CLASS ACTION TO BE LAUNCHED AGAINST MCMILLAN SHAKESPEARE OVER 'WORTHLESS' VEHICLE WARRANTIES
Written on the 19 June 2017 by Ben Hall
AN $80 million class action will be launched against McMillan Shakespeare Group (ASX: MMS) over claims it issued "worthless" warranties to tens of thousands of customers who bought used cars and trucks from the company.
Global litigation funder Vannin Capital has engaged leading law firm Quinn Emanuel Urquhart and Sullivan to file the class action against National Warranty Company (NWC), a subsidiary of ASX listed company McMillan Shakespeare.
"NWC over many years has charged consumers thousands of dollars each for a 'warranty' which obliges NWC to do nothing more than consider the claim," says Quinn Emanuel Partner Damian Scattini.
"Whether or not they pay anything is entirely at NWC's discretion, and guess which way they usually decide, against the consumer.
"It is astonishing that a product like this has been on the market for so long."
The open class claim against McMillan Shakespeare will be filed shortly and will allege the products breached provisions of the Australian Consumer Law, among other things.
The company is Australia's largest provider of salary packaging and novated leasing services and is also a leading provider of fleet and asset management and consumer and fleet financing.
"We look forward to working with Quinn Emanuel to bring NWC to account for its worthless warranties. This is a chance for consumers to claim a refund of the warranty and exorbitant interest that was bundled into the cost of their purchase," says Vannin Capital Counsel Tom McDonald.
McMillan Shakespeare responded to the report by releasing a statement to the ASX on Monday morning, and confirmed it acquired a warranty product business in 2015 which was operated by a subsidiary of Presidian Holdings Pty Ltd.
"While full details of the proposed claim have not been provided we understand the nature of the claim may be based on allegations of unconscionable conduct in relation to a warranty product business operated by a subsidiary of Presidian Holding Pty Ltd," says McMillan Shakespeare CFO and secretary Mark Blackburn.
"No claim has been served on Presidian and accordingly, there are not sufficient facts to hand to comment on the likelihood, merits or otherwise of the proposed claim."
Blackburn says the warranty product business contributes around five per cent of the company's underlying net profit after tax.
Vannin Capital is also backing Quinn Emmanuel in its $100 million class action on behalf of shareholders in embattled sports and surfwear e-tailer Surfstitch.
MMS shares were down nearly five per cent to $13.28 at around 11am AEST.
Never miss a story: Sign up to Business News Australia's free news updates
Follow us on Twitter, Facebook, LinkedIn and Instagram
Author: Ben Hall