FORMER Banksia investors are hopeful a $64 million settlement reached against company directors, auditors and the Trust company will flow to creditors by the end of this year after the Court of Appeal confirmed the amount this week.
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The settlement was reached in December, but an investor’s appeal against the judge’s decision to approve a payout to the litigation funder along with legal costs caused a delay in the money flowing to former investors.
The Court of Appeal was required to consider whether the $64 million settlement was allowed to stand.
That appeal was granted on Thursday and the payout was finalised.
Don McKenzie, the co-founder of the Kyabram Banksia Debentures Holders Action Group, said preparations were under way to deliver the funds to former investors.
“It’s a massive relief to have the court uphold the original decision,” he said.
“We look forward to getting the distribution out after a long and unnecessary delay.”
A debenture holder appealed the settlement on grounds that the costs report relied on by the funder was confidential, that objectors were prevented from inspecting evidence and that the Trust Company had encouraged a belief that a judgement of over $170 million could be satisfied.
The appeal also stated that parent companies had “apparent unwillingness” to contribute to an adverse judgement, which was allegedly used as justification to cap the settlement at $64 million.
It was argued that the $12.8 million funding commission for the funder was unreasonable because the funder had accepted a “very significant cost risk” of over $15 million.
The appeal also disputed the independence of an expert costs consultant.
Three Court of Appeal judges found the appeal should be allowed to proceed, but that the $64 million was a reasonable amount.
“The court can approve the settlement of the group proceeding and authorise the settlement by the SPR of their proceeding in advance of the determination of the application by the funder for its costs and commission,” the judgement reads.
“It is appropriate here to separate out the question whether to approve the settlement and the question whether to approve distributions of any money paid under that settlement.
“Principally, that is because the applicant has not impeached the finding of the judge that the settlement sum represented the total amount that was available to Trust Co to meet any judgment and that, in any event, the settlement sum represented a fair and reasonable compromise of the claims made by both Mr Bolitho and the SPR.”
Banksia operated primarily in Bendigo, Ballarat, the Goulburn Valley, Warrnambool, Kerang, Kyabram and the Western District as a rural non-bank lender.
It merged with competitor Statewide in 2009 – an institution in a “perilous financial condition” – but Banksia’s “failure to undertake adequate due diligence” during the merger meant the company collapsed in 2012 owing $600 million to over 16,000 investors.
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