National Australia Bank Ltd., whose shareholders are seeking A$450 million ($472 million) of damages over its exposure to U.S. subprime debt, lost a bid to have the identities of the group members disclosed.
A three-judge panel of the Supreme Court of Victoria in Melbourne today dismissed the bank’s appeal of a lower judge’s decision denying its request that 20 of the biggest shareholders involved in the lawsuit be identified.
“The group members (in this case, the market participants) usually play a passive role and discovery orders are not made against them,” Justice Kevin Bell wrote on behalf of the panel. “It was open to his honour to decide that the bank had not established sufficient grounds for departing from the usual course.”
The shareholders sued in November 2010 to recoup money they claim was lost as the bank’s stock declined because of its investments in U.S. subprime debt in 2008. National Australia Bank failed to disclose the risk of losses from subprime mortgages, Andrew Watson, an attorney at Maurice Blackburn Lawyers who represents the shareholders, said when the lawsuit was filed.
Watson said today disclosing the shareholders’ names would complicate the process, which a class-action lawsuit is intended to streamline. In a class-action suit, one plaintiff represents the group and common issues are identified. The representative plaintiff can be questioned by the defendant before a trial in what is known as discovery.
“Instead of discovery for one person, you might have discovery for 30” if the identities were disclosed, Watson said in a phone interview. “You would lose all the benefits of a class action.”
The trial is scheduled to begin in December.
Sharna Rhys-Jones, a spokeswoman for National Australia Bank, said it would defend the claim.
Shares of the bank fell 36 percent from July 24, 2008, to Sept. 18, 2008, after the Melbourne-based lender boosted provisions for its exposure to U.S. subprime mortgages to A$1 billion from A$181 million in early May of that year. The bank held A$1.2 billion of collateralized debt obligations, structured debt securities that are backed by bonds or loans.
The U.S. subprime-mortgage market collapsed in 2007, triggering a global financial crisis.
About 250 shareholders, including institutions, signed up for the lawsuit.
The case is Between Pathway Investments Ltd. and National Australia Bank Ltd. (NAB) SCL2010-6249. Supreme Court of Victoria (Melbourne).
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