Wine boss slams spate of lawsuits
Treasury Wine boss Warwick Every-Burns told BusinessDay litigation funds and their law firm partners were usurping the role of regulatory authorities in their pursuit of boards, while companies could shy away from growth plans for fear of being slapped with a shareholder class action lawsuit.
"We will end up with companies almost being scared to do what they should be doing in the marketplace because they are continually feeling that they are going to have these crazy class actions," Mr Every-Burns said. "People will start to become almost risk-averse if we are not careful.
"[Those] out there trying to fund this litigation, and really just pursuing their own commercial interests ... it's not in the best interests of the country, not in the best interests of the shareholders overall and essentially it adds to costs and distracts companies."
Mr Every-Burns knows the sting of a shareholder class action lawsuit first hand. Treasury Wine is currently being menaced by two legal actions flowing from its damaging $160 million write-down in July of wine inventories in the US. Litigation funder IMF and law firm Maurice Blackburn are drumming up support among aggrieved shareholders for a potential $100 million class action, while a separate lawsuit is being pursued by former Minter Ellison partner Mark Elliott.
The class actions will argue Treasury Wine breached its continuous disclosure obligations over timely admissions on the sinking value of poor-quality wines held by its US distributors, which ultimately had to be poured down the drain.
In the period following Treasury Wine's shock announcement about the unwanted wine its shares dropped 20 per cent.
But if IMF and others believe Treasury Wine will buckle and settle the case after drawn-out court hearings and manoeuvres, Mr Every-Burns said his board was not for turning.
"We are fighting it, we are absolutely on the high ground here, we believe it has no merit at all."
Mr Every-Burns said litigators leading the charge on class actions were seeking to replace regulators.
"[What] annoys us more than anything is that Australia is set up very well in terms of having incumbent bodies and independent regulatory authorities that really are best placed to assess whether a listed company has breached [its] corporate governance obligations," he said.
Frequently Asked Questions about this Article…
The CEO of Treasury Wine Estates, Warwick Every-Burns, is concerned that the rising number of class action lawsuits is being driven by self-interested litigators. He believes these lawsuits are not in the best interests of shareholders and could make companies risk-averse, hindering their growth plans.
Class action lawsuits can distract companies and add to their costs. They may also cause companies to shy away from pursuing growth opportunities due to the fear of being targeted by such lawsuits.
Treasury Wine Estates is facing legal action due to a $160 million write-down of wine inventories in the US. The lawsuits claim that the company breached its continuous disclosure obligations regarding the declining value of poor-quality wines held by its US distributors.
Following the announcement of the wine write-down, Treasury Wine Estates' shares dropped by 20%.
The class action lawsuits against Treasury Wine Estates are being led by litigation funder IMF and law firm Maurice Blackburn, with additional legal action pursued by former Minter Ellison partner Mark Elliott.
Treasury Wine Estates, led by CEO Warwick Every-Burns, is determined to fight the class action lawsuits, believing they have no merit. The company is not inclined to settle and is prepared to defend its position in court.
Warwick Every-Burns views litigators as attempting to usurp the role of regulatory authorities. He believes that Australia already has well-established regulatory bodies that are best suited to assess corporate governance breaches.
The increasing number of class action lawsuits could lead to a more risk-averse business environment, where companies are hesitant to pursue growth opportunities due to the fear of legal repercussions.