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No evidence of a loan advance sinks the Bendigo Bank’s loan recovery action against a Great Southern investor

When Michael Howard invested in the Great Southern 2006 Organic Olives Income Project, he was confident it would prove to be a fine investment. So confident, that he borrowed the total cost from Great Southern Finance (GSF).

Little did he expect that 12 years later he would be defending a loan recovery action by the Bendigo and Adelaide Bank Limited (Bendigo Bank) for a large debt in a project which never paid a return and was wound up early because it had run out of funds.

His defence was upheld because the Bendigo Bank failed to prove it made a loan advance, and was ordered to pay his legal costs in defending the action.

The decision is Bendigo and Adelaide Bank Ltd v Howard [2018] NSWSC 383, a decision of Justice Davies in the Supreme Court of New South Wales on 28 March 2018.


  • In June 2006, Mr Howard signed an Investment Application to purchase 3 ‘grovelots’ (there were 33 trees in a ‘grovelot’) in the Great Southern 2006 Organic Olives Income Project at a total cost of $24,490.
  • In the Product Disclosure Statement, the net harvest proceeds projected over the life of the scheme would see a return of funds invested and income.
  • Mr Howard signed a Finance Application to borrow the total cost from Great Southern Finance Pty Ltd (GSF). He selected a loan from GSF for a term of 10 years, with 3 years interest only, followed by 7 years principal and interest. He did not notice that the Product Disclosure Statement offered this type of loan only for the purchase of woodlots. For the purchase of ‘grovelots’ he needed to have selected a loan with ABL Nominees Pty Ltd (ABL), which was a principal and interest loan over 10 years.
  • GSF used the power of attorney which Mr Howard granted to GSF in his Finance Application to nominate ABL as lender, a company associated with what became Bendigo Bank, to enter into a loan deed with Mr Howard as borrower.

    Howard signed a direct debit request in favour of GSF. The first three years of payments were debited and made to GSF. The remaining seven years of payments were not made.
  • In January 2010, the 2006 Organic Olives Income Project was wound up because the manager of the project, Great Southern Management Australia Ltd (GSMAL), was insolvent. GSMAL’s Receiver and Manager was unable to raise funds to continue to cultivate the olive plantations because the operating cash projections showed a shortfall.
  • Between 2009 and 2014, many investors in the Great Southern Projects who funded their investment with loans offered through GSMAL pursued a class action against Bendigo Bank for relief from their loans. Their claim that the Product Disclosure Statements were defective failed.
  • In June 2016, Bendigo Bank commenced a loan recovery action against Mr Howard in the Local Court. By then, the loan had grown with interest to $66,569.32.
  • On 23 August 2017, Local Court Magistrate JA Soars ruled that Bendigo Bank could not recover the loan.
  • Bendigo Bank appealed to the Supreme Court of NSW.

Why was Bendigo Bank keen to pursue the appeal?

His Honour was intrigued by the sight of senior counsel and junior counsel at the bar table for both parties. The significance of the appeal as a precedent was made clear by an exchange which took place early in the oral submissions:

HIS HONOUR: Does this case have some sort of general importance that so much money seems to be being spent on it?

COUNSEL FOR THE BANK: It does insofar as the same set of documents and the same transactions and transaction mechanisms, apply, as I say, to many thousands of transactions. Curiously, there is, and we have given a reference in our list of authorities, ABL Custodian Services v Kunz which is reported in citations [2016] SADC 145 is in a sense the reverse of this case.

There the person ticked ‘grovelots’ when they intended woodlots, but otherwise the transaction documents and descriptions and so forth that the learned judge is dealing with, your Honour will find remarkably familiar because unsurprisingly it is essentially the same documents stream.


The reasons why the appeal was dismissed / the loan recovery action failed

Justice Davies dismissed the appeal on all 23 grounds put forward by Bendigo Bank. The principal reasons were:

  1. No evidence of a loan advance

    There were … no documents from ABL [as lender] … to show that it paid funds [for the purchase of the ‘grovelots’ by Mr Howard] … to GSMAL. (para 89, judgment)

    The documents produced, namely a loan deed in which ABL agreed to make a loan to Mr Howard, and evidence that three ‘grovelots’ were allocated to Mr Howard, were not sufficient to prove a loan.

    None of those matters proves from whence the funds came (para 101, judgment).

    …that the plaintiff did not prove that ABL advanced the funds, is determinative of the whole claim because the loan to the defendant [Mr Howard] cannot form part of what was purportedly assigned to Bendigo Bank. (para 106, judgment)
  2. The loan deed was not validly entered into by ABL / Bendigo Bank

    GSF was not authorised under the power of attorney in the Finance Application to nominate ABL to enter into the loan deed with Mr Howard in the face of the fact that Mr Howard had selected GSF as the lender in his Finance Application.

    Not only did the defendant indicate on the Finance Application that he selected GSF, he also completed the Direct Debit request which was addressed to GSF and was also expressed to be used “ONLY…IF USING GSF”. (para 40, judgment)

    In doing so, the Court rejected Bendigo Bank’s argument that Mr Howard’s loan selection with GSF was a misnomer, which the Court could correct by recognising ABL as the lender.

    It was no more allowable for GSF to select ABL as the financier than it would have been for it to allocate woodlots instead of grovelots to the defendant. (para 68, judgment)

    The Court held further that ABL was fixed with knowledge GSF had about the limits upon its power to nominate ABL as lender, when GSF acted as ABL’s agent. (paras 55 & 69, judgment)

    Finally, the Court held that, in circumstances where no loan deed was validly executed, no proceedings would be maintainable for recovery of a loan advance because they were barred by operation of the statute of limitations. (para 73, judgment)

    Note: A longer limitation period is applicable to a claim under a deed than the 6 year limitation period which is applicable to a simple action for the recovery of a debt.

Throughout the judgment, Justice Davies was at pains to make clear that he could only decide questions of law, because this was an appeal under Section 39 of the Local Court Act 2007 and because Bendigo Bank had not sought leave (under Section 40 of the Act) to appeal on questions of mixed law and fact. To the extent he did consider questions of mixed law and fact, he was not inclined to disturb the findings of fact made by the Magistrate.

Finally, in the opinion of Justice Davies, Kunz is entirely distinguishable from this case. The issues in ABL Custodian Services Pty Ltd v Kunz were whether to correct the ‘minor clerical error’ in ticking the ‘grovelots’, not the woodlots box; and the consequences flowing from the fact that Kunz was a member of the class action. (paras 51 & 52, judgment)


Mr Howard’s case was fairly and squarely based on putting Bendigo Bank to proof that a loan advance was made and that Bendigo Bank was the successor in title to from the original lender. The evidence of Bendigo Bank was found wanting in both respects.

The Bank’s Senior Counsel indicated in his oral submissions that the decision in this case had wider application. Its value as a precedent to assist borrowers will become apparent when future actions are heard.

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