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Investors to launch legal action against Centro
Email Print Normal font Large font AdvertisementEli Greenblat and Natalie Craig
March 27, 2008

EMBATTLED Centro Properties Group is the first company in the crosshairs of a multimillion-dollar shareholder class-action threat by a plaintiff law firm.

The group's directors and auditors could also face litigation stemming from investor anger over the business' lurch into the abyss.

Documents for the lawsuit against the Melbourne-based company, alleging non-disclosure of crucial information about its debt position, are expected to be lodged with the Federal Court by the end of April.

Coincidentally, this is around the time that Centro's creditors, a syndicate of banks and other lenders owed more than $2 billion, have given for the property company to recapitalise.

Litigation funder IMF will back law firm Maurice Blackburn to run class-action suits against Centro as well as two subprime victims, Gold Coast property and funds manager MFS Ltd and Allco Finance Group.

Centro is expected to be the first to be served with court documents.

The shopping centre owner and investor cut its earnings and admitted it had $3.9 billion of short-term debt in mid-December. Since then, shareholders have watched its shares plummet more than 80%. The price was steady yesterday at 23¢.

Centro's possible insolvency could mean a small payout for its complainants. But a spokesman for IMF said that if any of the companies facing litigation collapsed, the litigator would consider chasing down associated directors and auditors.

They could include Centro's founder and former chief executive, Andrew Scott, and MFS founder and former chief executive Michael King.

An MFS spokesman seemed unperturbed by the prospect of litigation when contacted by BusinessDay. "Our only comment is that we are unaware of any action … Anything else is purely hypothetical … we've seen the ads in the paper, but no one has contacted us."

MFS and its tourism arm, MFS Living and Leisure, failed to meet February deadlines to lodge their half-year results, and neither has committed to a new date for lodgement. Both have been suspended from trading since January.

Neither Centro nor MFS is believed to have made provisions in their accounts for litigation.