Court approves Centro's $200m class-action settlement
THE Federal Court in Melbourne has formally approved Australia's biggest-ever settlement in a class action, a $200 million deal for Centro shareholders, bringing to an end more than four years of complex and expensive litigation.
THE Federal Court in Melbourne has formally approved Australia's biggest-ever settlement in a class action, a $200 million deal for Centro shareholders, bringing to an end more than four years of complex and expensive litigation.In a brief hearing yesterday, Justice John Middleton said he was satisfied that the deal, covering almost 6000 institutional and retail shareholders in two class actions, was fair and reasonable.Of the $200 million, $67 million will be paid by Centro's former and long-time auditing firm, PricewaterhouseCoopers, which made certain admissions about negligence in the way it handled the audit of Centro's 2006-07 accounts. The balance of $133 million will be paid by Centro-related companies. After legal costs and distributing a commission to the litigation funders, the shareholders are likely to share in a pool of just more than $120 million.Lawyer Toby Borgeest, of Slater & Gordon, which represented about 5000 individual shareholders, said cheques were expected to be sent by the end of the year.IMF, which funded a class action run by law firm Maurice Blackburn, confirmed to the stock exchange that it will recoup $42 million from the settlement.Outside the court, IMF's investment manager, Wayne Attrill, said while the outcome in the Centro case was likely to have a positive effect on corporate behaviour in Australia, it would not by itself put an end to poor conduct.Lawyer Martin Hyde, of Maurice Blackburn, said there was a lot of pressure on companies in tough economic times, and while most companies would never find themselves the subject of a class action, the settlement in Centro would send a strong message to improve corporate standards generally.Mr Hyde said the overwhelming number of claimants in the Centro settlement were retail shareholders, although the value of superannuation funds' claims outweighed those of smaller shareholders.He said clients and the firm were "absolutely delighted" with the settlement. None of the shareholders participating in the class action objected to the settlement.PwC declined to comment yesterday. In his brief decision, Justice Middleton said reaching a deal must have been difficult "not just because of the complex legal and factual issues involved, but because of the changing events occurring in the marketplace whilst the trial was in progress".Justice Middleton noted that if the case had continued, the final determination would hinge on difficult and controversial aspects of law "and appeals would be inevitable"."Such a process brings greater uncertainty to recovery, and would involve substantial delay even if liability were to be established," he said. Centro's 2006-07 accounts included significant mistakes, notably more than $3 billion of short-term debt was wrongly classified as long-term debt and crucial details about guarantees Centro made in favour of a US-based associate company after balance date were not disclosed in the accounts.When Centro admitted in December 2007 that it was having difficulties refinancing its short-term debt, the Australian stock exchange asked Centro about the accuracy of its 2006-07 accounts, triggering an internal review into all its debt.
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