Supreme Court denies Timbercorp investors

It's likely the majority of Timbercorp investors will now have to repay their loans.


By Sarah Kendell

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The Victorian Supreme Court’s rejection of new defences tested by investors in collapsed forestry managed investment scheme Timbercorp could be the final nail in the coffin for those caught up in the scheme, meaning they would have to repay their loans to the group in full plus interest.

In a case heard earlier this month, Justice James Judd rejected defences put forward by Peter White, Peter Gruyters, Douglas Collins and Morag Lowe, four investors who had taken out loans to finance their investment in Timbercorp forestry schemes in 2007 and 2008, and were seeking to be released from their loan obligations after defaulting in 2009.

A High Court decision in November had given new hope to Timbercorp investors after the court ruled an unsuccessful class action in 2009 did not prevent other investors from coming forward with their own individual defences as to why their loans should not have to be repaid.

However, the rejection of defences used during the more recent Supreme Court case, which were common defences hundreds of other investors were seeking to use if they were successful, meant the majority of the around 1500 borrowers owing funds to Timbercorp Finance would likely need to repay their loans with interest, according to Mills Oakley partner Darren James.

“Justice Judd’s decision is significant – it will affect many hundreds of other borrowers who run the same or similar defences to those that these borrowers unsuccessfully ran,” James said.

“Timbercorp Finance intends to seek orders that borrowers pay interest on their loans at the rate agreed to by the borrowers under their loan agreements from the date that they defaulted on their loans until judgment.

“As most of these borrowers defaulted in the second quarter of 2009, if the court orders that interest be paid on that basis, it is likely to be substantial.”

A further hearing was likely to be held on the matter in February 2017, as final orders were yet to be made on each of the investors’ proceedings, including legal costs.

However, James said it was likely the investors would also be liable for Timbercorp’s legal costs as terms within their loan agreements had stated any fees involved with the recovery of loan amounts were their responsibility.

“The quantum of those costs will be determined later unless it can be agreed – but again, they will be substantial,” he said.

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