ANZ moves to defeat Ross Asset class action early

A date has been set for the first legal hurdle for Ross Asset Management investors in their class action against the ANZ Bank.

Tuesday, October 29th 2019, 8:19AM

by BusinessDesk

Five hundred investors have now signed up to the class action against ANZ, which alleges the bank breached its duties. The claim has been estimated at upwards of $70 million and is being defended by ANZ.

RAM, the country's largest Ponzi scheme, collapsed in late 2012. More than 800 investors believed more than $450 million was being managed on their behalf, but actual losses were closer to $100 million. About $10 million has been recovered.

The initial hearing is expected to take two days because rather than go directly to trial, the bank has opted to try and eliminate the investor group’s claim at a preliminary hearing scheduled for March.

The bank has already spent years fighting in court with the Financial Markets Authority, which in 2016 formed a view ANZ could be liable to investors and the regulator wanted to pass its information on. That information will be used if the case continues after this first hurdle.

As a strike-out application, no evidence will be heard, but the bank is arguing RAM investors don’t have a case.

“ANZ has made the application because it believes the claim is not reasonably arguable, which is the relevant legal test for a claim to be struck out under the High Court rules,” a spokeswoman says in a statement.

RAM investor group spokesman John Strahl says the bank is perfectly entitled to the preliminary action. That means the actual claim won’t be fully heard until 2021 at the earliest.

“We would have preferred to be getting on with discovery and the other preliminary steps to go to trial. That will have to take a bit of a back seat because they’ve told us they don’t want to expend time and effort until after this application, which is consistent with their ‘we’re completely innocent’ approach up until now.”

However, he says there is an opportunity for the courts to review the case with the "bare bones" they currently have. "And if the courts say no, we’d rather know about it now than in a couple of years time.”

Strahl says investors are in for the long haul, having made litigation funding arrangements with LPF Group. Under their deal, the litigation funder takes 25 percent if it settles before July next year, and 30 percent thereafter. RAM investors need to sign up for the claim before Jan. 31 to participate.

The FMA’s work investigating Ross and then the ANZ makes it one of the most time-consuming and costly cases for the regulator. It started receiving complaints about RAM in 2012.

The regulator spent about 4,500 hours and almost $140,000 in external costs on the initial investigation into Ross. It then spent another 3,000 hours fighting the ANZ and racked up another $705,000 in external costs.

This could be compared with the FMA’s most costly case as at July this year, the Hanover litigation. That case settled after the regulator paid $3.78 million to external advisors and 7,286 in staff hours.

The prosecutions of Paul Bublitz and other directors associated with Viaduct Capital and Mutual Finance cost $2.35 million and 16,097 in staff hours.

Section 34 of the Financial Markets Authority Act, which allows the regulator to step into the shoes of investors and take a claim, has only been used once. That was against Prince and Partners, a case which involved 1,346 staff hours and saw $820,000 in billings to advisors.

Tags: ANZ ponzi Ross Asset Management