Investors left out of pocket by the 2016 break-up of former AFL footballer Andrew Donnelly’s insurance business are leaving no stone unturned in their quest for lost money.
Investors left out of pocket by the 2016 break-up of former AFL footballer Andrew Donnelly’s insurance business are leaving no stone unturned in their quest for lost money.
At least five court cases are underway as investors and lenders, including Jon Fogarty, David McCleery, Rod Jones and Macquarie Bank, seek closure.
On the receiving end are Mr Donnelly and his former business partner Kim Hanson, who previously ran Vantage Holdings Group and its subsidiary Australian Reliance Group.
Their former auditor and lawyer are also enmeshed in the legal disputes.
The Reliance business was sold in 2016 to listed company PSC Insurance Group for up to $31 million but ever since, the court cases have been mounting, with claims millions of dollars of trust funds were misappropriated
A key player is Mr Fogarty, who had been a big lender to Mr Donnelly’s businesses.
The former Swan Districts footballer became a director of Vantage and its subsidiaries in late 2015 and continues as chairman of Vantage.
Mr Fogarty told Business News that he and others had spent in excess of $1 million funding legal action related to Vantage.
This includes direct recovery actions and associated matters.
Mr Fogarty has hired prominent lawyer Martin Bennett while other investors have hired top tier law firm Clifford Chance, signalling they have deep pockets.
Like other investors, Mr Fogarty is frustrated by the lack of action by the Australian Securities and Investments Commission.
“Where the hell is ASIC,” he said.
“Retirees and investors need regulators to act, to ensure investor confidence is maintained in regard to trust accounts.”
An ASIC spokesperson told Business News it was investigating matters related to Vantage but provided no details.
As chair of Vantage and its subsidiaries, Mr Fogarty sits behind legal action taken by Reliance Online Pty Ltd.
In hearings last year, Reliance alleged that Messrs Donnelly and Hanson had failed in their directors’ duties.
Justice Rene Le Miere is scheduled to hand down a decision on that matter in July.
In a separate legal move, 23 investors commenced Federal Court action this month against Cottesloe lawyer Simon Owen.
Mr Owen had been the trustee of a unit trust, Vantage Investment Fund, which was a part owner of Australian Reliance Group.
The 23 investors tipped more than $5 million into VIF between 2012 and 2014 but were left with nothing.
They negotiated a settlement agreement with Mr Owen in 2018, but he suspended repayments on his $25,000 debt last month.
He told Business News he hoped to pay the outstanding amount in coming weeks, before the matter got to court.
Mr Owen explained he had been a lawyer for Reliance but had barely seen or spoken to Mr Donnelly since he finished up as a trustee in 2015.
He added he was surprised at the losses subsequently incurred.
“There should have been ample assets to satisfy all investors funds,” he said.
The 23 investors taking action against Mr Owen have also taken action against PA Audit and its principal Mark English.
They have claimed negligence and misleading and deceptive conduct in audit and valuation reports prepared in 2014.
The investors said they relied upon the information in the documents prepared by the auditors.
PA and Mr English plead various defences, including proportionate liability, and have named various “concurrent wrongdoers”, including Mr Donnelly.
They also plead that the reports were based on misleading information provided by the fund managers.
The investors have made the same basic claim against Messrs Donnelly and Hanson; i.e. failing in their duty of care and engaging in misleading or deceptive conduct.
Details of this claim were spelt out in a 2019 Supreme Court hearing, where Mr Donnelly applied unsuccessfully for cost orders against some of the plaintiffs; i.e. the investors
The court was told Mr Donnelly’s costs in this matter alone would be in excess of $420,000.
A mediation conference on this matter is scheduled for next month.
The 23 investors are informally led by Mr McCleery, who chairs WA’s largest IT services company, Kinetic IT.
Other investors include Mr Jones, through his family office Hoperidge Capital, car dealer Denis McInerney and nightclub owner John Anderson.
Company directors Neil Warburton, Mark Hohnen, Blair Sergeant and Scott Cuomo were also investors in the Vantage Investment Fund.
Another investor was retiree Jennine Nener, whose son Todd Nener spent two years on the West Coast Eagles rookie list in 1997 and 1998, overlapping with Mr Donnelly’s five years at the club.
Corporate adviser Ty Ludbrook, through his family company Happy Valley Farm (Aust), was both an investor in VIF and a lender to Mr Donnelly.
In the latter capacity, he has commenced District Court action against Vantage Private Equity, which was run by Mr Donnelly and was the manager of VIF until January 2016.
Macquarie Bank recently joined the long list of parties taking legal action against Mr Donnelly.
The bank commenced an action last month claiming possession of Mr Donnelly’s Cottesloe property.
He borrowed $2.3 million from Macquarie in 2019, secured against his house.
The bank said Mr Donnelly had failed to pay $89,000 as at September 2020 and was in default under the loan agreement and mortgage.
Mr Donnelly’s critics refer back to one court case where a judgement has been handed down.
In September 2016, Mr Donnelly sought to overturn freezing orders that were imposed on $5.5 million of unencumbered assets.
Justice Peter Martino dismissed the application after assessing the alleged misuse of $5.1 million of trust funds.
“It is my view that there is a strongly arguable case that the first defendant (Mr Donnelly) knowingly assisted ……. in the dishonest misuse of trust monies,” he stated.
“If this case is made out at trial it would amount to involvement in serious dishonesty.”
On this basis, Justice Martino concluded: “there is a real risk that if not restrained the first defendant will dispose of assets so as to make a judgment fruitless”.
Through his lawyer, Mitch Tolcon of Forbes Kirby Lawyers & Consultants, Mr Donnelly issued a statement to Business News denying any wrongdoing.
“Mr Donnelly vigorously denies all allegations of wrongdoing relating to his conduct as CEO of the Reliance Group,” the statement said.
“Mr Donnelly will continue, through the court process, to defend his good reputation.
“Mr Donnelly is confident that when the true facts are brought to light, he will be fully exonerated.
“Mr Donnelly looks forward to providing a further statement in due course.”
