Slater and Gordon has announced a conditional settlement of a class action by investors in Australian Capital Reserve Limited (ACR) against The Trust Company (Nominees) Limited (the Trust Company).
The settlement, which is subject to Federal Court approval, would see the Trust Company pay a total of $25 million, including legal costs, to be shared among class action group members. This conditional settlement comes three weeks before trial.
Slater and Gordon class action lawyer Odette McDonald said the deal was great news for class action group members.
“This is a fantastic result for thousands of everyday investors, many of whom were elderly Australians looking for a safe place to invest their money,” Ms McDonald said.
“Through clever marketing, many people invested in ACR in the mistaken belief it was as safe as investing in a bank. Clearly, this was not the case.
“We will be contacting group members soon with details of the proposed settlement and the next steps towards having it approved so that the money can be distributed,” she said.
Slater and Gordon ran the class action ‘No Win No Fee’, which allowed the major class action to be brought without any out-of-pocket costs to group members.
The Trust Company does not admit liability under the terms of settlement, which will be put before the Federal Court for approval on 18 December 2015.
Slater and Gordon brought the Federal Court claim in May 2013 on behalf of more than 4000 retail investors who invested in ACR between 17 November 2005 and the company’s collapse on 28 May 2007.
The class action alleged that the Trust Company, which had been appointed as a trustee to protect ACR’s investors, breached its duty of care.
Between 2000 and mid-2007, ACR raised money by issuing debentures to the public. It used the money to make loans to other companies in its company group, the Estate Property Group, for use in property development.
The class action alleged that Trust Company should have investigated problems with the Estate Property Group’s finances and its property development business and stopped ACR from issuing debentures by no later than 17 November 2005.
ACR collapsed in May 2007 owing millions of dollars to approximately 7,000 Australian retail investors.
After Westpoint and Fincorp, it was the third major Australian fixed-interest investment scheme to collapse and has since been followed by high profile company collapses including Bridgecorp, Elderslie Finance and Asset Loans.
The conditional settlement was reached a month after settlement negotiations started and three weeks before a 10 day trial to be heard by Justice Middleton of the Federal Court.