Timbercorp Finance Pty Ltd (in liq) v Broderick
[2021] VSC 88
•3 March 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2014 00407
| TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190) | Plaintiff |
| v | |
| MICHAEL BRODERICK | Defendant |
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JUDGE: | RIORDAN J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 November 2020 |
DATE OF JUDGMENT: | 3 March 2021 |
CASE MAY BE CITED AS: | Timbercorp Finance Pty Ltd (in liq) v Broderick |
MEDIUM NEUTRAL CITATION: | [2021] VSC 88 |
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CONTRACT – Loan agreement for the purpose of financing investments in managed investment schemes – Default by borrower.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P H Solomon QC with Dr C O Parkinson, Mr J W G Grant | Mills Oakley |
| For the Defendant | Self-represented |
HIS HONOUR:
By originating process filed 5 November 2014, the plaintiff (‘Timbercorp Finance’)[1] seeks judgment against the defendant for the principal and interest outstanding under the following loan agreements:
[1]In various extracted quotations in this judgment, Timbercorp Finance is referred to as ‘TFPL’.
| Project | Loan No | Date | Type | Loan amount |
| 2008 Single Payment Timberlot Project | L0025763 | June 2008 | Initial | $166,320 |
| 2007 Almond Project and 2008 Olive Project | L0025764 | June 2008 | Initial | $467,910 |
| 2007 Almond Project and 2008 Olive Project | L0028723 | November 2008 | Stage | $133,550 |
The defendant was an investor (referred to as a ‘Grower’) in certain managed investment schemes, and a borrower under each of the loan agreements referred to in paragraph 1 above, which included two types of finance packages being:
(a)loans financing an investor’s liabilities to Timbercorp Securities Ltd (‘Timbercorp Securities’)[2] for initial application fees payable in relation to a scheme (‘Initial Loans’); and
(b)loans financing an investor’s liabilities to Timbercorp Securities for management or operational costs and licence fees or rental payable on the investments (‘Stage Loans’).
[2]In various extracted quotations in this judgment, Timbercorp Securities is referred to as ‘TSL’.
The loans were all taken out for the purpose of financing the costs relating to an agribusiness investment enterprise operated by the Timbercorp group of companies (‘the Timbercorp Group’). The history of these investments has been summarised in several judgments of this Court and, for present purposes, I only need to adopt the succinct general background provided by Kennedy J in Timbercorp Finance Pty Ltd (in liq) v Tomes:[3]
[3][2019] VSC 519, [9]-[16] (‘Tomes’).
The Timbercorp Group operated an agribusiness investment enterprise. Timbercorp Limited (TL) is the parent entity of the Timbercorp Group and was a publicly listed company on the Australian Securities Exchange.
The Timbercorp Group’s primary business activity was the establishment, development, marketing and management of primary industry-based projects, the acquisition of land, water rights and infrastructure and the provision of finance to investors in projects. The Timbercorp Group invested more than $2 billion in agribusiness projects in respect of 18,500 investors since 1992.
Timbercorp Finance was established to provide finance to investors to participate in [managed investment schemes (MIS)].
As at April 2009, the Timbercorp Group operated 33 MIS. Timbercorp Securities Pty Ltd (TSL), a wholly owned subsidiary of TL, was the responsible entity for each of the MIS and held an Australian Financial Services Licence.
On 23 April 2009, administrators were appointed to TL, TSL as well as Timbercorp Finance. On 29 June 2009, the creditors of TL, TSL and Timbercorp Finance resolved to wind up the companies, and the administrators were appointed liquidators. Mr Korda was one of those liquidators.
Related litigation
Following the issue of a group proceeding by investors (which was unsuccessful both at trial[4] and on appeal[5]), Timbercorp Finance pursued a large number of recovery proceedings against defaulting borrowers, including the current proceeding. After further litigation, it was decided that the defendants were not estopped from relying upon defences that had not been raised in the group proceeding.[6]
In 2016, a trial of four ‘test cases’ was heard by Judd J which included the matter of Collins and White, which will be referred to below. The defences raised in the test proceedings were unsuccessful both at trial[7] and in respect of two matters that were ultimately prosecuted and adjudicated on appeal.[8]
Since February 2018, the Court has managed 295 ongoing recovery matters.
[4]Woodcroft-Brown v Timbercorp Securities Ltd(in liq) (2011) 253 FLR 240.
[5]Woodcroft-Brown v Timbercorp Securities Ltd(in liq) (2013) 96 ACSR 307.
[6]Timbercorp Finance Pty Ltd (in liq) v Collins [2015] VSC 461; Timbercorp Finance Pty Ltd (in liq) v Collins; Timbercorp Finance Pty Ltd (in liq) v Tomes [2016] VSCA 128; Timbercorp Finance Pty Ltd (in liq) v Collins; Timbercorp Finance Pty Ltd (in liq) v Tomes (2016) 259 CLR 212.
[7]Timbercorp Finance Pty Ltd v Collins (2016) 119 ACSR 478.
[8]White v Timbercorp Finance Pty Ltd (in liq); Collins v Timbercorp Finance Pty Ltd (in liq) (2017) 123 ACSR 284 (‘Collins and White’). An application for special leave was refused by the High Court.
As at this day, there are 87 ongoing proceedings yet to be resolved.
The unchallenged and uncontradicted evidence in the case before me established the following facts.
Journal entries
The evidence of Timbercorp Finance’s expert, Mr Stone, was that the advancing of the loans by Timbercorp Finance, and the discharge of the debts payable by the defendant to Timbercorp Securities, were effected by a series of journal entries. For each Initial Loan, Timbercorp Limited (‘Timbercorp Ltd’)[9] transferred a sum of money, which was equivalent to the amount owed by the defendant under the Initial Loan, to Trust Company of Australia Limited (‘Trust Company’),[10] who received the money on behalf of Timbercorp Securities (‘Trust Co payment’). Mr Stone described the recording of the journal entries as follows:
[9]In various extracted quotations in this judgment, Timbercorp Ltd is referred to as ‘TL’.
[10]Pursuant to various custody agreements, Trust Company was appointed by Timbercorp Securities as custodian to receive and hold moneys paid by applicants in order to acquire interests under the scheme: see Collins and White (2017) 123 ACSR 284, 293 [30]-[31].
As TL was the entity with the operating bank account, in the Timbercorp Group:
(a)there was not at any time any actual ‘money’ payment (i.e. by way of cash, cheque or an electronic funds transfer) by TFPL to TSL;
(b)instead, the payment by TFPL to TSL discharging a Grower’s liability (or liabilities) to TSL was recorded by way of journal entries in the general ledgers of TSL and TFPL which show:
(i) a discharge of the Grower’s liability (or liabilities) to TSL;
(ii)a liability owed by the Grower to TFPL equal to the amount of the Grower’s discharged liability to TSL; and
(iii)a liability owed by TFPL to TSL equal to the amount of the Grower’s discharged liability to TSL; and
(c)where a loan was an Initial Loan, TL transferred ‘money’ to a Trust Co trust account on behalf of TSL, with an intercompany loan recorded in TSL and TL’s general ledgers as owing by TSL to TL for the amount of that transfer.
…
The transactions described at [the previous paragraph] above were recorded in the Timbercorp Group’s Great Plains general ledgers such that (heavily summarised, excluding GST and as elaborated below), if a Grower owed TSL $100, and took out a loan from TFPL for 90% of that liability, then, as a result of the relevant journal entries, the position between each of the Timbercorp Group entities and the Grower would be recorded in the general ledger as follows:
(a) TSL would record revenue of $100;
(b) the Grower would be recorded as:
(i) having paid $10 to TSL as a deposit from the Grower (Deposit);
(ii) owing $90 to TFPL (as an asset of TFPL) (Balance Liability);
(iii) having no residual liability to TSL;
(c)TFPL would be recorded as owing TSL $90 (which would be reflected as a liability in TFPL’s general ledger and an asset in TSL’s general ledger); and
(d)funds would be transferred by TL to the relevant Trust Co trust account on behalf of TSL, with TSL owing TL for the amount of funds transferred.
The same steps would occur for Stage Loans except that the step set out [in the immediately preceding sub-paragraph (d)] did not occur. That is, no transfer of funds would occur in the case of Stage Loans.
Loan No L0025763
By Application and Power of Attorney Form signed 10 June 2008, the defendant applied to Timbercorp Securities for the purchase of 60 Almondlots at a price of $184,800. The application stated that a payment of $18,480 was enclosed and the balance of $166,320 was subject to finance. By Tax Invoice No 002260149 dated 30 June 2008, Timbercorp Securities invoiced the defendant for the 60 Almondlots in the sum of $184,800.
By Loan Application Form dated 10 June 2008 and headed ‘2008 Timbercorp Projects Finance Package – Loan Application Form’ (‘the First Initial Loan Application Form’), the defendant applied to Timbercorp Finance to lend him $166,320, being the balance due to Timbercorp Securities for the purchase of the 60 Almondlots. The First Initial Loan Application Form included the following relevant provisions:
(a) On page 1, under the heading ‘Application Check’:
Before completing and signing this application form, all parties should carefully read this application form and the Timbercorp Projects Loan Explanation and Loan Terms provided with this application form (‘Explanation’) and seek independent legal and financial advice.
Unless the context requires otherwise, or the relevant word is defined in this application form, words printed ‘like this’ in this application form and some other key terms are defined in the Timbercorp Projects Loan Explanation and Loan Terms (‘Loan Terms’) document (see page 8 of the Explanation). In the Loan Terms, a reference to the ‘application form’ is a reference to this application form.
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All applications for finance are subject to approval by Timbercorp Finance.[11]
[11]Emphasis added in bold.
(b)On page 1, under the headings ‘Section Details’ and ‘Sections 16, 17 and 18 - Signatures’:
This, together with the Direct Debit Form, is the only place that you are required to sign. The formal legal documents will be signed on your behalf by attorneys (whom you will have authorised to do so in Section 11 of the application form) once your application has been approved.
(c)In section 6, under the heading ‘Project and Loan Details’, the required loan amount was recorded as $166,320 for a term of 8 years.
(d)In section 7, under the heading ‘Special Conditions’, it was noted in handwriting as follows:
Appn fees waived and special finance rate of $8.95% for 8 yrs as per AP.
(e)In section 12, under the heading ‘Power of Attorney’:
This section of the application form comprises a deed made on the day specified at the end of this application form, by each person and company that signs the form. A reference to you in this section 11 includes each guarantor.
Who and how you appoint
1.You appoint Timbercorp Finance Pty Ltd (ABN 88 054 581 190), each of our Directors and Secretaries, and each of our employees whose job title includes the word ‘manager’ separately as your attorneys.
2.You agree to formally approve anything an attorney does under this Power of Attorney. You declare that this power of attorney is given for valuable consideration and agree that you may not revoke our appointment.
The powers you give us
3. An attorney may, in your name:
(a)execute an agreement comprising the provisions and details completed consistently with this application form, and do everything we need to deliver it to us; …
(f)In section 13, under the heading ‘What Completing and Signing this Form Achieves’, it provided that the completion and signing of the form encompassed various things, including:
· You apply to us for a Timbercorp Finance Loan
…
· You and each guarantor (if any) appoint certain people to do specified things on your behalf, and in your name, under the Power of Attorney in section 12 if your application is accepted; …
(g)In section 14, under the heading ‘Important Acknowledgments’, it was relevantly acknowledged as follows:
By signing this document you and each guarantor (if any) acknowledges and confirms the following (a reference to ‘you’ in this section 14 includes each guarantor):
· you have read and understand each prospectus/product disclosure statement (including the relevant Product Ruling) and the Explanation (including the Loan Terms)[12] …
(h)In section 16, the defendant executed the document in the presence of a witness, Anthony D’Alessandro.
(i) On page 9, the defendant executed a direct debit form.
[12]Emphasis added in bold.
Timbercorp Finance also prepared a document entitled ‘2006 Timbercorp Projects Finance Package – Loan Explanation and Loan Terms’ (‘the Initial Loan Explanation Document’), which consisted of nine pages under the following headings:
(a)Loan Explanation;
(b)Calculation of Instalments;
(c)Loan Terms; and
(d)Provisions.
Under the heading ‘Loan Explanation’:
(a)On page 1, it stated that:
This document explains the basis on which you can apply to borrow money to invest in Timbercorp Projects.
(b)On page 2, under the sub-heading ‘What documents record the loan and the security?’, it stated that:
The loan terms at the back of this document will be incorporated into a Loan Agreement if we accept your application. The Loan Terms include the assignment and the guarantee and indemnity. In the application form you and each guarantor (if any) authorise us to:
· complete the details, based on the information in, or provided with, the application form; and
· sign the Loan Agreement as attorney for each of you.
The details and the Loan Terms will form the Loan Agreement which is signed by us as lender and as attorney for you and each guarantor (if any).[13]
[13]Emphasis added in bold.
Under the heading ‘Loan Terms’ there was a pro forma document in which details of the loan, including the name of the borrower, the loan amount, the loan term, the lower interest rate, the amount of instalments and the date of the loan agreement were blank. However, the higher interest rate was printed as 13.2% per annum and it was noted that:
This is a pro forma Document. Timbercorp Finance will complete the actual details for a particular applicant in accordance with a power of attorney granted by the applicant in the Loan Application.
Under the heading ‘Provisions’, various terms of the loan were set out. Under the sub-heading ‘Higher interest charges’, it stated that:
We may charge interest at the higher interest rate on any other amount, which is not paid on time.
A series of journal entries made on or about 13 June 2008 recorded (inter alia):
(a)a payment by Timbercorp Finance to Timbercorp Securities of $166,320 referrable to Loan No L0025763; and
(b)a discharge of the defendant’s liability to Timbercorp Securities for the balance due under Tax Invoice No 002260149.
By letter dated 30 June 2008 to the defendant, Timbercorp Finance confirmed that the defendant’s application for finance had been accepted. It attached a document headed ‘Loan Terms’ in which, unlike the pro forma document referred to in paragraph 11 above, the details of the loan, including the name of the borrower, the loan amount, the loan term, the lower interest rate, the amount of instalments and the date of the loan agreement were completed. As with the pro forma document, the higher interest rate was printed as 13.2% per annum.
On or about 30 May 2009, the defendant defaulted in his payments under the loan agreement.
By letter dated 15 July 2009 to the defendant, Timbercorp Finance’s solicitors enclosed a final demand for the total amount owing under Loan No L0025763 as at 8 July 2009, to be paid by the defendant within seven days of service of the demand.
The defendant has not paid the total amount owing under Loan No L0025763, being $301,352.77 together with interest thereon from 1 October 2014 compounding daily at the rate of 13.2% per annum, alternatively at the rate of $108.98 per day.
Loan No L0025764
By Tax Invoice No 2260164 dated 12 June 2008, Timbercorp Securities invoiced the defendant for 28 Almondlots at a price of $252,000 and 47 Grovelots at a price of $267,900, being a total sum of $519,900.
By Loan Application Form dated 10 June 2008 (‘the Second Initial Loan Application Form’), the defendant applied to Timbercorp Finance to lend him $467,910, being the balance due to Timbercorp Securities for the purchase of the 28 Almondlots and 47 Grovelots after payment of the deposit of $51,990. Except for the loan amount and the loan term, the Second Initial Loan Application Form included the same relevant provisions as the First Initial Loan Application Form.
By letter dated 12 June 2008 to the defendant, Timbercorp Finance confirmed that the defendant’s application for finance had been accepted. As with the acceptance of the First Initial Loan Application Form, it attached a document headed ‘Loan Terms’ in which the details of the loan, including the name of the borrower, the loan amount, the loan term, the lower interest rate, the amount of instalments and the date of the loan agreement were completed. As with the pro forma document provided with the First Initial Loan Application Form, referred to in paragraphs 11 and 14 above, the higher interest rate was printed as 13.2% per annum.
A series of journal entries made on or about 13 June 2008 recorded (inter alia):
(a)a payment by Timbercorp Finance to Timbercorp Securities of $467,910 referrable to Loan No L0025764; and
(b)a discharge of the defendant’s liability to Timbercorp Securities for the balance due under Tax Invoice No 2260164.
On or about 30 May 2009, the defendant defaulted in his payments under Loan No L0025764.
By letter dated 15 July 2009 to the defendant, Timbercorp Finance’s solicitors enclosed a final demand for the total amount owing under Loan No L0025764 as at 8 July 2009, to be paid by the defendant within seven days of service of the demand.
The defendant has not paid the total amount owing under Loan No L0025764, being $865,742.98 together with interest thereon from 1 October 2014 compounding daily at the rate of 13.2% per annum, alternatively at the rate of $313.09 per day.
Loan No L0028723
By Tax Invoice No 2416816 dated 1 October 2008, Timbercorp Securities invoiced the defendant in the sum of $133,550.
By Loan Application Form dated 11 November 2008 and headed ‘Timbercorp 2008 On-Going Finance Package - Loan Application Form’ (‘the Stage Loan Application Form’), the defendant applied for a loan amount of $133,550, being the total project payments due. Except for the loan amount and the loan term, it was relevantly identical to the First Initial Loan Application Form and the Second Initial Loan Application Form.
Timbercorp Finance also prepared a document entitled ‘Timbercorp 2008 On-Going Finance Package – Loan Explanation and Loan Terms’ (‘the Stage Loan Explanation Document’). It was relevantly identical to the Initial Loan Explanation Document, except that under the heading ‘Provisions’, clause 1 referred to the ‘payment of the balance of your invoice for your lots’ rather than ‘the balance of your application money for lots’.
A series of journal entries made on 19 November 2008 recorded (inter alia):
(a) a payment by Timbercorp Finance to Timbercorp Securities including the sum of $133,550 referrable to Loan No L0028723; and
(b) a discharge of the defendant’s liability to Timbercorp Securities for the balance due under Tax Invoice No 2416816.
By letter dated 19 November 2008 to the defendant, Timbercorp Finance confirmed that the defendant’s application for finance had been accepted. As with the acceptance of the First Initial Loan Application and the Second Initial Loan Application, it attached a document headed ‘Loan Terms’ in which, the details of the loan, including the name of the borrower, the loan amount, the loan term, the lower interest rate, the amount of instalments and the date of the loan agreement were completed. As with the pro forma document provided with the Initial Loan Application Form, referred to in paragraphs 11 and 14 above, the higher interest rate was printed as 13.2% per annum.
On or about 30 May 2009, the defendant defaulted in his payments under the loan agreement.
By letter dated 15 July 2009 to the defendant, Timbercorp Finance’s solicitors enclosed a final demand for the total amount owing under Loan No L0028723 as at 8 July 2009, to be paid by the defendant within seven days of service of the demand.
The defendant has not paid the total amount owing under Loan No L0028723, being $253,048.40 together with interest thereon from 1 October 2014 compounding daily at the rate of 13.2% per annum, alternatively at the rate of $91.51 per day.
Conclusion
On the evidence, I am satisfied as follows:
(a) With respect to Loan No L0025763:
(i) Pursuant to a loan agreement entered into between Timbercorp Finance and the defendant in June 2008, Timbercorp Finance advanced the defendant the sum of $166,320.
(ii) The terms of the loan agreement included the terms contained in the Loan Terms.
(iii) In breach of the agreement, the defendant failed to pay the instalments and interest due under the loan agreement from on or about 30 May 2009.
(b) With respect to Loan No L0025764:
(i)Pursuant to a loan agreement entered into between Timbercorp Finance and the defendant in June 2008, Timbercorp Finance advanced the defendant the sum of $467,910.
(ii)The terms of the loan agreement included the terms contained in the Loan Terms.
(iii)In breach of the agreement, the defendant failed to pay the instalments and interest due under the loan agreement from on or about 30 May 2009.
(c) With respect to Loan No L0028723:
(i)Pursuant to a loan agreement entered into between Timbercorp Finance and the defendant in November 2008, Timbercorp Finance advanced the defendant the sum of $133,550.
(ii)The terms of the loan agreement included the terms contained in the Loan Terms.
(iii)In breach of the agreement, the defendant failed to pay the instalments and interest due under the loan agreement from on or about 30 May 2009.
The relevant pleadings on which the trial proceeded were as follows:
(a) further amended statement of claim dated 1 July 2019;
(b) amended defence to further amended statement of claim and counterclaim dated 23 March 2020; and
(c) defence to counterclaim and reply to defence dated 13 May 2020.
By notice dated 9 October 2020, the solicitors for the defendant ceased to act. The defendant was self-represented from that date, including at the trial. At trial, he lead no evidence and made no submissions.
As no evidence was lead and no submissions were made by the defendant, I do not consider it appropriate for the Court to formulate submissions that may have been made.
However, as the defendant was self-represented, I considered the defences raised in the amended defence and counterclaim. I am satisfied that no issues of substance are raised that have not been dealt with in the previous decided cases brought by Timbercorp Finance,[14] and the defendant has suffered no apparent injustice by reason of representing himself and making no submissions.
[14]See Timbercorp Finance Pty Ltd v Collins (2016) 119 ACSR 478 (Judd J); Collins and White (2017) 123 ACSR 284 (Ferguson CJ, Santamaria and McLeish JJA); Tomes [2019] VSC 519 (Kennedy J); Timbercorp Finance Pty Ltd (in liq) v De Vries [2021] VSC 37 (Riordan J).
Orders
I propose to enter judgment for Timbercorp Finance in respect of each of the loan agreements referred to in paragraph 1 above, and I will hear the parties on the questions of the principal sums outstanding, interest and costs.
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