| Cause of Action: | Performance Finance Ltd ('PFL') raised money through the issue of debenture stock, issued by PFL through a trust deed under which Hayes Knight GTO Pty Ltd ('Hayes Knight') was appointed trustee for the debenture holders. All of the money raised by Performance Finance was then lent to a related company California Film Finance (Gold) Pty Ltd ('CFFG'). As such, PFL's virtual sole asset was the loans it made to CFFG.
By about mid 1998 it was apparent that there was likely to be a large shortfall of the funds to be received by CFFG (from film investors) when the debenture holders' loans matured. As a consequence, from either mid 1998 or late 1998 it became clear that there was a real issue as to whether PFL would in the future be able to repay the debenture loans as and when they fell due. The likelihood of this shortfall continued to increase over time.
Despite the concerns about whether the debentures would be repaid (which was based on publicly available information), Hayes Knight as trustee took no action until at the request of PFL it eventually appointed a receiver to PFL on 23 September 2003.
Virtually all of the debenture holders' funds of $7.74m (plus interest) had been lost by this time. Hayes Knight has now been removed as trustee by order of the Federal Court and a new trustee has been appointed. The action is by the new trustee against Hayes Knight in the Federal Court to recover damages for the trustee's breach of duties. |
