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High Court boost for shareholder class actions

Dispute Resolution & Litigation, Restructuring & Insolvency
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Litigation partner Caroline Goulden is quoted in today’s AFR, commenting on a ruling by the High Court that she and other lawyers believe will provide a significant boost for securities class actions.

In a 3-2 ruling, the High Court this week overturned a decision by the NSW Court of Appeal which said a mandatory examination of former Arrium director Colin Galbraith would be an abuse of process because it had been sought “predominantly for the purpose of pursuing private litigation against third parties”.

As outlined by AFR legal editor Michael Pelly, Arrium went into administration in April 2016 owing $2.8 billion to 60 banks and 30 noteholders. KordaMentha partners ran the business as administrators for 16 months before British billionaire Sanjeev Gupta bought it for about $700 million in August 2017. KordaMentha has been running claims aimed at clawing back proceeds, and resisting a move by law firm Banton Group to examine Mr Galbraith to gather evidence for a class action. Mr Galbraith is also a former director of the Commonwealth Bank. 

Together with ABL’s Leon Zwier, Caroline acted on behalf of the liquidators in seeking to set aside examination summonses obtained by two Arrium shareholders. She told the AFR that the case showed the power to examine under section 569A was “not the sole preserve of external administrators seeking to pursue claims to enlarge the insolvent estate for creditors, nor of the regulator seeking to expose corporate misbehaviour.”

She said that for class action promoters, section 569A will likely be faster, cheaper and more productive than relying on more challenging pre-action discovery procedures to obtain information sufficient to satisfy litigation funders.

”This, in turn removes the time advantage that might otherwise be enjoyed by an external administrator to prosecute proceedings to judgment and access usually finite pools of recovery, such as policies of insurance,” she said.

To read the full article, click here.

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