One of Australia’s biggest class actions has begun the Federal Court involving thousands of shareholders in Centro Property Group.
More than 50 lawyers are involved in the case, and all assembled together on Monday in the Melbourne court to represent clients in the class action against the property investment company.
The court will hear that two Centro companies, Centro Porperties Group and its listed subsidiary Centro Retail Group, engaged in misleading and deceptive conduct by not exposing the full extent of their known debts.
When the two companies eventually revealed the extent of their debts in December 2007 and admitted that they had been unable to refinance billions of dollars of debt that had become payable, their share prices fell dramatically.
Shareholders who lost millions when Centro’s share price crashed in late 2007 are seeking damages.
Lawyers in the trial, presided over by Justice Michelle Gordon, include Maurice Blackburn partner Martin Hyde, say investors are seeking damaged in excess of $200 million.
"Our clients range from individuals, some of whom lost their life savings on Centro, through to the largest financial institutions in Australia," Hyde said.
"The actions of Centro in not disclosing known debts of around $5.7 billion to shareholders, is reflective of the cavalier corporate conduct that led to the global financial crisis.
"This is a serious failure of corporate governance and proper accountancy practices that has led to thousands of Australians suffering very significant losses."
Centro last year restructured its businesses into a new entity. One of the issues to be raised in court is where responsibility for liability for the class action lies. The case Is expected to take 10 weeks.
Maurice Blackburn is alleging Centro failed to to adequately disclose to their security holders and to the ASX the full extent of their maturing debt obligations, as well as the risk that they may not be able to refinance their maturing debts at forecast cost or at all. Also, lawyers allege, the company failed to disclose the risk that there was no longer a reasonable basis for their respective profit forecasts.
Maurice Blackburn is also taking action against Centro's auditors PricewaterhouseCoopers (PWC) for failing to detect errors regarding Centro's debts in its financial accounts.