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Velocity Rewards’ company secretary linked to Virgin class action
The investors behind a Virgin class action have said Velocity Rewards should be added because of the alleged role its company secretary played in the airline’s decision to raise $325 million.
Naomi Neilson
Virgin investors have successfully added Velocity Rewards to a class action brought against the airline over an alleged failure to reveal its true financial position before it entered voluntary administration.
This action, brought by law firm Corrs Chambers Westgarth and lead applicant Matheson Property Group (MPG), alleged the airline failed to disclose its actual financial position to investors in a November 2019 notes prospectus to raise $325 million.
Shortly afterwards, the COVID-19 pandemic reached Australia, and Virgin entered into voluntary administration with $5 billion in debts.
While joining Velocity would “somewhat expand and … complicate the issues” to be determined in the proceedings, Justice Michael Lee said MPG’s bid should be accepted because “there is at least a coherent basis” to assert Velocity was aware of the alleged omissions.
“There is no ‘smoking gun’ in the possession of MPG which demonstrates knowledge or falsity [by Velocity’s company secretary] or any other natural person or persons of representation (a fortiori omissions) that can be attributed to Virgin,” Justice Lee said.
“However, there are pleaded and particularised circumstances that MPG alleges inferences can be drawn to such knowledge.”
In submissions before the Federal Court, MPG alleged Velocity made its loan available to Virgin, regularly extended its maturity date and size of its facility, and permitted Virgin to treat the drawn and undrawn loan balance as part of its unrestricted cash.
MPG also alleged Velocity had “requisite knowledge” because it was aware of the terms of the loyalty trust deeds, the investment policy, Virgin’s “cash balance from month to month”, and the prospectus.
Further, the lead applicant alleged Velocity’s company secretary was also the company secretary of Virgin and attended board meetings where the treatment of the Velocity loan was discussed.
“Although it is possible to say that as presently articulated, the case is not a compelling one, it is not my place to speculate as to what the evidence may reveal,” Justice Lee said.
“Moreover, I do not consider, with my present state of knowledge, that I can be satisfied that the articulated case against Velocity has no reasonable prospect of success.”
The matter has been listed for a case management hearing in March 2025 with the intention to fix a hearing date.
Naomi Neilson
Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly.
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