The corporate watchdog has settled its first class action over the failed Westpoint Group, nearly a year after it launching court proceedings.
The corporate watchdog has settled its first class action over the failed Westpoint Group, nearly a year after it launching court proceedings.
The Australian Securities and Investments Commission said the court today approved the terms of a confidential settlement of the final two investors who bought into Westpoint on the recommendation of Masu Financial Management.
Altogether, Masu allegedly recommended Westpoint to a total of 85 investors, which together with ASIC, launched the class action in December last year.
The claims of the other 83 investors had already been settled privately.
Earlier this week, six investors who lost money in Westpoint were awarded more than $850,000 by a Queensland court.
Westpoint, an Australia-wide property development group, failed between November 2005 and February 2006, leaving 4,300 mum and dad investors $300 million out of pocket.
ASIC's announcement is pasted below:
Masu Financial Management Pty Ltd has settled a class action brought by the Australian Securities and Investments Commission (ASIC) on behalf of 85 investors who were sold financial products in the Westpoint Group.
ASIC commenced the action in December 2007 on behalf of the investors who invested with Westpoint on the recommendation of Masu Financial Management Pty Ltd. The claims of the final two investors were settled on confidential terms approved today by the Federal Court of Australia in Sydney. The claims of the other 83 investors in the class covered by the ASIC action had already settled privately.
The claim alleged that in selling products with the risk and financial characteristics of Westpoint, Masu Financial Management did not comply with their obligations under the conditions of their Australian financial services licences and under the law.
ASIC has commenced 16 proceedings following its decision to take legal action for the benefit of investors who lost funds in the failed Westpoint Group. The claims for compensation against the parties, including financial planners, a trustee, auditor and directors, total approximately $549.9 million. This class action is the first of those proceedings to be resolved.
Background
On 8 November 2007, ASIC announced it would take legal action for the benefit of investors in the Westpoint Group seeking compensation for their failed investments. Following the announcement ASIC has commenced:
- class actions against six Australian financial services licensees, including Masu Financial Management;
- actions to recover damages from five directors and officers of certain companies in the Westpoint Group and entities associated with one of the directors;
- a class action against a trustee;
- action against accountancy firm KPMG over its auditing of companies in the Westpoint point.
ASIC is continuing to investigate matters arising from the Westpoint collapse.
ASIC commenced the actions under section 50 the ASIC Act, which enables it to begin and carry on civil proceedings for damages for investors where it appears to ASIC that such proceedings are in the public interest.
The case against Masu Financial Management was commenced in December 2007 by ASIC on behalf of investors who were advised by the Sydney-based financial planning group to invest in York Street Mezzanine Pty Ltd, Ann Street Mezzanine Pty Ltd, Market Street
Mezzanine Limited, Bayview Heritage Mezzanine Pty Ltd and Mount Street Mezzanine Limited between 2003 and 2005. 110 investors invested approximately $12.5 million in these companies. Of these investors, 25 had already commenced their own legal actions and so ASIC's case proceeded on behalf of the remaining 85 investors.
These property development projects used unsecured mezzanine finance whereby the fundraising obtained covered the difference between the amount the lenders were prepared to finance and the actual cost of the projects.
