Former shareholders of Australia’s Pan Pharmaceuticals brought a securities class action on Friday concerning the the 2003 collapse of the company, but the case is not filed against the company. Rather, the shareholders, along with customers and creditors of Pan, are suing the federal government’s Therapeutic Goods Administration over its decision to order a recall of 1600 Pan-manufactured “complementary medicine” products.
According to The Australian, that recall and the suspension by the TGA of Pan’s licence, caused the company to collapse, which cost shareholders hundreds of millions of dollars and resulted in the loss of 300 jobs.
The litigation is being funded by IMF, which is just off its recent success in the Aristocrat case (discussed here). IMF’s John Walker was quoted as saying that the case would claim that TGA officers “knowingly conducted themselves unlawfully” in circumstances where they were aware those actions would harm Pan’s customers, shareholders and creditors, and that the officers engaged in intentional wrongdoing.
The plaintiffs’ claim is that TGA broke the law by not making Pan and its founder Jim Selim aware of their intentions with respect to the recall. “The allegation is that they knew Jim (Selim) would fight and seek an injunction to restrain (the action). They thought that if they put him on notice of what they were doing, then he may well be able to fight the action. He wasn’t given natural justice”.
The Australian reports that the class action follows a Federal Court case in which the federal government was forced to pay $55 million to Mr. Selim personally related to the suspension.