Claimants in the Banksia securities class action are unlikely to ever see the $11 million owed to them in compensation, writes the Australian, “after administrators of a now-defunct litigation funder suggested it be liquidated.”
The funds were “ripped off by high-flying silk Norman O’Bryan and class action lawyer Mark Elliott,” who also ran Australian Funding Partners, the litigation funding company behind the claim.
The lawyers and litigation funder intended to claim $19.3 million in legal fees and commission from the $64 million class action settlement. The money was awarded to 15,600 investors, many of them elderly, who lost money when Banksia Securities collapsed in 2012.
“Investors objected to the massive payout, with a court later finding that [Australian Funding Partners] had acted as a shell controlled by Mr Elliot, while key lawyers in the case had acted as conduits for him.”
“In finding against Australian Funding Partners and others connected with the class action, Victorian Supreme Court Judge John Dixon said the lawyers had engaged in ‘egregious conduct’, describing the attempt to charge the victims ‘a fraudulent scheme’.”
Now the perpetrators of the fraud have run out of assets.
Cor Cordis, the administrators appointed to oversee Australian Funding Partners’ insolvency, said their “investigations had concluded that the company’s former directors may have breached the law by trading while insolvent” and failed to “adequately maintain books and records.”
In their report, the administrators write, “[o]ur investigations indicate that some of the company’s relevant books and records, including internal and external email correspondence, were destroyed prior to the appointment of administrators.”
“In all, Cor Cordis estimates that the company has $173,000 in assets but owed creditors – almost all unsecured – more than $23.3m.” This means nothing is left for the class actions claimants.
Cor Cordis recommends that the litigation funding company be liquidated, and its former directors investigated.
The news comes as the Australian Senate prepares to vote on legislation that will provide much needed oversight of the litigation funding industry.
The bill would cap the fees of class action lawyers and litigation funders at 30 percent of any total payout and give judges the power to approve and adjust the proceeds distribution terms laid out in the funding agreement to ensure they are fair and reasonable.
