Dick Smith class action approved by Supreme Court of NSW

Bannister Law has been granted leave to launch class action against Dick Smith on behalf of shareholders in the Supreme Court of NSW.

The law firm alleges that Dick Smith's half-year and full-year financial results from 2015 were misleading and deceptive because they didn't give a "true and fair" view of the failed retailer's true financial position.

Allegations stem from investigations into Dick Smith's buying practices, where creditors claim that its former directors made purchasing decisions in order to maximise rebates, which artificially inflated profits. Shareholders claim that shares were also inflated as a result of these "misleading" financial reports.

Principal lawyer Charles Bannister said the recent Supreme Court ruling was a win for shareholders, who could have been burned for potentially tens of millions of dollars.

“Thousands of shareholders have lost tens of millions because, we allege, DSHE contravened provisions of the Corporations Act, including by engaging in misleading or deceptive conduct on various occasions throughout 2015 in relation to DSHE shares," he said.

"The court’s ruling today is great news for those shareholders. Had the court denied leave, our case was over before it really began. We already have hundreds of registrants whom purchased shares within the relevant period of 16 February 2015 to 31 December 2015 and suffered loss due to the alleged misconduct of DSHE.”

Bannister's class action may end up competing with claims from Dick Smith's other creditors. Dick Smith's largest creditors, NAB and HSBC banks are estimated to be owed $140 million, and are represented by Dick Smith's liquidators Ferrier Hodgson. The Supreme Court ruled in May that the banks' claims could potentially compete with shareholder class actions, and that it would be first-come-first-served for each party to get their hands on compensation.

Another class action led by Investor Claim Partner said it was close to launching in May on behalf of shareholders. The ICP investigation focused on whether shareholders were misled from Dick Smith's 2013 prospectus up until it collapsed in 2016, and whether the company's true financial position was withheld.

Dick Smith fell into administration in January 2016 with approximately $400 million in debt - $260 million of which from unsecured creditors.