Australian Cotton Project class action

Under the Australian Cotton Project managed investment scheme investors bought shares and participating interests in a project which was to purchase land on the Condamine River in southern Queensland for planting and harvesting of cotton. The cotton was never planted. The land was never purchased. Despite this, no moneys were returned to investors.

The action

On 4 September 2001 Maurice Blackburn commenced a class action in the Federal Court on behalf of 74 shareholders in the Australian Cotton Project. The shareholder's case was that the managed investment scheme never properly commenced because minimum subscription was not reached, and that "round robin" cheques were insufficient. The case also alleged that the prospectus was misleading and deceptive.  The shareholders sued to recover moneys invested in the project.

Judgment and settlement

On 26 September 2003 His Honour Justice Finkelstein handed down judgment in favour of the shareholders.  He found that the minimum subscription of 2000 interests in the scheme had not been reached, and as a result, the project should never have commenced.

The responsible entity of the scheme, Corporate Investment Australia Funds Management Limited, was found liable to repay all application moneys paid for interests in the scheme.  The Custodian of the scheme, Cardinal Financial Securities Limited (In Liquidation) was found liable, as trustee, to repay those application moneys deposited into its bank account.

Following the lodgement of an Appeal by Cardinal, the case was settled for effectively payment in full.  Monies were distributed to shareholders in 2004.

Supporting information