7 May 2014
On 2 April 2014 Maurice Blackburn lodged a claim on behalf of Trilogy Funds Management Limited as responsible entity for the Pacific First Mortgage Fund (Trilogyand Fund, respectively) against law firm Minter Ellison Gold Coast (Minter Ellison). The claim was made in respect of losses sustained by the Fund following a co-lending transaction in favour of SP Marina Pty Ltd (In Liquidation) (SP Marina) in relation to the purchase of “Mariner’s Cove Marina” (Asset 32), located at 60-70 Seaworld Drive, Main Beach Queensland (Mariner’s Cove). The claim was commenced in the Federal Court of Australia and has been allocated to Justice Jacobson in Sydney.
Background
In April 2008 the Credit Committee of the Fund approved a total loan facility of $39.36m to SP Marina, with $11.76m to be advanced by the Fund and the remaining $27.6m to be advanced by City Pacific Limited (Receivers and Managers Appointed) (In Liquidation)(City Pacific) in its own right or as trustee. The loan approval was granted one month after the Board of City Pacific suspended unitholder redemptions. SP Marina was a related party to City Pacific. Another co-lender was also to provide additional loan funds to assist SP Marina to acquire Mariner’s Cove.
At the time of approving and advancing funds to SP Marina, City Pacific on behalf of the Fund engaged the services of Minter Ellison to assist with preparation of loan and mortgage documentation and associated materials. The final loan documentation and co-lending agreements effectively relegated the Fund to a subordinated ranking position behind the other co-lending party. This meant the Fund did not have a first-ranking security over Mariner’s Cove in respect of its advances to SP Marina and would rank second on any loan recoveries.
Claims
Trilogy’s claim alleges that, in entering into this co-lending arrangement, City Pacific failed to adhere to the Fund’s Constitution and Product Disclosure Statement, and was therefore in breach of the Corporations Act 2001 (Cth) (Corporations Act). Trilogy contends that by reason of Minter Ellison’s involvement in the alleged contravention of the Corporations Act it ought to compensate the Fund for losses suffered in connection with the SP Marina loan.
The SP Marina loan advances
Between 4 April 2008 and 4 April 2009 the Fund advanced amounts totalling $16,675,112.88 to SP Marina in relation to the purchase of Mariner’s Cove. The Fund suffered significant losses on the SP Marina loan. Trilogy claims that Minter Ellison should compensate the Fund for the full amount advanced to SP Marina less the amount received by the Fund from the sale of Mariner’s Cove following repayment of the full amount due to the co-lender. Trilogy on behalf of the Fund also claims interest on these losses from Minter Ellison.
Status of the claim
The claim was served on Minter Ellison on 3 April 2014. A first directions hearing is scheduled before Justice Jacobson in Sydney on Thursday, 8 May 2014.
We will keep Unitholders informed of any material developments in relation to this claim.
Should you have any enquiries please call Balmain Trilogy Investor Relations on 1800 194 500 or email contact@balmaintrilogy.com.au