Prime Trust Action Group Unitholder Update No. 27 – 22 May 2015
Although the progress of the various legal proceedings currently on foot continues to be frustratingly slow, we would like to provide investors with a further update on relevant matters as set out below.
Federal Court Proceedings Against Prime Trust Directors
Investors may recall that:
• in December 2013, the Federal Court found that the directors of Prime Trust had breached the Corporations Act in relation to the $33m listing fee that was paid from the Trust without investor approval;
• in December 2014, the Federal Court imposed financial penalties on the five directors in question, with a fine of $230,000 being imposed on Mr Lewski and fines of $20,000 for each of the other directors; and
• in December 2014, the Federal Court disqualified Mr Lewski from being a company director for 15 years, and imposed shorter disqualification periods on Mr Butler and Mr Jaques (4 years each) and Dr Wooldridge (2.25 years).
Following the Federal Court judgment being handed down in December 2014, all five directors lodged appeals. The appeals are scheduled to be heard over the period 25-28 May 2015 and we will provide updates on our website as they come to hand.
We understand that ASIC has cross-appealed in respect of the financial penalty and disqualification period for Mr Lewski, as well as the financial penalties for Messrs Wooldridge, Butler and Jaques.
It is of note that should the directors’ appeals be dismissed, the directors may be required to pay ASIC’s considerable legal costs in addition to the financial penalties. We expect that such legal costs, if awarded, may exceed the actual financial penalties imposed by the Court.
Listing Fee Compensation Proceedings
These proceedings are being conducted in the Supreme Court of Victoria by KordaMentha, the Receivers and Managers, on behalf of the secured creditors. The Receivers and Managers are seeking compensation for losses suffered by the Trust as a result of the payment of the $33m listing fee.
We understand that litigation funding has now been secured for these proceedings, and we expect these proceedings to be reactivated once ASIC’s proceedings in the Federal Court have concluded.
Management Rights Claim
These proceedings are being conducted by the Liquidators supported by a litigation funder.
The defendants to this claim include several members of the Lewski family, various entities associated with the Lewski family as well as Madgwicks Lawyers and other parties. We believe that this is a strong claim and eagerly await further developments.
Pitcher Partners Claim
We are pleased to report that progress continues to be made in relation to the claim against Pitcher Partners, the long-time auditors of Prime Trust.
We anxiously await further developments in relation to what we currently expect to be a very substantial claim.
Lend Lease Claim
In November 2014, the Liquidators issued legal proceedings against various Lend Lease companies, and various entities associated with Mr Lewski, in relation to the disputed management rights.
These proceedings are being brought under certain provisions of the Corporations Act which may provide the Liquidators with power to void particular transactions relating to the management rights of the Trust’s retirement villages; transactions which we believe caused significant detriment to the Trust.
The defendants have challenged whether the Liquidators have the right to pursue these claims, and we are currently awaiting further developments.
In recent times, a number of defendants have been publicly examined to determine their ability to meet any adverse judgment against them.
Investor Capital Losses
A number of investors have contacted us asking whether their capital losses in respect of their investments in Prime Trust can be claimed. Unfortunately, we are unable to provide taxation advice and encourage investors to seek their own advice on this and any other taxation related matters.
We understand that generally capital losses can only be claimed once the Liquidators have made a determination that there is no likelihood of a return. We note that no such determination has been made in relation to Prime Trust. Given that the liquidation of Prime Trust has been running for several years already and that it is likely to take several more years for all of the various legal proceedings to be completed, we are considering approaching the Australian Taxation Office with a view to seeking at least a partial recognition of the capital losses that investors have sustained. We will update investors further on this issue as and when there are any developments.
Thank you once again for your continued support of the Prime Trust Action Group.
Prime Trust Action Group