In what is the only securities class action to be filed in Australia this year, Maurice Blackburn Lawyers today began a class action case against Treasury Wine Estates over the late disclosure of a $190 million write-down in 2013 – a write-down that included a $33 million provision to pour six million bottles of out of date wine down the drain.
Litigation funder Bentham IMF Ltd is funding Australia’s leading class actions law firm Maurice Blackburn in running the case against ASX-listed global wine merchant, Treasury Wine Estates Ltd (TWE) on behalf of more than 600 affected shareholders.
Maurice Blackburn Principal Rebecca Gilsenan, who filed the class action in the Federal Court in Sydney today, said the claim alleges that TWE misled the market and breached its continuous disclosure obligations in relation to the financial impact of over-stocked US distributors.
“This action is being brought on behalf of hundreds of TWE shareholders, who lost millions of dollars when the company revealed the full extent of the problem in July last year. This is one of the most efficient and effective ways they can seek redress,” Ms Gilsenan said.
“The case will highlight the very serious responsibility listed companies have to disclose material information to the share market in order to maintain the integrity of the market and to ensure it retains its function of allocating capital in the most efficient manner possible for all those that participate in it.
“Our case will present evidence that TWE knew, or should have known by 17 August 2012 that large write-downs were inevitable and as such, the market should have been apprised of this far earlier. It wasn’t informed until July 2013, so shareholders unfairly paid an inflated price for the stock in the meantime.”
Bentham IMF Investment Manager Tania Sulan said the core allegation relates to inadequate disclosure of issues associated with excessive inventory held by Treasury’s US distributors.
“In the US wine market, the ban on producers selling directly to retail outlets means that all of TWE’s products must pass through third party distributors. The level and makeup of inventory held by TWE’s distributors was of critical importance,” Ms Sulan said.
“The management of TWE told the market on multiple occasions throughout the 2013 financial year that the company’s earnings would grow whilst it adequately managed its US distributors’ inventory levels.
“This case alleges that management did not tell the market in a timely way that the US distributor inventory levels of some of its brands were so high that TWE was at risk of having to destroy excess stock or give rebates or discounts to the distributors for excess, aged and deteriorating inventory.”
Ms Gilsenan said that despite being the only securities class action filed in Australia in 2014, support for class actions has continued to come as recently as last week from ASIC’s Chairman who highlighted the important role class actions play in the Australian business landscape.
''That's why I see class actions as a good development because the market decides it is something that they want to take on and if somebody is willing to fund it rather than calling on the public purse, then that to me is part of market efficiency.'' – ASIC Chairman Greg Medcraft, 25/06/14 in The Age newspaper.
Ms Sulan said that litigation funding played an important role in providing people with a private means of pursuing justice whilst simultaneously enforcing higher standards of corporate governance for all those involved in the sharemarket.