Shareholder of collapsed $750 million insurer CBL to sue directors
Friday, 18 October 2019
Shareholders of failed insurance company CBL, which was once valued at $750 million, have begun signing up to a class action lawsuit against its directors.
The class action is being funded by LPF, which funded the successful civil case against former prime minister Dame Jenny Shipley and fellow directors of failed construction company Mainzeal.
National investment company Forsyth Barr wrote to clients today encouraging them to join the action against the former directors of CBL, which collapsed last year.
Harbour Asset Management Limited and Australian based Argo Investments, which are fund managers whose funds held shares in CBL, have both joined the class action.
**READ MORE:
* CBL Corporation, once worth $750 million, put into liquidation
* Insurance failure prompts questions about regulation
* Call to protect KiwiSavers exposed to $750 million CBL
* Reserve Bank orders review after CBL Insurance liquidation
* Thousands of recently built homes covered by guarantees from CBL**
'The collapse of CBL in 2018, just over two years after it was listed on the NZX and ASX, represents one of the largest corporate failures in New Zealand's history,' said Andrew Bascand, managing director of Harbour Asset Management.
'In February 2018 CBL had a market capitalisation of around $747m, and the shareholders have lost everything. The directors of CBL need to be held to account, and the out of pocket shareholders must be compensated.
'Legal action is the only way shareholders can get any money back,' he said.
CBL specialised in providing insurance to owners of new homes that would fix faults in new homes, and while it issued some policies in New Zealand, most of its insurance business was done in Europe.
Its collapse led to questions being asked about the Reserve Bank's capability as a regulator of insurance companies, prompting the regulator to pay for an independent review into its handling of CBL.
The report found the Reserve Bank, which regulates the insurance and banking industry, first had suspicions about CBL's financial strength in 2013 but lacked the resources, and experience to investigate and did not actively pursue its concerns until 2017.
CBL directors Peter Harris and Alistair Hutchison blamed the Reserve Bank for the insurer's failure, which the independent report rejected.
The class action will be run by barristers Justin Smith QC, Mike Colson and Jonathan Orpin-Dowell, together with law firm Meredith Connell.
'The legal action claims there were false or misleading statements made in the IPO documents in September 2015, and then ongoing breaches of the continuous disclosure obligations,' said Meredith Connell partner Fionnghuala Cuncannon.
'The statement of claim will allege that the CBL directors issued misleading statements in the IPO prospectus that the company had adequate financial reserves to meet its insurance obligations at the time it publicly listed on the NZX and ASX and failed to subsequently correct those misleading statements.
'Further, CBL had been under investigation by the Reserve Bank since July 2017 over concerns about CBL's financial position and the inadequacy of its financial reserve,' she said.
Phil Newland, founder of LPF, said the CBL class action statement of claim would be filed in the High Court in October.
Interested shareholders could register online to join the class action.
'This class action is likely the only avenue now left available for shareholders to seek compensation for the losses that they have suffered as a result of the collapse of CBL,' the website claimed.
LPF Group was funding the litigation on a success fee basis, so it will only get paid, if the case was successful. Shareholders who signed up for the class action would have to pay nothing, if their case failed, LPF said.
The case was expected to take between two and four years to be finally decided.