A third class action has been launched against flailing sandalwood grower Quintis.

The action has been commenced in the Federal Court of Australia and is against Quintis (ASX:QIN), ex-CEO Frank Wilson, and Ernst & Young who were the auditors during the period the action is covering — August 31, 2015 to May 15, 2017.

An originating application and statement of claim were filed in the Federal Court on 23 May.

Quintis went into voluntary administration in January after recapitalisation plans didn’t work out.

Earlier that month, disgruntled shareholders, led by entrepreneur John Allen and backed by major shareholder Mr Wilson, sought to remove the board after events even the company’s own chairman described as a disappointment.

Their shares have been suspended since May last year after the ASX queried sales agreements with buyers in China, India, the Middle East and the US.

In a publicly-released ASX announcement, the litigation funder behind the action, Litigation Capital Management (ASX:LCA), says their class action is different to the other two because it is based on the 2015 and 2016 accounts and includes Ernst & Young.

Neither Ernst & Young nor Mr Wilson wished to comment on the matter.

Stockhead is seeking comment from Quintis.

Outlining the claims made in the filed statement of claim, LCM said: “The case alleges that in both 2015 and 2016… Those financial reports significantly over-stated the value of Quintis’ assets and the amount of Quintis’ profits in those years.”

“The effect of publishing the misleading financial reports was to artificially inflate the price of Quintis’ shares. Had people known the true state of Quintis’ financial position, they would either not have bought Quintis shares at all, or would not have paid as much as they did for them.”

The action claims that Quintis used “unrealistic assumptions” to calculate the value of its Sandalwood trees, including a heartwood yield of 20kg per tree when the company’s numbers suggested it would be closer to 10-15kg.

It claims Quintis recognised upfront grower fees as revenue in the year they were paid, rather than spreading them out over 15 years to match the services as they were provided.

And it claims Quintis labelled optional, and largely unpaid, annual grower fees as “intangible assets”.

Quintis, Wilson, and Ernst & Young will have 28 days after service of the statement of claim in which to file their defences.

The action is listed for its first case management hearing on 3 July.

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