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Timbercorp investors have failed in their ‘no loan’ defences to loan recovery claims

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.) [2017] 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 loans.

Why did the Court of Appeal find the loans were valid and enforceable?

There were three aspects to this finding:

  1. 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 three schemes.

    The loan was approved and the investments were confirmed prior to 30 June 2008.
  2. The payment to Timbercorp Securities of the loan amount

    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.
  3. 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 instalments.

    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 was made.

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