What did directors know and when did they know is the question at the core of class actions by grower investors against MIS companies and directors.
The ABC website carried a story this past week Class action against agribusiness digs deeper about the closing stages of a class action against failed MIS company Great Southern which has been running for months and was due to hear closing argument in July. A further 10,000 documents” have been uncovered that provide further evidence that the company misled investors.”
The ABC report continued:
“In what is Australia's largest ever class action, more than 20,000 investors are seeking to recover their money following the $2 billion collapse of the company's managed investment schemes in 2009.
Justice Clyde Croft agreed on Friday to reopen the case and allow the possible re-examination of witnesses, based on the documents which relate to the yield the company hoped to achieve from its timber plantations.”
More detailed reports appeared in the AFR this weekend. Former general manager of forestry and director Gavin Ellis, described by the AFR as “a star witness” will claim he personally warned senior executives including Great Southern’s founder John Young that the predicted yields were flawed as early as 2002.
Mr Ellis has already told ASIC who is taking its own action against Mr Young and fellow directors. However ASIC is allegedly refusing to supply a transcript of this interview to the class action court hearing. Instead Mr Ellis will provide his own copy of the interview.
Mr Ellis was acutely aware it seems about the problems of crap yields and “that the board should understand this and indeed that the market should understand this because the knock-on effects of this are many and they’re large”.
Mr Ellis and Mr Young adjourned to a luncheon establishment in Perth’s Hay St. Mr Ellis indicated he wished to obtain legal advice about his dilemma. Instead it was agreed that he resign as director, according to the AFR.
The Great Southern Ponzi scheme ran for a further seven years.
Amongst the 10,000 documents, allegedly, is confirmation that the forecast yields were exaggerated, everyone in the senior ranks knew it, and improved silviculture would not bridge the gap between yield of existing schemes and the projected yields being fed to prospective investors.
The progress of class actions is extremely slow. Other related cases see interminable arguments about whether a document prepared for the defendant and now in the hands of a plaintiff following discovery and which confirms the misdeeds they allege can be admitted as evidence or can the defendant claim privilege? How ridiculous is that?
A related finding arising from the Willmott Forests class action will also slow down future class actions. Plaintiffs will have to provide security for some of the defendant’s costs should their case fail. Without a litigation funder class actions are much less likely.
However if the behaviour was as dodgy as apparently shown by Great Southern directors such funding may not be too hard to find.