Following the banking royal commission, five law firms filed class action lawsuits against the financial services company seeking compensation on behalf of shareholders.
The class actions were brought forward by Maurice Blackburn, Slater & Gordon, Phi Finney McDonald and Shine Lawyers following a sharp fall in AMP’s share price after testimony at the royal commission last year.
During the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, several senior AMP executives gave testimony regarding misconduct relating to financial advice, with a number of them admitting to a number of potential crimes.
These included providing false and misleading statements to the regulator and charging customers for services that were not provided.
The ASX-listed company later announced the immediate resignation of its CEO after it lost more than $1 billion in shareholder value since March 2018, with the losses escalating following the royal commission hearings.
Last week (23 May), NSW Supreme Court Judge Julie Ward suggested that only one class action could move forward, and selected the case put forward by Maurice Blackburn, largely due to its “no win, no pay” funding model.
“In the present case, the combination of absence of a separate funding commission, the incentive created by an uplift in fees only once a specified resolution sum is achieved, the comparable return based on standardised assumptions and the fact that no common fund order is being sought seems to me to point in favour of the [Maurice Blackburn] funding model,” Judge Ward said.
An AMP spokesperson welcomed the decision to permit only one class action to proceed and said they would defend against the proceedings.
“AMP will continue to vigorously defend the class action proceeding. AMP denies the allegation that it had information that was required to be disclosed to the market regarding ‘fees for no service’ and AMP’s interactions with ASIC (including in respect of the Clayton Utz report),” they said.
AMP also noted that Maurice Blackburn had been ordered to pay millions in security for AMP’s legal costs.
“The selected class action has been ordered to pay $5 million in security for AMP’s costs,” said AMP.
A class action by Slater & Gordon will be consolidated into the Maurice Blackburn case but with the latter running the litigation alone.
Maurice Blackburn’s national head of class actions, Andrew Watson, was pleased with the result and said he looked forward to getting on with the job.
“We are pleased that the court accepted that Maurice Blackburn’s funding model could help deliver the best returns to group members. We look forward to getting on with the important job of obtaining a recovery for affected AMP shareholders.”
Class actions typically take a long time to reach a conclusion, with the next date set for next week for a directions hearing, which is largely a procedural issue.
[Related: AMP could face three class action lawsuits]