Shareholder Claims Management
ICP claim management services include:
- Monitoring the ASX to identify potential claims.
- Conducting forensic enquiries and briefing to obtain independent economic and legal opinion.
- Enrolling lawyers, ICP Capital and any insurer to provide the legal and financial services.
- Bookbuilding claims to create commercial viability and collective bargaining capabilities.
- Confidentially collating, storing and using information obtained from claimants to progress the claim.
- Considering the lawyers’ advice and providing day to day instructions, including assisting in the selection of counsel and experts.
- Communicating with the financial service providers and respondent company.
- Facilitating information about the claims to be provided to the respondent company at the earliest possible time in order to promote timely settlement of the claims.
- Assisting in settlement discussions or other ADR processes.
- Facilitating any disclosure to, or by, ICP’s clients required for court approval of any settlement.
- Facilitating reports to ICP’s clients every three months on the progress of the claims and particularly on material developments.
- Monitoring and reviewing the lawyer’s costs against budgets.
These services are all provided for 3% of Claim Proceeds, if any.
Monitoring and Identification
ICP monitors Australian Securities Exchange (ASX) announcements, trading data, analyst reports etc to identify potential continuous disclosure breaches or misleading and deceptive conduct that may have caused material losses to investment managers.
Three Primary Claim Criteria are integral to the assessment of the viability of claims:
- identification of information, material to the price or value of the relevant securities not disclosed when first made available to the Company or misrepresented when published (the “Information”);
- the period from when the Information was first available to the Company (and was not disclosed or was misrepresented) to the date of disclosure (the “Period”); and
- an estimate of the price at which the securities would have traded at during the Period had the Information been disclosed when the Information was first available to the Company; thereby enabling an estimate of the inflation in the price of the securities caused by the breach (the “Inflation”).
In addition, potential claims are identified by reference to:
- the extent and sophistication of analyst coverage (evidence of an efficient market in the securities concerned and a reality test regarding the materiality of the Information and the attitude of the market to the surprise announcement);
- the likely depth and complexity of the forensic inquiry to prove the contravention and the causally connected loss (relevant to liability and project risks);
- the market reaction to the alleged misconduct (including drops in prices of securities by more than fifteen percent with drops in market capitalisation of more than $100m), which may be judged on a spectrum from careless to heinous (relevant to proving liability and claimant opt in);
- the likely cost and duration of the claim;
- the likelihood of satisfactory legal advice, expert opinion/s and suitability of:
- the terms of the lawyer’s retainer;
- the funding agreement; and
- any adverse cost order cover; and
- the Company’s market capitalisation and likely insurance (evidence of the Company’s capacity to pay).
Initial Commercial Assessment
Once the monitoring process identifies a potential claim, the relevant quantative and qualitative data is analysed to determine whether:
- the Information is sufficiently defined and likely to be causative of the drop, or a material component of the drop;
- the Period is likely to prove, after forensic inquiry, to be of a duration to make any claim commercially viable; and
- the potential quantum of the total claim is sufficient. Reference is made to the Inflation and the number of securities purchased in the Period that are likely to be held until the end of the Period by investors who are likely to claim (“Initial Commercial Assessment”).
If the Initial Commercial Assessment is negative, ICP will:
- identify the Primary Claim Criteria which are relied upon to reject the potential claim at the Initial Commercial Assessment stage; and
- may include overview reporting on market shocks that have not been the subject of due diligence in periodic reports to ICP Clients.
The Due Diligence Phase
If the Initial Commercial Assessment is positive, a report is drafted by ICP addressing the commercial claim criteria (the “Forensic Report”).
The Forensic Report is then provided to:
- a regression analyst to obtain initial independent expert opinion on Information, causation, period and/or Inflation; and
- a senior counsel, experienced and skilled in securities litigation, as part of a brief to provide advice on the merits of the claim (the “Merit Opinions”).
If and only if the Forensic Report and Merit Opinions are positive will ICP recommend to investment managers that they consider joining with other investment managers to claim compensation for their losses.
If due diligence confirms the likelihood of the claim being legally and commercially viable, a summary of the due diligence outcomes may be provided to investment managers in a confidential communication. This will be accompanied by an offer to estimate the value of their individual claims and a request to commit to making the claim.
This commitment is essential in creating sufficient certainty that the Company has a commercially viable claim to commence.
If there is sufficient commitment from investment managers, investment managers with the greatest losses may be asked to form a committee of claimants, to provide instructions in respect of the common issues of fact and law and any settlement opportunities along with the Representative Party.
Finalization of the Bookbuild
Once the claim has been identified and analysed and there is receipt of the Forensic Report, legal advice, expert opinion, budget and suitable Investor Claim Agreements, the bookbuild phase seeks unconditional support from sufficient claimants to create commercial viability for the claim.
ICP will provide potential claimants with the claim proposal that may include a summary of the Forensic Report and Merit Opinions and the draft Investor Claim Agreements.
Investment managers will decide whether they will execute the Investor Claim Agreements and provide their relevant trading history if they have not already done so.
If there is sufficient claim value, covered by executed Investor Claim Agreements to make litigation commercially viable, then the pre litigation phase will commence. In this way, investment managers collectively determine whether the claim will proceed.
Opt in funded class action litigation shifts case selection from lawyers and funders to the Claimants. In doing so the underlying policy objectives of the market protection legislation (deterrence of prohibited behaviour, effective enforcement of statutory norms and compensation for those harmed) are given effect. In a real sense, the market chooses the class actions that will proceed.
The Pre Litigation Phase
It is in all parties interests, including the Company the object of the claim to seek to resolve shareholder claims as efficiently as possible.
A letter will be sent by the Claimants’ Solicitors to the Company particularising the claim including:
- a description of the Information, Period and Inflation;
- the essence of the Forensic Report and Merit Opinions;
- a summary of the total volumes and value of the trading of Claimants; and
- material specific to the particular Company to enhance management communication with its board, insurer, shareholders and lawyers.
If the Company is prepared to discuss the claim, a Confidentiality Deed will be executed to enable protected disclosure by both parties to:
- assess the materiality of the Information;
- identify the companies’ awareness of the Information; and
- quantify the Inflation.
This will enable the Committee, after receipt of further counsel’s advice and expert opinion relevant to the claim’s value, to provide informed instructions in any negotiation.
Similarly, the Company will have the benefit of the Trade Data of Claimants, to enable it to be informed of the total value of the claims.
The Claimants and the Company will, no doubt, state different views concerning the value of the claims, but at least each will be armed with sufficient information to either settle the claim or litigate.
The Litigation Phase
If the claim is not settled pre-litigation, then a final bookbuild will be conducted to:
- enhance the claim’s value;
- ensure an appropriate representative applicant is enrolled; and
- minimise the possibility of a competing claim.
A committee if formed, with the assistance of ICP, will provide the solicitors with instructions to prosecute the claims to maximize the net present value of any settlement or judgement proceeds.