IOOF class action dropped but legal woes remain

Global litigation giant Quinn Emanuel has scrapped its class action lawsuit against IOOF over alleged breaches of directors' duties, but separate proceedings against the wealth manager are ramping up.

In a statement to the Australian Securities Exchange on Monday, IOOF announced it had reached a settlement to end the Supreme Court of Australia case commenced by the Los Angeles-headquartered Quinn Emanuel Urquhart & Sullivan and bankrolled by litigation funder Regency.

The suit was filed in April 2019 on behalf of IOOF shareholders who allegedly sustained losses after misconduct and enforcement action by the Australian Prudential Regulation Authority was revealed at the Hayne royal commission and in media reports, wiping billions off the company's market value.

"The settlement requires court approval and the plaintiff has agreed to seek this approval at the earliest opportunity," the statement read.

"IOOF is making no payment to the plaintiff, its lawyers, its funder or any other class member as part of this settlement. IOOF is very pleased with the outcome."

Shares in IOOF rose 2.54 per cent to $4.44 on Monday following the settlement in the wealth manager's favour.

Quinn Emanuel partner Damian Scattini confirmed its proceedings against IOOF had been discontinued, blaming APRA's failed attempt at pinning directors' duty breaches on the company and having several of its executives disqualified from the financial services industry.

"The APRA proceeding was conducted in a surprising manner and it resulted in an unexpected outcome," Mr Scattini told The Australian Financial Review.

"Given the APRA decision, our client determined that it was no longer in the interests of group members to continue."

The Federal Court of Australia in October 2019 threw out APRA's lawsuit against IOOF, describing the regulator's case as "unpersuasive" and ordering it to pay costs. APRA did not appeal the decision.

'Small overlap'

However, Mr Scattini, a prominent plaintiff lawyer and former Maurice Blackburn partner, left the door open to further to litigation emerging out of the ashes of the collapsed suit.

"The settlement specifically allows any shareholder or former shareholder who wishes to do so to file a claim, whether individually or as a class," he said.

While the Quinn Emanuel action has been settled, a separate class action brought by local firm Shine Lawyers will go ahead, with a case management hearing scheduled in the courts on Thursday.

Shine class actions practice leader Craig Allsopp said he would not be deterred by Quinn Emanuel's withdrawal.

"Despite there being a small overlap, in terms of the claim period, between the class action Shine Lawyers has commenced against IOOF and the class action Quinn Emanuel has discontinued, the nature of each claim is actually very different," Mr Allsopp said.

"To our knowledge, Quinn Emanuel’s claim focused on undisclosed regulatory risk ... by contrast, the claim brought by Shine Lawyers is one of undisclosed business model risk, namely that IOOF failed to disclose that its business model was compromised in numerous material respect."

IOOF has restructured its superannuation trustee operations to ensure independence from the company's board since directors' duty breaches were alleged by APRA and the Hayne inquiry.