What is the best
way for a Great Southern Plantations investor to defeat a
loan recovery claim by the Bendigo and Adelaide Bank?
The Bendigo and Adelaide Bank is progressing with loan
recoveries against investors in Great Southern Plantations
with an outstanding loan.
It has a head start in loan recoveries against the
members of the class action (the Group Members) because in
the settlement deed approved by Justice Croft on 11 December
2014 it states that each of the Group Members “acknowledges
and admits their liability to the BEN Parties to pay the
Loan Balance under their Loan Deed”.
To re-cap, the class action would have failed
comprehensively, as Justice Croft observed in his judgment
approving the settlement, in that none of the impugned
product disclosure statements in the prospectuses for the
plantation projects were defective – see Clarke (as trustee
of the Clarke Family Trust) v Great Southern Finance Pty Ltd
(Receivers and Managers Appointed)(In liquidation) 
Anticipating defeat, M + K Lawyers negotiated the
settlement for the group members. The insurers of Great
Southern agreed to pay $20 million to reimburse the group
members legal costs. The Bendigo and Adelaide Bank agreed to
waive overdue interest on the loans and not to recover its
own legal costs against the Group Members.
Why was the Bank prepared to be so generous? The reason
is that the Settlement Deed contained a sting in the tail -
the group members acknowledged and admitted their liability
to pay their loan. As we will see, this acknowledgment was
of vital importance to the Bank.
In this article, we examine a futile application by an
investor who was group member to avoid being bound by the
Settlement Deed, and the successful defence of a loan
recovery claim by another investor who was not a group
member, who drilled into the detail of the loan
The futile application –
Dimitrov v The Supreme Court of Victoria  HCA 51
On 1 December 2017, Justice Edelman dismissed an
application made in the High Court of Australia by Peter
Dimitrov to not be bound by the Settlement Deed. Dimitrov
was a group member who wanted to be able to raise his
individual claims and defences against the loan recovery
claim by the Bendigo and Adelaide Bank.
The Settlement Deed provided:
The Lead Plaintiffs for and on behalf of themselves and all
Group Members acknowledge and admit the validity and
enforceability of the Lead Plaintiffs’ Loan Deeds and the
Group Members’ Loan Deeds AND
Release the Bendigo and Adelaide Bank and their Related
Entities from all Claims AND
Each of the Bendigo and Adelaide Bank and their Related
entities may plead this Deed as a bar or defence to any
claim or action brought by any of the Lead Plaintiffs or the
The application was dismissed. These are some reasons and
observations from the judgment:
- Group members could opt out of the class action if they
gave notice by 27 April 2012, before the trial commenced. Dimitrov did not give an Opt Out notice despite the warning
in it: “you will be bound by the outcome”.
- At the hearing approving the settlement, Dimitrov and
other group members opposed the orders giving effect to the
settlement on the grounds that it was manifestly unfair and
unreasonable. They failed, and so were bound by the
Settlement Deed – in particular the acknowledgment of the
validity and enforceability of the Loan Deeds.
- Dimitrov and others failed to appeal from the decision of
Justice Croft, which was a course they could have taken.
- Dimitrov has the opportunity to argue the issues in these
proceedings by proceeding with his application to set aside
default judgment in the District Court of New South Wales.
The successful defence –
Bendigo and Adelaide Bank Limited v M Howard
Click for the pdf of the Howard
On 23 August 2017, Magistrate JA Soars gave judgment for
the investor, M Howard, in a Great Southern Plantations loan
recovery claim made by Bendigo and Adelaide Bank. The case
was heard in the Local Court of New South Wales at the
Downing Centre Sydney.
The Bank claimed $24,490 together with interest of
$42,079.32 (to 1 June 2016) and ongoing interest at the rate
of 14.5% on the total, under a loan to fund the investment
in the Great Southern 2006 Organic Olives Income Project.
The Bank’s primary claim was under the Loan Deed. The
investor was not a group member and so was able to contest
the validity and enforceability of the Loan Deed, without
being bound by the acknowledgements and admissions in the
The relevant documents were:
- A Grovelot Application was signed and submitted by
the investor to Great Southern Managers Australia on 15
June 2006 to invest in 3 grovelots at $8,000 each. The
investment was a tax-driven agri-business investment,
with the investor able to deduct the application fee
immediately and to receive their money back and derive
income from olive oil sales over the ten year term of
- A Finance Application to fund the investment was
signed and submitted on 15 June 2006. The investor
ticked box 2 (even though box 2 was for woodlots), which
identified Great Southern Finance as the lender. The
investor did not tick box 3, which was for grovelots,
which identified ABL Nominees as the lender, because he
wanted his loan to be with Great Southern Finance.
- The Finance Application contained a Power of
Attorney in favour of Great Southern Finance to enter
into the Loan Deed and also a direct debit request form
for the loan repayments in favour of Great Southern
Finance. The loan repayments were debited until 2009,
when the Great Southern Group collapsed, and the project
was wound up because it was insolvent.
- The loan was an originated loan, that is, it was
originated by Great Southern Managers Australia as agent
of the lender, ABL Nominees. An Origination Notice dated
22 June 2006 was given by Great Southern Managers
Australia to ABL Nominees, to originate the loan.
- On 23 June 2006, ABL Nominees sold the investor’s
loan (as part of a loan portfolio) to the Adelaide Bank,
which later became the Bendigo and Adelaide Bank.
- The Loan Deed was signed on 20 June 2007 (a year
later!) by Great Southern Finance on behalf of the
investor pursuant to the Power of Attorney, in favour of
ABL Nominees as lender. The loan repayment obligations
were independent of the fate of the project.
The investor was successful in defending the Bank’s claim
for these reasons.
- The Loan Deed was not binding on the investor
because the Court found that the Power of Attorney did
not authorize Great Southern Finance to sign the Loan
Deed on behalf of the investor in favour of ABL Nominees
- The Court did not consider that box 2 in the Finance
Application had been ticked in error, and refused to
‘correct the error’ to recognize ABL Nominees as the
lender instead of Great Southern Finance.
- The Court was not satisfied that the documents
demonstrated that ABL Nominees had advanced a loan of
$24,490, or that it was advanced on or about 15 June
- The Bank’s fall-back claim, that the debt was due
under a loan agreement, was statute-barred because more
than 6 years had elapsed since the date of advance in
The Court made these observations:
- No business records of ABL Nominees were produced to
support the making of a loan;
- The acknowledgement of debt in the Loan Deed was not
operative because the Loan Deed was not binding on the
- There was no evidence that ABL Nominees had accepted
the offer in the Origination Notice to purchase, nor
that it had paid the amount to purchase, the originated
loan to the loan originator, Great Southern Managers
- The Court was not satisfied that ABL Nominees had
assigned the investor’s loan to the Adelaide Bank.
- The Court was not satisfied from the business
records that the Adelaide Bank had paid ABL Nominees to
purchase the investor’s loan.
The Bendigo and Adelaide Bank is vigorously pursuing an
appeal from this decision to the Supreme Court of New South
Wales. The appeal is set down for hearing on 1 March 2018. A
more definitive decision can therefore be expected in a
matter of months.
It would not have been easy for Great Southern
Plantations to maintain good business records, when
according to ASIC, it had 43 agricultural managed investment
schemes and about 52,000 investors.
It makes sense why the Bank was so generous in the
Settlement Deed – by obtaining the loan acknowledgments, it
avoids argument on whether the Loan Deeds / loan
documentation were deficient.
The deficiencies in record keeping were exposed in the
The Bendigo and Adelaide Bank ‘inherited’ these
deficiencies when it purchased the loan books.
Investors who were not group members are not bound by the
Settlement Deed. As the Howard Case illustrates, they may be
rewarded by a careful examination of the documentation, and
may successfully defend a claim for recovery of a loan debt
if the documentation is deficient.
For all investors, it is worth consideration that the
Bendigo and Adelaide Bank be put to formal proof that their
loan is an originated loan. If not, the Bank may not have
acquired the loan and therefore have no title to sue.