The Federal Court of Australia has approved the settlement of a compensation claim initiated by the Australian Securities and Investments Commission for Bongiorno Financial Advisers clients who were advised to invest in York Street Mezzanine, a company within the failed Westpoint Group.
ASIC has also reached an agreement to settle a class action against Melbourne-based trustee company State Trustees for AUD13.5m. The settlement of this class action is subject to the approval of the court.
In the Bongiorno settlement, Bongiorno must pay eligible investors a total of AUD2,559,760. The court approved a distribution mechanism whereby group members will ultimately recover between approximately 43 and 62 per cent of their invested capital in York Street. This figure takes into account dividends received through the liquidation of York Street and payments Bongiorno made previously to certain group members.
The settlement is now binding upon group members adjudicated by the court as being eligible to receive the settlement sum of AUD2.6m. Under the terms of the settlement, Bongiorno has until 30 December 2009 to pay this sum.
ASIC commenced proceedings against Bongiorno Financial Advisers (Aust) Ltd in December 2007 and against Bongiorno Financial Advisers Pty Ltd in February 2008 alleging that the companies, in providing such advice, were negligent, engaged in misleading and deceptive conduct, and acted in breach of conditions of their respective Australian financial services licences. The two companies are among seven Australian financial service licensees against which ASIC commenced proceedings for compensation on behalf of Westpoint investors.
The class action against State Trustees, initiated in the Federal Court, relates to investments made in mezzanine notes issued by Market Street Mezzanine, another company in the failed Westpoint group.
This settlement approval application results from the global mediation initiated by ASIC to resolve the litigation commenced by it seeking compensation on behalf of Westpoint investors.
ASIC commenced proceedings against State Trustees in March 2008 alleging that State Trustees, as the trustee of an unsecured mezzanine note issue by Market Street Mezzanine (in liquidation), breached its duty to the holders of Market Street Mezzanine notes and failed to comply with its obligations under the Corporations Act.
The settlement with State Trustees, if approved by the court, will result in compensation being paid by State Trustees to approximately 525 eligible investors in Market Street Mezzanine notes. The settlement was reached without any admission of liability by State Trustees.
