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On 23 December 2014, Slater and Gordon commenced a class action against Australian Executor Trustees Limited (AET), arising from the collapse of Provident Capital Limited (Provident). The class action has been brought by Mr Innes Creighton, the representative plaintiff, on behalf of all persons who held debentures issued by Provident as at 29 June 2012 (Creighton Class Action).
Provident was a non-bank lender, which financed its activities largely through money raised by issuing debentures to the public. In 2012, the company collapsed owing $130 million to ordinary Australians who had invested in Provident debentures. Investigations subsequent to the collapse indicate that many of Provident’s loans had been non-performing for some time, and the company likely had a net asset deficiency and was balance sheet insolvent for some time prior to its collapse.
AET had been appointed the trustee for debenture holders of Provident in accordance with the Corporations Act 2001 (Cth). In this role, AET had a number of duties, including a duty under the Act to exercise reasonable diligence to ascertain whether the property of Provident, that should be available, would be sufficient to repay debentures when they became due. The Creighton Class Action alleges that AET failed in the performance of its duties to debenture holders, including by failing to exercise reasonable diligence to ascertain the value of Provident’s loan portfolio, and seeks compensation for debenture holders who suffered loss as a result.
The Creighton Class Action is an “open” class action which is being conducted on a “No Win No Fee” basis. This means that debenture holders are not currently required to take any steps to be part of the Creighton Class Action, and there is no requirement to pay a percentage-based commission to be part of the Creighton Class Action. Group members in the Creighton Class Action will be notified by the Court if they need to take steps to remain in the Class Action.
Slater and Gordon has a strong track record in class actions brought against trustees of failed debenture issuers, having secured multi-million dollar settlements on behalf of holders of debentures issued by Fincorp and Australian Capital Reserve. If you have any questions about the Creighton Class Action, please contact us on 1800 071 827 or by email at firstname.lastname@example.org. We are sending regular updates to group members who have registered with us.
The Creighton Class Action was listed in the Federal Court for mediation in November 2015, and for trial in March 2016.
However, in June 2015, six months after the Creighton Class Action was commenced, a second class action was commenced in the Supreme Court of NSW against AET (Smith Class Action). The Smith Class Action represents a subset of debenture holders in the Creighton Class Action, who have signed a litigation funding agreement with, and agreed to pay a 30-40% commission to, a third party litigation funder. Slater and Gordon is not affiliated with the law firm or litigation funder who issued the Smith Class Action.
The Creighton Class Action was subsequently transferred to the Supreme Court of NSW, which resulted in the mediation and trial dates being vacated and the resolution of debenture holders’ claims being delayed. The Supreme Court of NSW was required to consider whether it should allow only one class action to proceed, or whether both should proceed concurrently or in a consolidated form.
On 5 February 2015, Justice Ball delivered a judgment where he accepted that if only one of the class actions were permitted to proceed it should be the Creighton Class Action. However, his Honour decided to allow both class actions to proceed concurrently, and the Court will give group members who are in both class actions the chance to make a choice as to which class action to remain in.
There are significant advantages to debenture holders if they participate in the Creighton Class Action. Critically, the funding arrangements in the Creighton Class Action are more beneficial. As Justice Ball stated:
“There can be little doubt that if the proceedings settle for a substantial sum of money then the funding arrangements in the Creighton Proceeding are more beneficial to class members than the funding arrangements in the Smith Proceeding, since in the former case class members will not have to pay a percentage of their recoveries to a litigation funder. That is a significant factor favouring the Creighton Proceeding, and may be a critical one to many debenture holders…”
Although the position is less clear if the proceedings do not settle, and the class actions run to verdict, that is a situation which occurs rarely. If the class actions do not settle, then individual damages claims of group members may need to be considered by the Court. However, as Justice Ball noted, representative proceedings often settle and – in this case – any individual damages claims are unlikely to be complicated.
One other significant advantage of the Creighton Class Action is that it is being run by one of the most experienced class action firms in Australia. We have been a leader in class action practice in Australia for over 20 years. We have one of the largest, most-experienced, and well-resourced plaintiff class actions teams in the country, and we have recovered hundreds of millions of dollars for participants in class actions. We have secured multi-million dollar settlements on behalf of debenture holders in other cases, including the first private class action against a debenture trustee ever conducted in Australia.
We also acted in one of the few class actions that have had settlements approved by the Supreme Court of NSW since the current class action regime was implemented in NSW. That matter was the Fairbridge Farm class action, which resulted in a landmark $24million settlement for victims of childhood sexual abuse. By contrast, the lawyers running the Smith Class Action have never to our knowledge run a class action to completion regarding any subject matter in any court.
Following a directions hearing on 16 August 2016, the Creighton Class Action and the Smith Class Action have been listed for a trial commencing in May 2017. In the meantime, the Court has made orders requiring us to prepare the case brought by the representative plaintiff, Mr Creighton, for trial, including orders to prepare relevant evidence. The parties must also conduct a mediation to attempt to reach a settlement. We expect that this will occur early in 2017.
On 20 May 2016, the Court granted the Plaintiff leave in the Creighton Class Action to file a Further Amended Statement Claim (FASOC). The amendments include allegations of further breaches of the Corporations Act and the Debenture Trust Deed by the Defendant and also amendments to the group member definition so that it encompasses all holders of debentures issued by Provident as 29 June 2012.
In the second half of 2016, the Court is likely to approve correspondence which will be sent to those affected by the collapse of Provident. That approved correspondence will contain information about the two class actions and the options for those who suffered loss and damage arising from Provident’s collapse.
If you would like to register your details with us to receive further information and updates about the proceeding, please telephone Slater and Gordon on 1800 071 827 or contact us by email at email@example.com.