Banksia investors at a meeting in Warrnambool with lawyers involved in the class action.
THE barrister handling the class action legal case against Banksia Securities has expressed strong confidence the case will succeed.
Norman O’Bryan, SC, told a meeting of the South-West Banksia Investors Support Group yesterday he had “rarely been more confident in the success of a case than I am in the success of this case”.
Mr O’Bryan also told the meeting of about 150 investors he hoped the class action might win up to $100 million for investors.
However, he doubted the class action would be able to recover all of the shortfall of $280 million-$350 million that investors presently faced.
He said how much the case would win for investors was likely to depend on how much professional indemnity and other insurance had been taken out by those being sued — the Banksia Securities Limited (BSL) and the associated Cherry Fund Limited (CFL) companies, their directors, auditors and the trust company for the two companies.
He told investors that Banksia Securities paid a $75,000 insurance premium last year for its directors, indicating they had substantial insurance policies to protect them against being sued. It was not known how much insurance the companies’ auditors, RSD Chartered Accountants, had but they were expected to have some, Mr O’Bryan said.
He said the trust company for BSL and CFL, the Trust Company, was likely to be “the better bet” to contribute significantly to any payout won through the class action.
The Trust Company, whose role was to protect the interests of investors, had “a healthy balance sheet” and any contribution to a payout from it was not likely to be limited by its insurance policy.
Mr O’Bryan said he was confident of a successful outcome to the class action because of the big discrepancy between Banksia’s provision for bad loans last year of less than $7 million and the $170 million of bad loans that Banksia’s receivers believed the company’s actually had at the time.
He said the amount of bad loans could not have risen so sharply in the two months last year between the time when Banksia was saying its bad loans totalled less than $7 million and when the Banksia receivers were called in.
“The reality is that these loans were going bad over a period of time.
“They should have been recognised as going bad and something done about it,” Mr O’Bryan said.
“There’s no question the accounts were wrong.
“People reading them would not understand the company’s true financial position.”
Mr O’Bryan said he expected a Supreme Court directions hearing for the case in a few weeks’ time would direct his team and those of the defendants into negotiations to see if an agreement could be reached without going to trial.
Mr O’Bryan warned investors that if those being sued had insurance and the case went to trial, it could take years before there was a resolution.
He also told the meeting his team was likely to bring in a litigation funder within the next six months if the case looked like it would continue for some time.
The litigation funder would meet the costs of the case in return for a portion of any payout.