Multiplex Class Action

The Action

On 18 December 2006 Maurice Blackburn commenced a class action against Multiplex Limited and Multiplex Funds Management Limited ("Multiplex") in the Victorian Registry of the Federal Court.   The proceeding is brought by P Dawson Nominees Pty Ltd on its own behalf and on behalf of all securityholders who purchased or acquired an interest in Multiplex securities during the period 2 August 2004 and 30 May 2005 and who had entered into a Funding Agreement as at the date of issue.  Current estimates of the total claim value are between $100 and $150 million. 

The Statement of Claim alleges that from 2 August 2004 until 30 May 2005 Multiplex breached the continuous disclosure provisions of the ASX Listing Rules and the Corporations Act, and or engaged in misleading or deceptive conduct, by not properly disclosing to securityholders and the ASX the full story regarding the material cost increases and delays in the construction of the Wembley National Stadium and the consequences of those on the Multiplex Group earnings forecast.  Subsequent revelations about the Wembley project in February and May 2005 led to dramatic falls in the share price.

ASIC investigations result in Enforceable Undertaking and Settlement Offer

ASIC has investigated Multiplex's disclosures relating to the Wembley project.  Specifically, it investigated whether Multiplex had complied with its continuous disclosure obligations under ASX Listing Rule 3.1 and s.674(2) of the Corporations Act.  As a result of that investigation, on 20 December 2006 Multiplex entered into an Enforceable Undertaking with ASIC, which included some limited settlement offers for securityholders who acquired their ordinary Multiplex stapled securities between 3 February 2005 and 23 February 2005.  All other Multiplex securities and or acquisitions are excluded.

ASIC also made findings as to corporate governance, compliance procedures, reporting and controls which will assist the securityholder class action.  We also consider that the offer of settlement is a good indication that Multiplex understands the weakness of its position in this matter. 

Securityholders have a strong claim from 2 August 2004 to 30 May 2005

We consider that there is strong evidence to support a finding that Multiplex knew or ought to have known of the problems that they were experiencing on the Wembley project, and the likely consequences of those problems on the Multiplex Group earnings forecasts, from 2 August 2004.    Leading up to this date, Multiplex had been engaged in an increasingly acrimonious dispute with one of the primary sub-contractors on the Wembley project, steelworks contractor Cleveland Bridge UK ("CBUK").  Internal management forecasts as early as 8 June 2004 showed costs overruns on the steel subcontract of between $60 to $94 million.  At the time the Multiplex Group's annual profit forecast was $131 million.   By 30 June 2004 Multiplex said the project was in delay by 84 days, but on the same day gave notice to CBUK to cease erection works without a fixed price contract in place with its replacement sub-contractor.  On 2 August 2004 CBUK left the site altogether.  By that stage only 8,500 tonnes of a total of 22,000 tonnes of steelwork on the stadium had been erected.  According to Multiplex announcements, Multiplex subsequently paid the replacement sub-contractor over $250 million (£100M) to complete the job.

Notwithstanding the above:

On 18 August 2004 Multiplex announced to the ASX that the contractual dispute with CBUK would not affect the Wembley Stadium project program or impact on group earnings. Multiplex also advised that it would complete the Stadium project ahead of program.

On 27 September 2004 Multiplex announced a bid for the Ronin Property Group involving an offer involving Multiplex securities and cash of $0.08 each. The offer documents were silent as to any cost increases or delays with the Wembley Stadium project and values Multiplex securities accordingly.

On 30 September 2004 Multiplex issued its Annual Report. It is also silent as to any cost increases or delays with the Wembley Stadium project.

On 4 November 2004 Multiplex issued proceedings against CBUK claiming damages of almost AUD$87.5 (£35M) for costs and delays allegedly caused to it by CBUK on the Wembley Stadium.

In November 2004 stock market analysts on a Multiplex investor and analyst tour visited Wembley Stadium and were informed the project was back on track.

In November 2004 Multiplex announced the issue of up to $450M worth of securities known as SITES.

In December 2004 Multiplex announced and completed a $120M institutional placement.

In December 2004 securityholders were required to pay a final instalment of $0.97 on their partly paid securities.

In late January 2005 the Multiplex Wembley Project Director stated in a memo that losses on the Wembley project could be between A$116M and A$210M, whilst other company management predicted a A$37.4M profit.

Throughout the process of capital raising, Multiplex was either silent as to any material costs and delays with the Wembley Stadium project, or insisted that the Wembley project was on time and on budget. They made no disclosure of any cost increases and delays with the Wembley Stadium which then existed.

The Commencement of Disclosure

On 24 February 2005, at its half-yearly presentation of results for the period ending 31 December 2004, Multiplex announced that they had written back profit on the Wembley project to break even, but believed Multiplex's claims were sound and that ultimately the project would exceed break-even. There was no mention of the latest forecasts by Multiplex's Wembley Project Director made in late January 2005.  Following this announcement, 20 million Multiplex securities traded and the security price fell 16%, closing at $4.56.

From 24 February 2005 through to 27 May 2005 Multiplex continued to assert that the Wembley Stadium project would be "break-even or better".

On 30 May 2005 Multiplex finally revealed Wembley would make a loss of $109 million (£45M) and would not be completed until March 2006.  When trade reopened over 200 million Multiplex securities traded in a single day and the security price fell in excess of 20%, closing at $2.56.

On 18 August 2005 Multiplex announced a further A$8.6M contingency in relation to the Wembley project. 

At the Multiplex Annual General Meeting in November 2005 CEO Andrew Roberts acknowledged in his address the "extraordinary impact that Wembley has had on the Group and on [its] securityholders".   Those losses continued, with further losses on the project announced by Multiplex on 19 December 2005.

Registration of Interest

Securityholders who have suffered losses due to the fall in share price can register their interest in the class action with Maurice Blackburn. If you acquired Multiplex securities between 2 August 2004 and 30 May 2005 and are interested participating in the class action, please email us on multiplexclassaction@mauriceblackburn.com.au with your name and contact details, or register directly now by following the directions below.

Please note that registration does not obligate you to participate in any action, and does not obligate you in any way in relation to legal costs. It will however ensure that you will be provided with information regarding the progress of the potential claim and will enable us to provide you with advice regarding whether you should participate in the claim.