Shareholders suing failed education and training provider Vocation Limited will share in a $50 million class action settlement that has taken five years to achieve.
The action against the former ASX-listed company was jointly brought on behalf of shareholders by legal firms Maurice Blackburn and Slater and Gordon (ASX: SGH) which joined forces in 2015 shortly after initiating separate legal actions.
The settlement follows a Federal Court ruling last year in a civil case brought by ASIC against Vocation's former directors CEO Mark Hutchinson, chairman John Dawkins and CFO Manvinder Grewal.
The court found the directors had breached their statutory duty of care by permitting the company to breach its continuous disclosure obligations.
The allegations against Vocation relate to trading in the company's shares between July and October 2014.
Vocation, a company that listed on the ASX in 2013, was a provider of vocational education, training and assessment under contract to the Victorian Department of Education and Early Childhood development.
The class action alleged Vocation's former directors, and its former auditors PricewaterhouseCoopers, had failed to disclose in 2104 that the government contract was in peril.
The company's auditor at the time, PricewaterhouseCoopers, was listed as second respondent in the action.
It was alleged that Vocation directors knew about problems with the contract as early as July 2014 but did not announce the full extent of this until October that year.
It later emerged that Vocation had to return $19.6 million in government funding and relinquished contracts with the department.
The devastating loss of revenue led to Vocation being placed into voluntary liquidation.
Slater and Gordon says the legal action alleged that PricewaterhouseCoopers was liable for misleading statements in relation to its audit of the company's financial reports in mid-2014. It says the Victorian Government's review was already under way at the time.
Vocation was also alleged to have made misleading or deceptive statements in its initial public offer documents, and that its former directors made misleading public statements about the company after it listed.
Shareholders represented by the law firms who had bought Vocation shares between 27 November 2013 and 4 December 2014 are eligible for a share in the negotiated settlement which is still subject to court approval. This is expected to occur early next year.
Slater and Gordon says hundreds of shareholders who registered for the class action will be eligible for their share of the payout.
"Often, when a company goes into liquidation, shareholders are left out in the cold," says Slater and Gordon's practice group leader Andrew Paull.
"Even if they were misled, it can be difficult for them to recover any of their losses.
"In this case, after a long and hard-fought battle, we are pleased to have been able to achieve a meaningful outcome for Vocation's former shareholders."
Business News Australia