Saraceni loses appeal against Commonwealth Bank

The court has dismissed property developer Luke Saraceni’s appeal against Commonwealth Bank over the $500 million Raine Square project.

Westgem Investments, owned by Mr Saraceni and Hossean Pourzand, was incorporated in September 2004 as a joint venture vehicle to develop Raine Square in the Perth CBD.

Mr Saraceni was the sole director of Westgem Investments.

Westgem missed two loan repayments worth $50 million and was put in liquidation in 2012, before construction of Raine Square was completed.

Multiple property assets held by Mr Saraceni were sold to cover debts to the Commonwealth Bank of Australia (CBA).

Mr Saraceni filed a lawsuit against CBA in 2017 over the estimated losses following the breakdown of the Raine Square project.

In response, CBA claimed Westgem owed $200 million in unpaid interest, on top of other fees and penalties.

Westgem also claimed the financiers engaged in misleading or deceptive conduct, causing Salta Constructions to suspend work on Raine Square and terminating its contract in 2009.

Westgem alleged the project would have been completed without additional costs and delays caused by Salta’s termination.

In his judgment delivered in October 2020, Justice Paul Tottle rejected Westgem’s claims and found the financiers did not engage in unconscionable conduct.

Justice Tottle found the financiers were entitled to withhold advances for Westgem to meet its payment obligations to Salta, as per the contract.

The WA Court of Appeal upheld Justice Tottle’s findings in a 346-page judgment that was delivered this morning.

Supreme Court Justice Graeme Murphy said the judge was correct to dismiss the misrepresentation claims.

Fellow Justice Robert Mitchell upheld the initial finding that the financier’s refusal to provide information to Salta was not misleading or deceptive, and did not cause any loss or damage to Westgem.

“Given the unchallenged finding that Salta wanted to terminate the 2007 Salta Building Contract to avoid the significant loss it was facing under that contract, an express statement of the financiers' true position would not have prevented suspension or termination of that contract,” he said.

The original financiers for the Raine Square development were Bankwest and Bank of Scotland, but CBA acquired Bankwest for $2.1 billion in October 2008.

According to the judgment, the core bundle of evidence, being in excess of 14,000 pages of material, represented only 10 per cent of the total "trial library".

Bankwest moved into the office premises in Raine Square and started to pay rent in April 2012 while the retail component of the development opened in August of that year.

Charter Hall bought the Raine Square development for $458 million in June 2013.