28 Sep 2017, Courier Mail, Brisbane, Business News, Liam Walsh
BRISBANE-based class action firm Shine Corporate has itself become the target of a lawsuit from disgruntled shareholders.
The claim potentially worth tens of millions of dollars has been filed against Shine due to the collapse of profits in the legal outfit in 2016.
Shine told the stockmarket that “the matter will be vigorously defended”, but did not responded to The Courier-Mail queries. Its shares dropped 9 to 62 yesterday.
The lawsuit was filed on Tuesday in Queensland’s Supreme Court by US-based Quinn Emanuel Urquhart and Sullivan. It marks the latest in such class-action lawsuits legal firm Maurice Blackburn recently settled its shareholder case on behalf of client investors against rival Slater and Gordon for $36.5 million.
It also is another example of class action lawsuits taking place in Queensland following State legislative reforms this year.
“We chose Queensland because a) Shine is based in Queensland, b) the Supreme Court of Queensland now … has the capacity to hear and determine class actions, and c) as a Queenslander myself, I prefer to see the Queensland courts preside over matters that arise in its backyard,” said Quinn Emanuel’s Damian Scattini.
Shine is a 41-year-old firm started in Toowoomba that specialises in personal injury claims. Listed on the stock market in 2013, Shine pitches itself as fighting for the underdog – it even recruited high-profile US legal activist Erin Brockovich as a spokeswoman.
Shine itself has flagged class actions against the Defence Department over contamination at Oakey in Queensland and Malaysian Airlines over the shooting down of aircraft MH17. Quinn Emanuel’s lawsuit targets Shine’s revelation in 2016 that previous profit guidance would be cut heavily.
Shine had earlier forecast earnings (before interest, tax, depreciation and amortisation) of between $52 million to $56 million for fiscal 2016. On January 29, 2016, the company cut that forecast to be between $24 million and $28 million.
One factor Shine blamed was a fall in how much money could be recovered from files what’s known as “work in progress”. A more aggressive approach to writing down the value of work in progress reduces profits.
The lawsuit includes an argument that Shine either knew or should have known far earlier about problems in how much work in progress could actually be recovered. “The extent to which (work in progress) was recoverable was a key risk to Shine Corporate’s revenue and profit,” the pleading states.
But it argues that statements from Shine about work in progress were “misleading and deceptive” and “not based on actuarial methodology”.