The ultimate objective of the PTAG is to pursue all of the claims and issues it has identified and in so doing maximise the return for unit holders.
This will be achieved by:
1. pursuing a claim against APCH and other parties for the return of the Listing Fee;
2. restoring ownership of the management rights to the Trust by seeking to rescind the arrangements by which the management rights were restructured and transferred to Lend Lease Primelife (LLP, formerly Babcock & Brown Communities);
3. investigating and if viable pursuing a claim against APCH and other parties in respect of misleading and deceptive statements made in offer documents issued from August 2005 onwards;
4. pursuing claims against all parties who can be proven to have acted in breach of the Corporations Act, in breach of the Trust’s Constitution or who engaged in other illegal or improper actions;
5. if and where possible working with the Receivers appointed by the secured creditors to maximize the value of the retirement villages; and
6. raising funds to achieve the above.
Representatives of PTAG have been pressing for the issues noted above to be pursued since the initial appointment of Mr Stirling Horne and Mr Petr Vrsecky as voluntary administrators of APCH. In recent weeks we have been establishing a working relationship with Lawler Draper Dillon (LDD) during which time we have been able to gain an appreciation of some of the additional issues they have had to deal with. However, we do not necessarily agree as to the manner in which some of these matters have been dealt with, particularly those concerning the disputes lodged to the Financial Ombudsman Service (FOS), and we continue to discuss these issues with them. We do welcome Mr Horne’s acceptance of the unit holder issues and his decision to recognise some of our claims whilst his investigations into our other claims continue. We will continue to pursue this.
Unit holders should note from the recent update provided by LDD dated 12 October 2011 that it is likely that in the absence of any proposal for a Deed of Company Arrangement (DOCA), APCH will be placed in liquidation at the proposed November creditors meeting. This is an important development, as it will allow legal proceedings to be commenced against those whom we believe have been responsible for the losses incurred by unit holders.
This development also has ramifications for the role that PTAG is able to provide. To date its role has primarily been to lobby the various parties and agencies responsible for APCH to pursue the claims that have been identified. As outlined in the LDD update we are very pleased that our efforts to date have been reflected in LDD agreeing to pursue various matters through the Courts. We thank those who have supported us through this very critical stage.
However, this should not mark the end of our involvement. In the update LDD highlights that it is highly probable that the remaining assets of Prime are unlikely to realise sufficient funds to provide distributions to unit holders whether they are recognised as unsecured creditors or not. Pursuing those responsible for the losses is likely to be the major source available for providing any return.
The complexity of the Prime structure and the competing interests of secured creditors, unsecured creditors and unit holders will require the ongoing involvement of PTAG to ensure that returns to unit holders, whether as unsecured creditors or unit holders, are maximized. This will require access to legal advice. To date we have been ably supported by Clarendon Lawyers on an informal pro bono basis. As we proceed this arrangement needs to be formalized and PTAG needs to be able to pay for the legal advice that it receives. Other consultants may need to be engaged from time to time. This is why we now need to raise funds to go forward.
We also recognise the approaches by LDD, in recent weeks, to communicate with PTAG, and the conveners of PTAG wish to express their willingness to offer support in assisting LDD in efforts to maximize recoveries through whatever means are available to achieve PTAG’s objectives.
Pursuit of Listing Fee Claim
Following the listing of the Trust on the ASX in July 2007, a Listing Fee was paid to APCH in accordance with the provisions of the scheme constitution. This particular provision had been the subject of an amendment to the scheme constitution in August 2006, which was made without the consent of unit holders. This Listing Fee was subsequently paid to entities associated with Mr Lewski.
In recent weeks PTAG have been undertaking further investigations with the assistance of LDD to examine the circumstances under which the balance of the Listing Fee was paid in June 2008. We believe there is evidence to demonstrate the involvement of other parties, not previously believed to be directly associated with the transaction. If this evidence is further substantiated then it may improve the recoveries from this particular claim.
Restoration of the Management Rights to the Trust
Restoring the management rights to the Trust is the first step in improving the value of the assets.
Prior to the appointment of Receivers and Administrators in October 2010, a number of unit holders questioned the basis on which the management restructure, outlined in the pds issued in June 2007, was granted approval by APCH together with claims made that the restructure would “not be adverse to Prime Trust or Unitholders”. This conflicted with the claims made by APCH in its announcement through the ASX on 11 June 2010 when it forewarned a write down of the asset values at 30 June 2010 in the range of $130 million to $150 million. It further disclosed that negotiations were continuing with LLP to purchase back the management rights for between $42.5 million and $45 million and that the return of value from the transaction was believed to be in excess of the purchase price. This was later confirmed to Roger Pratt in October 2010 when APCH provided a copy of the valuation register which indicated a value of the management rights in excess of $100 million.
At a meeting with LDD in May 2011, PTAG were advised that the Administrator had been working with Mr Lewski on a possible legal action against LLP for failing to meet its obligations in managing the Trust’s properties and seeking to terminate the management arrangements between the parties
Mr Horne mentions the potential for pursuing the LLP claim in the recent update. PTAG recognises that many unit holders may have serious reservations about the proposed funding for such an action. Unit holders should note that before this happens there are a number of processes that need to be undertaken which includes obtaining the consent of the Court. PTAG will be able to seek its own legal advice as to whether to support or oppose such an exercise on behalf of the unit holders as well as investigating as to whether there exist alternative opportunities of pursuing the claim.
Investigation of Claim for Misleading and Deceptive Statements Made in Offer Documents
APCH issued a number of product disclosure statements (pds documents) in which invitations were made to the public to invest in the Trust. The pds documents issued since August 2005 included schedules of the anticipated cash flows that it believed would be derived from a number of facilities; specifically those relating to the villages, which remain as the core assets of the Trust. Further disclosures intimated that these funds were available and would be used to pay distributions to unit holders.
The forecasts included cash flows that related to increases in ingoing contributions, or interest free loans, paid by incoming residents when they arrive in the village and that were repayable in substantial part when the residents moved out. It was usually the case that the contribution received from the new incoming resident was higher than that previously paid by the resident that they were replacing. These amounts therefore represented forecast increases in liabilities of the Trust and would not be included in the determination of accounting income of the Trust as disclosed in its financial statements. The Trust was only subsequently able to pay the level of distributions forecast in the pds documents by subsequently distributing unrealised gains from the revaluation of the Trust’s assets, which was in conflict with its stated accounting policies.
The above is just one of numerous examples we have collated where we believe that the pds documents were designed to mislead and deceive investors.
Pursuing Claims against Other Parties
During the course of our investigations, we have identified numerous other parties whom we believe acted improperly in relation to the Trust. We believe that it will be possible to take legal action against these parties in order to recover part or all of the unit holder losses arising as a direct result of any such improper actions.
We note that the update provided by LDD identifies a number of advisers who are likely to face legal action. These parties include, but are not limited to, Madgwicks Lawyers, Pitcher Partners, Kidder Williams, Balmain Commercial, Rees Partners and a number of property valuers.
Maximizing the Value of the Retirement Villages
As noted above, the restoration of the management rights and any further improvement in the value of the retirement villages is vital in achieving and maximising any return to unit holders. Control of these assets currently resides with the Receivers appointed by the secured creditors. For the purpose of restoring the management rights there are potential benefits from the Receivers and unit holders exchanging and sharing the information they have collected in relation to the management of the Trust by APCH.
There are likely to be situations where the interests of the secured creditors conflict with those of the unit holders and in these circumstances it is important that there is legal counsel available to ensure that unit holders’ representatives are fully appraised of their rights and how they may be affected in particular circumstances.
Raising Funds for a Fighting Fund
To date the work undertaken on behalf of PTAG has been financed out of the personal resources and time of a few individuals. We acknowledge the considerable support of Clarendon Lawyers in Melbourne who have not charged for their services, a situation which obviously cannot continue given the position that has now been reached. If we are to continue to “press home” the opportunities that have been created, funding is required in order to be able to pay legal and other professional advisers for their advice. Regrettably there is no certainty when pursuing matters through the Courts but we believe that we have developed strong claims that can be successful if properly pursued.
We therefore seek the support of the PTAG membership. We do not expect unit holders to make large donations. Given the significant level of support by unitholders a contribution of $100 would raise a significant sum of money that would greatly assist in our endeavours. We understand that there are some unit holders who have incurred considerable losses as a result of their investment in the Trust and would find even this amount difficult to find in their present circumstances. The contribution is voluntary. We also encourage those advisers whose clients have invested in the Trust to add their support. All contributions will be treated confidentially where required.
How to make a voluntary contribution please select this link
18 October 2011