05/09/2013 - 15:13

Resort developers face legal fight

05/09/2013 - 15:13

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TENSION: Conflict has arisen over the construction contract for the 4.5-star Oaks Broome apartment development.

A prominent group of Perth investors may be drawn into a legal stoush over the financially stricken development of a multi-million dollar Broome apartment resort.

Past and present directors of the resort’s failed developer, Tropicana Enterprises, are understood to be in the sights of the builder, Rapley Wilkinson, over an alleged $1.3 million debt.

They include prominent hospitality player Peter Prendiville and his brother, Michael, former Real Estate Institute of Western Australia president Stephen Seward and Broome International Airport chairman Michael Caplehorn and deputy chair Louis Sauzier.

Rapley Wilkinson was already engaged in legal action against Tropicana over the struggling project before secured creditor Bankwest stepped in about two months ago.

KordaMentha partners Scott Langdon and Cliff Rocke were appointed in June as receivers and managers of Tropicana by Bankwest after 40 per cent of the strata-titled units failed to sell.

That followed Supreme Court orders in March that Tropicana pay Rapley just over $1 million in retention monies it claims it is owed after the construction of the $85 million, 4.5-star Oaks Broome resort.

Rapley Wilkinson built the resort in two stages, with the first stage completed in July 2009.

The builder, which is a wholly owned subsidiary of listed building company Nomad Building Solutions, claims it has not received the payment and has threatened to pursue further legal action.

In a letter obtained by Business News and addressed to Tropicana’s directors, Rapley Wilkinson said it would continue to “vigorously explore options to recover the monies owed to it” and to “scrutinise the conduct of, and potential liability of, past and present directors in respect of Tropicana’s breach of conduct and the dissipation of retention monies”.

A ‘means’ inquiry was held at the beginning of June to determine whether Tropicana could repay its debt, with proceedings adjourned to a date yet to be determined.

At the inquiry, Tropicana directors admitted that the group had not sold any units in the resort for a number of years and flagged that it faced the possibility of foreclosure in the near future.

During those proceedings, prior to the bank’s intervention, counsel for Rapley Wilkinson also raised the issue of whether Tropicana was insolvent.

Nomad Building Solutions managing director Peter Hogan said the evidence provided by the directors at the inquiry had not been particularly helpful.

KordaMentha confirmed that 75 of the resort’s 174 studio, one-bedroom and two-bedroom apartments had not been sold and were now being held in receivership.

The receivership of the developer is not believed to have directly affected the resort's operations, managed by Oaks Hotels & Resorts.

Oaks, which holds a portfolio of resorts across Australia, New Zealand and the United Arab Emirates, agreed in 2007 to pay Tropicana $15,996 ‘per key’ sold by the group and $3.15 million for an associated freehold area within the property, in a management letting rights transaction valued at up to $6.96 million.

Tropicana directors contacted by Business News declined to comment.

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