Banksia litigation funder Australian Funding Partners destroyed records, has almost no assets

Compensation owed to Banksia Securities victims ripped off by high-flying silk Norman O’Bryan and class action lawyer Mark Elliott is unlikely to ever be distributed.

In October, the Victorian Supreme Court found the company and several lawyers had engaged in egregious conduct and operated a fraudulent scheme in an attempt to claim more than $19m in legal costs from the settlement in a class action against Banksia Securities. Picture: Getty Images

More than $11m in compensation owed to Banksia Securities victims ripped off by high-flying silk Norman O’Bryan and class action lawyer Mark Elliott is unlikely to ever be distributed after administrators of a now-defunct litigation funder suggested it be liquidated.

In a damning report lodged this month, the administrators of Australian Funding Partners said it was “presently uncertain if any amounts will be recoverable for creditors of the company”.

Cor Cordis administrators Rachel Burdett and Barry Wight said their investigations had concluded that the company’s former directors may have breached the law by trading while insolvent, the “possible failure to adequately maintain books and records” and failing in other unspecified duties.

“Our investigations indicate that some of the company’s relevant books and records, including internal and external email correspondence, were destroyed prior to the appointment of administrators,” they wrote in a report dated January 6.

In October, the Victorian Supreme Court found the company and several lawyers had engaged in egregious conduct and operated a fraudulent scheme in an attempt to claim more than $19m in legal costs from the settlement in a class action against Banksia Securities.

The company was ordered to pay $11.7m in compensation and entered administration.

Australian Funding Partners was run by high-profile class actions lawyer Mark Elliott – who died in a vehicle accident in February 2020 – and ran the class action with Mr O’Bryan and Michael Symons, a Melbourne barrister.

Banksia Securities, once one of the largest debentures firms, collapsed in October 2012, owing its 15,600 investors – many of them elderly – around $663m. Banksia liquidators Ferrier Hodgson later agreed to a $64m settlement.

Australian Funding Partners was alleged to have aimed to overcharge members, with agreements to take 30 per cent of any settlement reached on Banksia Securities. This would have seen it secure $19.3m in legal fees and commission from the settlement.

Investors objected to the massive payout, with a court later finding that the company had acted as a shell controlled by Mr Elliot, while key lawyers in the case had acted as conduits for him.

In finding against Australian Funding Partners and others connected with the class action, Victorian Supreme Court judge John Dixon said the lawyers had engaged in “egregious conduct”, describing the attempt to charge the victims “a fraudulent scheme”.

He said they had also waged a “campaign of intimidation” against the class action member who raised concerns about the commission and legal fees. “Mr O’Bryan and Mr Symons each contrived backdated costs agreements and invoices, to appear as if their fees were legitimately incurred.

“Each of them included hundreds of hours of time for work that had never been performed,” the court found.

Norman O’Bryan.

Justice Dixon also found Mr Elliot reverse-engineered Australian Funding Partners’s $5.2m in costs claims into “fee targets” that Mr O’Bryan, Mr Symonds and Anthony Zita met. Both Mr O’Bryan and Mr Symons filed for bankruptcy after that judgment.

The Cor Cordis report found Australian Funding Partners had net liabilities of $2m in 2019 – even before the decision – which rose to $2.1m in 2021.

It had not made regular profits, and accumulated trading losses of approximately $5.6m from 2015 to 2021. “Profits recorded in 2017 and 2020 are likely due to a number of expenses that were incurred however not paid,” the administrators write in their report.

“It is likely that large expenses were recorded in 2020, which were in relation to the Banksia matter that were not previously paid or recorded.”

In all, Cor Cordis estimates that the company has $173,000 in assets but owed creditors – almost all unsecured – more than $23.3m.

“We note that no assurance was provided regarding the following financial statements for the company and therefore the amounts specified … have not been verified for accuracy, reliability and completeness,” the report notes. “As we are still in the process of obtaining the books and records of the company, we have not made a determination regarding the accuracy of the company’s financial position and therefore there is a possibility of assets being overstated and liabilities being understated.”

Mr Elliott and Mr O’Bryan commenced proceedings against Banksia Securities debenture holders in November 2012, alleging that the trustee had failed to comply with its duties, including exercising reasonable diligence in determining whether the company had complied with the law and that it had sufficient assets to repay the value of the debentures as they fell due.

In astonishing proceedings, Mr O’Bryan – whose father and grandfather were both Supreme Court judges – told a court in August 2020 that he should be struck off the roll of legal practitioners.

“Mr O’Bryan seeks to convey and give some measure of effect to his contrition and his very deep regret at his actions and to do what he is now able to do to assist in these proceedings being brought to conclusion,” Mr O’Bryan’s barrister, David Batt QC, told the court.

Cor Cordis has recommended Australian Funding Partners be liquidated, and will investigate the affairs of its former directors.