Two lawyers who schemed to relieve Banksia debenture holders of a court payout by concocting an 'egregious and fraudulent' class action have declared bankruptcy after being ordered to pay millions in compensation.
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Former QC Norman O'Bryan and solicitor Michael Symons filed for bankruptcy after Justice John Dixon found they were liable as part of a gang of lawyers who devised a class action to enrich themselves by "intending to claim more than $19 million in purported legal costs and funding commission from the settlement sum in a group proceeding."
The move to file for bankruptcy will frustrate Banksia investors further, after years of complicated and slow legal manoeuvring by the lawyers' defence teams.
According to legal affairs website Lawyerly, none of the lawyers nor AFP have assets in their name to pay 'any significant portion of the $11.7 million awarded to group members or the costs of the proceeding, which total at least $10 million.'
"The special purpose receivers have sought confirmation from the lawyers' professional indemnity insurer, the Legal Practitioners' Liability Committee (LPLC), that it will grant them indemnity for the amounts owing. It is understood that the LPLC has so far paid $3 million on behalf of O'Bryan and Symons but the receivers could have a fight on their hands to recoup the whole judgment from the insurer," Lawyerly editor Christine Caulfield wrote.
Debenture holder advocate Keith Pitman said the to date LPLC solicitors have confirmed $3,0127,738.96, professional indemnity Insurance, will be paid: $1,558,191.39 on behalf of O'Bryan and $1,454,547.54 on behalf of Symons.
"But that is just under a half cent in the dollar - a long way short of the almost $20 million that Justice Dixon ordered," Mr Pitman said.
The lawyers - O'Bryan, Symons, Anthony Zita, Alex Elliott and the late Peter Trimbos - formed or were part of a litigation funder called Australian Funding Partners Limited (AFPL), along with another deceased solicitor, Mark Elliott.
As members of AFPL, the quinumvirate were found to have connived to win over a quarter of the Banksia Investors' likely settlement, in the realm of $20 million, through invoicing the applicants for greatly inflated fees, misleading judges and hiding conflicts of interest.
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In a scathing court judgement in October, the lawyers were found to have acted not only against their clients' interests, but to the detriment of of the law in Victoria.
"AFP, Alex Elliott, the lawyer parties and Mr Trimbos all sailed together as a flotilla throughout this litigation, until like flotsam they foundered on their misconduct and deception," lawyers for the Banksia investors said.
"They were a tight- knit group of scoundrels, working on numerous cases together over the eight-year period of this litigation."
Justice Dixon ordered the defendants to be either struck from, or show cause why they should not be struck from, the roll of legal practitioners in Victoria, and referred the reasons for judgement and the record of trial to the Director of Public Prosecutions.
Banksia Securities collapsed in October 2012, owing millions of dollars to investors, many of them retirees in regional and rural communities in Victoria, with a substantial number in Ballarat.
At the time of its collapse, Banksia owed approximately $663 million to approximately 15,622 debenture holders and had 956 loans outstanding to third party borrowers, totalling approximately $527 million.
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