Dick Smith class action clears first hurdle
The Supreme Court of NSW has granted legal firm Bannister Law leave to file a class action against Dick Smith (DSHE) on Monday.
Bannister Law principal Charles Bannister says the ruling is a win for shareholders who loss a lot of money when the company collapsed in January 2016.
“Thousands of shareholders have lost tens of millions because, we allege, DSHE contravened provisions of the Corporations Act, including by engaging in misleading or deceptive conduct on various occasions throughout 2015,” he said in a statement on Tuesday.
Bannister said the firm alleges that the retailer misled shareholders about the financial health of the company through directors’ declarations that the accounts during 2015 were up to Australian Accounting Standards.
He said it will be alleged that the use of supplier rebates to artificially inflate Dick Smith’s reported profit deceived shareholders who have suffered loss and damage as a result.
The proposed class action is in addition to claims filed earlier this year in the Federal Court by Dick Smith’s lenders, National Australia Bank and HSBC.
The banks have accused the company of buying “bad stock” to inflate income and earnings.
Dick Smith went into voluntary administration in January 2016 after failing to secure a funds injection from its banks.
Litigation firm Investor Claim Partner (ICP) had been going through Dick Smith’s business records, including relevant insurance policies that it obtained through the Federal Court.
The firm’s chief executive and co-founder John Walker says more than $300 million in Dick Smith shares issued through the company’s 2013 prospectus are now worthless.
“The focus of the investigations has been on whether shareholders were misled by Dick Smith from the outset, and until its collapse, with key information regarding its true financial position being withheld or misrepresented,” he said.
He said ICP had looked into supplier rebates that allegedly inflated Dick Smith’s reported gross profit, margins and underlying earnings.
The class action is open to shareholders who purchased Dick Smith shares between November 25, 2013 and January 4, 2016.
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