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).

Orders for filing claimant evidence by September have been made in both class actions and class closure orders in the Mastoris Claim will be sought to enable an envisaged mediation of all four claims to proceed later in 2018.

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