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Appeal of failed CommBank shareholder class action begins
Counsel for Commonwealth Bank’s shareholders has claimed the Federal Court got it wrong when it dismissed a class action over its alleged failures to comply with anti-money laundering obligations.
Naomi Neilson
Earlier this year, Justice David Yates shut down a class action that alleged the Commonwealth Bank of Australia (CBA) did not correct defective cleansing notices between June 2014 and August 2017 and then traded its shares at an “artificially inflated price”.
They alleged CBA had information about these contraventions but failed to disclose them on the Australian Securities Exchange (ASX).
Justice Yates said he was not satisfied the ASX listing rules required CBA to disclose that information to the market.
“More generally, I am not satisfied that the information, in any of its pleaded forms, was information that a reasonable person would expect to have a material effect on the price or value of CBA shares if that information were to have been generally available at the relevantly pleaded times,” Justice Yates said.
Appearing before the appeal bench on Monday (18 November), counsel for the class action said it was wrong of Justice Yates to find its pleaded information was artificial and that it would have been misleading if the disclosures were released to the market.
The counsel said that with the “very close” resemblance between the way AUSTRAC summarised the allegations and the case in the class action, it was “pretty hard to think of a clearer case where the substance of the material said to be required to be disclosed has been captured in the pleading, which is the requirement”.
The class action also alleged the judge was wrong to find there were no known consequences for Commonwealth Bank’s failure to conduct a risk assessment because this requirement was “central”.
Further, the class action took issue with the finding that the broker, Goldman Sachs, would not take any view of the outcome of the proceedings, because it had admitted there could be “significant implications” for the bank, “including value and price of shares”.
Counsel added that prior to the money laundering allegations, CBA’s investors believed it to have an “excellent reputation” that made the bank “one of the leading, safe and reliable companies in Australia”.
However, 50,000 alleged contraventions later and the investors’ trust in Commonwealth Bank was “destabilised”.
“The Commonwealth Bank could no longer be described as a company that had an excellent compliance with the law, [and] it was now a company shown – even if not deliberately – to be responsible for the largest breaches of these legislations in Australia’s history,” the counsel said.
CBA will outline their position later in the week.
Naomi Neilson
Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly.
You can email Naomi at:
