04/09/2009 - 11:33

EY settles Sons of Gwalia claim at $125m

04/09/2009 - 11:33

Bookmark

Upgrade your subscription to use this feature.

The long-running saga of the Sons of Gwalia collapse has reached another milestone with the former mining company's auditor Ernst & Young agreeing to pay $125 million.

EY settles Sons of Gwalia claim at $125m

The long-running saga of the Sons of Gwalia collapse has reached another milestone with the former mining company's auditor Ernst & Young agreeing to pay $125 million.

If approved by creditors, the sum will add to $3 million to be paid by former directors and $50 million agreed to be paid by their insurers.

Provided creditors accept the deal struck between EY and SoG administrators, Garry Trevor, Andrew Love and Darren Weaver, the accounting firm will become the biggest contributor to creditors, usurping American International Group, the giant insurer rescued by US taxpayers last September.

AIG will contribute $30 million and the balance of the insurance contribution is coming from two Lloyd's syndicates.

About $20 million of that was to be available to fund the directors' legal defence.

The four directors to contribute directly - company founders Peter and Chris Lalor, finance director Eardley Ross-Adjie and audit committee chairman Thomas Lang - will contribute $3 million without any admissions.

Tantalum and gold miner SoG colllapsed in 2005 under the weight of its own hedge book owing about $800 million.

That amount grew substantially when some shareholders won the right in the High Court to considered as creditors.

Litigation funder IMF Australia says it will receive $18 million in revenue if the settlement with EY is approved.

 

Below are releases from EY, Ferriers and litigation funder IMF:

Ernst & Young Australia today announced that it had settled, subject to creditor approval, the
Sons of Gwalia proceedings.
Ernst & Young has been vigorously defending claims made against it by the Administrators for
Sons of Gwalia, since 2005.
The parties entered into mediation in August 2009.
The proposed settlement is for an amount of A$125 million, including interest and costs. In
settling, there were no admissions of any liability by any of the parties.
In announcing the settlement Mr Gerard Dalbosco, Oceania Managing Partner and Chief
Executive Officer, Ernst & Young Australia said: "The decision to settle is a commercial one
and after four years of litigation we want to bring this matter to a close."
"By settling this matter we will be able to put it behind us. The firm remains financially strong
and we are continuing to, invest in and, grow our business," said Mr Dalbosco.
"It is important that due process is respected. The Administrator will now seek creditor approval
for the proposed settlement in a meeting on 23 September 2009", said Mr Dalbosco.

 

Ferrier Hodgson Partners Garry Trevor, Andrew Love and Darren Weaver announced today
that they have reached a settlement with Ernst & Young and the Shareholders that will
result in $125m being payable to Sons of Gwalia Limited - subject only to creditor approval
at a meeting to be held on 23 September 2009.
Mr Trevor said: "This settlement together with the previous settlement of $53 million, made
with the directors and their insurers, will add $178 million to the asset pool which will allow
for a significant dividend to be paid by December 2009 and will assist in bringing this longrunning
administration to a close."
"The decision that the settlement was in the best interests of creditors was made in
consultation with our legal team and the Creditors Committee and after consideration of a
range of legal and commercial issues."
A report to creditors that recommends creditors of Sons of Gwalia approve the terms of the
settlement is to be posted to creditors on 8 September 2009. Notices of meetings will be
provided on the same day by advertisements in the West Australian and Australian
newspapers.
Should creditors resolve to approve the terms of the settlement, the Administrators confirm
that they will be in a position to declare and pay a dividend by the end of 2009.

 

1. The Board of Directors of IMF (Australia) Ltd ("IMF") is pleased to announce the conditional
settlement of litigation against the auditors of Sons of Gwalia Ltd (Subject to a Scheme of
Arrangement and Deed of Company Arrangement) ("SOG") by SOG itself and by
shareholders of SOG by way of a class action.
2. The conditional settlement is subject only to the approval of the creditors of SOG. The
Administrators' have set the meeting of creditors to be held on 23 September 2009.
3. IMF will recommend the settlement to creditors and expects that they will give their approval.
4. If the conditional settlement is approved by creditors, IMF expects to receive revenue of
approximately $18M from the total dividend to be paid by SOG and generate a profit after
capitalised overheads of approximately $17M (before tax).
5. IMF advises this was the confidential settlement announced on 24 August 2009.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options