City Pacific First Mortgage Class Action
On 27 April 2012, Maurice Blackburn filed an application and a
statement of claim in the Federal Court in Sydney against
Philip Sullivan, Stephen McCormick, Ian Donaldson and Thomas Swan,
the directors and officers of the former ASX listed City Pacific
Ltd (Receivers & Managers Appointed) (In Liquidation).
The claim brought by Trilogy Funds Management Limited as
responsible entity for the Pacific First Mortgage Fund (formerly
known as the City Pacific First Mortgage Fund) follows significant
losses on Fund loans to property developer, Atkinson Gore
Agricultural Pty Ltd (Receivers & Managers Appointed) (In
Liquidation) permitted during 2006 and 2007.
Trilogy's case alleges that lending decisions made by the
defendants, as members of the credit committee of City Pacific,
were unreasonable and failed to follow the Fund's lending criteria,
compliance plan and constitution. The claim alleges that the
poor lending decisions resulted in an increase in a loan facility
to Atkinson Gore Agricultural over its 'Seven Mountains'
development in Canungra, Queensland. Trilogy claims the
defendants should pay the Fund compensation for losses sustained by
the Fund as a result of these poor lending decisions.
The claim alleges the defendants breached their statutory duties
under the Corporations Act 2001 when granting certain
loan facility increases to Atkinson Gore Agricultural Pty Ltd and
approving advances above the facility limit. These increases
were said to be for the purposes of securing a large rural site
known as 'Seven Mountains' known by City Pacific as 'Saddleback'.
It is alleged that members of the credit committee
unreasonably relied on a March 2006 valuation by PRP Valuers and
Consultants Gold Coast Pty Ltd. These valuations provided two
alternative values for the Saddleback land being:
- $64.1 million, if the land was rezoned from 'rural' use;
- $102.4 million, if the land was also included in the 'Urban
Footprint' area under the South East Queensland Regional Plan or
declared under the State Development and Public Works
Organisation Act 1971 a 'State Significance' project.
The claim alleges that, at the time of the loan facility
increases, the Saddleback land had not been rezoned from its
'rural' use, nor was it ever declared a 'State Significant' project
or included in the 'Urban Footprint'. Trilogy alleges that it
was unreasonable and in breach of the credit committee's
obligations and duties under the Corporations Act to rely
on such vastly inflated valuations based on unsatisfied
By 1 July 2007, the Fund had advanced over $60 million to
Atkinson Gore Agricultural in connection with the Saddleback lands,
which were ultimately sold in 2012 for $7.627 million.
Status of the claim
Trial date allocated
On 5 September 2013, this matter was set down for a two
week trial scheduled to commence on Monday, 10 March 2014 in
Sydney. Justice Wigney has been allocated as the docket Judge for
this matter and will preside over the trial.
Claim and Defence
Trilogy lodged its claim against the defendants in the Federal
Court of Australia on 27 April 2012. The defendants have
since denied responsibility for any losses to the Fund arising from
their approval of the loans the subject of Trilogy's claim. On 27
September the defendants lodged a cross claim
alleging entitlements to certain indemnities for legal costs
(incurred in relation to the proceeding) arising from a deed of
indemnity said to have been granted by City Pacific Ltd.
Trilogy has denied it is bound by that deed. Trilogy
filed its defence to the
cross claim on 17 October 2012.
Mr McCormick lodged his further
amended defence on 3 December 2012. On 12 March
2013 Mr McCormick's solicitors ceased to act.
Mr McCormick is now unrepresented in this matter and has advised
that, at this stage, he intends to take no further part in the
On 8 March 2013, following a detailed review of the defendants'
evidence, Trilogy filed an amended statement of
claim containing further particulars of the Saddleback
transaction and the defendants' knowledge of those matters.
On 22 May 2013, Trilogy filed a further amended statement of
claim narrowing the scope of its claim. Messrs Sullivan,
Swan and Donaldson filed their defence on 24 May 2013.
The parties have served all of their evidence.
On 14 May 2013 Trilogy served a copy of the documents it
proposes to tender at trial and provided an amended index to those
documents on 31 May 2013. The defendants are to serve any
additional documents they propose to tender at the trial by 8
Proposed early hearing of Mr McCormick's cross claim
On 26 February 2013 Justice Emmett dismissed Mr McCormick's
application to have his cross claim determined in full prior to the
hearing of Trilogy's claim and ordered Mr McCormick pay the costs
of that application.
Proposed cross vesting application dismissed
On 21 May 2013 Justice Griffiths dismissed the respondents'
application to have the proceedings cross vested to the Supreme
Court of Queensland.
A pre-trial timetable was put in place by Justice Jacobson at
the directions hearing on 5 September 2013, for the pre-trial steps
including provision of the final tender bundle of documents for
tender at trial and service of written submissions and other final
preparations for the trial.
Since replacing City Pacific Ltd as the responsible entity of
the Pacific First Mortgage Fund in July 2009, Trilogy has been
investigating City Pacific's management of the Pacific First
Mortgage Fund. Trilogy is continuing its investigations to
determine the best avenues available to recover funds on behalf of
unit holders in the Pacific First Mortgage Fund.
Towards this end a public examination of Mr Philip Sullivan,
former Managing Director and CEO of City Pacific, was conducted on
2 and 3 February 2012. Mr Sullivan was questioned in relation to
various loan transactions involving the Fund entered into during
2008 and 2009 and his personal financial position. In the lead up
to those examinations Mr Sullivan was also ordered to produce
documents relating to his financial position to the Supreme Court
Examination hearings have also been conducted in the Supreme
Court of NSW on 19, 20 and 21 March 2012. Examinaton hearings
involving Mr Ross Griffiths and Mr Mark Sutton of the Commonwealth
Bank of Australia were conducted on 19 and 20 March. Mr Allan
Titterton from PPB Advisory was also examined on 21 March 2012.
Further examinations of Mr Sullivan, Mr Larry Matthews and Mr
Steve McCormick were conducted on 5, 6 and 7 September 2012 and
other examinations of individuals involved in other loan
transactions the Fund entered into are scheduled in the Supreme
Court of New South Wales on 18 December 2013 and 3 February
Unit holders in the Pacific First Mortgage Fund should direct
any enquiries they have regarding these matters to Balmain NB
Corporation Limited as asset manager of the Fund on telephone
number 1800 194 500 or email firstname.lastname@example.org.