Shareholders to sue CBL claiming failure on disclosure
An Australia-based litigation funder and local law firm Glaister Ennor are about to launch a class action on behalf of CBL Corp’s shareholders, claiming failure to observe disclosure rules from the time of the initial public offering in September 2015.
CBL’s shares were suspended from trading on both the NZX and ASX in February last year after the company revealed the Reserve Bank had been questioning its solvency for some time, certainly since July 2017, but that it had been bound by the central bank’s confidentiality order from telling the market any earlier.
CBL and its subsidiaries have since gone into liquidation. CBL shares last traded at $3.17 on NZX before they were suspended, valuing the company at $747.4 million.
ASX-listed IMF Bentham says it has agreed to fund the litigation against CBL Corp and says it has support from a number of CBL’s institutional investors, although it won’t name them. It is now looking for retail shareholders to sign on to its action.
IMF Bentham investment manager Gavin Beardsell says the amount sought will depend on how many shareholders sign on to the action, the extent of their shareholdings, and the amount the courts deem they have lost. “It would be safe to say it would be tens of millions of dollars.”
CBL had 1071 shareholders as at January 31, 2017, according to its last filed annual report.
The last substantial shareholder notice filed by the largest institutional shareholder, Harbour Asset Management, in January 2018 showed it owned almost 17.3 million shares, or 7.3 per cent of the company.
Companies Office records show that at January 12, 2018, ACC owned nearly 10.2 million shares (4.3 per cent), while Forsyth Barr Custodians held about 7.5 million (3.2 per cent).
The 2015 float raised $125.3m with 80.9 million shares sold at $1.55 each.
The first liquidators’ report filed in June by Neale Jackson and Brendon Gibson of KordaMentha estimated CBL owed preferential creditors $566,766, secured creditors $6.6m and unsecured creditors $172.8m, including intercompany liabilities of $26.2m.
They said they were unable to reliably estimate CBL’s assets but that the amount that could be recovered from the subsidiaries would be a key driver and two of the largest subsidiaries were under the control of other insolvency officials.
Beardsell says the litigation will proceed either with the liquidators’ consent or, failing that, Glaister Ennor will apply to the New Zealand High Court for leave to proceed against the company in liquidation.
“If we’re successful, we anticipate there will be insurance to pay any settlement or judgment,” he says.
“We don’t know who the insurer is and we intend to take steps at an early stage” to find out.
He expects a statement of claim will be filed by the start of next month.
Glaister Ennor managing partner Jack Porus and his fellow partner Mitch Singh will be the solicitors representing the shareholders. Philip Skelton, QC, is their barrister.
The CBL case is being taken on an “opt-in” basis, so only shareholders who sign up to the suit will be entitled to any settlement or judgment.
One of CBL’s likely defences will be the RBNZ confidentiality order but the claim goes back much further than that to the IPO, he says.
The case is based on the Financial Markets Conduct Act 2013’s disclosure requirements. The claim will be that the shareholders suffered loss and damage as a result of the company’s failure to abide by the act.
Beardsell says he can’t say what percentage of any settlement or judgment his firm will collect if the suit succeeds. That will depend on how long the case takes and the fees his firm incurs.