Owners to launch commission...

Owners to launch commission case

http://www.goldcoast.com.au/article/2012/10/16/439907_gold-coast-business.html

Martin Rasini | 09:17am October 16, 2012
THE Phoenician resort at Broadbeach appears set to become the subject of a no-win, no-fee class action, in a case that could have multimillion-dollar ramifications for the management rights industry.

The bid seeks compensation for undisclosed commissions and is planned by former unit owner Wayne Stevens, who is urging past and present Phoenician unit owners to be party to the action.

It relates to the time when the resort's letting rights were held by Driftcove, an arm of accommodation company S8, and, if successful, claims against other letting industry players could follow.

Bookings at the Phoenician were made via Gold Coast Booking Centre, also an S8 entity, which took an undisclosed commission and passed remaining funds to Driftcove, which took a disclosed commission.

The practice is understood to have been widespread in the industry and S8 director Chris Scott claimed the undisclosed commissions were legal as they were provided for in the letting agreement.

Now, law firm Johnson Winter & Slattery has advised Mr Stevens it believes the undisclosed commissions could be illegal and damages and compensation claims are viable in the Phoenician and other buildings.

Mr Stevens, Unit Owners Association of Queensland president, said class-action costs would be met by a litigation funder in return for about one-third of any sum awarded.

"We need unit owners past and present to sign up to make the class action a reality and they need only visit the UOAQ website," he said.

John McDonald, of R&R Lawyers, said the class action should be pursued to bring clarity to what constituted adequate disclosure.

"In 2007, the English appeal court saw fit to pursue the question in detail, considering rulings made in 1875, 1899 and 1904," he said.

"It held that a mortgage broker had failed to obtain borrowers' informed consent to commissions despite a contractual provision stating that 'in certain circumstances the lender does pay commission to brokers/agents'.

"The lender was required to refund commission ...

"If the class action is pursued, we will all be the wiser for it."

Discontent at the Phoenician surfaced in 2003 and the body corporate later hired an investigator to book a stay in the building in a bid to expose any inflated commissions.

The Office of Fair Trading raided buildings in August 2006 after receiving complaints S8 was double-dipping on fees by directing bookings to its wholesale businesses. In December 2006, S8 was taken over by MFS.

In July 2007, OFT launched an action against Driftcove and Chris Scott alleging 2900 breaches of law, but the case was dismissed in February 2009.

However it immediately raided the Phoenician, alleging there were irregularities in accounting practices.

In December 2010, Mr Scott was fined $130,000, ordered to pay $66,000 in OFT costs, and banned for life from operating as a letting agent in Queensland.

Also, Driftcove paid more than $25,000 in compensation to 83 Phoenician unit owners and a further $215,000 in OFT costs after the Queensland Civil and Administrative Tribunal found it failed to fully disclose letting charges.

Driftcove admitted no liability.