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In early may Goal Group blogged about how the Centro class action case made Australian history. In the latest development The Federal Court in Melbourne has formally approved Australia’s biggest-ever settlement in a class action lawsuit, a $200 million deal for Centro shareholders, bringing to an end more than four years of complex and expensive litigation.

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. The $200 million would be divided as follows:-

  • $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.

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.

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In what has been the biggest court case of the year, Centro Retail Australia and PricewaterhouseCoopers have in principle agreed to a record class action settlement of $200 million lead by law firm Maurice Blackburn.

This long running case has centred on allegations that Centro and its former auditors engaged in misleading and deceptive conduct and breached continuous disclosure laws. The investors, some of whom lost their life savings accused Centro of misleading and deceptive conduct for not disclosing it had at least $3 billion of interest-bearing debt due within 12 months.

The actual case began more than four years ago, after the shopping centre owner and funds manager nearly collapsed under $5.7 billion of debt.

Maurice Blackburn’s class action principle Martin Hyde said “This is a very good day for Centro shareholders and a very good day for the Australian investor community generally…. We think that this sends a strong message to corporations and their advisers that they’ll be held accountable to shareholders if their conduct falls short of what the law requires”

IMF Australia, which helped fund the class action lawsuit, said the settlement complemented previous civil penalties brought against Centro’s former executives following action from ASIC.

Once legal costs have been finalised, about $150 million will go to Maurice Blackburn group members, with the remaining $50 million to go to investors represented by Slater and Gordon.

Goal Group understands that Federal Court Justice Michelle Gordon has given parties until 10.15am (AEST) on Thursday to finalise the settlement details, or the trial will resume.

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