An Australia-based litigation funder and local law firm Glaister Ennor are about to launch a class action on behalf of CBL Corp's shareholders, claiming failure to observe disclosure rules from the time of the initial public offering in September 2015.
CBL's shares were suspended from trading on both the NZX and ASX in February last year after the company revealed the Reserve Bank had been questioning its solvency for some time, certainly since July 2017, but that it had been bound by the central bank's confidentiality order from telling the market any earlier.
CBL and its subsidiaries have since gone into liquidation.
CBL shares last traded at $3.17 on NZX before they were suspended, valuing the company at $747.4 million.
ASX-listed IMF Bentham has agreed to fund the litigation against CBL Corp and says it has support from a number of CBL's institutional investors, although it won't name them. It is now looking for retail shareholders to sign onto its action. 
IMF Bentham investment manager Gavin Beardsell says the amount sought will depend on how many shareholders sign onto the action, the extent of their shareholdings, and the amount the courts deem they have lost.
“It would be safe to say it would be tens of millions of dollars.”
CBL had 1,071 shareholders as at Jan. 31, 2017, according to its last filed annual report. 
The last substantial shareholder notice filed by the largest institutional shareholder, Harbour Asset Management, in January 2018 showed it owned almost 17.3 million shares, or 7.3 percent of the company.
Companies Office records show that at Jan. 12, 2018, ACC owned nearly 10.2 million shares, or 4.3 percent, while Forsyth Barr Custodians held about 7.5 million shares, or 3.2 percent.
The 2015 float raised $125.3 million with 80.9 million shares sold at $1.55 each.
The first liquidators' report filed in June by Neale Jackson and Brendon Gibson of KordaMentha estimated CBL owed preferential creditors $566,766, secured creditors $6.6 million and unsecured creditors $172.8 million, including intercompany liabilities of $26.2 million.
They said they were unable to reliably estimate CBL's assets but that the amount that could be recovered from the subsidiaries would be a key driver and two of the largest subsidiaries were under the control of other insolvency officials.           
Beardsell says the litigation will proceed either with the liquidators' consent or, failing that, Glaister Ennor will apply to the New Zealand High Court for leave to proceed against the company in liquidation.
“If we're successful, we anticipate there will be insurance to pay any settlement or judgment,” he says.
“We don't know who the insurer is and we intend to take steps at an early stage” to find out.
He expects a statement of claim will be filed by the beginning of November.
Glaister Ennor managing partner Jack Porus and his fellow partner Mitch Singh will be the solicitors representing the shareholders and they have engaged Philip Skelton, QC, as their barrister.
Skelton has been arguing the class action against Southern Response on behalf of Brendan and Colleen Ross, who are represented by solicitor Grant Cameron of GCA Lawyers.
Last month, the Court of Appeal ruled that that case could proceed on an “opt-out” basis, meaning all the more than 3,000 people in the same position as the Ross couple are automatically included unless they actively opt out.
That's the first time a New Zealand court has allowed an opt-out case and, if the Ross couple are successful, it will still require an “opt-in” process to decide how much individual claimants are entitled to.
However, the CBL case is being taken on an “opt-in” basis, meaning only those shareholders who sign up to the suit will be entitled to any settlement or judgment.
Beardsell says that's because New Zealand doesn't have “common fund orders,” the type of orders Australian courts generally make in successful class action cases.
All the Australian class action cases to date have settled out of court but settlements are still overseen by the courts.
By proceeding on an opt-in basis, “you know when you commence a proceeding that you've already got sufficient sign-ups to make it commercially viable. It removes the uncertainty that there currently is in relation to common fund orders,” Beardsell says.
One of CBL's likely defences will be the RBNZ confidentiality order but the claim goes back much further than that to the IPO, he says.
The Financial Markets Conduct Act 2013's disclosure requirements is the particular law the case is based on. The claim will be that the shareholders suffered loss and damage as a result of the company's failure to abide by the act, particularly by failing to keep shareholders properly informed about its French builders' insurance business.
Beardsell says there may be causes of action against RBNZ and/or the Financial Markets Authority – it became aware of the CBL situation in 2017 – and against CBL's directors, but they're not included in the action because “the short answer is we don't need to” include them.
“It may be that there's also some fault by the regulators, but there's no need for investors to complicate their claims at increased cost,” he says.
“The listed company had the statutory obligation of disclosure at the time of the IPO” and subsequently.
One or more of the directors may be liable, “but if the company's liable, that's all we need to establish.”
Beardsell says he can't say what percentage of any settlement or judgment his firm will collect if the suit succeeds but that will depend on how long the case takes and the fees his firm incurs in the meantime.
IMF Bentham claims an 89 percent success rate across 192 completed cases over the past 17 years and Beardsell says claimants have received more than 50 percent of the proceeds.
But without a funder such as IMF Bentham, it is unlikely such a case would proceed.
“Typically, even institutional investors don't have any appetite to pursue their own proceedings.”