Clough facing $200m claim

The liquidators of failed engineering contractor Forge Group have gained financial backing to pursue a claim worth about $200 million against Forge’s former major shareholder.

ASX-listed IMF Bentham said today the Supreme Court of Western Australia had approved its litigation funding agreement with the liquidators, Ferrier Hodgson.

The funding will be used to investigate and, if appropriate, pursue claims against Clough Operations Pty Ltd, which is owned by Murray & Roberts after the South African company moved to full ownership of Perth-based Clough.

The claim relates to Clough’s decision in March 2013 to sell its 31 per cent shareholding in Forge for $187 million.

Forge was subsequently placed in voluntary administration in February 2014.

It went into liquidation one month later, amidst multiple contractual disputes and legal claims against its clients and business partners.

IMF said the initial  claim  value  it will  include  in  its  next  quarterly  investment  portfolio report for this  matter  is  $200 million.

“This  is  IMF’s  best  estimate of  the  claim’s  recoverable amount,  which  may  change  over  time  and  may  be  different  in  subsequent  investment portfolios,” the company said.

Clough said today it denies any wrongdoing and will vigorously defend any claim to the extent made.

Perth-based Clough sold its shares in Forge three years after making its initial investment.

The two companies also formed a joint venture to bid on major resources and infrastructure projects.

“Clough has supported the growth of Forge as it has developed into a successful engineering and construction company over the past few years,” chief executive Kevin Gallagher said at the time of the share sale.

“Forge has delivered strong growth and has been an outstanding investment for Clough.”

IMF’s funding for the Forge Group liquidator is additional to an agreement to fund a shareholder class action against Forge Group, alleging misleading and deceptive conduct and breach of continuous disclosure obligations.

The shareholder action, run by Slater & Gordon, relates to losses sustained by Forge on two large power station projects – at West Angelas in the Pilbara and Diamantina near Mt Isa - of its wholly owned subsidiary, Forge Group Power, previously CTEC.

In addition, Ferrier Hodgson is pursuing multiple claims, including against Rio Tinto and Samsung C&T, over security bonds seized after the collapse.

Ferrier Hodgson’s Martin Jones and Ben Johnson were appointed voluntary administrators of Forge Group and subsidiaries on February 11 2014.

As a consequence, the company’s financiers appointed Mark Mentha and Scott Langdon of KordaMentha as receivers and managers.

Creditors placed the group into liquidation on March 18 2014.