Rival CBL class action sparks ASIC complaint

Peter Harris, managing director of CBL Corporation. Photo / File

LPF Group, the funder of a class action against the directors of the collapsed insurance company CBL Corp, has complained to an Australian regulator about the actions of the funder of a potential rival class action that is directed at the company itself, not the directors.

Auckland-based LPF's class action, which also targets CBL itself, is supported by the failed insurer's largest institutional investor, Harbour Asset Management, Australia-based Argo Investments and broking firm Forsyth Barr, while ASX-listed IMF Bentham hasn't named the shareholders it is representing.

CBL and its subsidiaries are in liquidation. It had a market value of $747 million in February 2018 when its shares were suspended from trading on the NZX and ASX.

LPF director Phil Newland says he has complained about IMF Bentham's actions and statements to the Australian Securities and Investments Commission under its rule 248, governing conflicts of interest and disclosure.

"Our concern is they've been representing to would-be plaintiffs that suing only the company in liquidation is a perfectly customary thing to do," Newland says.

IMF Bentham investment manager Gavin Beardsell told BusinessDesk when it announced its action in mid-October that his firm's litigation would proceed either with the liquidators' consent or, failing that, the local law firm it had engaged, Glaister Ennor, would 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," Beardsell said then.

"We don't know who the insurer is and we intend to take steps at an early stage" to find out.

Newland says statements such as these spurred his complaint to ASIC. "We don't want the shareholders of CBL to be confused because of the actions IMF (Bentham) have taken," he says.

In particular, LPF is disputing that targeting a company's insurer is common practice in Australia. IMF Bentham's Beardsell says it is common "because there is no need to sue the directors if the company has sufficient insurance to cover the claim."

But Newland says such a course of action is extraordinarily unusual.

Beardsell says LPF's complaint "has no basis. These complaints are a weapon of choice by this funder."

The complaint also deals with the lack of disclosure of the fact that CBL's former chair, John Wells, Glaister Ennor managing partner Jack Porus, and the QC IMF Bentham has engaged, Philip Skelton, sat on the same school trust board for a number of years.

BusinessDesk asked Porus about this back in October.

"With respect to Sir John Wells, he resigned from the board of the Auckland Grammar School Foundation Trust earlier this year, well before Glaister Ennor received instructions to advise on the proposed CBL class action," Porus said.

"The decision not to join the CBL directors as defendants in the class action was made to avoid unnecessary additional costs for shareholders and delay that will inevitably arise from the added complexity of having six additional defendants and their legal teams involved in the proceedings," he said at the time.

Class actions, particularly those taken by shareholders against listed companies, have been rare in New Zealand. The ongoing case against Feltex directors and vendors is the only one to have reached the courts.

However, such cases are common in Australia, which has developed a set of rules around how such claims should be conducted, unlike in New Zealand.