Recently, an open class action was filed against Australian catering and hospitality services company Spotless Group Holdings Limited. Other firms have or are considering filing suit. This means that all affected investors are included and will be bound by the court’s decision unless they formally opt out or exclude themselves from the class. Any funds made available in an opt-out case are only distributed to investors who file proof-of-claim forms.
The action alleges that Spotless breached its continuous disclosure obligations and engaged in misleading or deceptive conduct concerning its 2015 financial results by adopting a change in accounting policy, which it failed to disclose in accordance with governing accounting standards. Shares fell more than 40% to $1.33 in December 2015 when the company issued an earnings downgrade.
AUSTRALIAN CLASS ACTIONS
FRT is seeing more instances of organizers filing open classes, or converting closed classes to open proceedings, where all investors during the relevant time period are included, not just those registering in advance. This follows earlier closed class filings where competing organizers announced parallel investigations, solicited investors to join their actions rather than others, and then contested each other for leadership positions in court, similar to the US.
The open class filing in Spotless shows Australia is moving further towards U.S.-style opt-out securities litigation.