This ASX-listed legal fund could earn a record payout in CBA class action
Litigation funder IMF Bentham could earn a cut of hundreds of millions of dollars if a class action suit against the Commonwealth Bank is successful.
IMF (ASX:IMF) will foot legal bills for the potential class action, which seeks compensation for Commonwealth Bank shareholders following steep falls in the bank’s share price due to a government investigation.
The government’s anti money-laundering watchdog AUSTRAC accused the bank of “serious and systemic” breaches after ATMs were allegedly used by criminals to launder millions of dollars.
CBA says delays in reporting the problem were due to a software coding error.
Maurice Blackburn Lawyers is pursuing the case on behalf of up to 800,000 shareholders.
“Anyone who purchased shares between August 17, 2015 and August 3, 2017 is in the class action – but they can opt out if they want to,” IMF executive director and legal veteran Hugh McLernon told Stockhead.
If the case goes ahead and Maurice Blackburn wins, IMF will earn 25 to 30 per cent of the payout, which could eclipse Australia’s previous biggest class action settlement, when Centro Properties was ordered to pay $200 million in 2012.
IMF was the funder on that case too.
However, if CBA wins, IMF could be out of pocket millions of dollars if the case drags on for years.
Last year IMF took a $9.5 million hit when the High Court dismissed a long-running case against ANZ which alleged the bank charged credit card customers with excessive fees.
If the class action is successful, the court will decide the exact percentage of the payout that IMF pockets.
“That percentage is within the discretion of the court, but would normally be 25 to 30 per cent,” Mr McLernon said.
“It’s impossible to estimate costs, but you’d be battling to do a large scale class action for much less than $10 million.
“We pay out the invoices as the work is done. At the end of the day we either have a big income or a big extra loss.
“If our client loses then we pay the adverse costs of the defendant – in other words we pay out all our costs and then the defendant’s costs.
“If we win, we get our money back plus a percentage of the amount settled.
“A very large percentage of cases are settled. So instead of waiting three years we might only wait for one and a half years.”
Litigation in the CBA case was likely to continue for two to three years, Mr McLernon said.
IMF reduced its cost exposure with a series of steps including insurance and co-funding, he said.
“It’s a reasonably long-term business. We’ve got a large pipeline of 50 or more cases now around the world.
“We’ve been profitable for the last eight years. We are extremely careful.”
IMF shares were flat at $1.87 in afternoon trading.