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Woodcroft-Brown v Timbercorp Securities Ltd

Woodcroft-Brown v Timbercorp Securities Ltd

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2011 0176

ALLEN RODNEY WOODCROFT-BROWN	Appellant
ALLEN RODNEY WOODCROFT-BROWN	v
TIMBERCORP SECURITIES LIMITED (ACN 092 311 469) (IN LIQUIDATION)	First Respondent
	and
GARY WILLIAM LIDDELL	Second Respondent
and
ROBERT JAMES HANCE	Third Respondent
and
SOL CHARLES RABINOWICZ	Fourth Respondent
and
TIMBERCORP FINANCE LIMITED (ACN 054 581 190) (IN LIQUIDATION)	Fifth Respondent

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JUDGES	WARREN CJ, BUCHANAN JA and MACAULAY AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	3 – 6 June 2013
DATE OF JUDGMENT	10 October 2013
MEDIUM NEUTRAL CITATION	[2013] VSCA 284
JUDGMENT APPEALED FROM	Woodcroft-Brown v Timbercorp Securities Ltd & Ors [2011] VSC 427

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CORPORATIONS – Appeal – Managed investment scheme – Product disclosure statement – Disclosure of prescribed information by Responsible Entity – Meaning of ‘significant risk’ – Whether a risk ceases to be a ‘significant risk’ if it is capable of being managed – Whether risks that are being managed are required to be disclosed – Whether information contained in Annual Reports and ASX announcements required to be included in the product disclosure statement – Whether directors had knowledge of information about a ‘significant risk’ – Whether non-disclosures relied upon – Appeal dismissed – ss 674, 675, 1013C, 1013D, 1013E, 1013F, 1022B of the Corporations Act 2001 (Cth).

MISLEADING AND DECEPTIVE CONDUCT – claims under s 1041H(1) of the Corporations Act 2001 (Cth) – Considerations relevant to assessing whether representations misleading and deceptive – Whether representations relied upon – Appeal dismissed.

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Appearances:	Counsel	Solicitors
For the Appellant	Mr J W K Burnside QC with Mr C H Truong	Macpherson + Kelley
For the First Respondent	Mr P D Crutchfield SC with Dr O Bigos	Arnold Bloch Leibler
For the Second to Fourth Respondents	Mr J Delany SC with Mr A J McClelland	Brian Ward & Partners
For the Fifth Respondent	Mr A Archibald QC with Mr H N G Austin and Dr C O Parkinson	Herbert Smith Freehills

Introduction

Background to the collapse of the Timbercorp Group

Trial and judgment

The non-disclosure case
The misrepresentation case
False or misleading statements
Reliance and causation

Shift in the appellant’s case

Case on appeal

The evidence concerning the Lehman collapse
The support by the bankers
Equity raisings
Source of inflows
The securitisation process
Cash flows
Matters in the public domain

Grounds of appeal

Ground 1
Ground 2
Ground 3
Ground 4
Ground 5
Ground 6
Ground 7
Ground 8
Ground 9
Ground 12
Ground 13
Ground 14

Summary

THE COURT:

Introduction

Timbercorp Securities Ltd, a member of the Timbercorp Group, operated and was the Responsible Entity for horticultural and forestry managed investment schemes (‘MISs’). Timbercorp Finance Pty Ltd (another member of the Group) would lend money to investors so that they could invest in the MISs.

In 2009 the Timbercorp Group collapsed and went into liquidation. At the time of collapse there were 33 registered MISs and three unregistered private scheme offers. As a result of the collapse, the majority of MISs could not be carried out to completion, meaning…

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: [2013] VSCA 284
Decision Date: 10 October 2013

CaseChat Overview and Summary

The case of Woodcroft-Brown v Timbercorp Securities Ltd involved the appellant, Woodcroft-Brown, who contested the decisions of the lower courts regarding her claims against Timbercorp Securities Ltd, the respondent. Woodcroft-Brown sought to challenge the adequacy of the disclosure made by Timbercorp concerning significant risks associated with a managed investment scheme. The appeal was heard by the Full Court of the Federal Court of Australia.

The legal issues that the court was required to address included the interpretation of the term 'significant risk' within the context of a product disclosure statement under the Corporations Act 2001 (Cth). Specifically, the court needed to determine if a risk could cease to be considered significant if it was capable of being managed, whether managed risks must still be disclosed, and the extent to which information from Annual Reports and Australian Securities Exchange (ASX) announcements should be included in the product disclosure statement. Additionally, the court considered whether the directors of Timbercorp had knowledge of significant risks and if the non-disclosures were relied upon by Woodcroft-Brown.

The court's reasoning involved a detailed analysis of the statutory provisions and case law concerning managed investment schemes and disclosure obligations. The Full Court found that the lower courts had correctly interpreted the relevant sections of the Corporations Act. The court held that a risk could still be deemed significant even if it was being managed and that managed risks must be disclosed. Furthermore, the court determined that Annual Reports and ASX announcements were not automatically required to be included in the product disclosure statement unless they contained information about significant risks. The Full Court also found that there was no evidence that the directors had knowledge of the significant risks and that Woodcroft-Brown had not relied on the non-disclosures.

As a result of this reasoning, the appeal was dismissed. The Full Court upheld the findings of the lower courts that Timbercorp had adequately disclosed the significant risks associated with the managed investment scheme and that Woodcroft-Brown's claims under the Corporations Act for misleading and deceptive conduct were not substantiated.

Orders