Primelife executives take fight to court

SENIOR executives of Lend Lease Primelife are fighting moves to publicly examine them over a controversial $60 million sale of management rights of the collapsed Prime Retirement & Aged Care Property Trust.

By InvestSMART · 16 Nov 2011

By InvestSMART ·
16 Nov 2011

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The executives, led by the chief executive, Paul Walsh, have claimed in documents lodged with the Federal Court in Sydney that the Australian Securities and Investment Commission improperly exercised its power by authorising the receiver Korda Mentha to summons them to be examined about the affairs of Australian Property Custodian Holdings Limited, the responsible entity for the trust.

The $400 million retirement village group, with 12 properties in Queensland, NSW and Victoria, went into administration late last year. Korda Mentha, a receiver appointed to some of the villages by Capital Finance Australia and NAB - which are owed $158 million - has already conducted examinations in Melbourne over the management rights sale.

Unitholders - of whom there are more than 9000 - and are represented by the Prime Trust Action Group, have also been agitating about the propriety of the management rights sale.

The Melbourne court examinations have heard that a company of founder Bill Lewski, called Retirement Guide, was granted management rights for no cost. It later sold those rights to Babcock & Brown Communities, now owned by Lend Lease Primelife, for $60 million.

The administrator of the trust, Stirling Horne from lawler draper dillon, told BusinessDay the three receivers who had been appointed by the secured creditors believed the management rights were integral to any sale. "The receivers believe if they are are to sell the villages without the management rights there might be significant loss," he said.

For the unitholders of the once ASX-listed trust, the management rights sale was but one action that was detrimental to their interests, Mr Horne said.

In his second report to creditors, to be released today, Mr Horne said he would lodge a legal claim by the end of the month against directors challenging another controversial fee - this time a $33 million listing fee paid by unitholders when the trust listed on the stock exchange. The fee was paid to the responsible entity, which was owned by Mr Lewski.

The administrator's investigation has identified other issues of detriment to unitholders. This includes the alleged improper payment of distributions, unauthorised investments to third parties, and alleged misleading and deceptive conduct as a result of defective disclosure. Mr Horne issued letters of demand to 10 current and former directors of APCH, seeking compensation for alleged breaches of the Corporations Act and the trust's own constitution. The directors include Mr Lewski and the former federal Liberal health minister, Dr Michael Wooldridge.

In a note on its website, ASIC says it is making inquiries into the conduct of APCH, about its operation and the current circumstances of the fund.

"ASIC is liaising with the administrators of APCH and is considering what further action is required," the statement says.

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Frequently Asked Questions about this Article…

What are Primelife executives disputing in court over the $60 million management rights sale?

Senior executives of Lend Lease Primelife, led by CEO Paul Walsh, have gone to the Federal Court in Sydney to challenge moves to publicly examine them about the controversial $60 million sale of management rights for the collapsed Prime Retirement & Aged Care Property Trust. They argue the Australian Securities and Investments Commission (ASIC) improperly authorised receiver KordaMentha to summons them for examination about the trust's affairs.

What role did ASIC and KordaMentha play in the Primelife / Prime Retirement investigations?

ASIC authorised the receiver KordaMentha to summon people for examination about the affairs of Australian Property Custodian Holdings (the responsible entity for the trust). KordaMentha, appointed as a receiver to some villages by secured creditors, has already conducted court examinations in Melbourne into the management rights sale. ASIC says it is making inquiries, liaising with the administrators and considering what further action is required.

What exactly was sold for $60 million and who profited from that sale?

Court examinations heard that Retirement Guide, a company owned by founder Bill Lewski, was granted management rights for no cost and later sold those rights to Babcock & Brown Communities (now owned by Lend Lease Primelife) for $60 million. That $60 million management rights sale is a central focus of the investigations and unitholders' complaints.

How big was the Prime Retirement & Aged Care Property Trust and how many unitholders were affected?

The trust was part of a roughly $400 million retirement village group that included 12 properties across Queensland, New South Wales and Victoria. The article says there were more than 9,000 unitholders affected by the collapse.

What other controversial fees and alleged misconduct have been identified by the administrator?

Administrator Stirling Horne has flagged another contentious item: a $33 million listing fee paid by unitholders when the trust listed on the ASX, allegedly paid to the responsible entity owned by Bill Lewski. His investigation has also identified alleged improper payment of distributions, unauthorised investments to third parties, and potentially misleading or deceptive conduct arising from defective disclosure.

What legal action has the administrator taken or planned against directors of the trust?

Mr Horne said he would lodge a legal claim by the end of the month challenging the $33 million listing fee. He has issued letters of demand to 10 current and former directors of Australian Property Custodian Holdings seeking compensation for alleged breaches of the Corporations Act and the trust’s constitution. The named directors include Bill Lewski and former federal health minister Dr Michael Wooldridge.

How have unitholders responded and who is representing their interests?

Unitholders — more than 9,000 people — have been agitating about the propriety of the management rights sale. They are represented by the Prime Trust Action Group, which has been active in raising concerns about the sale and other actions that may have been detrimental to unitholders’ interests.

What are the implications for investors following the collapse and the ongoing examinations?

According to the article, receivers appointed by secured creditors (including Capital Finance Australia and NAB, which are owed about $158 million) believe the management rights were integral to any sale of the villages and that selling without them could cause significant loss. Meanwhile, the administrator’s investigations and planned legal claims signal potential recovery actions on behalf of creditors and unitholders and underscore ongoing regulatory inquiries by ASIC into the trust’s operation and disclosures.