Trustee tussle as creditors chase millions
BANKRUPT former rich lister Phil Sullivan is fighting to axe his bankruptcy trustees, who are pushing for a public examination into what he owns and investigating potential transfers to related parties.
Former City Pacific CEO Mr Sullivan has three times been ordered to pay what is now worth more than $79 million to more than 12,500 mostly elderly investors in City Pacific’s Pacific First Mortgage Fund, which collapsed in 2009.
He was declared bankrupt on June 18 last year after a decade of court battle over the collapse of listed City Pacific, which at its peak had a market capitalisation of nearly $1 billion.
He has now lodged a Federal Court application seeking the removal of bankruptcy trustees Terry van de Velde and Jason Cronin of SV Partners and the reappointment of David Clout and Patricia Talty of DCA.
Mr Sullivan originally appointed John Park and Andrew Weatherly of FTI Consulting as trustees, but they were replaced by Mr Clout and Ms Talty in June after a creditor meeting.
Creditors then voted to oust those administrators in September, installing the SV Partners trustees.
Mr van de Velde and Mr Cronin retain the financial backing of the major creditor, Trilogy Funds Management, to which $79 million, or 94 per cent, of Mr Sullivan’s debt is owed and which holds remaining funds for City Pacific’s vicsurance tims. Aside from Trilogy, the only significant creditors of Mr Sullivan are trusts related to his wife Tuija.
Documents lodged with the court allege the former trustees had found transactions involving entities associated with Mr Sullivan which needed further investigation and that the prospect of investors receiving any dividend hinged on the result.
In the court documents, Mr Sullivan argues SV Partners are not sufficiently independent of Trilogy as they provided short-term consultancy advice to the fund before they were appointed trustees.
The bankrupt further claims a report completed by a now-deceased SV Partners accountant for City Pacific in 2005 should disqualify the firm from now acting as his trustees.
In its submissions filed with the court, Trilogy rejects that SV Partners is not sufficiently independent, adding that they were willing to fund the administrators’ investigations of the Sullivan family trusts, which Trilogy said held “significant assets” and were “undoubtedly related to” Mr Sullivan. Trilogy said Mr Sullivan and his related entities had “not provided full and frank disclosure of the relevant transactions” over the past decade.
Property records show Mr Sullivan owned a property at Ensenada Court, Broadbeach Waters for six months after he was bankrupt, before it was transferred by an unspecified third party for $800,000 in December.
Company records filed with ASIC show he transferred directorship of his company Goldmount Lodge, owner of numerous successful racehorses, to daughter Dee Sullivan in April 2018, and that the company is still ultimately owned by his wife Tuija.
In January 2016, after a Federal Court judge ordered Mr Sullivan and three colleagues to pay back investors in the disastrous Pacific First Mortgage Fund, Mr Sullivan said he had no assets or into cover any potential payout.
“I’ve got nothing left,” he said at the time.
Nine months later, mortgage documents show a company he directed, DCG Development Capital, jointly loaned $15.5 million to a company owned by fellow failed GFC developer Mark Howard.
Mr Sullivan resigned as a director of DCG Development Capital in February 2018.
Property sales data reveals companies directed by Mr Sullivan’s family, including his son Grant Sullivan, who lives with his father and mother in a waterfront Broadbeach Waters mansion, hold a lucrative property portfolio.
Public records reveal Grant Sullivan created a new company for almost every property purchase, all listing the waterfront family mansion as the registered address.
Directorships of some of these companies are now held by Dee Sullivan.
More than 2000 City Pacific investors have joined a new claim against corporate regulator ASIC, saying it let them down by not adequately investigating the case.
Through advocacy company SR Group, they also plan to lodge a compensation claim under the new Compensation of Last Resort Scheme, which was announced in the wake of the Royal Commission into the financial services sector and begins on July 1.
Through multiple court actions, City Pacific’s solicitor Minter Ellison and accountant KPMG have been ordered to pay compensation to victims.