ABC Learning Class Action
On 17 December 2010, Maurice Blackburn filed a proceeding in the
Federal Court of Australia against ZYX Learning Centres Ltd,
formerly known as ABC Learning Centres Ltd (ABC
Learning). The proceeding was launched on behalf of
a large group of ABC Learning shareholders and is being funded by
Bentham IMF Limited.
ABC Learning was a child care services company that was listed
on the ASX until it announced on 6 November 2008 that voluntary
administrators had been appointed. On 2 June 2010, creditors
of ABC Learning voted to place the company into liquidation.
The application that was filed on 17 December 2010 sought leave
from the the Federal Court to commence a class action. The
application for leave needed to be made because the
Corporations Act 2001 (Cth) prevents a civil proceeding
being commenced against a company that is in liquidation unless the
court gives leave.
On 22 July 2011, the Federal Court gave leave allowing the
commencement of a class action seeking compensation for
shareholders as a result of non-disclosures and misleading or
deceptive conduct by ABC Learning.
The class action has not yet been commenced because ABC Learning
remains in liquidation and the potential recovery for shareholders
therefore remains uncertain.
However, on 24 October 2012 the liquidators of ABC Learning
commenced proceedings in the Federal Court against CBA Corporate
Services, other banks and partners of McGrath Nicol (in their
capacity as receivers and managers of ABC Learning) to recover
amounts received by those parties under company charges granted by
ABC Learning. If these claims are successful, the money that is
recovered may in due course be distributed to ABC Learning's
unsecured creditors (which includes shareholder creditors).
It may be some time before the amount (if any) recovered by
ABC Learning's liquidators is known.
The commercial viability of commencing the class action or
seeking other remedies for shareholders will continue to be
revaluated from time to time in light of developments in the
proceedings commenced by ABC Learning's liquidators.
Events leading to a class action
During 2006 and 2007, ABC Learning made a series of positive
earnings and profit announcements during a period of significant
expansion of its business in Australia, New Zealand, the US and the
UK. In its financial statements for the 2007 financial year
that were published in late August 2007, ABC Learning heralded
total revenue of more than $1.69 billion and net profit after tax
of $143.1 million. At that time, ABC Learning shares were
trading around $7.07 per share and the company made a series of
positive earnings forecasts.
However, after the close of trading on 25 February 2008, ABC
Learning published its interim results for the 2008 financial year
and disclosed for the first time that some of its revenue was in
fact derived from payments by developers of its childcare centres
to support centres during periods of occupancy growth and
liquidated damages received from child care developers. These
non-operating sources of revenue were as much as $99.5 million in
the first half of the 2008 financial year, in which ABC Learning
announced net profit after tax of merely $37 million. The ABC
Learning share price plunged more than 40 per cent after the
announcement of the 2008 interim financial results.
Then, on 31 July 2008, ABC Learning announced a further downward
adjustment to its guidance for the 2008 financial year. In
the published ASX announcement it was revealed that the earnings
results for the 2006 and 2007 financial years would need to be
restated. It was revealed for the first time that ABC
Learning's revenue in 2006 had been overstated by $30 million, and
in 2007 revenue had been overstated by $14 million. The
reason for the overstatement was that ABC Learning had received
payments from an employment services company, 123 Careers Pty Ltd,
which should have been amortised over a ten year period rather than
being recorded as revenue only in 2006 and 2007. By 31 July
2008, ABC Learning shares were trading at around $0.73 per
Ultimately ABC Learning never published its 2008 financial
results and, as was noted above, on 6 November 2008 voluntary
administrators were appointed and on 2 June 2010 the company's
creditors resolved to wind up ABC Learning.
If the class action is commenced, it will be alleged that ABC
Learning contravened its continuous disclosure obligation under the
Corporations Act and that it engaged in misleading or deceptive
conduct as a result of its failure to provide timely disclosure
1. the payments received from developers and the fact that a
material component of ABC Learning's revenue was comprised of these
2. the fact that a material component of its revenue in 2006 and
2007 was derived from payments from 123 Careers.
The claim group and claim period
The proposed claim period is from 28 August 2006 to 31 July 2008
and if the class action is commenced, it is proposed to be
conducted on behalf of ABC Learning shareholders who:
- bought ABC Learning shares during the claim period
- suffered damage resulting from the conduct of ABC Learning,
- have entered into a funding agreement with Bentham IMF
Bentham IMF Limited is not currently accepting new entrants to
the ABC Learning class action. Should existing clients have any
queries they may contact Bentham IMF Limited at www.imf.com.au or
1800 016 464.