The class action claim if brought on behalf of Trilogy Funds Management, as responsible entity for the Pacific First Mortgage Fund, formerly the City Pacific.

The claim is against directors and officers of the former ASX-listed company, Philip Sullivan, Stephen McCormick, Ian Donaldson, Thomas Swan and Peter Trathen.

It follows millions of dollars being written off by the Fund as a result of its losses on loans to property developers, Bullish Bear Holdings Pty Ltd and Atkinson Gore Agricultural Pty Ltd between 2006 and 2009. The claim follows notices of demand being sent to the former directors and officers, Maurice Blackburn said in a statement.

In July 2009 Trilogy replaced City Pacific Ltd as responsible entity of the Fund at a time when the value of the Fund had already been written down by $514 million. Trilogy’s case alleges that lending decisions made by the defendants were unreasonable and failed to follow the Fund’s own lending criteria causing significant loss and detriment to the Fund’s 11,000, predominantly elderly, investors.

The claim seeks damages of $60 million for losses arising from several transactions being the Fund’s loans to Bullish Bear in connection with its ‘King Tide’ development in Broadbeach Queensland, and loans to Atkinson Gore Agricultural relating to its ‘Seven Mountains’ development in Canungra, Queensland.

Maurice Blackburn Principal Jason Geisker said:
“It is fundamental to the fair and proper operation of any registered managed investment scheme that those entrusted with management of such schemes act in the best interests of scheme members. Investors are entitled to expect responsible entities and their officers to comply with their statutory obligations.”

Geisker said that where managed investment schemes are not conducted in accordance with their constitutional requirements, investors are exposed to unacceptable additional investment risks without their knowledge or consent.

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