CBA class action goes to Federal Court

Aggrieved Commonwealth Bank Australia (CBA) shareholders will be represented in a joint class action heading to Federal Court today (7 November), after mediation resulted in no settlement.

The class action — brought by law firm Maurice Blackburn Lawyers (MBL) with support from litigation funding giant Omni Bridgeway in 2017 — was first brought against CBA on behalf of investors who suffered losses due to the share price fall following the institution of legal proceedings by AUSTRAC — the Australian government’s financial intelligence agency.

The bank has already paid a $700 million penalty after being taken to court by AUSTRAC.

While the case had been in mediation in September 2022, no settlement was agreed upon.

As such, the class action for shareholders now continues as it heads to trial today (7 November). 

Background to the suit

As the legal firms explained, shareholders in Australia’s largest ASX-listed company suffered one of the biggest single price movements in CBA’s recent history following revelations that CBA was being taken to court by AUSTRAC for alleged contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).

“When news of the AUSTRAC proceeding became public, CBA’s share price fell from an intra-day high of $84.69 on 3 August 2017 to an opening price of $80.11 on 7 August 2017 (a fall of $4.58 or 5.4 per cent) — a significant movement for an otherwise stable stock,” MBL outlined.

“The class action alleges that CBA knew about serious instances of non-compliance with the AML/CTF Act and that its failure to disclose that information to the ASX amounts to misleading and deceptive conduct and a breach of its continuous disclosure obligations under the Corporations Act 2001 (Cth) and the ASX Listing Rules.”

The lead-up to a Federal Court decision

As reported in The Adviser in 2018, the big four bank was ordered to pay a civil penalty of $700 million after admitting to contraventions of Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act.

At the time, CBA also admitted contraventions in risk procedures, reporting, monitoring and customer due diligence.

While the Australian Securities & Investments Commission (ASIC) had been looking into the alleged disclosure breaches associated with AUSTRAC’s money laundering case, it revealed in 2020 that it would not be taking any enforcement action into the matter.

However, the class action on behalf of shareholders has been drawn out over the last few years.

The class action law firms recently sought an order that would prevent group members who did not register by the class action deadline (7 June 2022) from participating in any settlement that may have been agreed to before the trial date of 7 November 2022.

However, MBL added that investors who had purchased ordinary CBA shares between 16 June 2014 to 3 August 2017 may still be eligible to participate.

“Even if you did not respond by the deadline, you will remain a group member in the proceeding and may still be eligible to participate in some circumstances (for example, if a settlement is reached after 7 November 2022, if there is a judgment in favour of the applicant, or if the Court does not make an order of the kind the parties intend to seek),” an MBL statement confirmed.

[Related: CBA to pay $700m penalty in AUSTRAC case]