This article is from the Australian Property Journal archive
BROOKFIELD Multiplex has finally closed the chapter on the long running Wembley Stadium fiasco after the Federal Court approved a $110 million settlement deal.
Justice Finkelstein in Melbourne’s Federal Court approved the settlement which comes after a four-year compensation fight brought by 120 investors including 27 institutions.
The lawyers are expected to claim $10 million in costs so $100 million will be split between the investors, which would return approximately 65 cents in every dollar. The institutional investors will get 97% of the funds.
Brookfield Multiplex yesterday said the settlement amount has been funded by recoveries from third parties and the deal was reached on the basis of no admission of liability by the Multiplex Group.
Although Maurice Blackburn principal Andrew Watson maintained that this was a major win for the investors who alleged they lost millions when Multiplex failed to tell the share market about its losses on the Wembley Stadium and other projects such as the Qantas hangar at Brisbane Airport and the West India Quay hotel and apartment project in the UK — between August 2004 and May 2005.
In February 2005 Multiplex said Wembley was on target and forecast a profit of $235 million but three months later it downgraded its profit forecast to $65 million because of costs blowout at Wembley. Multiplex had priced the Wembley job at £445 million but a series of events ensued causing the project costs to blow out to £1 billion.
Multiplex’s share price peaked at $6.50 but following several profit downgrades its share price eventually dived by 40% wiping $2 billion from the company.
However, Multiplex did not shoulder all the burden of the Wembley Stadium debacle. In late 2008, it successfully sued its contract Cleveland Bridge UK at the British High Court and won £8 million in compensation.
Meanwhile Watson yesterday said the compensation achieved on behalf of group members is 20 times greater than what those group members would have obtained had they accepted the settlement offer made by Multiplex under the Australian and Securities Investment Commission enforceable undertaking in 2007.
In 2007, Multiplex entered into an enforceable undertaking with ASIC to establish a $32 million fund to meet the claims of shareholders who suffered loss.
He added that had the case gone to trial, investors could have potentially won $300 million if the case was successful.
Watson said it was a hard fought case which had established a number of important precedents.
Throughout the case, Multiplex tried to have the class action derailed by accusing the two overseas litigation funders of operating an unregistered management investment.
This prompted ASIC to grant temporary relief to the class action funders who would otherwise be required to apply to funded representative proceedings and funded proof of debt arrangements as ‘managed investment schemes’ under Chapter 5C and Chapter 7 of the Corporations Act 2001 (the Corporations Act).
Meanwhile retired businessman and lead applicant in the case Peter Dawson said he lost a modest sum as a Multiplex shareholder.
“So for me it’s always been about the principle of highlighting corporate wrongdoing and improving corporate governance. The only way boardrooms will get the message is when little people stand up and say this is wrong and I was prepared to take a stand on this,” he added.
Australian Property Journal