This article is from the Australian Property Journal archive
MORE than 4,000 investors in Australian Capital Reserve have settled their class action against The Trust Company – more than eight years after ACR collapsed and just three weeks before the trial was due to start.
ACR collapsed in May 2007 owing around $300 million millions of dollars to approximately 7,000 Australian retail investors.
After Westpoint and Fincorp, it was the third major Australian fixed-interest investment scheme to collapse and has since been followed by high profile company collapses including Bridgecorp, Elderslie Finance and Asset Loans.
Slater and Gordon brought the Federal Court claim in May 2013 on behalf of more than 4,000 retail investors who invested in ACR between 17 November 2005 and the company’s collapse on 28 May 2007.
The class action alleged that the Trust Company, which had been appointed as a trustee to protect ACR’s investors, breached its duty of care.
Between 2000 and mid-2007, ACR raised money by issuing debentures and using the money to make loans to other companies in its company group, the Estate Property Group, for use in property development.
The class action alleged that Trust Company should have investigated problems with the Estate Property Group’s finances and its property development business and stopped ACR from issuing debentures by no later than 17 November 2005.
The class action reached a settlement with the Trust Company three weeks before trial and would see the Trust Company pay a total of $25 million including legal costs, to be shared among class action group members.
Slater and Gordon class action lawyer Odette McDonald said the deal was great news for class action group members.
“This is a fantastic result for thousands of everyday investors, many of whom were elderly Australians looking for a safe place to invest their money.
“Through clever marketing, many people invested in ACR in the mistaken belief it was as safe as investing in a bank. Clearly, this was not the case,” McDonald said.
Under the terms of settlement, the Trust Company does not admit liability. The agreement will be put before the Federal Court for approval on 18 December.
ACR and Estate Property Group’s assets were subsequently sold to Becton Property Group for $533 million in 2007. Becton outbid all contenders for the assets and took on $584 million worth of debt including $533 million for the acquisition and $50 million for working capital.
The portfolio included nine apartment projects in Sydney and Melbourne, seven undeveloped greenfield sites in NSW and one near complete commercial office development also in NSW.
In February 2013, Becton went into receivership after its lender refuse to provide the waivers and support requested by the company.
It was a sad day for one of the founders Max Beck, who established the company in 1976 along with Michael Buxton.
In an interview with Australian Property Journal at the time, Beck said he was saddened by the news.
“It’s just so tragic that a company that took 30 years to build has been allowed, by others, to collapse in just a few short years.
“My thoughts are with all the wonderful people and chairman that work for Becton today and contributed so much to the company in the past,” Beck said.
“This is a very sad day for all Becton employees and shareholders and the property industry more generally because over more than 30 years Becton had created a fantastic reputation for the highest quality development and I cannot understand what has happened to the company since I ceased to be involved with it,” Beck said.
Australian Property Journal
