AMP under siege from ‘record’ class actions, investors urged to wait
Scandal-plagued AMP could soon set a new record in Australian courtroom history.
It runs the risk of defending against five competing class actions — launched by essentially the same pool of disgruntled investors, making the same kinds of allegations about AMP’s wrongdoing.
If all these duplicate cases are allowed to be prosecuted in court, the biggest losers will be the shareholders as the enormous legal costs may eat into the pool of funds they hope to recover.
Even AMP could argue it’s a victim here, given its legal costs may skyrocket if it has to defend against five cases.
And the biggest winners would be the army of lawyers and litigation funders which stand to profit handsomely, if they win the case or secure a lucrative settlement.
“If we end up with five competing class actions against one defendant, that’s likely to be the most we’ve seen in Australia,” said Michael Legg, a law professor at the University of New South Wales.
“The court needs to pick which class action to proceed — either by consolidating them, or picking one and staying the others.
“The issue for the judge is which one do I pick to go ahead?”
There is a risk that most of these lawyers will incur hefty preparation fees, but leave empty-handed.
When asked by the ABC, most of the law firms in this matter conceded it might happen to them. Particularly if the court decides it would be vexatious, oppressive, or an abuse of process for so many identical class actions to proceed against the same defendant.
On the other hand, judges have enormous discretion when it comes to case management.
Some have allowed identical class actions to proceed at the same time before consolidating them after a few months — or even after more than a year.
“Nothing in life is certain, and we understand it’s a contested marketplace,” said Andrew Watson, head of class actions at Maurice Blackburn.
Why gang-up on AMP?
“There’s the perception that AMP has a difficult position to defend due to the admissions it made at the banking royal commission,” said Dr Peter Cashman, a barrister who specialises in class actions.
“It’s on the public record that AMP suffered a major drop in share value, a lot of money is at stake, and there are a lot more litigation funders in the marketplace.”
Basically, this could be an easy case to win since AMP has already made several public confessions about its wrongdoing.
Last week, Quinn Emmanuel and Phi Finney McDonald were the first plaintiff firms to launch their AMP class actions — in the Supreme Court of NSW and Federal Court respectively.
They were followed by Maurice Blackburn, who started advertising itself as “a very clear choice” for investors on Tuesday.
But Maurice Blackburn hasn’t filed its court documents, nor has it decided which court should hear the dispute.
“We’ll take our time, and make our decision over the course of the next few weeks,” Mr Watson said.
“We won’t be rushed to file just because other firms have preceded us.”
Under Australian law, just because a lawyer is the first to file a class action won’t guarantee that their case will be the one that is allowed to proceed.
Shine Lawyers told the ABC it plans to file its statement of claim by the end of this week, while Slater & Gordon is waiting to finalise its agreement with a litigation funder.
“If you haven’t already filed a case, you have to factor in — is it worth bringing the proceedings knowing that you might not be the one chosen to run it?” Professor Legg said.
They will all be making similar arguments about how AMP wronged its shareholders, and that it shouldn’t have:
- Gouged customers by charging them fees for no services,
- Repeatedly lied to the corporate regulator ASIC about the issue,
- Sought to influence a supposedly independent report by law firm Clayton Utz — to downplay the knowledge and involvement of senior executives,
- Engaged in conduct that was “misleading and deceptive” or “false and dishonest”, and
- Breached its continuous disclosure obligations — by failing to disclose material information to the public for several years.
Instead, shareholders had to find out the hard way at the royal commission, when AMP executive Anthony Regan admitted that his employer engaged in some of these indiscretions under intense cross-examination.
How much are they charging?
With no way of knowing which class actions will be allowed to proceed, which one should AMP shareholders sign up to?
“You’d want to be waiting, especially if you signed up with one of the earlier class actions,” Professor Legg warned.
“Now that there’s a third option, you’d start to wonder whether you got the best deal possible.”
Those who sign up to Maurice Blackburn’s case will pay “a very low 12.5 per cent commission upon any successful recovery”, according to its press release.
That amount will end up in the pockets of its financier, International Litigation Funding Partners (ILFP).
However, what doesn’t appear in Maurice Blackburn’s press release is that it typically charges an “uplift fee”, which adds 25 per cent on top of its solicitors’ fees (which is a component of the client’s total legal costs).
This is how the firm explains the basis of charging uplift fees, when a case is taken on a no-win, no-fee basis:
Maurice Blackburn charges a 25 per cent uplift fee if it succeeds in a ‘no win, no fee’ case (Maurice Blackburn)
Lawyers are permitted to charge these fees under the Legal Profession Uniform Law.
But even if a law firm charges a 25 per cent uplift fee, that may not necessarily make it the most expensive option.
For example, a firm’s lawyers may cost $500 per hour (without an uplift). Another firm may charge $350 per hour, plus the 25 per cent uplift — which equates to $437.50 as the final hourly rate.
In this situation, the latter firm would be the more economical choice for AMP shareholders.
Shareholders should also keep in mind the Maurice Blackburn class action is open to them if they purchased AMP shares between 27 May 2015 and 13 April 2018.
Maurice Blackburn’s entry into the game appears to have triggered a bidding war.
QE partner Damian Scattani said he will not charge clients a 25 per cent uplift fee, and financier Burford Capital will charge clients a 10 per cent commission.
“We have the lowest commission, and no uplift fee for our lawyers’ time,” he said.
On the other hand, Ben Phi said PFM’s case would be “partially funded, and partially no-win, no-fee”. When asked to elaborate, he would not provide further details.
He also refused to confirm how much commission PFM’s financier, IMF Bentham, would charge.
“IMF has made clear it will place itself in the hands of the court. The rate charged will be determined by the court according to what’s fair and reasonable,” he said.
A litigation funder’s cut typically varies between 25 and 40 per cent of the winnings.
Both firm’s class actions are open to shareholders who bought AMP shares between May 2013 and April 2018.
Augusta Ventures is the litigation funder for Shine Lawyer’s case.
Shine’s class action expert Jan Saddler said she is currently discussing the funder’s commission with the AMP shareholders who signed up to its class action, and will reveal the rate after that consultation.
Mr Saddler said a “modest component” of the case will be run on a no-win, no-fee basis, which attracts a 25 per cent uplift fee, similar to Maurice Blackburn.
Slater & Gordon’s litigation funder is Therium, and the firm has been contacted for further information about its fees.
The lawyer ‘beauty contest’
As for which law firm’s class action will prevail, Dr Cashman believes it might come down to a metaphoric “beauty contest”.
“The judge may ask the firms to submit competing bids, and outline what’s the best offer they can make to class [action] members”.
He also said the court will consider which firm had the most appropriate resources and expertise.
“The bottom line is, from the class member’s [AMP shareholder’s] perspective, which firms will get them the most money at end of day?”
Professor Legg agrees that cost is an important factor to consider where there are competing class actions.
“If there are lower legal fees, the litigation funder charges a lower commission, the court may find that more attractive.
“If you’re more expensive on an hourly basis, that might reflect greater expertise and efficiency — it’s hard to make these comparisons.”