Aristocrat Leisure Limited Class Action

Many shareholders purchased shares during the period that the share market was misinformed by these announcements.

Aristocrat announced its first profit downgrade on 7 February 2003 in respect of its profits, resulting in 40% of its total shares being traded in 10 days and decreasing in capitalisation from $2 billion to $1 billion.  The forecast was revised from $109M to $80.2M.

Its second profit downgrade which occurred 3 months later on 27 May 2003 resulted in the same turnover in 4 days, further decreasing Aristocrat's capitalisation by over $0.5 billion.

The Action

Maurice Blackburn commenced the Aristocrat class action in November 2003.  The class action is on behalf of all shareholders who acquired an interest in shares in Aristocrat between 19 February 2002 and 26 May 2003 inclusive who suffered loss as a result of Aristocrat's conduct alleged in the Statement of Claim.

The class action alleges that some of the company's market forecasts and announcements in the period between 19 February 2002 and 26 May 2003 were in breach of the Corporations Act and other Acts in that they were misleading and deceptive.  It also alleges that Aristocrat failed to disclose all material information to the market in a timely way during the same period which was a breach of the Corporations Act.

Aristocrat's Admissions

Prior to the commencement of the trial, Aristocrat made a number of significant admissions, including that:

    (a) Its 2001 full year financial results were overstated by $30M in
    revenue and $15M profit before tax because they included
    recognition of a large Peruvian transaction which the applicable
    accounting standards did not permit;

    (b) Its 2002 half year financial results were overstated by $32M
    in revenue and approximately $12M profit before tax because they
    included recognition of three further South American contracts which
    the applicable accounting standard did not permit; and

    (c) As at 10 December 2002  it was not reasonable for Aristocrat to
     maintain a 2002 full year profit forecast of $109M profit after tax.

Issues at Trial

Although Aristocrat made these admissions of fact, it continued to deny misleading and deceptive conduct, or a breach of the continuous disclosure regime. The Applicant sought  to prove its case by taking the Court through over 200 discovered documents in detail and calling an expert forensic accountant, an expert investment manager and an expert in calculating loss as witnesses. For the most part, Aristocrat’s defence was technical in nature and they only called one witness, a loss expert.

The main remaining areas of dispute between the parties at the trial were:

    (a) what the correct methods are for determining the quantum
     of  loss caused by Aristocrat’s breaches of the Trade Practices Act  
     and the Corporations Act; and

    (b) whether shareholders are required to show direct reliance upon
    the false and misleading or non-disclosed statements of Aristocrat 
    in order to show that their losses were “caused” by the misconduct,
    or whether it is sufficient to show that the market relied on that
    information and shareholders made a loss simply by purchasing
    shares at an inflated market price. 

We are confident that the Applicant will establish that Aristocrat breached the Trade Practices Act and the Corporations Act throughout 2002 and is liable to pay compensation to shareholders.

The Court's Decision

The trial judge, Justice Stone, has reserved her decision.

The Class

Some of Australia's largest financial institutions have joined this case and the claims of known class members total in excess of $200 million.

Maurice Blackburn is representing the Applicant in the class action, Dorajay Pty Ltd. If you fall within the class description set out above you are a class member whether or not you retain us. You are not liable to pay legal costs to us merely because you are a class member. We have instructions to pursue the Applicant's claim to finality, which will have the effect that common questions of fact and law relevant to your claim as a class member will be finally determined by the Court.

However, unless these proceedings are settled, upon determination of the common questions each class member will need to prove that he or she has individually suffered loss and damage. We will not act on your behalf for this purpose unless you enter a retainer agreement with us.

If you want us to act on your behalf please contact David Niven on (03) 9605 2837 to discuss the retainer arrangements. We have a team of people who can assist you in your legal requirements in this case.  Please note that IMF (Australia) Ltd is funding the litigation for the Applicant and a substantial number of class members and has offered to fund other class members who are our clients.

Please also note that our statement above that you are not liable to pay legal costs to us merely because you are a class member is subject to a qualification. This qualification is that the Applicant has instructed us to make an application under s33ZJ of the Federal Court of Australia Act for an order that the costs reasonably incurred by the applicant in prosecuting the claim, to the extent that they exceed the costs recoverable by it from Aristocrat, be paid to the Applicant out of any damages awarded to class members who had not otherwise fully contributed to the costs of conducting the proceedings.  Such contribution may be made by entering into a litigation funding agreement, or by some other arrangement made with us to pay an appropriate share of the legal costs.