The final chapter in the legal brawl between giant property trust GPT and its shareholders drew to a close on Wednesday. The Davids won and the Goliath agreed to pay $75 million for allegedly failing to disclose in 2008 that the company was financially underperforming its previous forecasts.
It was a two-year battle and it went to the wire. In class action cases, neither party wants the outcome to be determined by the courts and this was no exception.
Allowing the courts to set precedents presents hazards for both sides. The corporate defendant would have to accept liability if it lost and the damages could be more onerous. For the shareholder plaintiffs, a poor outcome could be every bit as damaging if an unfavourable precedent was set.
Corporate continuous disclosure is an area in which the phrase "the lawyers always win" is particularly apposite. This class action was mounted in 2011 by lawyers Slater & Gordon and bankrolled by a US litigation funder who, for its troubles, will probably get about 25 per cent of the proceeds.
Thanks to the newly intense focus in this area, legal firms are raking in fees for ensuring companies adhere to legal disclosure responsibilities. For the legal fraternity, corporate disclosure is lucrative business.
This is not a criticism of class action lawyers or those that fund them. They both have their place and without them shareholders would receive no financial redress.
The real culprits in this particular case were the (then) board and management of GPT whose poor strategy decisions led to them producing a financial performance that they ultimately (allegedly) attempted to hide and eventually needed to correct.
The genesis of the GPT saga dates back to a time (before the global financial crisis) when this staid, conservative property trust decided that these features were not sexy enough in a business era where debt and growth were the prevailing fashion.
GPT decided it needed to get with the party and entered into a joint venture with Babcock and Brown, a high-risk, high-return financial outfit that eventually fell victim to the GFC. The DNA of these two companies could not have been more different.
GPT's greatest crime probably was its misguided investment decisions. The fallout and the ultimate brush with corporate law came about because it allegedly was hiding the true underperformance of the eastern European residential joint venture with Babcock and Brown.
But poor strategy (while a sin) is not a legal problem; lack of disclosure and misleading the market are.
But the world has moved on since 2008 when GPT (and plenty of others) made statements about future profits that were more hopeful than realistic.
Disclosure rules have been tightened and most reputable companies are far more aware or afraid of the consequences of not keeping markets informed.
Continuous disclosure provisions under law or ASX guidelines, at least on most issues, are top of mind having been tightened, better explained and worked over by regulators.
With this in mind it was sweetly ironic to read analysis by Kristen Le Mesurier from governance advisers Ownership Matters talking about the poor corporate disclosure around litigation.
Le Mesurier says lack of disclosure and provisioning by companies about "litigation events" gives a high potential for earnings surprise.
In other words, the companies that are under legal onslaught for misleading the market, thanks to a lack of disclosure, could be compounding their alleged sins by failing to keep shareholders informed about the financial ramifications of the legal action.
The report says that 40 per cent of companies in the ASX 300 are exposed to litigation that could have a material impact on their levels of reported profit.
Not all these legal claims are actually about disclosure but plenty are. It is not that companies are hiding litigation, rather potential liabilities are not particularly well explained to shareholders.
Le Mesurier says the continuous disclosure regime and relevant accounting standards don't ensure companies give enough detail about potential exposure to litigation.
The decision not to provide enough detail on potential legal liabilities "does little to mitigate the high level of potential for earnings surprise from adverse litigation outcomes", according to the Ownership Matters report.
There are many reasons companies under any kind of legal threat don't want to quantify it. In the first instance, it can be difficult to assess. It can also provide a signal to the litigants of what damages are expected.
In many cases, some of the legal damages are covered by insurance, but all too often the detail around what is recoverable is not disclosed.
And in almost all cases the companies under legal threat don't cherish the stigma of being accused of misleading investors, cartel behaviour, bid rigging, price fixing etc. None are brand enhancing.