By Amanda Morrall
As many as 1,000 investors with combined losses in the "tens of millions" have so far registered their interest in a class-action style lawsuit targeting trustees, auditors and other professionals tasked with supervising dozens of finance companies that collapsed leaving billions of dollars of investors' money on the line.
Auckland lawyer Andrew Hooker, spearheading the legal action with Australian firm Slater & Gordon, said on Monday he expected the numbers would "increase significantly" beyond that as interest in the case continued to mount.
"We're still collecting registrations so the numbers could easily double,'' said Hooker, partner with Turner Hopkins law firm.
Turner Hopkins and Slater & Gordon announced plans for the lawsuit on March 23 on the heels of a legal victory in Australia involving finance company FinCorp. A settlement, worth a reported A$30 million, would see investors across the Tasman recoup some of their losses.
Here in New Zealand, it is estimated that investors in failed finance companies lost NZ$2.3 billion with billions more potentially at risk.
(For a complete list of failed finance companies as well as a list of the trustees that served them, those auditors that were involved and an account of how much lawyers and receivers were paid in fees see interest.co.nz's deep-freeze section.)
Hooker said the registration process would remain open for another month or so. In the meantime, an expert was being hired to start investigating individual trustees, company directors, auditors and other parties for allegations of breach of fiduciary duty.
Turner Hopkins and Slater & Gordon have already spent 12 months laying the ground work and expect the case could go to court by June or July.
Shareholders Association chairman John Hawkins said his group was not specifically involved in the lawsuit but would be discussing the issue at an upcoming board meeting this week.
While the majority of its members were not involved with finance companies, Hawkins said the lawsuit should be regarded as a good opportunity for investors who were.
"I think that obviously anything that can assist some of the people in getting back some of their funds is something they should be pursuing providing they are not chucking good money after bad and I don't see any particular risk in this case.''
Hawkins said it would be all the more attractive for investors as they did not have to put up any money up front to join the lawsuit.
"Whether they can make a case under New Zealand law as it currently stands, remains to be seen,'' he added.
"It depends a lot on how the trustee deeds were written but you wouldn't think the litigation funders would take it on unless they were convinced there was a reasonable chance of making some progress."
New Zealand law, as it stands, does not allow for U.S.-style class-action lawsuits but legislative changes are currently under review.
Hooker said a common law device known as representative-action could achieve the same effect as a class-action lawsuit. He said the Fincorp settlement in Australia also bode well for investors here.
"While Australian and New Zealand law differ in some respects, the Fincorp case involves very similar circumstances to what occurred in New Zealand. This raises the real prospect New Zealand victims may be able to receive compensation from Trustee companies following the collapses of local finance companies over the past few years,'' he said previously.
Since 2006 dozens of finance companies have gone under or faltered affecting more than 20,000 investors, most of them retail 'mum and dad' types. The numerous trustees overseeing operations have not been held to account. (For original article on the announcement of class-action lawsuit click here.)