The Supreme Court of Victoria has fired a broadside at the business model of one-man shareholder litigator Mark Elliott, arguing the former partner with Minter Ellison had likely set up his Melbourne City Investments (MCI) vehicle for the purpose of launching class action law suits to generate legal fees for himself.
The decision could have an impact on the ability of investors to bring shareholder class actions against corporations with the courts flooded in recent years with shareholder litigation to create a major headache for company directors.
However, the court yesterday did not grant the wishes of defendants Treasury Wine Estates and Leighton Holdings to throw out Mr Elliott’s class actions against them on the grounds of abuse of power, rather allowing the cases to proceed if Mr Elliott ceases to act for MCI, or MCI is replaced as the representative plaintiff.
MCI was set up by Mr Elliott, formerly a senior executive at Computershare. He quickly began scooping up small parcels of shares in more than 145 publicly listed companies, sometimes investing less than $700 in each company.
In 2013 MCI began separate shareholder class actions against Treasury Wine, Leighton and WorleyParsons, claiming failure to properly disclose price sensitive information related to profit downgrades as well as misleading or deceptive conduct.
Treasury and Leighton banded together to have their cases thrown out of court citing abuse of process. They said the case was brought against them for generating legal fees for Mr Elliott, who was the solicitor for MCI as well as its sole director.
‘‘I do not think that the proceedings are an abuse of process,’’ said Judge Anne Ferguson in her written decision.
‘‘I have however reached the conclusion that, unless Mr Elliott ceases to act for MCI in the proceedings or MCI is replaced as the representative plaintiff, Mr Elliott should be restrained from acting as the solicitor for MCI and the proceedings should not be permitted to continue as group proceedings.’’
Justice Ferguson said she agreed with the defendants' submissions that MCI was created by Mr Elliott to bring proceedings against listed companies and that as solicitor he would earn fees.
‘‘Although Mr Elliott was in court instructing during the hearing, he did not in his capacity as a director of MCI give any evidence in circumstances where the facts called out for explanation by him.’’
MCI was represented in court by Norman O’Bryan, SC.
But in a win for Mr Elliott Justice Ferguson said the class action was not an abuse of process nor oppressive simply because Mr Elliott is the sole shareholder and director of MCI as well as its lawyer.
A spokesman for Treasury Wine said the company welcomed Justice Ferguson’s judgment.
‘‘TWE has consistently maintained that the MCI case against the company is entirely without foundation and will continue to take all necessary action to vigorously defend is position in any legal proceedings,'' the spokesman said.
