TELSTRA TRUMPETED “class action dismissed” while opposing counsel Slater & Gordon was equally buoyant about the approval of the Telstra class action settlement by the Federal Court last week.
Justice Peter Jacobsen officially approved the settlement in the Federal Court on 13 December. Only six shareholders of an estimated 29,000 possible class members lodged objections to the settlement.
Telstra issued a written statement immediately after approval was handed down: “Telstra expected to win the case, but we could not guarantee we would recover our costs, meaning that the small settlement offer put to us by our opponents represented the best outcome for our shareholders.”
“I just think that’s nonsense,” responded Ken Fowlie, partner at Slater & Gordon. “The fact of the matter is that when the settlement was reached, the case was fully prepared, it was about to start in trial, his honour the judge indicated that he didn’t expect the trial to run for more than a couple of weeks and even Telstra would struggle to spend $5 million on a case that was about two weeks away from beginning,” he said.
“Telstra is not the sort of company that resolves claims lightly, and to be honest, the fact that Telstra has made any offer of settlement resulting in money being provided to shareholders I think speaks much louder than their press release in terms of their contention about the case,” Fowlie said.
Telstra group general counsel Will Irving maintained that the costs of ongoing appeals and the risk of non-recovery from the lead plaintiff were instrumental in the decision to settle. “It was a very asymmetrical case in terms of the costs — the onus was really completely on Telstra,” he said.
While Fowlie believes that this is a situation where “shareholders are unambiguously better off”, Irving said that the amount awarded was only 1.2 per cent of the $300 million originally claimed. He hinted that Slaters’ own shareholders should be concerned about the time and cost of the firm’s involvement in the case.
“The fact that Slater & Gordon — on the evidence they put before the court yesterday — have written-off a whole lot of time and have not charged for all sorts of things, suggests that at least in this case they have recognised that they have walked away with a big loss for their shareholders as well,” Irving said.
“I’d hope that their shareholders and their management would have a long, hard look this type of case. Hopefully in future they recognise that there are costs to litigation on all sides, and running cases which are speculative, and in this case ultimately — in my view — doomed to failure, is not actually in anyone’s interests,” he said.
The value of the payout to shareholders is the only aspect of the settlement deal not in dispute by the parties. Investors who purchased Telstra shares on-market between 12 August and 2 September 2005, and who did not sell those shares before 6 September 2005, will be entitled to claim compensation in respect to those shares. The compensation will be up to 5 cents per share, depending on the number of shareholders who make a claim.
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