2 Dec 2019

Failed insurer CBL faces second class action

7:07 pm on 2 December 2019

Another application for a class action against the failed insurer CBL has been filed at the High Court in Auckland.

Supreme Court in Wellington, Coat of Arms

Photo: RNZ / Rebekah Parsons-King

The action, backed by Australian litigation funder IMF Bentham and law firm Glaister Ennor, followed a class action against CBL by the Auckland-based LPF Group, filed a month ago.

The latest class action, which would seek compensation for shareholders, alleged CBL breached its obligations to keep investors informed about the state of its French insurance business.

CBL was worth almost $750 million on the New Zealand stock exchange when it collapsed in February last year, hitting investors across the world.

"We have continued to receive strong interest in the IMF funded action from both retail and institutional investors in New Zealand and abroad, and we have signed up a significant amount of shareholders who together purchased tens of millions of shares in CBL and whose investment has been lost due to the company's alleged misconduct," IMF Bentham investment manager Ewen McNee said.

Litigation funders back cases on a no win, no fees basis, meaning they collected a slice of any damages awarded or had to pay all of the costs if they lost.

A former director of CBL, Peter Harris, was not immediately available for comment, but in his response to the other class action filing last month, he said it was a 'cheap shot' by LPF Group to get ahead of its competitor, IMF.

He said the allegations by LPF accusing him of misleading shareholders, breaching disclosure obligations and of insider trading, were 'damaging and unsubstantiated'.

"The court is the proper forum to decide whether these allegations are true or not, or had anything to do with any loss, not through the media before the court case is even heard," Mr Harris told RNZ Business in November.

"The IPO was an incredibly robust process, with many professional firms and several government regulators involved."

CBL was still under investigation by the Financial Markets Authority and the Serious Fraud Office.

An external review of the Reserve Bank's handling of the downfall of CBL Insurance found that it acted properly in fighting through the courts for its liquidation, however was at times too lenient and did not act on early concerns.

Get the RNZ app

for ad-free news and current affairs