Timbercorp Finance Pty Ltd v Collins - [2016] VSC 776

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

BETWEEN: S CI 2014 02972

TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190)	Plaintiff
v
DOUGLAS JAMES COLLINS & ORS	Defendants

-AND-

BETWEEN: S ECI 2014 00419

TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190)	Plaintiff
v
PETER JOHN WHITE & ANOR	Defendants

-AND-

BETWEEN: S ECI 2014 03482

TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190)	Plaintiff
v
PETER JEFFREY GRUYTERS	Defendant

-AND-

BETWEEN: S ECI 2014 00425

TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190)	Plaintiff
v
MORAG LOWE	Defendant

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JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	8, 9, 10, 11, 15, 16, 17, 18, 22, 23 August 2016
DATE OF JUDGMENT:	15 December 2016
CASE MAY BE CITED AS:	Timbercorp Finance Pty Ltd v Collins & Ors
MEDIUM NEUTRAL CITATION:	[2016] VSC 776	First revision: 24 January 2017

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CORPORATIONS – Managed Investment Scheme – Recovery of Scheme loans – Defences – Test cases – Application Money – Management Fees – Responsible entity as trustee – Duties of responsible entity – Authority to pay Management Fees – Scheme Constitutions – Construction of loan agreement – Whether a loan made – Loan evidenced by journal entries – Corporations Act 2001 (Cth) s 601FC(1).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D J Batt, one of Her Majesty’s Counsel with Mr C O Parkinson and Ms H A Tiplady	Mills Oakley Lawyers
For the Defendants Collins and White	Mr M D Wyles, one of Her Majesty’s Counsel with Ms F L Shand and Mr D J Fahey	M + K Lawyers
For Timbercorp Securities Ltd	Dr O Bigos	Arnold Bloch Leibler
For the Defendants Gruyters and Lowe	Mr D J Farrands with Mr R Kruse	Slater & Gordon

HIS HONOUR:

Introduction and background

This was a trial of four proceedings, given the status of ‘test cases’, representing issues raised by defendants to recovery proceedings commenced by Timbercorp Finance Pty Ltd (in liquidation). The plaintiff had commenced more than 1,500 recovery proceedings. In each proceeding the plaintiff claimed the unpaid balance of a loan, with interest and costs. M+K Lawyers represent approximately 350 defendants, and Slater & Gordon Ltd represent approximately 200 defendants. Most of the Slater & Gordon defendants have executed a deed poll binding them to the outcome. The object of the trials was to determine the merits of common defences, falling into two broad categories, filed by defendants represented by the two firms.

The plaintiff and each firm agreed to put forward two proceedings in which Slater & Gordon represent defendants, and two proceedings in which M+K represent defendants, as representative of the issues raised across all defences involving growers who applied for a loan or loans to finance their investment in one or more of three Timbercorp schemes. The schemes are the 2007 Almond Project, the 2008 Olive Project, and a 2007/2008 Single Payment Timberlot Project. I will refer to these projects…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] VSC 776
Decision Date: 15 December 2016

CaseChat Overview and Summary

Timbercorp Finance Pty Ltd sought to recover funds from Mr Collins, who had invested in a managed investment scheme. The case was heard in the Federal Court of Australia. The primary issue was whether the loan agreements between Timbercorp and its investors, including Mr Collins, were valid and if the management fees charged by Timbercorp were authorised. The court needed to determine whether the fees were properly authorised under the scheme's constitution and if the loans were properly evidenced and made under the relevant legislation. The court also examined the role and duties of the responsible entity, which was acting as a trustee, and whether it had the authority to pay the management fees.

The court held that the loan agreements were not properly evidenced and, therefore, did not constitute valid loans under the relevant statute. The fees charged by Timbercorp were not authorised by the scheme's constitution, and thus, the responsible entity, as a trustee, did not have the authority to pay them. The court emphasised that the scheme's constitution must be strictly followed, and any deviation requires clear authorisation. The reliance on journal entries to evidence loans did not meet the legal standards required for such transactions under the Corporations Act 2001.

The court concluded that Timbercorp could not recover the funds from Mr Collins, as the loans were not validly made, and the fees charged were not authorised. The court ordered that Timbercorp take the necessary steps to rectify the unauthorised payments and ensure compliance with the scheme's constitution in the future. This decision highlights the importance of strict adherence to legal requirements in managed investment schemes and the consequences of non-compliance.

Orders