Settlement approved in class action against Slater & Gordon’s legal advisors

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The court approved the $28 million settlement against Arnold Bloch Leibler, who acted as legal advisors in the disastrous Quindell acquisition. 

This decision arises from the class action against Arnold Bloch Leibler (ABL) on behalf of persons who acquired shares in Slater & Gordon Ltd (SGH) between 30 March and 25 November 2015 (ABL Class Action).

The background circumstances to the proceeding involved SGH’s acquisition of the Professional Services Division from Quindell plc (PSD), that was announced to the market on 30 March 2015 (PSD Acquisition). In order to fund the acquisition, SGH undertook a capital raising via a rights offer. The capital raising occurred without a prospectus as permitted by s 708AA of the Corporations Act 2001 (Cth) and instead, SGH published to the ASX a number of documents discussing the commercial allure and risks associated with the PSD Acquisition (Offer Documents). ABL acted as SGH’s legal advisor in respect of the capital raising, chaired the due diligence committee convened to review the Offer Documents and provided a legal opinion to SGH that the Offer Documents were free from material misstatements and were not misleading. It was alleged that this was not the case and that the Offer Documents should have disclosed a material regulatory risk facing the PSD that was known at the time of the PSD Acquisition. The ABL Class Action is the third of three class actions relating to the PSD Acquisition. An earlier class action against SGH was settled in 2017. Prior to an in principle settlement being reached in the ABL Class Action on 19 October 2021, the ABL Class Action was due to proceed to a joint trial with the other class action against Pitcher Partners (SGH’s auditors) that commenced in November 2021, with judgment presently reserved. 

Under the terms of the settlement, ABL agreed to pay $28 million. Justice Beach approved the settlement of the ABL Class Action, finding that the settlement was fair and reasonable. The approved deductions from the settlement sum were as follows:

• $7,840,000 to the funder (by way of a common fund order (CFO), representing 28% of the settlement sum) – his Honour’s reasons for making a CFO rather than a funding equalisation order are notable (see [29] to [38]);

• $4,757,716.76 for legal costs and disbursements (as per the report of Cate Dealehr, who was appointed as an independent costs referee);

• $400,000 for settlement administration costs; and

• $16,800 as a lead applicant reimbursement payment.

Following the above deductions, eligible class members (being those who registered by the registration deadline ordered by the Court), would collectively receive 53.52% of the settlement sum. 

Hall v Arnold Bloch Leibler (a firm) (No 2) [2022] FCA 163

Federal Court of Australia, Beach J,
4 March 2022

Applicant’s Solicitors: Maurice Blackburn;
Respondents’ Solicitors: DLA Piper;
Applicant’s Funder: International Litigation Partners

Austlii Link: Available here

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