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Class conscious: rise of the class action
Jan McCallum
Big cash settlements are encouraging more investors to pursue class actions.
THEY run for years, cost millions of dollars and pit small investors against major corporations, but shareholder class actions are on the rise.
Actions are proposed or under way against National Australia Bank, OZ Minerals, AWB and Centro Properties, for instance.
The financial crisis has meant more shareholders will seek to recover losses, but the downturn will make claims more complicated as shareholders will have to prove they suffered a loss because of the company's misleading conduct or failure to disclose important information.
Companies are likely to argue that losses could not have been foreseen in the meltdown.
Simon Diuzniak, investment manager of the litigation funder IMF Australia, said investors and fund managers were frequently in contact to suggest actions but often there was not a strong enough case or money left to compensate shareholders.
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The firm turned down most cases it was offered and only funded the "blatant cases" that had caused significant loss.
"These are not cheap to run, it has got to be a multimillion-dollar claim."
Mr Diuzniak said the firm, which has 11 shareholder actions proposed or under way, would make an assessment as to whether a company had misled the market, whether its conduct was egregious or flagrantly bad and whether there were enough shareholders to make a case worth pursuing.
A shareholder class action is the only realistic way small investors can take on a large corporation. An action tries to prove the company had engaged in misleading conduct, such as misstating earnings or debt, or that it failed to disclose important information to the market and investors lost money as a result.
Such actions are relatively new in Australia. The first was against the insurer GIO in 1999 and centred on statements made during a hostile takeover.
The case was settled in 2003 with a payment of 60 cents in the dollar to 22,000 shareholders.
Only two large institutional investors joined the case but that is changing, the chairman of legal firm Maurice Blackburn, Bernard Murphy, said. Mr Murphy spent many fruitless hours travelling the country trying to get fund managers involved in taking on GIO.
He said that in last year's Aristocrat Leisure case, Australia's largest class action settlement at $144.5 million, more than 90 per cent of the claim was from institutions.
It is typical for institutions to account for most of the amount claimed, although small shareholders comprise 90 per cent of the claimants.
Shareholder class actions are growing due to more Australians owning shares, the publicity over cases and the emergence of litigation funders such as IMF, which is listed on the stock exchange.
The litigation is usually fought on a no-win, no-fee basis, and disgruntled shareholders have to opt in by signing an agreement with the legal firm running the case and the litigation funder, who takes the financial risk by paying the costs. The law firm's charge will relate to its hours worked, with a bonus called an "uplift" if it wins, but the funder gets a success fee, usually between 20 and 40 per cent of the settlement.
Although concerns have been raised of a US-style explosion of litigation, Associate Professor Vince Morabito of Monash University's department of business law said class actions here were so expensive that firms would not run them unless they were 80 per cent certain of success.
"In Australia, if you lose, you have to pay a significant proportion of the defendant's total cost and that is a big disincentive to starting a case which has no substantive merit," he said. "The floodgates won't be opening."
Bernard Murphy said cases continued to be vigorously contested and his firm would only start one if the misconduct was egregious and the losses material.
Cases are often settled out of court during a trial, which means there are few precedent-setting judgments and decisions can drag on as they are appealed.
"Over time I think we will see them become more streamlined as the case law becomes more settled and judges become more experienced, and the defendants realise that trial by attrition is not an effective strategy," Mr Murphy said.
The defending companies are also disadvantaged by the lack of case law, according to Jason Betts, senior associate at legal firm Freehills, which advises companies on class actions.
He said directors and executives were becoming more concerned about the prospect of litigation but did not have judgments to provide guidance on how courts might interpret the law.
Mr Betts said the fear of action was making companies re-examine their procedures for disclosing information to the market. Business was also worried that Australia might be following the US where claims with little merit are filed with the aim of securing an early settlement.
A stumbling block to class actions is whether, if a company has gone broke, there will be money to compensate investors, an issue that has been raised regarding proposed action against ABC Learning Centres.
Mr Murphy has no doubt that shareholder class actions will lead to changes in corporate behaviour, just as smoking and asbestos ones caused changes.
"Litigation costs money and money drives corporate decisions," he said.
What to consider if you are approached to join a class action:?Has there been serious misconduct?
?Has there been material loss?
?What are the terms of your involvement, e.g. is it no-win, no-fee, or are you exposed to costs? Would you have to contribute to a fighting fund?
?Do the law firm and funder have experience and a reputation in the field?
?In which jurisdiction is the case being fought? Most class actions go to the Federal Court but Victoria also has class action legislation. The situation might not be so clear in other states. |
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记下一点温柔时光 (2012-6-5) 老猫晒太阳 
发表于 2017-2-3 10:34
暗箱操作股价应该赔钱
空不得啊。。你空了平仓需要有人做多才行啊
我没有具体操作过。。。但是国内期货就只有等交割了。。
