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Victory: November 2015: Voluntary Dismissal of $600 Million Claim

November 2015

In 2014, Australia’s largest bank, Commonwealth Bank of Australia, (CBA) commenced proceedings in the NSW Supreme Court over one of Australia’s largest corporate collapses during the global financial crisis – ABC Learning Centres Limited. The suit was against the liquidators of the company as well as its auditors, directors and officers – four of which were Quinn Emanuel clients. The claim was commenced a week before the expiry of the statutory limitation period and at a time when most of the available insurance had been eroded by past claims and regulatory investigations. The Bank’s solicitors (Jones Day) had been working up the case for some months and already had a copy of our client’s insurance policy.

Years earlier, CBA had agreed to underwrite the offering of $600 million worth of notes; only $150 million of which were eventually purchased by investors. The claims alleged that the defendants engaged in misleading or deceptive conduct, by providing declarations as to the company’s financial position and auditing compliance. However, CBA had long been a company advisor and was intimately involved in due diligence processes for the underwriting. Further, our clients had been advised by auditors in respect of those. In short, the claims were plagued with problems from the start.

The Quinn Emanuel team in Sydney – Michael Mills, Michelle Fox, Penelope Abdiel and Thomas Brebner – identified major deficiencies in the pleadings and brought a strike-out application (a very rarely-used form of motion to dismiss, because of its high burden) against the Bank. CBA was forced to amend its pleadings four subsequent times over and then defend against the application for two hearing days in Court.

The Bank survived the strike out (as procedurally it should always have done) but on such a restricted basis, that it then sued for peace; or the legal equivalent - mediation. The Bank insisted that any settlement had to be accompanied by a full statutory declaration listing our clients’ (and others’) personal assets and wealth. The Quinn Emanuel team refused and conveyed our position that, on that basis, there would be no mediation and we should proceed to an expedited trial. Eventually the Bank conceded on this and at the mediation the matter was fully (and confidentially) resolved on terms very favorable to our clients. Needless to say, they are thrilled, as is their insurer.