Legal bid over Pounamu deal

Investors in one of bankrupt property developer Dan McEwan's projects are taking unusual legal action to try to get their money back.

They plan to argue that troubled financier Strategic Finance was in league with McEwan in illegally offering them investments in the luxury Pounamu apartments in Queenstown.

The 50-unit project overlooking Lake Wakatipu has been completed, and Strategic and its co-lender Bank of Scotland are demanding that the investors settle on $1 million agreements to buy the apartments.

But around 10 investors say they put $4 million in as shareholders, not purchasers, and were told they would never have to buy the properties.

More importantly they say that they should have been given a registered prospectus and investment statement. Because if they weren't the investment offer is void, they claim, and their original funds should be returned to them.

McEwan was convicted in November of breaching the Securities Act by selling investments without the proper offer documents.

Judge Philippa Cunningham rejected his defence that the people he raised money from for proposed developments in Queensland and Fiji were "habitual investors" and did not require the documents.

The Pounamu investors say they weren't habitual investors.

They say Strategic and McEwan were so closely aligned that the financier would have been well aware of this.

"I think Strategic were an integral part of the entire project, that's my belief," said Peter Seers, a North Shore finance broker and ex-promoter of McEwan's schemes who is speaking on behalf of the investors.

Seers said it was believed around 20 investors were affected, meaning Strategic was potentially seeking the settlement of $20 million worth of sale and purchase agreements. The group taking action would like to hear from these other investors, he said.

One Pounamu apartment is being advertised for $450,000.

Barrister Gareth Bodle, who is also working on behalf of the investors, said in 2006 they were told the Pounamu apartments hadn't sold and to protect their investment they must underwrite the properties.

However they were told they would not have to buy the apartments because the developers would sell them close to completion, Bodle said.

The investors will allege that Strategic was integral in putting together this rescue plan.

Chief executive of Strategic, Kerry Finnegan, said the financier would only have looked at the transaction from a funding perspective.

He denied Strategic and McEwan were in cahoots. "I think that's a bit of a stretch of the imagination, to be honest."

Finnegan said the Pounamu apartments had been completed on time and within budget, and the investors were obliged to meet contractual arrangements.

"I think what we're seeing in this environment is a lot of people trying to avoid their obligations and perhaps this is part and parcel of why they're looking to try to take this course of action."

McEwan said he was not allowed to be involved because of his status as a bankrupt: "I can't make any comment, simply because of my position."


Seers said Strategic had begun summary judgment proceedings against individual investors in various courts around the country, and the group planned to file its claim next week in defence of those actions.

"They feel quite confident that they were misled and taken [for] a ride, and that the law should be there to protect them."

WHO'S WHO

DAN McEWAN
Property developer who set up the Investors Forum. Ran three-day seminars and charged small investors a $5000 "procurement fee" to get access to McEwan projects such as Pounamu Apartments.

STRATEGIC FINANCE
Finance company in a five-year moratorium with its 15,000 retail investors owed $325 million. Financed various McEwan projects. Holds the second mortgage over Pounamu behind co-lender Bank of Scotland.