The former auditors of Sons of Gwalia, Ernst & Young, have agreed to a $125 million settlement over their role in the gold miner’s collapse.
Company administrators Ferrier Hodgson said today they had reached a settlement with Ernst & Young, four months after the former directors of the collapsed gold miner agreed to a landmark $53 million settlement.
Ferrier Hogdson’s Garry 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 long-running 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.”
Ferrier Hodgson said it would declare and pay a final dividend to shareholders by the end of the year, subject to creditors approving the terms of the settlement at a meeting on September 23.
Ferrier Hodgson had claimed Ernst & Young was negligent over the accounting of gold and dollar hedging contracts while Sons of Gwalia and former directors allegedly had inadequate internal controls that allowed unauthorised speculative trading.
However Ernst & Young said today the proposed settlement was not an admission of any liability.
Ernst & Young chief Gerard Dalbosco 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.”
Ernst & Young have been vigorously defending claims made against it by Ferrier Hodgson over its role in the collapse of Sons of Gwalia since 2005.
Sons of Gwalia collapsed in 2004 with debts exceeding $800 million after suffering from falling gold reserves and hedging losses.
In April, the company’s directors, led by brothers Peter and Chris Lalor, agreed to a landmark $53 million settlement over their role in the miner’s collapse.
The Lalor brothers were once high-profile leaders of Australia’s gold industry and their miner WA’s pre-eminent gold producer. They have since shunned the limelight.
The Sons of Gwalia administration became a landmark case in Australian corporate history after thousands of shareholders were allowed to join the list of unsecured creditors following a controversial High Court ruling two years ago.
The administrators have sold Sons of Gwalia’s assets.
St Barbara Mines picked up the struggling gold operations at Leonora and Southern Cross while Talison Minerals, a Perth miner owned by Denver-based Resource Capital Funds, paid $205 million to buy the Wodgina and Greenbushes tantalum business.
Talison has since shut Wodgina because of a global slump in tantalum demand.