A Brisbane based mezzanine finance group has claimed in the Supreme Court that it made a $1.6 million property investment on the strength of representations that the net worth of the project developers that would yield surplus assets in the event of any default.
Such claims – by funds managers Anthony Moreton – are alleged to have included representations concerning Paul Brinsmead’s Kingscliff and Gold Coast property holdings and colleague Peter Madrers’ “big double block at Kingscliff”.
The deal – with the ill-fated Resort Corp – was done just prior to the eruption of the US sub-prime mortgage crisis in June 2007.
Resort Corp’s glittering Tweed Coast apartment portfolio crashed when the company went into external administration in early 2009. The Vererdi finance group’s investment went with it.
Because the relevant representations were false or made without reasonable grounds, so Venerdi alleges, the information memorandum in which they were contained was “misleading or deceptive”.
It claims relief against Anthony Moreton Group and CEO Anthony Hazell – for the value of its investment plus its “opportunity cost” of $680k – under the TPA equivalent of s18 of the Australian Consumer Law, and in negligence.
But the Defendants have counterclaimed, alleging that Venerdi should in turn be liable to them for Venerdi’s breach of their own warranty spelled out in the documents that it had “made its own assessment” of the developers and had not relied on any representations made by them.
Moreton and Hazel were just as much entitled to rely on that as Venerdi was entitled to rely on theirs, they assert.
On that reasoning, any damages payable by them to Venerdi for their error, must be paid back to them by Venerdi as a consequence of Vernerdi’s breach of its “no reliance” warranty.
But according to the court, such logic was flawed.
Allowing the defendants to cross claim for the amount of their own liability for misleading or deceptive conduct would “extinguish the plaintiff’s claim and in effect destroys its statutory right to damages”.
Moreton and Hazell’s counterclaim was struck out but they were given leave to file an amended defence and/or counterclaim, because “it may [yet] be possible to formulate a counterclaim based on the reliance exclusion clause”.
The dispute will proceed to trial later in 2014 or in 2015.
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