Colonial First State Investments settles class action for $100m

Wealth management group Colonial First State Investments (CFSIL) has agreed to an in-principle settlement of $100 million for a class action brought against it by compensation law firm Slater & Gordon.

The matter related to CFSIL’s payment of commissions to financial advisers and the fees charged to members of the Colonial First State FirstChoice Superannuation Trust, in the period 1 July 2013 to 1 June 2020.

The case was first brought in 2019, following the banking royal commission, as part of Get Your Super Back campaign by Slater & Gordon.

It alleged that CFSIL, which was a subsidiary of the Commonwealth Bank of Australia (CBA) at the time, did not act in thousands of customers’ best interests by continuing to charge existing members high fees under the commission arrangements. This was despite legislation being introduced that banned the charging of commissions on new super accounts from 2013 onwards.

Slater & Gordon alleged that Colonial had the power to reduce the fees or transfer existing members to identical products with lower fees and where commissions were not paid, but the lawyers suggest this did not happen until 2019 and 2020.

While agreeing to the settlement, CFSIL continues to deny the allegations.

In a statement, the wealth group said: “Following a confidential, court-ordered mediation on 16 June 2023, CFSIL and the applicants have agreed to settle the class action. The settlement is subject to court approval.

“In agreeing to resolve the litigation, CFSIL continues to deny the allegations and makes no admissions of liability or wrongdoing.

“If the court approves the settlement, eligible group members will each recover a share of the agreed settlement sum of $100 million, after accounting for any deductions which may be approved by the court, such as legal fees charged by the applicants’ lawyers and any commission approved by the court to be paid to the funder of the class action.”

While the settlement is still subject to court approval, if approved, it would mark the highest settlement achieved by the law firm in a group proceeding.

Noting the agreement to settle, the law firm’s class actions practice group leader, Kirsten Morrison, said: “This is a great outcome for the many thousands of customers who put their faith in Colonial to look after their financial interests but were disadvantaged by the arrangements in place with financial advisers that were not in customers’ best interests.”

A notification of the settlement is expected to be sent to eligible group members in August 2023.

A similar class action brought against CFSIL by Maurice Blackburn was settled last year for $56.3 million.

Slater & Gordon is also pursuing Commonwealth Bank and Colonial First State in a separate group proceeding for allegedly breaching the trust of super fund members by investing members’ retirement savings with its parent bank, even though the bank did not allegedly offer the best interest rates. That class action is ongoing.

Similar actions have also been brought against AMP, BT, and ANZ OnePath.

[Related: CBA's super arm faces scrutiny under class action]