A UK-based litigation financing firm will handle three $152.4 million lawsuits against the former auditor, legal advisor and financial advisor of Cash Store Financial Services Inc., a Canadian payday lender that filed for creditor protection in 2014. Was.
Agusta Ventures has agreed to finance lawsuits against KPMG LLP, Cassell’s Brock & Blackwell LLP and Canaccord Genuity Corp for professional negligence and breach of contract, brought by a group of cash store creditors in 2015. KPMG was the cash store’s auditor from 2002 to 2014, during which period Casals was its legal advisor and Canaccord was its former financial advisor.
The lawsuits allege that the three firms failed to identify multiple red flags in the cash store’s business model and help it fix problems, including “material misrepresentations” about how the company financed its loans. .
Cash Store’s litigation trustee Bill Aziz explained that the lawsuits are intended to benefit creditors who “have been harmed because they advanced loans to the company in circumstances where there was a fundamental misstatement of Cash Store’s business model”. He owed creditors more than $130 million, plus 12 percent in annual interest, he said.
The Cash Store, which was located in Edmonton and had more than 500 Canadian locations, provided high-interest loans to mostly low-income people with bad credit scores. The company’s missteps eventually led to an Ontario court refusing to renew its license and its shares being delisted from the Toronto Stock Exchange.
“These lawsuits allege that KPMG, Castles Brock and Canaccord caused more than $100 million in damages to Cash Store and its creditors,” said Mr. Aziz, president of Bluetree Advisors Inc., which is based in Oakville. is a corporate restructuring advisory firm. , Ont.
“The funding for litigation that we have been able to secure ensures that the litigation against the defendant”[s] is fully funded and we can see through the trial to hold them accountable for their misconduct.”
KPMG, Cassels and Canaccord have filed relevant statements of defense in response to the lawsuits, with each party denying that it acted negligently and denying any breach. Duty for cash store.
“These multiple actions are a transparent attempt by disgruntled bondholders to retain reputable professional firms as a result of cash stores liable for losses. [company’s] Own mismanagement,” KPMG wrote in the statement in its defence.
Canaccord wrote that it did not advise Cash Stores on the acquisition of the loan portfolio issued in the statement of claim, adding that The claims against the firm were barred by a statute of limitations anyway.
Casals wrote in his defense statement that he never violated his duties of Cash Store, and that the law firm’s duties were limited to its client, and not Cash Store’s investors.
Mr. Aziz did not disclose Augusta’s total funding package, but said that if plaintiffs lose a case and must pay those costs, it will fund up to $8.5 million to pay defendant’s legal costs.
Mr. Aziz said, “We spent a lot of time working with Augusta and her lawyer to make sure they understood what was at issue here.” “Augusta Ventures is underwriting this because they think it has a good chance of success.”
Litigation funding is relatively new in the Canadian legal system. If the plaintiff’s claim is successful, bankroll lawsuits often get a settlement deduction. In proceedings under the Companies Creditor Arrangement Act, a potential litigation financing agreement must meet a number of conditions for it to be approved, such as the length of time the financing is required, and whether the financing will increase creditor returns.
Founded in 2013, Augusta has funded more than 250 cases in the UK, US, Australia, Asia and Canada, and provided more than $600 million in capital. Augusta’s Canadian office was established in 2019, and has an office in Toronto.
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