Prime Trust Investors Left in the Lurch Because of Legal Fees
Prime Trust Action Group (PTAG) would like to advise investors of a new (and very disturbing) development with Prime Trust. PTAG is outraged by this development and is currently considering asking all investors to write to the local Federal MP so as to bring this issue, and the conduct of the insurance company concerned, to their attention and the attention of Parliament.
Professional Indemnity insurance is a cornerstone of the financial services and investor protection regime in Australia, and an essential prerequisite to obtaining an Australian Financial Services Licence.
The attached article by Ben Butler in The Age dated 17 February 2014 suggests that the entire $5m cover under APCH's Professional Indemnity Insurance Policy ("PI Policy") has been exhausted by the APCH directors by way of legal fees, leaving nothing to be made available for claims made by aggrieved investors.
PTAG put the Liquidators on notice in July 2011 of investor claims against APCH and we understand that these claims were duly passed on to the insurance company within the prescribed period. PTAG does not accept that the APCH directors, who were each found in the Federal Court to have contravened the Corporations Act on several occasions, should be given priority in claiming against the PI Policy ahead of investors.
PTAG does not accept that the insurer, AIG Australia Ltd (formerly Chartis Australia Insurance Ltd), has acted appropriately in reserving the proceeds of the PI policy for the exclusive use of the APCH directors, having been advised that there were significant and multiple claims that investors were able to make as the liquidation of APCH and the Trust progressed.
PTAG notes that there have been claims by directors under professional indemnity insurance contracts that have been excluded in cases where directors have "gained any profit or advantage to which one is not legally entitled" or engaged in a "deliberate conflict of interest", points which appear to be soundly confirmed by the Federal Court judgment.
If AIG only pays claims in respect of the APCH directors (who were found to have breached their responsibilities under the law) and rejects all claims from innocent investors (who have suffered loss as a result of the actions of the APCH directors, as confirmed by the Federal Court), then PTAG suggests that this would be a failure of the Australian financial services system of the highest order. We believe that a successful claim by the Liquidators against the PI Policy may assist in funding various legal actions against certain parties for further alleged misdeeds in relation to the Trust, thereby potentially boosting the pool of funds recovered for investors.
PTAG is also aware that the NZ Supreme Court (the equivalent of the Australian High Court) has determined, in a case known as the Bridgecorp case, that directors are not entitled to claim legal costs under professional indemnity insurance policies until other claims have been assessed. PTAG is also aware that a similar case may be brought before the Australian High Court in the near future, and suggests it would be inappropriate for AIG to release any funds under the PI Policy for the benefit of the APCH directors at the present time.