Supreme Court Justice Ross Robson this month approved a settlement of $13.25 million to be paid by Banksia’s directors, solicitors and auditors RSD chartered accountants and other professional firms.

The settlement follows court action by the Banksia investors class action, fronted by Laurence Bolitho of Kyabram, and Banksia’a receivers/liquidators.

Those who made the settlement offer include Banksia directors Grenville Skewes of Warrnambool, Peter Keating, Patrick Godfrey, Nicholas Carr and Neil Mathison. The offer follows negotiations between the parties.

Two of the co-founders of the Kyabram Banksia Debenture Holders Action Group, Don McKenzie and Doug Crow, said the expected return to investors from the settlement of about two cents in the dollar should flow through in the next few months. The settlement should lift the return so far to Banksia investors to 82 cents in the dollar of their investment.

However the two said they were “extremely disappointed” with the amount of money awarded and said the Banksia directors and other officers had “inadequate” professional indemnity insurance cover.

“The Banksia Directors and Officers insurance cover was only $10 million which was also to cover any defence costs they incurred. The auditors also held a cover of just $10 million.

“Given that the trustee (Banksia’s trustee, The Trust Company) will also be taking action against these parties, it is felt that the settlement is probably as good a result as could be expected,” the two said.

Mr Crow and Mr McKenzie said they believed The Trust Company was the most culpable party in the collapse of Banksia in 2012. The collapse left 16,000 investors, including more than 1000 debenture holders in the south-west, owed hundreds of millions.  

The two were hopeful separate court action being taken against The Trust Company, now owned by Perpetual, for $133 million plus interest will produce a higher settlement than that obtained from the Banksia directors and other officers. That case is due to be heard by the Supreme Court in March, next year.

The two said The Trust Company had also been the trustee for Statewide Secured Investments when Banksia took over Statewide in 2008 and as such had a conflict of interest that should have stopped it agreeing to the merger.  

“This situation becomes even worse in regard their culpability where a forensics audit shows the expense, loss and damage Banksia incurred by agreeing to enter into and implement the amalgamation (with Statewide).

“The forensic audit shows that Statewide had negative assets at the amalgamation date which included 26 loans that had a total loss of over $54 million with some $40 million of not permitted loans under the Trust Deed and that the Statewide merger virtually brought about the Banksia failure,” the two said.

They said Banksia investors were entitled to be “disgusted” at the incompetence of Banksia’s and Statewide’s management that was revealed in the court hearings and related investigations.  

“These matters should have been discovered by the trustee (The Trust Company) long before the appointment of receivers,” they said.

“After all it is duty of the trustee to oversee and protect the interest of investors.  

“Banksia could possibly have survived without the Statewide merger and with appropriate management decisions,” Mr McKenzie and Mr Crow said.