Westpac confirmed it has been hit with another class action relating to the AUSTRAC scandal. Via Financial Standard.
The
class action, brought by Johnson Winter & Slattery, has been filed
on behalf of certain shareholders who acquired interest in Westpac
securities or equity swap confirmations between 2013 and 2019.
“The
claim relates to market disclosure issues connected to Westpac’s
monitoring of financial crime over the relevant period and matter which
are the subject of the AUSTRAC proceedings,” Westpac told the ASX.
“The claim does not identify the amount of any damages sought.”
Westpac said it will be defending the claim, as it has said for the other class actions filed against it.
Prior to this proceeding being filed, Westpac said it expects around $80 million in additional expenses in FY20 as part of its response plan to the AUSTRAC scandal.
The bank is facing 23 million alleged breaches of anti-money laundering and counter-terrorism laws brought on by AUSTRAC.
The
regulator alleges, amongst other things, Westpac failed to
appropriately assess the online money laundering and terrorism financing
risks associated with the movement of money into and out of Australia
through correspondent banking relationships.
The bank is also facing class actions from US-based law firm Rosen Law on behalf of purchasers of Westpac shares between November 2015 and November 2019, as well as another Australia-based class action lodged by Phi Finney McDonald.
Class action lawyers are having a field day following the Hayne royal commission. A top litigation funder reveals how taking Aussie companies to court has become big business, via The Adviser.
Maurice
Blackburn Lawyers was the first to file a class action against a big
four bank following the publication of the royal commission final report
in February. The law firm filed a class action against Westpac over
alleged breaches of the bank’s responsible lending laws.
But
Maurice Blackburn is now reconsidering after ASIC lost its infamous “red
wine and Wagyu steak” case against Westpac last month.
Meanwhile,
embattled wealth giant AMP is facing multiple class actions in light of
the extensive misconduct uncovered by the royal commission. AMP
advisers are now preparing their own class action against the group.
Neill
Brennan, the co-founder and managing director of litigation funder
Augusta Ventures, believes class action lawsuits improve the regulatory
regime.
“Two
of the bigger regulators, the ACCC and ASIC both favor class actions.
From an ASIC perspective with shareholder class actions, it acts as a
policeman to some extent. So, if there are breaches of rules such as
continuous disclosure, ASIC can intervene, obviously, but it’s from a
regulatory perspective cheaper for an individual group of shareholders
to bring an action on their behalf, for themselves,” Mr Brennan
explained.
“Similarly, for the ACCC, there are kind of three
prongs to how they regulate. There are obviously penalties that they
impose. There are jail terms that can be imposed for cartel activity, et
cetera. But also, if there are damages brought by individuals or by
groups, that helps with the ACCC control of competition as well. So,
from a regulatory perspective, class actions are beneficial.”
In May, Augusta Ventures announced that it would be funding a class action against AMP.
Herbert
Smith Freehills partner Jason Betts said the focus of class actions has
largely been about governance issues and corporate malfeasance.
“When
we started this journey 25 years ago, I think people thought this will
be more a story about traditional products liability, manufacturing
defects, or mass disaster, mass tort accidents, natural disasters,” he
said.
“That hasn’t been the story, I think largely because the
cost of prosecuting these claims is significant, and in Australia, these
claims relied largely but not exclusively on litigation funders to
support them. And funders have, again, largely but not exclusively
focused on corporate malfeasance.
When you talk about the big
cases in Australia at the moment, they are predominately directed toward
corporate governance issues like continuous disclosure, like
misrepresentation in respect of financial parameters, earnings guidance,
impairments, financial calibrated cases.”
We don’t have a lot of
guidance in this country on how the law will determine those issues at
the moment. Statistically speaking, these corporate governance cases
settle. And so we’re in unusual state of opaqueness around how this
regime will look in five or 10 years’ time.
Mr Betts said that
statistically most corporate governance cases settle. He said
Australia’s class action culture, which is very strong, is much like
America’s. With a few cost differences.
“We’ve got a high rate of
adult share ownership. We’ve got the high focus on corporate governance
issues generally. We don’t have guidance from the law. We’ve got an
entrepreneurial funding market, different to really the rest of the
globe,” he explained.
“All of these doctrinal challenges that
that raises, there couldn’t be a more interesting time to sort of think
about the future of class action litigation.”
Betting on the
outcomes of a legal dispute is a risky game. As a litigation
funder, Mr Brennan said the stakes are higher for class actions where
limited information is available.
“A funder walks into a
situation at the start where legal merit is judged but not obviously
absolutely clear. It’s prior to disclosure, prior to witness statements,
prior to a lot of information, so you’re making a call with limited
information,” he said.
“Then you have question marks over whether
or not the case will actually be run, because of multiplicity [of]
hearings. And then when it comes to the end of it, the court can
actually obviously step in and say, ‘Well, we think the funding
commission should be X instead of Y,’ and that’s a hindsight decision.
“The
risks that a funder faces are large, and if it all goes wrong, the
money is nonrecourse, so the funder’s not going to be paid anything. And
so, the risks a funder faces need to be commensurate with the rewards
that they’re going to achieve in a competitive environment.”
Slater and Gordon has today filed a class action against AMP on behalf of over two million Australians, via InverstorDaily.
The
class action is the second to be filed by Slater and Gordon as part of
its Get Your Super Back campaign that kicked off following the Royal
Commission.
The first class action launched by Slater and Gordon as part of their Get Your Super Back campaign was against Colonial First State.
The
case alleges that through arrangements with related parties, trustees
AMP Super and NM Super paid too much to related AMP entities for
administration services.
The case also alleges that they failed to secure an appropriate return on cash-only investment options.
Senior
Associate Nathan Rapoport at Slater and Gordon said super members
trusted that AMP would act in their best interests but instead were
charged exorbitant fees.
“Both AMP Super and NM Super, as
trustees of the funds, should have taken steps to secure the best deal
for members on a commercial arms-length basis,” said Mr Rapoport.
Mr
Rapoport said that the Royal Commission head evidence of a group of AMP
cash option members who received negative returns due to un-competitive
interest rates and excessive fees and not even the trustee was aware of
it.
“These customers would have been better off keeping their retirement savings under their bed,” Mr Rapoport said.
An AMP spokesperson said that the group acknowledged the class action proceeds and would vigorously defend the proceedings.
“The
action relates to fees charged to members, and the low interest rate
received and fees charged on cash-only fund options. The proceedings
will be vigorously defended.
“AMP and the trustees of its
superannuation funds are firmly committed to acting in the best
interests of their superannuation members and acting in accordance with
legal and regulatory obligations. We encourage any customers who have
concerns to contact AMP directly or their financial adviser,” an AMP
spokesperson said.
This is the latest class action to hit AMP after Maurice Blackburn Lawyers also
filed a class action against AMP seeking compensation for shareholders
alleging it breached the Corporations Act for failed to disclose its
practice of charging fees for no service and for its interactions with
ASIC.
Slater and Gordon were one of the five law firms to compete for the shareholder class action but Maurice Blackburn eventually won the right to continue on the case due to its funding model.
Maurice Blackburn Lawyers has filed the first class action against AMP, alleging that the bank eroded more than an estimated two million superannuation accounts with ‘unreasonable fees’, via InvestorDaily.
The action is seeking compensation for the bank’s super fund members. Maurice Blackburn has opened an online portal where members can sign up to claim fees dating back to 30 May 2013.
Material
tendered during the royal commission conveyed that AMP’s super funds
were charging uncompetitive administration fees, with high costs
exceeding returns and causing investment losses in some cases.
Maurice
Blackburn’s action has claimed that AMP trustees failed to monitor,
compare, negotiate or seek reductions of hefty fees being pocketed by
the group’s companies, despite their duty to act in the best interest of
members.
“It’s
important that inquiries and regulators uncover mass wrongdoing of this
nature, but that doesn’t give people back their hard-earned
superannuation funds, which they need for their retirement,” Brooke
Dellavedova, principal lawyer, Maurice Blackburn said.
“We estimate that over two million accounts have been impacted by AMP’s alleged misconduct.
“This
class action asserts that AMP trustees breached statutory and general
law obligations, essentially paying itself handsome fees from members’
funds. The case we are running will hold AMP to account for that.”
AMP said the proceeding will be “vigorously defended” in a statement, noting that it had cut product fees in the last year.
“In
2018, we cut fees on our flagship MySuper products, benefiting
approximately 600,000 existing customers as well as new customers,
improving member outcomes. In 2019, we also cut fees to MyNorth,” AMP
said.
“AMP and the trustees of its superannuation funds are firmly
committed to acting in the best interests of their superannuation
members and acting in accordance with legal and regulatory obligations.
We encourage any customers who have concerns to contact AMP directly or
their financial adviser.”
Litigation funder Harbour is funding the class action, which has been filed in the Federal Court in Melbourne.
“Importantly,
the matter will proceed in a way that means no one has to dip into
their own pockets to fund the litigation,” Ms Dellavedova said.
“AMP
account holders can band together to recover compensation, in
circumstances where most people would not bring a case on their own.
“If
you have had a superannuation account with AMP at any time since 30 May
2013, then you can sign up for this action to recover some of your lost
funds, including compound growth amounts you missed out on.”
Five global investment banks are facing a cartel class action lawsuit after a suit was filed at the Federal Court yesterday, via InvestorDaily.
Maurice
Blackburn Lawyers, who is also taking on AMP in a class action, have
launched the suit against UBS, Barclays, Citibank, Royal Bank of
Scotland and JP Morgan, claiming the banks colluded to rig foreign
exchange rates.
The suit alleges that between January 2008 and 15
October 2013, traders in chat rooms bearing names such as ‘The Cartel’
and ‘The Mafia’ communicated directly with each other to coordinate the
manipulation of FX benchmark rates.
“The chat rooms included
those named ‘The Cartel’, ‘The Mafia’, ‘One Team’, ‘One Dream’, ‘The
Players’, ‘The Three Musketeers’, ‘A Co-Operative’, ‘The A-Team’, ‘The
Sterling Lads’, ‘The Essex Express’ and ‘The Three Way Banana Split’,”
according to Maurice Blackburn’s statement of claim.
It is
alleged that the actions resulted in the pricing of ‘spreads’ and the
triggering of client stop loss orders and limit orders.
“Sharing
with each, alternatively one or more, of the other respondents, and/or
one or more of the other cartel participants, information in relation to
trade in FX Instruments with respect to one or more of the affected
currencies, including in relation to trade volumes and/or trade
strategy,” said the statement of claim.
The alleged conduct has
been the subject of extensive regulatory and private enforcement action
worldwide including settlements in the US and Canada resulting in the
payment of US$2.3 billion and CA$107 million respectively.
Some
of the allegedly affected currencies include the Australia, Canadian,
New Zealand and US dollar as well as the Russian ruble, Indian rupee,
the Euro and the British pound.
Maurice Blackburns principal
lawyer Kimi Nishimura said that the cartel behaviour could have affected
a number of Australian business and investors.
“Australian
businesses and investors – particularly medium to large importers,
exporters, institutional investors and businesses with operations
overseas – have been affected by the distortion of the FX market by
these banks.
“Such cartel behaviour cheats Australian businesses
in circumstances where they may already have been vulnerable to currency
fluctuations,” she said.
The class action will be represented by
lead plaintiff J.Wisbey and Associates, a medical equipment importer,
but is open to any customers that brought or sold currency during the
period where total value of transactions exceeded over $500,000.
Spokespeople for the banks involved did not issue a statement at time of writing.
The NSW Supreme Court has selected law firm Maurice Blackburn to be the one to take a shareholder class action against AMP following last year’s royal commission; via InvestorDaily.
Five
law firms, Maurice Blackburn, Slater & Gordon, Phi Finney McDonald
and Shine Lawyers, all filed class action lawsuits against the financial
services company seeking compensation on behalf of shareholders.
The
actions followed a drop in AMP’s share price after testimony at the
royal commission last year, which was followed by the resignation of
AMP’s then chief executive and chairwoman and the dismissal of its
general counsel after criticism of his handling of a report by Clayton
Utz.
NSW Supreme Court Judge Julie Ward chose Maurice Blackburn,
whose funding model under their “no win, no pay” promise she considered
the best.
“In the present case the combination of: absence of a
separate funding commission; the incentive created by an uplift in fees
only once a specified resolution sum is achieved; the comparable return
based on standardised assumptions and the fact that no common fund order
is being sought, seems to me to point in favour of the [Maurice
Blackburn] funding model,” Judge Ward said.
The case against AMP alleges AMP engaged in misleading and deceptive conduct and breached its Corporations Act obligations when it failed to disclose its practice of charging fees for no service and in its interactions with ASIC.
An
AMP spokesperson welcomed the decision to permit only one class action
to proceed and said they would defend against the proceedings.
“AMP
will continue to vigorously defend the class action proceeding. AMP
denies the allegation that it had information that was required to be
disclosed to the market regarding ‘fees for no service’ and AMP’s
interactions with ASIC (including in respect of the Clayton Utz
report).”
AMP also noted that Maurice Blackburn had been ordered to pay millions in security for AMP’s legal costs.
“The selected class action has been ordered to pay $5 million in security for AMP’s costs,” said AMP
A
class action by Slater & Gordon will be consolidated into the
Maurice Blackburn case but with the latter running the litigation
alone.
Maurice Blackburn’s national head of class actions Andrew
Watson was pleased with the result and said he looked forward to getting
on with the job.
“We are pleased that the Court accepted that
Maurice Blackburn’s funding model could help deliver the best returns to
group members. We look forward to getting on with the important job of
obtaining a recovery for affected AMP shareholders.”
Class
actions typically take a long time to reach a conclusion with the next
date set for next week for a directions hearing, which is a largely
procedural issue.
A class action lawsuit that was being planned on behalf of “Australian bank customers that have entered into mortgage finance agreements with banks since 2012” has been dropped due to a lack of a “clear cause of action”; via The Adviser.
Law
firm Chamberlains has announced that its major class action against
various Australian banks will no longer proceed despite interest in the
matter.
In May of this year, it was announced that law firm
Chamberlains had been appointed to act in the planned class action
lawsuit, which was instructed by Roger Donald Brown of
MortgageDeception.com to represent various Australian bank customers
that had been “incurring financial losses as a result of entering into
mortgage loan contracts with banks since 2012”.
The law firm had
been calling on bank customers to join the class action, led by Stipe
Vuleta, if they had “incurred financial losses due to irresponsible
lending practices”.
In an update to interested parties, seen by
The Adviser, Chamberlains commented: “Over the last few months, we have
been busy investigating the scope of a potential legal claim, which
could be commenced as a class action against various Australian banks.
“During
this process, we have engaged with senior and junior counsel to assist
with the questions of law to be raised if an action were to be commenced
in the Federal Court of Australia.
“Despite
our efforts, we have been unable to identify a clear class of claimants
who have a clear cause of action against a particular Australian bank.”
It continued: “As a result, we are unable to take this process further.”
While
the law firm has said that some may still have “an individual case
arising from [their] dealings with the banks, which may have merit
outside of the framework of a class action”, it would encourage those
people to “seek independent legal advice about [their] claim”.
Class actions in focus
Several
class actions against major lenders have already been initiated
following some of the revelations from the royal commission, including four separate class actions against AMP on
the grounds that the company breached its obligations to customers and
engaged in “misleading and deceptive representations to the market”.
The legal action was announced after senior AMP executives appeared before the royal commission as
witnesses. Some of the executives admitted to a number of potential
crimes and suggested that these were repeatedly mischaracterised to the
Australian Securities and Investments Commission (ASIC) and to its
customers as being “administrative errors”.
These included
providing false and misleading statements to the regulator and charging
customers for services that were not provided.
Law firm Slater and Gordon has filed class action proceedings in the Federal Court against National Australia Bank and MLC on behalf of customers sold worthless credit card insurance.
Slater and Gordon Class Actions Principal Lawyer Andrew Paull said the action alleges MLC and NAB engaged in unconscionable conduct, in contravention of the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act), by selling insurance to card holders who were ineligible to claim under the terms of the policy.
“All of the claimants had a NAB credit card and were then offered NAB credit card insurance,” Mr Paull said.
“However it was highly unlikely that they would benefit from this policy.
“Most were existing NAB customers and the bank should have known the insurance was likely to be of little or no benefit to them. Despite knowing this, NAB have continued to push the insurance widely, reaping millions in premiums while doing so.”
Mr Paull said most people were sold the insurance over the phone and were not given a reasonable opportunity to understand the terms and conditions of the policy.
“In the case of the life cover, the policy was of minimal value to many customers. NAB admitted as much in the Royal Commission.
“Both NAB and MLC were in much stronger bargaining positions than any of the people they were contacting and selling this insurance to.
“They have taken advantage of hundreds, potentially thousands of their loyal customers.”
Customers sold insurance included students and people without gainful employment, and people on disability pensions; all of whom were ineligible to claim the main benefits under the policy.
“Casual, contract or self-employed workers were subject to exclusions from the income protection coverage, but were not made aware of this fact when they agreed to purchase the insurance.
Jessica Purcell was a full time university student when she was pressured to take out consumer credit insurance, despite being a casual employee at the time and ineligible to claim certain aspects of the policy.
“It was sold to me like it was something that I had to take out. I honestly wouldn’t have thought twice about it if I hadn’t heard about the class action. I would have just kept paying it,” she said.
Customers with existing life and/or income protection insurance were also encouraged to take out insurance on their credit card, despite already being covered by their existing policies.
Mr Paull said Slater and Gordon believes these practices amount to unconscionable conduct in breach of section 12CB of the ASIC Act.
“We believe NAB’s and MLC’s conduct falls well short of the standard of behaviour the industry expects.
“In short they have taken advantage of people knowing that they can’t cover them.
“NAB and MLC have been fleecing consumers of millions and it’s only right that they pay it back.”
Which customers are included in the class action?
Group members include:
people who did not meet the employment criteria, eg. unemployed persons, casuals, students, seasonal workers, self-funded retirees, dependent spouses
people who were employed by their family
people who were self-employed
people with a pre-existing medical condition, or critical illness
people who were otherwise ineligible to claim one or more of the main benefits of the policy
people who were otherwise highly unlikely to require, or be able to benefit from the policy, such as people who held effective income protection policies
Maurice Blackburn Lawyers has confirmed that it is preparing court proceedings against the major banks and brokers in regards to alleged breaches of the NCCP, according to The Adviser.
On Monday, media reports began circulating about rolling litigation being levelled at the major banks and brokers relating to alleged breaches of the National Consumer Credit Protection Act 2009 (NCCP Act).
The move follows on from questions asked by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry over whether credit providers have adequate policies in place to ensure that they comply with “their obligations under the National Credit Act when offering broker-originated home loans to customers, insofar as those policies require them to make reasonable inquiries about the consumer’s requirements and objectives in relation to the credit contract, to make reasonable inquiries about the consumer’s financial situation, and to take reasonable steps to verify the consumer’s financial situation”.
Earlier this year, the royal commission was damning in its critique of the lenders’ policies when it came to ensuring customers can afford their home loans, with ANZ being called out for their “lack of processes in relation to the verification of a customer’s expenses”, and both Westpac and NAB revealing that there had been instances of their staff accepting falsified documentation for loans.
Further, Westpac recently admitted to breaches of responsible lending obligations when issuing home loans to customers and agreed to pay a $35 million civil penalty to resolve Federal Court proceedings.
While there has not been any systemic issues with arrears rates or housing affordability to date, Maurice Blackburn has suggested that the reliance on benchmarks, such as the Household Expenditure Measure, coupled with a softening property market and the “maturity of interest-only loans”, could “leave thousands in financial ruin, staring at the prospect of bankruptcy”.
In a statement to The Adviser, Maurice Blackburn principal Josh Mennen confirmed that the law firm is pursuing legal action, stating: “A combination of banks’ relaxed lending standards and brokers’ involvement in loan sales has resulted in widespread debt over-commitment that threatens the stability of the broader economy. A survey of more than 900 home loans conducted by investment bank UBS found that around $500 billion worth of outstanding home loans are based on incorrect statements about incomes, assets, existing debts and/or expenses.
“This means 18 per cent of all outstanding Australian credit is based on inaccurate information, often caused by poor advice or misrepresentations by a mortgage broker eager to generate a sale commission.”
It should be noted that the figures quoted are in relation to a UBS report which asked borrowers about the accuracy of their home loan applications, and that representatives from several bodies — including ASIC — have called into question the weight of this response, arguing that “for many consumers the additional work and additional steps that banks and other lenders are taking to verify someone’s financial situation won’t be apparent to them”.
For example, ASIC’s Michael Saadat, senior executive leader for deposit takers, credit and insurers, said last year that “consumers are probably not the best judge of what banks are doing behind the scenes to make sure borrowers can afford the loans they’re being provided with”.
In his statement to The Adviser, Mr Mennen continued: “A staggering 30 per cent of loans surveyed had been issued based on understated living costs and around 15 per cent on understated other debts or overstated income.
“Add to the equation the fact that a huge proportion of mortgage loans issued over the past decade were ‘interest-only loans’. These loans have an initial period (usually five years) where only the interest on the loan is repaid. However, after the interest-only period ends and the principal is also paid down, the loan repayments can increase between 30–60 per cent.”
While the principal conceded that this “problem has been contained” by investors being able to sell their interest-only investment properties and therefore “often fortunate enough to sell the investment property at a gain or at least break even, clearing the mortgage without too much pain,” he suggested that the current environment in which interest rates are rising, while some property markets (such as Sydney and Melbourne) are declining, could be cause for concern.
“These factors, in combination with the maturity of interest-only loans, will further drive up distress sales in a stagnant or contracting market and may leave thousands in financial ruin, staring at the prospect of bankruptcy,” the lawyer said.
Realising a prediction from UBS analysts that theevidence of “mortgage mis-selling and irresponsible lending” found during the royal commission could result in the banks being subject to “very costly” class actions, Maurice Blackburn is now mounting legal cases against banks and/or brokers.
Mr Mennen said: “We believe that, as consumers losses are crystallised, many will have strong claims for compensation against their lender and/or mortgage broker for breaches of the National Consumer Credit Protection Act 2009 (NCCP Act) for failing to comply with responsible lending obligations including by not making reasonable inquiries and verifications about customers’ ability to repay the loan.
“We are acting for many such customers and are preparing to commence court proceedings against major banks in the coming months.”
It is not yet known which brokers or broker groups, if any, will be targeted in the legal action.
However, the corporate regulator has reiterated its view that lenders should be held accountable for breaches of responsible lending obligations, irrespective of whether the loan was broker-originated.
In its most recent Enforcement Outcomes report, which outlines the action the financial services regulator has taken over the first half of the calendar year, the Australian Securities and Investments Commission (ASIC) stressed that lenders should not offload blame to third parties when a loan is found to be in breach of responsible lending obligations.
Hot on the heels of Slater & Gordon launch of the ‘Get Your Super Back’ campaign, today I discussed the current state of the mortgage industry with Roger Brown a prime mover in the class action being planned against both major lenders and banking regulators. Looks like November will be an important check point.
