THOUSANDS of investors stung by the collapse of the Fincorp property empire have been handed hope of compensation.
The Federal Court of Australia has authorised the release of details of a compensation scheme to the estimated 5,100 Australian investors who stand to benefit from the offer.
Lawyers for investors in the group, which collapsed in 2007 owing noteholders about $200 million, have struck a settlement deal over its failure with Fincorp’s trustees Sandhurst Trustees Limited.
Slater & Gordon litigation lawyer Odette McDonald said the proposed settlement would benefit thousands of “mum and dad and retiree investors” who had lost their savings when Fincorp collapsed.
“These people were lead to believe, through clever marketing and other endorsements, that Fincorp was as safe as investing in a bank, when it clearly wasn’t.”
“This proposed settlement is a victory for the thousands of small investors who were misled by Fincorp.”
No dollar value was put on the settlement at the Federal Court hearing yesterday. Slater & Gordon has been seeking up to $100 million.
The proposed deal, which requires investor approval, would see Slater & Gordon's legal costs paid out of the settlement pool before the proceeds are distributed to investors.
Slater & Gordon lawyer McDonald said to be eligible to participate in the proposed settlement scheme, claimants must have invested in secured and/or unsecured notes issued by Fincorp on or after 7 December 2004, held those notes as at 23 March 2007, and suffered loss or damage.
“What is particularly significant is that unsecured noteholders, who have received nothing through the liquidation and receivership of Fincorp and who thought that they had no chance of recovering any of their investment, will be eligible to receive a return of some of their lost capital under the proposed settlement scheme.”
McDonald said the total size and value of the settlement would be determined by the number of people who decide not to opt out of the open class action.
“The proposed settlement scheme has a sliding scale of compensation to reflect the strengths and weaknesses of different claims,” she said. “If approved, the class action will result in a multi-million dollar settlement.”
Slater & Gordon was able to pursue compensation from the appointed trustees of Fincorp, Sandhurst Trustees Limited, under a provision of the Corporations Act 2001 that deals with trustee responsibilities. The case represents one of the first times the provisions have been used to pursue compensation from a trustee following a corporate collapse.
McDonald said the use of the provisions under the Corporations Act was a significant legal milestone.
“These laws mean that when a company like Sandhurst acts as trustee for a company raising money from the public, and when the fund raising company involved folds, there might still be an avenue for justice and the recovery of lost investments.”
Slater & Gordon’s clients approved the settlement offer last week. The settlement will now be subject to approval by all group members and the Federal Court.
Slater & Gordon, head of commercial and project litigation, Ken Fowlie, said the result again demonstrated the importance of Australia’s class action system.
“Class actions are by far the most affordable, effective and transparent way of achieving justice when big business fails its customers,” Fowlie said.