only are the legal and quantum issues in shareholder class actions complex, but there are yet to be any definitive judgements in Australia on many of the key issues that continue to rapidly evolve. Every new matter raises a new set of challenges. You're probably wondering why this is so hard given it's a well-trodden path elsewhere.

Australians may be surprised to hear that, while shareholder class uncovered some fundamental differences in the evolution of actions have been common in the United States for many years, shareholder damages methodologies in Australia compared with there still remains a dearth of judgments dealing with the details elsewhere. That deeper understanding leads us to consider of damages. Although the high-level principles of assessing loss whether the Dura Principles would apply in Australia and whether seem at first glance to be straight-forward, the devil is in the other options might be available - or even required. detail. And most securities class actions filed in the United States settle long before judges turn their minds to the details of Why do damages methodologies assessing the loss suffered by each shareholder. cause so much debate? You're probably wondering why this is so hard given it's a well- It's partly because we don’t yet have a precedent setting out a trodden path elsewhere. Australians may be surprised to hear common language with which to communicate. The discussion that, while shareholder class actions have been common in the typically relies on terms that are not precise, undefined or United States for many years, there still remains a dearth of commonly misunderstood by both lawyers and experts. For judgments dealing with the details of damages. Although the high- example, terms such as “true value” and “fundamental value” are level principles of assessing loss seem at first glance to be straight- commonly used by lawyers instructing experts but are not forward, the devil is in the detail. And most securities class actions explicitly defined in the law or in valuation standards. What is an filed in the United States settle long before judges turn their event study and importantly what is it not? What are LIFO and minds to the details of assessing the loss suffered by each FIFO, and why does it matter? We’ll explore that further in Part 3 shareholder. of our series on ‘demystifying damages’.

Furthermore, the deeper we go in comparing notes with FTI Even if we could adopt the same methodologies as those Consulting's American experts, the more we realise that the employed in the United States, and have a common “rules” applied in the United States don’t necessarily apply here in understanding of the damages principles, there are still additional Australia. For example, in Part 2 of this series we explore the issues unique to the Australian landscape that don’t seem to have. “Dura Principles” (as we will refer to them), and how (and why) they changed the earlier methodologies in the Unites States. We FTI Consulting • 1 CLASS ACTION SERIES | PART 1 - CLASS ACTIONS DAMAGES: THE BIG PICTURE been dealt with elsewhere. Adding the effect of litigation funding arrangements and multiple competing class actions to the mix significantly increases the degree of difficulty. We understand that it's tempting for lawyers to leave these issues to be dealt with by their experts behind the scenes, down in the depths of complex financial modelling scenarios. Part 4 of our series tackles what lawyers need to know about the impact of those uniquely Australian challenges on damages calculations.

Involvement in many shareholder class action matters over the last few years has also confirmed what we already knew… it takes a diverse set of skills to truly surround the issues. Whilst there are some issues that can be equally dealt with by either forensic accountants, business valuers or economists, as soon as the degree of difficulty increases, a greater depth - and a combination - of specialised expertise is required. Do you need so many experts, and who does what? Stay tuned for Part 5, our expert Q&A.

The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals

Dawna Wright Senior Managing Director +61 3 9604 0604 [email protected]

About FTI Consulting

FTI Consulting is an independent global business advisory firm dedicated to helping organisations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. FTI Consulting professionals, located in all major business centres throughout the world, work closely with clients to anticipate, illuminate and overcome complex business challenges and opportunities. Connect with us on Twitter (@FTIConsulting), Facebook and LinkedIn. FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm. www.fticonsulting.com ©2019 FTI Consulting. All rights reserved.