The Commonwealth Bank has found itself in the middle of a battlefield between two class action laws firms and their respective litigation funding partners.
Both firms are clamouring for a slice of the damages they expect will arise from the lack of disclosure by Australia’s largest lender about its money-laundering scandal.
Lined up on one side is Maurice Blackburn whose action is being bankrolled by IMF Bentham and on the other is Slater and Gordon breakaway firm Phi Finney McDonald which is funded by UK-based Therium.
Presumably both see CBA’s possible lack of disclosure about Austrac’s investigation into an alleged 50,000 or more breaches of money laundering and terrorism financing laws, as fertile ground for shareholder compensation.
And this would mean a big payday and a juicy return for the litigation funders – one that is worth fighting over.
While the formal announcement of the second class action from Phi Finney McDonald was delivered to the the bank’s chief executive Matt Comyn on Monday evening at the close of his first day in the job, it is understood the bank was aware that over the past few months a second class action was being investigated.
There could be little doubt that the Commonwealth Bank’s lawyers will be looking to the court to have these two similar actions joined.
Meanwhile, the two class action firms will be in a race to win over as many CBA shareholders as possible.
Maurice Blackburn has a timing advantage in that it filed its case in October last year and appears to have focused on retail investors.
However, it’s working with an opt out model so all shareholders will be considered parties unless they choose not to be.
The Phi Finney McDonald class action has already recruited a number of larger institutional shareholders including giant US pension funds California State Teachers Retirement System (CalSTRS), Teachers Retirement System of Texas (Texas TRS), Massachusetts Pension Reserves Investment Management Board, and Colorado Public Employees Retirement Association (CoPERA).
It says it has Australian super funds on board as well but wouldn’t nominate which ones.
If eligible, CBA shareholders wanting to ride the Phi Finney McDonald action will need to sign up or opt in.
Given shareholders can’t join both there will be pilfering attempts by both sides as it is considered unlikely both will make it to the finishing post.
Phi Finney McDonald’s marketing pitch is based on price. Where litigation funders generally take about 30 per cent and as much as 40 per cent of damages awarded from class actions, Phi Finney McDonald says shareholders will get a significantly bigger slice of the proceeds – but it won’t say how much more just yet.
The pool of potential CBA investors is larger in this latest class action because it covers an additional year.
“Phi Finney McDonald’s class action will allege that CBA breached its disclosure obligations over a three-year period. Accordingly, it is open to a much larger number of investors than the competing action, which only covers a two year period,’ it said in a statement.
But the nature of the claims against CBA are broadly the same. They revolve around the bank’s alleged non disclosure of the Austrac investigation.
Phi Finney McDonald Director, Odette McDonald, said that the action would seek compensation for investors who acquired shares in CBA between June 16, 2014 and August 3, 2017.
“We consider that the integrity of CBA’s anti-money laundering and counter-terrorism financing systems, and compliance with laws and directions of regulators, was of incredible importance to CBA shareholders,” she said.
“This is clear from the proactive steps investors have taken in driving this action.”
Maurice Blackburn alleges the bank’s statement to the Australian Securities Exchange on August 9 showed it had been aware of the issues much earlier than disclosed.
Once the disclosure was made the CBA share price fell precipitously.
For Comyn the second class action comes amid battles the bank is dealing with on a series of fronts.
Last week Austrac stuck with its legal arguments that are part of its case that Commonwealth Bank repeatedly breached anti-money laundering laws, despite the bank’s rebuttals as it filed its response to CBA’s amended defence.
Austrac continues to play legal hardball despite the fact that CBA appears hopeful that mediation discussions are progressing and could lead to a settlement.
For Comyn, who wants to appear the face of the new and better behaved CBA, these issues as well as the APRA investigation in the bank and any fallout from the royal commission will mean there may be plenty of unexploded grenades to navigate.
Elizabeth Knight comments on companies, markets and the economy.
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