National law firm Gadens has launched a lawsuit against property investor Oliver Hume Corporation on behalf of overseas investors fearing they will lose the majority of their $12 million investment.
Three separate proceedings have been filed in the Supreme Court of Victoria amidst allegations the trustee of the Oliver Hume Australia Property Income Fund provided "imprudent" loans to related entities.
The firm alleges these loans contained interest rates and other key terms that were inconsistent with previous representations made to investors.
Gadens says investors fear they will only get back a fraction back of the $12 million invested as a result.
"The investors allege that when the borrowers of the imprudent loans fell into default, the trustee failed to call the loans and protect the investors' interests," says Gadens.
"Instead, they allege that the trustee breached its fiduciary and statutory duties by allowing the borrowers to remain in default."
Oliver Hume Property Funds, the trustee of the fund and Oliver Hume's AFSL funds management company, has been named as a defendant in the proceedings alongside managing director Michael Duster, as well as Oliver Hume Property Funds managing director David Rogers.
"Notably, Duster and Rogers are both directors of the trustee and most of the related entities receiving loans from the fund," says Gadens.
"These shared directorships between lender and borrower may have impacted upon their judgment and the decision not to call in the loans after they came into default."
Gadens says it understands further claims will be filed against Oliver Hume "imminently" in the Supreme Court of Victoria.
A spokesperson for Oliver Hume says the company has always acted in the interest of its unitholders, investors and stakeholders.
"We will continue to do so as we have done for the last 68 years. The claims are without foundation. All defendants will be defending the allegations," the spokesperson says.
The lawsuit comes at an inopportune time for the 60-year-old company as it struggles to keep its head afloat following a $2.2 million loss in the 2018 financial year.
The group has been struggling to make projects stick in recent months, announcing it had copped a $4 million capital loss on a Brisbane River development site in October.
The company paid $14.7 million for the 32 Cribb Street block in Brisbane's city fringe in 2014, and sold the site for $10 million to Brisbane's Power Group at the end of 2019 according to the Australian Financial Review.
Since then the embattled developer was forced to cut staff numbers just before Christmas in response to the ailing housing market.
Business News Australia
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