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Provident Class Action

Provident Class Action

On 23 December 2014, Slater and Gordon commenced a class action arising from the collapse of Provident Capital Limited (Provident).  The class action is brought by Mr Innes Creighton on behalf of all persons who held debentures issued by Provident as at 29 June 2012 (Creighton Class Action).

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. 

The Creighton Class Action is brought against Australian Executor Trustees Limited (AET), the trustee for debenture holders of Provident under the Corporations Act 2001 (Cth).  AET’s duties included exercising reasonable diligence to check whether Provident’s property was 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, and seeks compensation for debenture holders who suffered loss as a result.

Another Class Action

The Creighton Class Action was initially 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 commenced, a second class action was commenced against AET in the Supreme Court of NSW (Smith Class Action).  The Smith Class Action represents only some of the debenture holders in the Creighton Class Action.  Specifically, its membership is limited to those who have signed a litigation funding agreement which obliges them to pay, from any damages recovered, up to 40% of those damages as commission to the litigation funder, as well as the legal costs incurred.  Slater and Gordon is not affiliated with the law firm or litigation funder who issued the Smith Class Action.

The Smith Class Action has significantly slowed the progress of the Creighton Class Action.  Due to the commencement of the Smith Class Action, the Creighton Class Action was transferred to the Supreme Court of NSW, which resulted in the loss of the trial date in March 2016.  Furthermore, although the Creighton Class Action would have been ready for trial by the end of 2017, the lawyers running the Smith Class Action requested that the trial not commence until the second half of 2018.  These steps have resulted in an extended delay to the resolution of debenture holders’ claims against AET.

Comparison of the Class Actions

On 5 February 2016, Justice Ball delivered a judgment, in which 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, and to 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.

Another 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 best resourced plaintiff class actions teams in the country, and we have recovered hundreds of millions of dollars for participants in class actions.  We have a successful 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. 

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.

Current Status

As above, at the request of the lawyers running the Smith Class Action, the matter has been listed for trial commencing in July 2018.  A mediation is expected to occur in early March 2018.

In support of the claims made by Mr Creighton and by group members, we have now served AET with eleven detailed reports from experts in the following disciplines:

a)  accounting and insolvency;

b)  macroeconomics;

c)  regulatory guidance; and

d) property valuation.

On 15 December 2016, the Court granted Mr Creighton leave to file an updated claim document (the Second Further Amended Statement of Claim (SFASOC)), which included amendments to further align the claim with those expert reports.

A copy of the SFASOC is available here. AET has also provided its defence to the SFASOC. AET must serve any expert evidence which it intends to rely upon by 26 May 2017.

AET has joined insurers and auditors (the Cross-Defendants) to the proceeding.  The addition of these parties is another reason that the trial date has been delayed. AET alleges that if the Creighton Class Action succeeds, the Cross-Defendants are liable to reimburse it some or all of the compensation awarded to Mr Creighton and group members.

We anticipate that, in mid-2017, the Court is likely to approve a notice which we will send to those affected by the collapse of Provident (approved notice).  That approved notice will contain information about the two class actions and the options for those who suffered loss and damage arising from Provident’s collapse.  It is likely that as part of the approved notice, the Court will require group members of the Smith Class Action (each of whom is also a group member of the Creighton Class Action) to choose which class action they wish to remain in

Further information

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 provident@slatergordon.com.au.

Documents

Second Further Amended Statement of Claim

Notice of Class Action