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A class action spearheaded by Shine Justice (ASX: SHJ) against EML Payments (ASX: EML) has led to a $37.36 million settlement with the Brisbane-headquartered global card payments provider, which has made no admission of liability in the case that has been looming for several years.
The proceedings were brought by two plaintiffs on behalf of shareholders who had invested in EML before the Central Bank of Ireland (CBI) raised serious concerns around the anti-money laundering compliance of subsidiary PFS Card Services, and during a protracted remediation period that followed.
While PFS was based in Ireland, its operations extended throughout Europe and at the time some 27 per cent of EML's consolidated revenue was dependent on the subsidiary's authorisation from Irish authorities. Uncertainty around its regulatory future led to a share price slump from which EML has never recovered.
The Australian business eventually liquidated PFS 18 months ago, winding down a business that was burning $20 million in cash annually and had cost EML much more than that since becoming part of the company in 2020.
As the COVID-19 pandemic was in its early stages, EML had managed to negotiate down the purchase price for the business by £94.5 million ($189 million) to £131.5 million ($263.5 million), but it turned out to be a poisoned chalice as governance troubles later emerged.
The Shine class action, with Paul Leighton Mumford and Gayle Mumford as the lead plaintiffs, was due to be heard in August in the Supreme Court of Victoria.
The plaintiffs alleged that EML had breached its continuous disclosure obligations by failing to inform the ASX of information relating to alleged failings and deficiencies in the company's governance and controls, as well as the potential regulatory consequences.
It was also alleged that EML engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, regarding both its representations on the adequacy of its anti-money laundering and counter terrorism financing (AML/CTF) control framework, as well as the time and cost of remediating the AML/CTF control frameworks following intervention by the CBI.
The payments provider has denied these allegations at all times.
EML Payments notes the proceedings were brought on behalf of shareholders who acquired an interest in ordinary shares of EML during the periods 19 December 2020 to 19 May 2021, and 18 August 2021 to 25 July 2022.
"In reaching this settlement, EML makes no admission of liability rather it has elected to reach a commercial settlement in the best interests of shareholders allowing the new board and management team to fully focus on the execution of the EML2.0 strategy announced in November 2024," EML stated in a release to the ASX.
Shine Lawyers is expected to receive 24.5 per cent of the settlement recovered in the class action, or approximately $9.34 million.
After Shine launched the class action in late 2021, formally filing proceedings in 2022, EML's then-CEO Tom Cregan described it as "baseless and opportunistic" but set aside a $10.5 million provision.
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