Some Hope For Life Savings Locked In Limbo
The Age
Monday November 27, 1995
Lisa Pickersgill looks at the state of play in the biggest crashes of the early '90s and finds that, at last, some wrongs have been `righted'.
Five years after they lost, Estate Mortgage, OST and Pyramid investors are still awaiting compensation.
DOORS closed for millions of investors in the early '90s following the careless management of their savings by high rollers who stepped beyond the mark. Many who lost money in Estate Mortgage, OST and Pyramid Building Society are still demanding compensation.
Some are finally seeing results. Victims of other crashes may never get a cent.
OST Friendly Society.
Ever since OST Friendly Society was taken over by its then biggest rival - the IOOF group - in 1990, more than 30,000 investors have been restricted to withdrawing some or all of their money. The good news is that only one asset remains to be sold within the partially frozen funds, one fund has been completely reopened and 60 per cent of the money has been repaid to investors. The bad news is that some investors will never recoup all of their original capital.
IOOF has paid out around $264 million to OST investors. The long-awaited sale of the Dreamworld theme park - subject to Foreign Investment Review Board approval - for over $80 million is expected to improve liquidity and allow investors to unlock more of their tied-up cash.
The Deferred Annuity has been reopened, as has 40 per cent of the Accumulator and 20 per cent of the Mortgage Bond fund.
Around $28 million, although available to investors, has not been withdrawn. As OST promoted the funds as capital-guaranteed, IOOF has been meeting death and maturity payments, but as the funds still have deficiencies, the freeze has been extended.
Ross Higgins, IOOF's group corporate lawyer, says the extension should not be viewed negatively as ``the vastly improved liquidity from Dreamworld's sale provides significant scope for IOOF to make fresh releases and pursue alternative reopening strategies".
According to Higgins, the tentative proposals involve making early access offers to all members but at a discount. If an investor chooses not to take up the offer, they can remain in the funds until maturity and allow IOOF to honor their guaranteed payout.
The Farrow Group.
Last week, the liquidator announced a settlement, said to be more than $5 million, against the two former Farrow directors.
Found guilty of breaching the Building Societies Act, Bill Farrow, the group's former chief executive, has also been fined $50,000 plus costs of $70,000.
Around 25 per cent of the cases in the commercial list awaiting trial in Melbourne's Supreme Court are Pyramid-related.
The Farrow group included Pyramid, Geelong and CountryWide building societies and Farrow Finance. Broadly, those adversely affected by the Farrow shut-down were ordinary building society account holders (many of whom have already accepted a settlement), noteholders in the finance company and non-withdrawable shareholders.
The Australian Securities Commission (ASC) announced a settlement against ANZ Executors & Trustee Co Ltd (trustee), Day Neilson Jenkins & Johns (the auditors) and Hugh Ross Somerville (the investigating accountant). The $14.3 million settlement means payouts are being sent to the 1400 unsecured noteholders in Farrow Finance. The value of their investment, when interest is included from the date of liquidation, was $28 million to $30 million.
For the noteholders, most of whom had invested between $1000 and $10,000, the payout equals the face value of their notes, including the 15 cents dividend paid by the liquidator in 1992. They can also receive any future dividends that might come about during the liquidation of Farrow Finance.
Still waiting for their day in court is the committed group of 4800 non-withdrawable shareholders. The class action is fighting for compensation from the Victorian Government regarding reassurances about the Farrow Group, which then closed its doors several months later.
Estate Mortgage In November 1990, more than $640 million of unitholders' funds were frozen in the six Estate Mortgage trusts. At that time, 70 of the 76 trustee-approved loans were in default.
Just before the fund's trustee, Burns Philp, slipped into voluntary liquidation, Global Funds Management took over the trusts and, in December 1993, listed the trusts on the stock exchange as the Meridian Investment Trust.
Global is now part of Tyndall. Mike Wilkins, managing director of Tyndall Investment Management, is committed to delivering the best possible result to unitholders. He says: ``We are the single largest unitholder in Meridian so it is in our interest to get a good result, too." Tyndall has plans to broaden the funds' investment base, as the current trust deed only allows mortgage-related investments, refinance the $170 million bank debt (until the banks are repaid, unitholders cannot be paid distributions) and pursue the legal action against Burns Philp and the eight other defendants.
A date in February 1997 has finally been set for the legal action against the former trustee.
``We have submitted in excess of one million pieces of paper related to this case," Wilkins says.
Aust-Wide.
Aust-Wide Management, which once offered 12 unlisted property trusts, was the first group to stop investor withdrawals following the collapse of the commercial property markets in the early '90s. Money managed by this group has since been dispersed in several directions. Litigation continues.
In December 1992, Heine Investment Management took over several of the Aust-Wide trusts, including the Flexi Property Fund and the Grosvenor Trust. Bankers Trust later acquired 51 per cent, plus management rights of the Grosvenor Trust, which is now invested in Grosvenor Place and 120 Collins Street, Melbourne.
The ASC is pursuing a $130 million civil action on behalf of 2600 former unitholders in Aust-Wide Trust and Aust-Wide Flexi Property Trust for breach of trust in relation to the investment in 1 O'Connell Street. The court date is set for 19 February 1996. But the listed $30-million Flexi Fund's largest shareholder, Colibri, a private company, is raking up support to oust Heine as manager. The Australia-wide Unitholders Action Group also supports the removal of Heine.
Global Funds Management picked up the Aust-Wide Property Income Trust. BZW-Mirvac acquired the Australia Wide Property Trust, which is now listed as the BZW Commercial Property Trust. The management of the Australia-Wide Target Fund No 1 and 2 also went to BZW.
Earlier this year, Permanent Trustee paid $4.5 million as compensation to unitholders, in relation to an investment made by Target No 1 into Target No 2 during 1990. Both funds are unlisted and the property assets, predominantly Sydney residential, are now fully leased.
© 1995 The Age