Lawyers for a $200 million-plus class action against the Centro group say it is unrealistic for the restructured company to claim it is not liable for losses of the old entity.

More than four years since the shopping centre owner and funds manager nearly collapsed under $5.7 billion in debt, what may be the biggest class action in Australian history began in Melbourne on Monday.

About 5,000 investors – some of whom lost life savings – accuse Centro of misleading and deceptive conduct for not disclosing in 2007 that it had at least $3 billion of interest-bearing debt falling due within 12 months.

When it did disclose the debt – as is legally required by the Australian Securities Exchange – its shares plunged by 76 per cent in one day on December 17, 2007.

Centro has since restructured itself as listed retail property trust Centro Retail Australia, including the Centro Retail Group.

However its other entity, the more debt-ridden Centro Properties Group was abandoned and the new entity claims it should not be responsible for the old entity’s past mistakes.

Senior Counsel Noel Hutley, representing the class action, ridiculed the “no liability” defence.

“There is a degree of unreality to sever knowledge about what’s happening,” he told Justice Michelle Gordon.

“One group would have known what the investment group was considering.”

A common board and executive had overseen the two Centro groups, Mr Hutley said.

Maurice Blackburn’s Martin Hyde, who is principal lawyer on the case, said outside the court that people invested in Centro under the misapprehension that it was well-placed against the backdrop of the global financial crisis.

“They were actually investing money in entities that had $6 billion of debt due before Christmas-time,” he told reporters.

Maurice Blackburn and Centro are also separately taking action against Centro’s auditors PricewaterhouseCoopers (PWC) for approving its financial accounts and failing to detect errors regarding Centro’s debts.

The court heard Centro dramatically increased its funds under management by $14 billion to $25.5 billion in the year leading up to its near collapse.

It greatly expanded its operations and its debt gearing (debt to equity) increased above its own recommended 35-40 per cent to about 74 per cent by the end of 2008.

At least 50 lawyers packed into extra benches in the court on Monday, while more lawyers filled the public gallery.

The civil action is expected to run in the Federal Court sitting in Melbourne for at least 10 weeks.

The shareholders’ case received a boost last year when Federal Court judge John Middleton ruled in favour of the corporate regulator that eight Centro directors failed to exercise due care and diligence.

Centro shares were up 2.5 cents at $1.92 on Monday.