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Case Study

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Lawyer vs Lawyer – Class Action

LAWYER V LAWYER – CLASS ACTION 2016

Reports have emerged in the media this week that two of Australia’s biggest law firms are set to go head to head in a class action. Maurice Blackburn is set to file against Slater & Gordon who in 2007 became the first law firm in the world to list on the stock exchange.

The proposed class action is a result of Slater & Gordon recently announcing half year losses of $958 million dollars after its board took the decision to write down the value of the firm’s United Kingdom assets which have taken a significant fall in value since they were acquired recently.

Slater & Gordon is accused of misleading shareholders as to the financial health of the company. In essence, information put out by Slater & Gordon in November 2015 indicated that the business was travelling well and the company was in good shape. Some three months later however the company is reporting massive losses which has resulted in a plummeting share price and huge losses to wealthy shareholders and mum and dad investors alike.

There is no specific evidence yet of any of Slater & Gordon’s directors breaching their duties under the Corporations Act however this case does highlight that running a business via a company structure does have with it important rules that directors must follow including:

  • Taking adequate care in exercising your powers as a director in running the company;
  • Acting in the best interests of the company;
  • Not improperly using your position to gain an advantage for yourself or someone else;
  • Preventing the improper use of information obtained through your position to gain an advantage for yourself or someone else;
  • A duty not to trade while insolvent;
  • A duty to keep adequate financial records that clearly record and explain transactions and the company’s financial position.

In essence, the Corporations Act requires directors of companies to act in a manner that is beneficial to the company and does not seek to cause any detriment or loss to the company. These obligations extend to misleading shareholders who usually make their investment decisions based on the information the company provides to them about its financial performance.
It remains to be seen who will stand victorious as two of Australia’s legal juggernauts come up against each other in what will be one of the most expensive, hard fought and publicised legal battles of recent times.

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Case Study: Dying Without a Will

The Surry Hills property of an elderly woman whose body lay undiscovered for some 8 years after her passing has been determined by the Supreme Court of New South Wales to rightfully belong to her sister-in-law. This is despite the fact that the deceased died leaving a number of blood relatives behind.

The decision by the Supreme Court may surprise some on the surface, however it is a decision that makes legal sense.

A Coronial Enquiry found that the deceased, Ms Wood, died at the age of 86 in the year 2004. Despite the fact that her body was not found until 2011, the law dictates that where a person dies without a Will the question of who is entitled to their estate is to be determined as at the date of the person’s death.

As at the year 2004 (when Ms Wood died) Ms Wood had no spouse, children or parents surviving her and only one remaining sibling.  The laws that govern what happens when someone dies without a will dictate that her surviving sibling became the person entitled to her estate immediately upon Ms Woods’ death.  What makes this case interesting is that the said sibling died after Ms Wood’s passing 2004 but before her body was discovered in 2011. The issue of contention amongst family members is the fact that this did not extinguish his entitlement. As he was entitled to Ms Wood’s estate at the date of his death, it follows that the beneficiary of his estate (being his wife/Ms Wood’s sister-in-law) became the indirect beneficiary of Ms Wood’s estate as well.

The decision of the Supreme Court has left many members of Ms Wood’s family who are related to her by blood outraged that her estate has passed to someone who was related to the deceased only by marriage.

While the circumstances surrounding Ms Woods’ death are disturbing, the lesson is that had she written a Will before her passing then her estate would have ended up in the hands of someone other than a sister-in-law with whom she had little contact (such as a blood relative).

Ms Wood’s estate was made up of her Surry Hills home which is expected to fetch $1.2million at auction.