Prime Trust Action Group Unitholder Update No. 7 – 19 August 2011

This Unitholder Update provides information on a number of current issues as follows:

Public Examinations

Public Examinations are scheduled to be conducted in the Supreme Court of Victoria on 22-24 August 2011. The following parties have been summoned to appear:

Parties Associated with APCH, the Trust’s Responsible Entity

Mr Bill Lewski, former Managing Director
Mr Phillip Powell, former Managing Director
Mr Neil Rodaway, Managing Director
Mr Mahanthran Krishnan, former Company Secretary

Parties Associated with Madgwicks, the Trust’s Legal Advisers

Ms Lorna Gelbert, Partner
Mr Graeme Levy, Partner

Parties Associated with Lend Lease Primelife, the Manager of the Trust’s Retirement Villages

Mr Paul Walsh, Chief Executive Officer
Mr David Payne, General Manager, Retirement Villages
Mr Wai See Chung, Head of Legal
Mr Peter Velez, Partner, Watson Mangioni as Lawyers for Lend Lease Primelife

The Public Examinations are being conducted by KordaMentha, the receivers to seven of the Trust’s retirement villages. The Examinations are expected to focus on how the village management rights, an asset that we believe was part of the Trust, came to be transferred to Mr Lewski and then, shortly thereafter, onsold to Babcock & Brown Communities Ltd (now Lend Lease Primelife) in a transaction which earned Mr Lewski the sum of $60 million, and led to the value of the Trust’s retirement villages falling by more than $100 million as a result of the management rights being held by a hostile third party.

Representatives of the Prime Trust Action Group will be flying in from Perth and Sydney to attend the Examinations and we expect to provide a further update to unitholders following the conclusion of the Examinations. Unitholders residing in Melbourne wishing to view proceedings may visit the Supreme Court of Victoria at 436 Lonsdale St, Melbourne. We would expect the sessions to commence at 10am each day and will endeavour to post the confirmed session times on our website.

Please note that we would expect the above Public Examinations to be the first in a series of Public Examinations to be conducted into various transactions entered into by Prime Trust under the management of APCH.

Letters of Demand

On 14 July 2011, the Prime Trust Action Group issued Letters of Demand to APCH and the following past and present APCH directors and executives:

Mr Bill Lewski, former Managing Director
Dr Michael Wooldridge, Chairman
Mr Neil Rodaway, Managing Director
Mr Cedric (Richard) Beck, former Chairman
Mr John Deans, former Chairman
Mr Kim Jaques
Mr Anthony Hancy
Mr Peter Clarke
Mr Mark Butler
Mr Mahanthran Krishnan, former Company Secretary

In addition, Lawler Draper Dillon, as administrator of the Trust, also issued Letters of Demand to past and present APCH Directors demanding that the Trust be immediately reimbursed for more than $100 million. An article that refers to these Letters of Demand is available for viewing from our website. Unitholders may wish to note that the Letters of Demand issued by the Action Group demanded a quantum considerably greater than $100 million.

Developer Loans

We have been campaigning for almost a year over the issue of APCH providing loans to developers. We have argued that these loans were contrary to the Trust’s Constitution and we have demonstrated that such loans were not disclosed to potential investors in the Product Disclosure Statements. We have undertaken further investigations into these matters and provided a comprehensive detailed report to the administrator and ASIC outlining some very serious allegations. We also note the extraordinary situation whereby some of the developer loans were provided on an extremely risky second mortgage (or even third mortgage) basis, and that some of these loans were provided to developers owned by Mr Lewski. We have demanded that immediate action be taken to pursue those responsible for the massive losses on these high-risk developer loans (currently estimated at $75 million including interest).
 

Further Investigations

We have recently completed an in-depth investigation into the role played by a party (other than APCH) who we believe contributed heavily to the demise of the Trust. The results of this detailed investigation have been provided to the administrator and to ASIC. We have urged the administrator to immediately investigate the matters raised in our report and to take all actions as necessary to pursue the party concerned to the maximum extent permitted by the law.

Financial Ombudsman Service

As previously reported, the administrator of the Trust has commenced action in the Supreme Court of Victoria designed to prevent unitholders from pursuing claims against Prime Trust through the Financial Ombudsman Service. The Action Group believes that such action is unwarranted and notes that unitholders have a legal right to make complaints as per the terms of the Australian Financial Services Licence held by APCH.

Some unitholders have made strong submissions to the administrator over this issue, especially in light of the administrator’s commitment that unitholders are creditors of the Trust. Given that substantial legal and other costs are being incurred by the administrator in pursuing this matter, and given that the action is designed to penalise unitholders, the administrator has been asked to confirm which party is funding the Court action as we believe it would clearly not be appropriate to charge the associated costs to unitholders.

The administrator’s Submission to the Court was made on 14 July 2011 and was followed by a Submission made by FOS on 29 July 2011. Both of these Submissions are available from our website. It is possible that ASIC may also be making a Submission in this matter. The Court Hearing to determine the matter is currently scheduled for 5 October 2011.

Prime Action Support Group

In pursuing the objectives of the Prime Trust Action Group, we, of course, have frequent need to consult with our legal advisers and obtain legal advice. We have been most fortunate to have had Clarendon Lawyers undertake considerable legal work in support of the Action Group’s objectives at no charge up to now.

In order to prosecute our case against APCH and other parties, we are now finding the need more and more to obtain considered legal advice and this is becoming increasingly difficult with our limited resources. With that in mind, we are in the process of establishing an incorporated body, to be known as the Prime Action Support Group, which will raise funds to pursue the objectives of the Action Group. We are in the process of registering this organization and establishing Rules, opening bank accounts etc.

We will soon be asking unitholders and advisers to make voluntary contributions to the Prime Action Support Group, which will be used as a fighting fund to continue the pursuit of the Action Group’s objectives. The funds so raised will enable us to continue working with Clarendon Lawyers in fully exposing those responsible for the collapse of the Trust. We are also grateful for the many unitholders who have previously offered financial support, offers which we have had to decline given that we did not have incorporated status or a bank account.

Thank You

We would like to thank all members for their continued support of the Prime Trust Action Group. With your help, we recently reached the milestone of having 400 million units registered in support of the Action Group. Thank you also for the many, many expressions of support and encouragement we receive each day, it certainly helps us to keep us motivated.

Thank you also to the many unitholders for their constant offers of assistance. We will be contacting our army of volunteers again shortly for assistance in distributing letters to those of our members who do not have email addresses. We expect to issue a further update following the Public Examinations but please also remember to check our website from time to time for further developments: www.primetrustactiongroup.com

Prime Trust Action Group
19 August 2011

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