The corporate regulator has agreed to settle a class action against Professional Investment Services relating to financial advice it gave to clients over the failed Westpoint Group.
The corporate regulator has agreed to settle a class action against Professional Investment Services relating to financial advice it gave to clients over the failed Westpoint Group.
The settlement agreement, which is subject to court approval, comes nearly two years after the Australian Securities and Investments Commission started legal action against the Brisbane-based business, one of the country's largest financial planning network.
ASIC had alleged that PIS was negligent and breached conditions of the Australian financial services licence.
Should the court approve the undisclosed settlement, compensation will be paid to clients by PIS, which has not admitted liability.
The settlement is set to be the second ASIC has reached on behalf of Westpoint investors. In November last year, ASIC settled a claim against Masu Financial Management.
ASIC said the settlement was the result of a global mediation to resolve legal proceedings it had started on behalf of Westpoint investors.
The global mediation has since been adjourned and ASIC chairman Tony D'Aloisio said it had been a beneficial process.
"The collapse of the Westpoint Group involved many distinct Westpoint funds, a large number of financial planners and advisers, different classes of investors, receivers and liquidators in a complex network of legal claims and rights," he said.
"Confidentiality obligations prevent further information being released at this stage but ASIC expects to make further announcements in the near future."
Westpoint, an Australia-wide property development group, failed between November 2005 and February 2006, leaving 4,300 mum and dad investors about $300 million out of pocket.
Last month, three partners from KPMG's Perth office, Brett Fullarton, Robert Kelly and Grant Robinson, agreed to stop practicing as auditors for between nine months and two years following their involvement in Westpoint.
The ASIC announcement is below:
ASIC has reached an agreement to settle the ASIC initiated Federal Court class action proceeding against Queensland based financial services firm, Professional Investment Services Pty Ltd (PIS). The proceeding concerns a claim for compensation relating to financial advice given by PIS to clients (Group Members) to invest in the failed Westpoint Group of companies. The settlement of the proceeding is subject to the approval of the Court.
ASIC commenced action against PIS in December 2007 alleging that PIS, in providing such advice, was negligent and breached the conditions of its Australian financial services licence. The settlement with PIS, if approved by the Court, will result in compensation being paid by PIS details of which will be disclosed as part of the Court approval process. The settlement was reached without any admission of liability by PIS.
The process for approval of the settlement will include:
- obtaining a final determination as to the identity of the Group Members who will receive the benefit of the settlement;
- writing to those Group Members, providing details of the compensation they will receive and giving them the opportunity to lodge with the Court any objection to the settlement;
- the Court considering the submissions of ASIC (and PIS) and any Group Member as to why the settlement should or should not be approved; and
- if the Court does approve the settlement, then (following a period to allow for any appeals) ASIC will, upon payment by PIS, distribute compensation to Group Members.
ASIC has filed an application with the Court in Brisbane seeking final determination of the identity of Group Members to whom compensation will be distributed and seeking approval for it to communicate with those Group Members, providing details of the compensation they will likely receive and providing them with an opportunity to object to the settlement. That application is due to be heard by the Court on 15 September 2009. ASIC will, after Group Members have had time to consider their position, file a further application seeking Court approval of the settlement.
This settlement approval application results from the global mediation initiated by ASIC to resolve the litigation commenced by it seeking compensation on behalf of Westpoint investors.
Update on global mediation
The global mediation has been adjourned allowing negotiations to continue between the parties to the mediation in respect of the unresolved matters.
ASIC Chairman Tony D'Aloisio said the global mediation had been a very beneficial process.
'The collapse of the Westpoint Group involved many distinct Westpoint funds, a large number of financial planners and advisers, different classes of investors, receivers and liquidators in a complex network of legal claims and rights.
'Confidentiality obligations prevent further information being released at this stage but ASIC expects to make further announcements in the near future', Mr D'Aloisio said.
If approved by the Court, this will be the second settlement ASIC has reached on behalf of Westpoint investors against an Australian financial services licensee arising from the collapse of Westpoint. In November 2008, ASIC settled a claim on behalf of investors against Masu Financial Management Pty Ltd (refer MR 08-217). The terms of that settlement remain confidential between the parties.
Related Westpoint matters
ASIC continues to participate in the mediation of claims against other Australian financial services licensees and a claim against State Trustees Limited. If these matters can be resolved at mediation and the settlements are individually approved by the Court, it is expected that the settlement process will, in each case, be similar to that in the PIS matter (outlined above). These other claims are:
- In December 2007 and February 2008, ASIC commenced proceedings against Bongiorno Financial Advisers Pty Ltd and Bongiorno Financial Advisers (Aust) Ltd respectively on behalf of clients of Bongiorno alleging negligence and breach of licence conditions.
- In March 2008, ASIC commenced proceedings against State Trustees Limited (STL) alleging that STL had breached its duties to the holders of Market Street Mezzanine notes and its obligations under the Corporations Act.
- Also in March 2008, ASIC commenced proceedings against Strategic Joint Partners Pty Ltd (SJP) on behalf of the firm's clients, alleging negligence and breach of licence conditions by SJP in recommending Westpoint products.
- In August 2008, ASIC commenced proceedings against Glenhurst Corporation Pty Ltd on behalf of clients who had invested in Westpoint products on the advice of Glenhurst. As Glenhurst was in liquidation, ASIC subsequently commenced proceedings against the company's professional indemnity insurer QBE Insurance.
- ASIC also has claims against a further two Australian financial services licensees: Dukes Financial Services Pty Ltd (now known as Barzen Pty Ltd) and Brighton Hall Securities Pty Ltd (In Liquidation) on behalf of clients of those firms.
ASIC also has claims against directors of Westpoint companies and the Westpoint auditors, KPMG. These claims are also the subject of the global mediation which has been adjourned, however the litigation against the directors and KPMG will continue alongside the mediation process until any settlement is reached. As the mediation process is confidential, ASIC cannot make any further statement at the present time as to the progress of negotiations with the directors and KPMG. If a settlement of these claims or any of them can be reached, further announcements will be made at the appropriate time. In the event that any settlements with the directors and/or KPMG do occur, any compensation is likely to be paid to the mezzanine companies to be administered by the liquidators of the companies concerned and included in the amounts which may form the subject of any distributions by the liquidators. Further information as to this process will be included in future information provided for investors.
The action against KPMG returns to court on 23 October 2009 when it is expected the Court will make directions for further steps to be taken in the litigation.
