Enraged Gold Coast investors stick to class action guns

By Bob Dey

Disgruntled investors in the Phoenician apartment tower on the Gold Coast are continuing their pursuit of a class action against the developer, Raptis Group.

Their application will be heard in Canberra on April 16 for special leave to appeal to the High Court against a Federal Court ruling (also on an appeal), which turned down the class action approach and would force the investors to pursue their cases individually, and therefore more expensively.

The legal action began when 18 New Zealand clients of marketing agents Chris Couper & Associates claimed misrepresentation over the 39 units they signed in 1996 to buy from Raptis, developer of the two-tower, 249-unit Phoenician at Broadbeach.

The number of investors in the court action rose to 37 last year, with a range of claims including allegations that the units were sold on earnings projections between 60 and 114 per cent greater than those the developer was using.

Raptis was also suing the original investors who failed to settle, claiming the cost of having to resell apartments in a far softer market.

The company reported a $A1.3 million loss for the December half-year, attributing much of it to the Phoenician legal battle and the cost of remarketing and reselling units.

It also achieved substantial abnormal gains through sale of management rights at that development, for $A4 million, and the nearby Moroccan apartments.

Three judges of the Australian Federal Court issued a split ruling last November, the majority rejecting the investors' view that there were enough common elements to their claims for a class action to be run.

The High Court hearing next week is on an application for special leave for the investors to appeal against rejection of the class action. The next course would be a final procedural hearing on that issue, or a move to individual claims being heard separately in the Federal Court.

As this case moves its slow way forward, impacts are starting to be felt from Australia's new Managed Investments Act and the Queensland Government has held a meeting of industry representatives at the start of an overhaul of the State Auctioneers and Agents Act.

The Australian arm of New Zealand industrial and commercial property syndicator, Waltus Investments, is proceeding with two new prospectuses and finding that some of its smaller competitors are opting out of the syndication market.

Waltus director Shayne Hodge says the Managed Investments Act is eliminating smaller players because 0.5 per cent of the issuer's assets must be lodged with the Australian Securities and Investment Commission and compliance costs are high.