To fight for shareholders.

On behalf of Dick Smith shareholders, Bannister Law has commenced the legal process to a file a class action against the retailer in the Supreme Court of NSW.

Bannister Law’s class action will be underwritten by Vannin Capital, an international litigation funder with dispute funding capital up to US$500 million (A$658 million).

The claim filed alleges that Dick Smith contravened various provisions of the Corporations Act, including the continuous disclosure obligations. In essence, it is alleged that during 2015, Dick Smith made decisions about what stock to purchase based primarily on the rebates that could be obtained from suppliers rather than focusing on buying stock that customers actually wanted to buy.

This led to an increase in bad stock which could not be sold and an increase in debt. In November 2015, the retailer was forced to make an impairment of A$60 million of the bad stock.

The shareholders allege that Dick Smith was aware of the problem of the accumulation of the bad stock earlier in 2015 and that, in breach of its continuous disclosure obligations, it failed to advise the market of this fact.

It is also alleged that the retailer accounted for the rebates it received in a way that was not in accordance with the Australian Accounting Standards, the effect of which was artificially to inflate profits reported in its consolidated financial statements published in 2015, in contravention the Corporations Act.

Shareholders claim that during 2015 the share price was inflated as a result of the contraventions of the act and that they have suffered loss and damage as a result.

Vannin Capital’s Patrick Coope said, “Investigation suggests that shareholders have a very strong case. We are pleased to be funding the case as we think it important that the matter be vigorously pursued.”

Bannister Law founder and principal, Charles Bannister stated, “We have investigated and followed this matter since January 2016 and we are pleased to finally be in a position to make this application in order issue proceedings and to pursue shareholders losses. We are confident that our alliance with Vannin Capital will deliver results for shareholders.”

Dick Smith investor: “Something was clearly wrong”

Coffs Harbour resident Kris Pierce is a single father and runs his own horticulture business. He had been looking at Dick Smith Holdings for some time before he bought in. According to Pierce, the financial reports and store expansion program, coupled with the solid, well-respected Australian brand all suggested the retailer would be a sound investment.

“Although I’m only a casual investor, I still do my due diligence and study the markets every day,” Pierce said.

“I saw a few dips in the Dick Smith share price, but nothing in my research suggested that those dips were the beginning of the end for the company. For things to go so bad, so quickly after a positive financial report, something was clearly wrong. There were certainly no external factors that explain that rapid collapse,” he added.