CBA shareholders file Federal Court class action

Law firm Maurice Blackburn and litigation funder IMF Bentham have filed an open class action for shareholders of the Commonwealth Bank of Australia regarding the drop in the bank’s share prices following AUSTRAC allegations.

In August of this year, Australia’s financial intelligence and regulatory agency (AUSTRAC) initiated civil penalty proceedings in the Federal Court against the Commonwealth Bank of Australia (CBA) for alleged “serious and systemic non-compliance” with anti-money laundering and counter-terrorism laws. 

AUSTRAC’s action, which was detailed in a 580-page statement of claim, alleges that the CBA contravened the AML/CTF Act in more than 53,700 cases, which could see the bank pay up to $966 billion in penalties if found guilty. 

As first proposed in August, the law suit has been brought by the two companies to form a “true heavyweight legal battle” representing the CBA’s 800,000 shareholders, who suffered from “a significant share price drop” following the allegations. 

After news of the AUSTRAC legal proceedings became public, CBA shares dropped from an intra-day high of $84.69 on 3 August 2017 to an opening price of $80.11 on 7 August 2017.

The legal bodies have stated that this is "a significant movement for an otherwise stable stock".

The proposed action against the CBA will allege contraventions involving “engaging in misleading or deceptive conduct and/or breaching continuous disclosure obligations in relation to its non-compliance with the AML/CTF Act”, which IMF Bentham said is “information that a reasonable person would expect to have a material effect on the price or value of CBA shares”.

According to a statement by Maurice Blackburn, the statement of claim specifically identifies chief executive Ian Narev, chair Catherine Livingstone, chief risk officers Alden Toevs and David Cohen, and non-executive directors Launa Inman and Sir David Higgins as having “early knowledge of the AUSTRAC issues”.

Class action an 'opt out' for shareholders

Maurice Blackburn national head of class actions Andrew Watson said: “Our investigations and analysis show that this drop was in the top 1 per cent of price movements that the CBA experienced in the past five years, so clearly the news was of material significance to shareholders.” 

Maurice Blackburn has said that the action has been filed on an open class basis, meaning, all affected shareholders will have their rights protected, and those that don’t wish to participate can opt out.

Shareholders who purchased ordinary CBA shares between 1 July 2015 and 1pm on 3 August 2017 can register their details to participate. 

The class action, headed by lead plaintiff and long-time share market investor William Phillips, will be run on a "no win, no fee" basis, with all costs fully underwritten by IMF and Maurice Blackburn.

IMF has said that it will pay the other side's costs if the class action is unsuccessful and the claims are lost.

Maurice Blackburn's statement released ahead of the case being filed said: “Shareholders in Australia’s largest bank have sent a clear signal that they won’t tolerate the corporate misconduct that has mired the bank in bad news in recent times, with thousands registering their interest in the class action, including hundreds of institutional investors.” 

Mr Watson added: “Investors would expect the CBA to take a leadership role in setting high standards of corporate conduct. Given the opposite appears to have happened here, shareholders have every right to seek accountability by exercising their legal rights in the most efficient and effective way possible — through the class actions regime.” 

IMF Bentham executive director Hugh McLernon added: “Investors need to have faith in the integrity of the market for the market to properly function, and it is fair to expect that the biggest players on the market will live up to that expectation.” 

The CBA released a brief statement acknowledging the class action filed against it earlier this week. It said: "Commonwealth Bank of Australia (ASX: CBA) has today been served with a class action proceeding filed in the Federal Court of Australia in Melbourne.

"CBA intends to vigorously defend this claim."

[Related: APRA to conduct inquiry into CBA]

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Annie Kane

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