investors have failed in their ‘no loan’ defences to loan
Two Timbercorp investors have been ordered to repay
Timbercorp Finance loans advanced to fund investments in
three failed agricultural schemes – the 2007/2008 Timberlot
Project, the 2007 Almond Project and the 2008 Olive Project
managed investment schemes.
The orders were made in the Court of Appeal of Supreme
Court of Victoria, affirming the orders of the trial judge,
in the decision of White v Timbercorp Finance Pty Ltd (in
Liq.); Collins v Timbercorp Finance Pty Ltd (in Liq.)
 VSCA 361 (8 December 2017) (Ferguson CJ,
Santamaria and McLeish JJA, jointly).
Subject only to leave to appeal being granted by the High
Court of Australia, the two investors, and indeed all
Timbercorp investors who were members of the class action,
appear to have reached the end of the road in contesting
their legal liability to repay their Timbercorp Finance
Why did the Court of
Appeal find the loans were valid and enforceable?
There were three aspects to this finding:
- The creation of the loan
Mr White invested $70,840 in the Timberlot Project,
$72,000 in the Almond Project and $85,500 in the Olive
Project. He paid a deposit of $22,834 with his
Application for investment with Timbercorp Securities,
and made an Application for finance for $205,506 plus
$250 loan application fee with Timbercorp Finance to
fund the balance payable for the investments in the
The loan was approved and the investments were confirmed
prior to 30 June 2008.
- The payment to Timbercorp Securities of the loan
Clause 1 of the Loan Agreement provided:
We [Timbercorp Finance] agree to lend you the loan amount by
paying it to
Timbercorp Securities Limited AFSL 235653 (or as it directs) as
payment of the
balance of your application money for lots and the loan
application fee as described
in the application form.
The Court held that journal entries made in the books of
Timbercorp Securities and Timbercorp Finance that the
loan amount was paid in accordance with clause 1
were sufficient evidence of the loan.
The Court also inferred an agreement to make the payment
by journal entry because Timbercorp Securities and
Timbercorp Finance were related parties: they were both
wholly-owned subsidiaries of Timbercorp Ltd; they had
the same directors; their financial statements were
subject to annual directors’ declarations and an
independent audit report; the group had a single
operating bank account.
- Did Mr White ratify the loan payment?
The Court found that Mr White had obtained a tax benefit
from the loan because he claimed a full tax deduction
for the investment schemes. He had also paid loan
The knowledge that he had acquired an interest in the
schemes, giving rise to a claim for tax deductions
ratified any irregularity in the manner in which the
loan amount was paid.
The successful application by the Timbercorp investors to
the High Court of Australia to be permitted to raise ‘no
loan’ defences to loan recovery claims made by Timbercorp
Finance has turned out to be a false dawn. The Court of
Appeal has found the defences were not made out.
Timbercorp investors who were members of the class action
cannot defend loan recovery claims by arguing that no loan