Disgruntled investors in the collapsed Australasian broking firm Halifax Investment Services have until December 10 at the latest to sign up as “active members” of a funded class action appeal.
Under a product disclosure statement lodged in NZ last week, litigation fund Omni Bridgeway Investment Management (OBIML) urge any so-called ‘category 1’ Halifax clients on both sides of the Tasman “who wish to become Active Members of the Scheme” to apply before September 23 this year – the date of an appeal to be heard both in Australia and NZ courts.
“However, OBIML will accept applications from Category 1 Investors to be admitted as a member of the Scheme up until such time that the Funded Proceedings are the subject of a final judgment, provided such date is no later than 10 December 2021,” the PDS says.
The Halifax appeal funding agreement is treated as an investment scheme under Australian law, requiring disclosure documents to be issued. Under the trans-Tasman Mutual Recognition agreement, Australian investment schemes can register documents almost as-is in NZ (and vice-versa).
As reported in August, a final settlement to distribute over A$200 million among the 12,000 Halifax clients – including 3,800 in NZ – awaits the outcome of the appeal lodged by Choo Boon Loo as a representative category 1 investor.
In a letter this August, the Australian legal firm handling the appeal, Maddocks, notes: “The role of Mr Loo as a representative party in the Initial Proceedings created complexities for individual investors and their ability to bring an appeal. However, it also gave rise to the possibility that any appeal, brought in the name of Mr Loo, would need to be funded by Mr Loo personally. For this reason, Mr Loo approached a litigation funder to assist with the costs of any appeal proceedings. This course was supported by a number of Category 1 Investors.”
The appeal – to be heard jointly by the Federal Court of Australia and the NZ Court of Appeal on September 23 this year – challenges an earlier legal decision setting the valuation date for disputed Halifax assets as at the time the firm collapsed into administration late in November 2018.
According to the Loo appeal, the previous Australian and NZ Halifax judgment should have “calculated the proportionate entitlements of the clients of Halifax AU and Halifax NZ as close as possible to the distribution date and, in any event, only after the Liquidators realised all extant investments”.
Halifax category 1 investors either “elected to keep their position open following the November 2018 administration date or “had a higher valuation on their investments post-administration”, the Maddocks letter says.
The trans-Tasman broking firm specialising in derivatives – and headed at the time in NZ by Andrew Gibbs – collapsed late in 2018 revealing a A$20 million shortfall and the misuse of co-mingled client funds.
While Halifax liquidator, KPMG, estimates all investors should receive 100 per cent of their funds back as per the November 2018 valuation, the pending appeal could significantly alter the distribution if it succeeds.
“… should the Appeals be successful and the Courts conclude that the Liquidators are justified in calculating the proportionate entitlements of investors at a date later than the Administration Date, the likely effect of that finding will be that Category 1 Investors will receive a larger distribution from the funds held on trust than they otherwise would have received had the Appeals not been pursued,” Maddocks says.
Active members of the appeal will receive communication on the case progress but all category 1 Halifax investors should benefit if the courts rule in favour of Loo.
The global litigation funder, Omni Bridgeway, will take at least a 10 per cent cut of extra category 1 distribution if the appeal succeeds while bearing all costs if the legal bid fails.
Omni Bridgeway also announced in July it would investigate potential claims against CMC Markets for clients “who may have suffered loss and damage relating to their investment” in the Crude Oil West Texas Intermediate (WTI) Cash product.
As reported last year, some investors were caught short last year as CMC altered pricing in the product amid extreme volatility in the oil market.