GPT to pay investors up to $75m to settle class action
Slater & Gordon negotiated the settlement on behalf of more than 2300 class action group members in a deal that followed a four-week trial in the Federal Court.
Initially, Slater & Gordon began proceedings against GPT in the court in December 2011. The claim was brought on behalf of investors who purchased shares in GPT between February 27, 2008, and July 6, 2008.
It is the second such action in the real estate investment trust sector after disgruntled shareholders took on the former Centro Properties (now Federation Centres) and accountant PwC over alleged inadequate disclosure requirements during the global financial crisis.
In both cases the action centred on the period between late 2007 and 2008, when the global financial system was being hit by the subprime debt crisis, which then morphed into the global financial crisis. In the ensuing couple of years, the REIT sector was hard hit, with the share prices of many trusts more than halved over concerns about their financial health.
The GPT class action followed an announcement from the group on July 7, 2008, in which the company downgraded its forecast earnings and distributions for the 2008 financial year by almost 30 per cent. In response, GPT's share price fell dramatically.
Slater & Gordon's Ben Phi said it was alleged that when GPT provided its distribution guidance on February 27, 2008, it was aware that it faced material and substantial risks that it failed to disclose.
GPT maintains it complied with disclosure requirements in 2008.
Elizabeth Knight — Page 30
Frequently Asked Questions about this Article…
The GPT class action was settled for up to $75 million to be shared among thousands of affected investors. It centred on allegations that GPT engaged in misleading and deceptive conduct and breached continuous disclosure obligations around its 2008 earnings outlook — issues that caused a dramatic fall in GPT’s share price when forecasts were later downgraded.
The settlement applies to members of the class action — investors who purchased GPT shares between February 27, 2008 and July 6, 2008. Slater & Gordon negotiated the deal on behalf of more than 2,300 group members who were part of those proceedings.
The settlement amount is up to $75 million in total to be distributed among eligible class members. The exact payment each investor receives will depend on the number of claimants and the court-approved distribution process.
Plaintiffs alleged GPT provided distribution guidance on February 27, 2008 while aware of material risks it failed to disclose, amounting to misleading and deceptive conduct and breaches of continuous disclosure obligations. On July 7, 2008, GPT downgraded its forecast earnings and distributions for the 2008 year by almost 30%, which triggered a sharp share-price fall.
GPT has maintained that it complied with disclosure requirements in 2008. The settlement resolved the dispute without an admission of liability by GPT as reported in the article.
The GPT action is the second major REIT-sector class action linked to late 2007–2008 disclosures during the global financial crisis. It followed a high-profile claim involving Centro Properties (now Federation Centres) and PwC, with both cases focussing on disclosure issues as trust share prices tumbled during the GFC period.
Slater & Gordon represented the class action members. Proceedings began in December 2011 and the settlement followed a four-week trial in the Federal Court, with counsel including Slater & Gordon’s Ben Phi involved in negotiations.
Key takeaways are to monitor company guidance and disclosure closely, understand that failures in continuous disclosure can lead to shareholder losses and legal action, and that class actions can provide a route for collective recovery. The GPT case also highlights how market shocks like the global financial crisis exposed disclosure and risk-management problems in the REIT sector.
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