Quintis Limited Class Action

ATTENTION: QUINTIS LIMITED SHAREHOLDERS

REGISTER FOR THE DAVIS CLASS ACTION

Quintis Limited

Davis Class Action

This is the online registration portal for group members of the Quintis Limited class action being conducted by Piper Alderman (the Davis Class Action) in the Federal Court of Australia (Federal Court) with funding from LCM Operations Pty Limited (LCM), a subsidiary of the listed litigation funder Litigation Capital Management Limited (AIM: LIT).

The Davis Class Action has been brought by Mr Geoffrey P Davis and Mr Geoffrey W Davis as the trustees of the G. P. Davis Superannuation Fund (Davis Applicants) on behalf of and seeking compensation for certain shareholders of Quintis Limited (Subject to a Deed of Company Arrangement) (Quintis) against Quintis, Frank Wilson (a director of Quintis) and Quintis’ auditors, Ernst & Young (EY).

The group members in the Davis Class Action are those shareholders who acquired Quintis (ASX: QIN) shares listed on the Australian Securities Exchange (ASX) at any time in the period 31 August 2015 to 15 May 2017 (Claim Period) and who suffered loss or damage by reason of the alleged conduct described below.

Please note, you are not eligible to participate in the Davis Class Action if you have been an officer or employee of Quintis.

A different class action seeking compensation for Quintis shareholders is being conducted by Gadens Lawyers. That class action has been brought by Excel Texel Pty. Limited (and another party) against Quintis and Mr Wilson (but not EY) (Excel Texel Class Action).  The Davis Class Action and Excel Texel Class Action are being case managed together in the Federal Court.

Opt Out

In July 2019, the Court issued Opt Out Notices to all persons fitting within the definition of group members in both the Davis Class Action and the Excel Texel Class Action which required group members to make a decision as to which of the two class actions they wished to participate in.

The Court ordered Opt Out deadline for group members concluded on 6 August 2019.

Those group members that are eligible and/or have chosen to participate in the Davis Class Action can, if they have not already, register their details using this portal. Please note, if you are planning to register on behalf of more than one person or entity using this portal, you will need to re-load your internet browser before submitting the second and any subsequent registration.

Claim

The Davis Applicants allege that during the Claim Period:

  1. Quintis and Mr Wilson made false or misleading statements and engaged in misleading or deceptive conduct within the meaning of sections 1041E and 1041H of the Corporations Act, and/or section 12DA of the Australian Securities and Investments Commission Act (ASIC Act), by overstating in the FY15 and FY16 Financial Reports the value of Quintis’ biological assets, its profit attributable to its recognition of certain establishment fees as revenue, and its recognition of optional annual fees as intangible assets. This had the effect of materially overstating Quintis’ assets and revenue; and
  2. EY made false or misleading statements and engaged in misleading or deceptive conduct within the meaning of sections 1041E and 1041H of the Corporations Act, and/or section 12DA of the ASIC Act, by issuing its FY15 and FY16 Audit Opinions, and representing that Quintis’ FY15 and FY16 Financial Reports did not materially misstate the value of Quintis’ biological assets, its profit attributable to its recognition of certain establishment fees as revenue, and its recognition of optional annual fees as intangible assets, which had the effect of overstating Quintis’ assets and profits.

The Davis Applicants allege that, if Quintis’ FY15 and FY16 Financial Reports had been properly audited, the real value of its shares would have been a fraction of what the market attributed to it. The Davis Applicants claim that they and the group members suffered loss as a result of these alleged contraventions because if the alleged misrepresentations had not been made, and the true value of Quintis’ securities had been known, they either would not have purchased ordinary shares in Quintis or would have paid much less for them. Quintis and Mr Wilson made representations regarding the financial position of Quintis in relation to the financial statements for FY15 and FY16 that were misleading or deceptive, or false or misleading, in breach of the Corporations Act and/or the ASIC Act, because the representations were untrue or without reasonable basis. It is also alleged that EY negligently conducted its audit of the financial statements for FY15 and FY16.

Update on the Proceedings

On 12 March 2020, the Davis Applicants and the applicants in the Excel Texel Class Action, together with their respective funders, agreed to a confidential settlement of the claims against Quintis (only) (Settlement). This Settlement was predicated on the basis that the entire sub-limit of the relevant insurance policy available to Quintis to meet any claims against it was AUD $10 million (Relevant Sub-Limit). The parties’ application for Court approval of the Settlement, originally listed for 7 May 2020, was adjourned following a review of certain subpoenaed documents indicating that the Relevant Sub-Limit of Quintis’ insurance policy may in fact be AUD $50 million, not AUD $10 million.

Accordingly, the Davis Applicants and the applicants in the Excel Texel Class Action initiated proceedings on behalf of Quintis, against certain Lloyds Underwriters, for the rectification of Quintis’ insurance policy to reflect a Relevant Sub-Limit of AUD $50 million (Rectification Proceedings).

The hearing of the Rectification Application concluded on 18 September 2020 and on 28 January 2021 and 6 April 2021 respectively, his Honour Justice Lee delivered his principal and further judgments in the Rectification Proceedings, which inter alia, found that the Applicants had succeeded in establishing that Quintis’ relevant insurance cover should be increased by AUD $11.25 million (Judgments).

On 4 May 2021, Piper Alderman received notice from the Solicitors for the Respondents in the Rectification Proceedings that appeals against his Honour Justice Lee’s Judgments had been lodged with the Federal Court by insurers:

  1. Argo Managing Agency Ltd for and on behalf of the underwriting members of Lloyd’s Syndicate 1200 (as subscribing underwriter to policy number B0507N16FA15360); and
  1. Vibe Syndicate Management Limited as managing agent for and on behalf of the underwriting members of Lloyd’s London Syndicate 5678 (as subscribing underwriters to Policy Number B0507N16FA15370),

(the Appeals).

Piper Alderman was instructed to act for the Respondents in the Appeals. Their Honours Chief Justice Allsop, Justice Middleton and Justice Yates heard the Appeals on 13 September 2021 and 14 September 2021, and on 19 May 2022, the Full Court of the Federal Court found for the insurers and overturned the original Judgments.

The practical effect of the Full Court’s decision on the Appeals is that the Relevant Sub-Limit of Quintis’ insurance cover is AUD $10 million (not AUD $21.25 million as found by Justice Lee), and the Settlement with Quintis can proceed.

A judge of the Federal Court will determine whether the Settlement is fair and reasonable.  That hearing will happen on 1 July 2022.  If the Settlement is approved by the Federal Court, the Davis Class Action will continue against Mr Wilson and EY, but will not continue against Quintis.

Mr Wilson and EY are scheduled to file their evidence in July and August 2022.  The Court has also ordered the Davis Applicants and the applicants in the Excel Texel Class Action to attend a mediation with Mr Wilson and EY, which is to occur by 7 October 2022.

The Davis Class Action, together with the Excel Texel Class Action are otherwise listed for a six week hearing commencing in February 2023.

Group members of the Davis Class Action will receive a notice approved by the Federal Court which provides further information in relation to both the approval of the Settlement with Quintis and the upcoming mediation with Mr Wilson and EY.  You can access the notice here.

Registration for the Davis Class Action

You are invited to register to participate in the Davis Class Action by submitting your contact information and details of your acquisition of Quintis shares in the Claim Period with Piper Alderman.

You will require the following information to complete the registration process:

  • An email account which you check regularly;
  • Details of your acquisition of Quintis shares in the Claim Period (together with any opening balance and any sale transactions made during the Claim Period); and
  • Details of your acquisition of Quintis Shares prior to 31 August 2015 and held during the Claim Period.

If you have any questions please contact us by email QINShareholder@piperalderman.com.au.

Piper Alderman and LCM have established policies and procedures for managing conflicts of interest, client confidentiality and privacy.  Any conflict of interest (actual, apparent, perceived or potential) will be notified to claimants in a timely manner.  Copies of the relevant Conflicts Policies can be provided upon request.

Please click the links to view the Piper Alderman Privacy Policy or LCM Operations Pty Ltd Privacy Policy.

Copies of documents relevant to the Davis Class Action can be downloaded via the following links:

Davis Applicants’ Second Further Amended Statement of Claim

Representative Proceeding Funding Agreement – Member – LCM Operations Pty Ltd (ACN 616 451 033)

Davis Applicants’ Settlement and Mediation Registration Notice

Register for the Davis Class Action by clicking here.