Shareholder class action filed over $750 million insurer's collapse
Rob Stock: Stuff 1 November
Lawyers taking a class action law suit seeking damages from the directors of failed $750 million insurer CBL have filed their statement of claim at the High Court in Wellington.
They allege wrongdoing by CBL's directors, including that the directors made misleading statements in the initial public offering (IPO) documents issued when the insurer listed on the NZX sharemarket.
They also allege breaches of continuous disclosure obligations and insider trading.
The directors of CBL, Peter Harris and Alistair Hutchison have blamed the Reserve Bank for the insurer's failure. They have been contacted for comment.
The CBL class action was being led by major shareholders Harbour and Argo Investments Limited, and was seeking compensation for "significant financial losses" shareholders suffered when the company collapsed in 2018.
At the time its shares were suspended from trading by NZX, the insurer was valued at around $750m, making its failure one of the biggest in New Zealand corporate history.
Andrew Bascand, chair of the CBL class action claim committee, said: "The claim alleges the directors of CBL are responsible for misleading statements in the IPO documents that, at the time the company listed on the NZX and ASX, it had adequate financial reserves to meet its insurance obligations.
"The claim also alleges that directors are responsible for the company failing to update the market in the period after the IPO with material information about CBL's financial position."
"The insider trading allegations in the statement of claim allege that directors Peter Harris and Alistair Hutchinson, through companies controlled by them, sold shares in CBL while they were in possession of material information relating to CBL that they knew was not available to the market generally."
"Shareholders globally lost hundreds of millions of dollars when CBL collapsed," Bascand said. "The directors must be held to account for their actions and shareholders compensated for their losses."
"We believe legal action is the only way investors in CBL can get any money back," he said.
CBL specialised in providing insurance to owners of new homes that would fix faults in new homes, and while it issued some policies in New Zealand, most of its insurance business was done in Europe.
Its collapse led to questions being asked about the Reserve Bank's capability as a regulator of insurance companies, prompting the regulator to pay for an independent review into its handling of CBL.
The report found the Reserve Bank, which regulates the insurance and banking industry, first had suspicions about CBL's financial strength in 2013 but lacked the resources, and experience to investigate and did not actively pursue its concerns until 2017.
The class action is being funded NZ litigation funding firm LPF Group.
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