Dixon Advisory files for voluntary administration as liabilities grow

Class actions representing the former clients of stricken wealth manager Dixon Advisory are in limbo after its owner, E&P Financial, placed it into administration.

PwC partners Stephen Longley and Craig Crosbie have been appointed as voluntary administrators.

Class actions representing the former clients of stricken wealth manager Dixon Advisory are in limbo after its owner, E&P Financial, placed it into administration.

In a statement, E&P said it had appointed PwC partners Stephen Longley and Craig Crosbie after determining “that mounting actual and potential liabilities mean it is likely to become insolvent at some future time”.

“Actual or potential liabilities include … possible damages arising from the representative proceedings led by Piper Alderman and Shine Lawyers,” E&P said.

The Australian Financial Complaints Authority is separately investigating Dixon Advisory while E&P has reached a deal with the Australian Securities & Investments Commission to pay the penalty handed to its subsidiary.

“The appointment of voluntary administrators to (Dixon) has become necessary in light of the increasing number of claims against (Dixon) and the potential associated financial liabilities,” said E&P chief executive Peter Anderson.

“It has also become apparent that settling individual claims as they arise will likely lead to inequalities between client creditors.”

The administration would ensure “all client creditors are treated equitably”, he said.

Shine Lawyers in December became the second law firm to lodge a claim against Dixon on behalf of former customers alleging the company had failed to comply with the Corporations Act and other regulations and had put its own interests ahead of its clients.

ASIC was also investigating Dixon over 126 alleged breaches by representatives providing advice, although it reached an agreement with the corporate regulator in July and agreed to pay $7.2m.

As part of the deal, Dixon admitted to having contravened the law on 53 occasions by failing to act in the best interest of clients in providing financial advice.

Dixon specifically was alleged to have had significant commercial interests in and received commissions for advising clients to place their savings into the US Masters Residential Fund, the Asian Masters Fund, the Cordish Dixon Private Equity Funds and other similar products.

E&P was previously known as Evans Dixon after the merger of Evans & Partners and Dixon Advisory in 2017. It listed on the ASX the following year at $2.50 per share – on Wednesday, shares closed 1c lower at 57c.

With Dixon in administration, class actions against the company must be given the written consent of PwC or the Federal Court.

“This means that, for the time being, the action against (Dixon) is automatically ‘stayed’ (in other words, on hold) until either the administrator or the Federal Court indicate otherwise,” the Shine Lawyers class action team told participants in the lawsuit.

“The class action brought against the three additional respondents (E&P Financial, Alan Dixon and Christopher Brown) remains unaffected by this announcement, and will continue to progress,” the notice reads. It is also being sued by Maurice Blackburn on behalf of a self-managed super fund which says it suffered a $883,000 loss because of the provision of poor advice.

E&P, which trades on the stock market, noted the voluntary administration process only related to Dixon Advisory and did not impact other companies within the group or their clients. “There is no recourse for (Dixon) liabilities to other entities within (E&P Financial Group),” it said.

The Melbourne-based wealth manager said it intended to present creditors with a “comprehensive settlement” to cover all claims made against Dixon Advisory.

E&P was working to facilitate the “prompt transfer” of Dixon Advisory clients to a replacement provider, it said.

The latest financial account lodged by Dixon Advisory shows it made a loss of $2.9m in the 2021 financial year, with revenues of $11m. That compared with a profit of $69,000 in 2020 off revenues of $16.7m in that period.

“The company notes recent developments since the end of the financial year in relation to the Covid-19 pandemic … whilst the Covid-19 pandemic to date has not significantly impacted the operations of the company (but) a definitive assessment of the future effects of these restrictions on the company cannot be made,” the accounts lodged with ASIC read.