Posted on 02 Feb 2017
Leading class action law firm Slater and Gordon has partnered with new litigation funding arrival Therium Australia Ltd to prepare an investor class action against Spotless Group Holdings Ltd (SPO).
The proposed class action would include investors who acquired shares in the company between 25 August 2015 and 1 December 2015.
Slater and Gordon Practice Group Leader Tim Finney said the claim will allege that Spotless misled the market by issuing guidance for FY16 financial performance which lacked reasonable grounds.
“Our investigations indicate that most of the information Spotless announced in December 2015 was available to the company months earlier,” Mr Finney said.
“The company should never have set market expectations so high in such circumstances.”
The proposed class action will be funded by Therium Australia Limited, a newly established subsidiary of Therium Capital Management, one of the UK’s most recognised litigation funders.
Slater and Gordon Practice Group Leader Tim Finney said Therium has offered eligible claimants the most attractive funding terms for a shareholder class action in Australia.
Key events in Spotless class action:
- On 25 August 2015, Spotless Group Holdings Ltd (SPO) guided the market to expect FY16 results to materially exceed FY15 across revenue; Earnings Before Interest and Tax, Depreciation and Amortisation (EBITDA); and Net Profit After Tax (NPAT).
- Spotless’ shares fell by approximately 50 per cent following a series of announcements made between 2 and 9 December 2015, where the company revealed that FY16 EBITDA would be flat year-on-year, and NPAT would be 10 per cent below FY15.
- The causes of this downgrade included expensing previously capitalised bid costs, changed business conditions, and underperformance of acquired businesses; and the FY15 result benefited from several one-off benefits which would not be repeated in FY16.
“Unlike most Australian litigation funders, Therium’s commission is calculated as a percentage after the legal costs of running the case have been deducted from the settlement amount,” Mr Finney said.
“This closely aligns the interests of group members and the funder, and has been recently identified by the Courts as an incentive to keeping litigation costs within a reasonable range.
“Additionally, Therium’s commission will start at 22.5 per cent for group members with large claims, which is well below the industry standard (typically between 30 per cent and 45 per cent).
“Together, these measures ensure that the maximum amount of any recoveries will be returned to group members.”
Ongoing legal costs assessment Mr Finney said the Spotless class action funding agreement also included ongoing monitoring of legal fees, in what is believed to be an Australian first.
“Lawyers’ fees for the Spotless class action will be monitored on a quarterly basis by independent litigation costs experts,” Mr Finney said.
“This provides added confidence to participants that the legal costs will be reasonable and proportionate and, as far as we’re aware, it hasn’t been done before in an Australian class action.
“Participants will also not be required to pay any fees unless the class action is successful and in no circumstances will they ever be out of pocket.”