Class Action – Dick Smith Holdings

ICP, which is uniquely focused exclusively on ASX shareholder claims, is proposing a shareholder class action to be run by Johnson Winter Slattery on behalf of aggrieved Dick Smith investors who suffered losses due to alleged breaches of disclosure obligations and misleading and deceptive conduct, subject to sufficient interest from affected Dick Smith shareholders and the satisfactory completion of investigations.

Background to the allegations

ICP has had the assistance of Johnson Winter Slattery (JWS), together with a forensic accountant and econometrics expert, to review public information to assess whether there is a shareholder claim emanating as far back as the Dick Smith (DSH) Prospectus.

ICP Capital funded JWS to file a claim in the Federal Court seeking orders that the liquidator of DSH to provide business records including insurance and stock/rebate records to ICP’s client in accordance with sections 247(A) (i) and 486 of the Corporations Act relevant to ICP’s suspicion that DSH made representations in its Prospectus, and at various times in the period from its listing on the ASX until the appointment of Administrators, which gave a false impression to the market about the financial position of DSH and the value of DSH shares.

These representations arose, at least in part, by virtue of:

  • DSH accounting for provisions and supplier rebates in a manner which appears to have inflated its gross profit, gross margin, net profit and EBITDA and NPAT;
  • DSH apparently failing to adequately adjust the carrying value of inventories to recognise net realisable write-downs; and
  • DSH presenting in its Prospectus historical financial information for the 2011 – 2013 years, which overstated the value of assets and equity available to ensure its expansionary business plan would be possible.

Leave to proceed with the class action was granted by the Supreme Court of NSW on 9 February 2018 (Judgment).

Since then, orders have been obtained for four related proceedings to be heard together in September 2019, being:

  • a claim by the bankers to DSH;
  • a claim by DSH against its directors;
  • a class action funded by ICP Capital (the Mastoris Claim); and
  • a class action funded by Vannin (the Findlay Claim).

On 20 August 2018 Ball J made the following orders:

  • The parties are directed to attend a mediation.
  • 8 October 2018 (the Class Deadline) be fixed as the date on or before which a Group Member may opt-out. (Completed).
  • Any Group member who wishes to participate in any distribution of any amount agreed in an inprinciple settlement at the mediation of either of the class actions by 10 February must register their interest before 8 October 2018. (Completed)
  • Nothing in these orders precludes any Group Member who has not registered from having their claims in relation to a Dick Smith Proceeding considered at any mediation or settlement that takes place at some future time, if no in-principle settlement of that particular Dick Smith Proceeding is reached by 10 February 2018.
  • The plaintiffs in the Mastoris and Findlay class actions have until:
  1. 24 September 2018 to file any expert accounting evidence. (Filed)
  2. 12 October 2018 to file any other expert evidence. (Filed)

The defendants are ordered to serve all evidence on which they rely together (including evidence in chief in relation to any cross-claim) with a provisional list of documents to be tendered by 22 February 2019.

The claims are next before the Court on Friday 1 March 2019.