Andrew Main From: The Australian September 02, 2011...

Andrew Main
From: The Australian
September 02, 2011 12:00AM

VICTORIAN judge James Judd yesterday rejected a class action claim by 2200 investors in defunct group Timbercorp Securities who alleged misleading and deceptive conduct by the group's management in the way it solicited investments.

Alan Woodcroft-Brown and fellow investor Francis Van Hoff were lead claimants in the group, financed by the claimants and managed by Ron Willemsen of Melbourne solicitors Macpherson and Kelley. They claimed inadequate disclosure in product disclosure statements issued by Timbercorp, which was incorporated in 2000 and went into administration in 2009. The claimants had invested not only in timber lots but also in horticultural schemes such as the 2007 almond project and the 2008 olive project.

Timbercorp collapsed partly because of an adverse ruling on horticultural schemes issued in February 2007 by the Australian Tax Office, but mainly because the demand for tax-driven rural managed investment schemes slumped after the global financial crisis of 2008.

Mr Willemsen said he expected the case, the outcome of which "could result in some claimants losing their houses", to go to appeal after a further orders hearing on October 6.

Justice Judd of the Victorian Supreme Court said the claimants alleged they had been given false financial representations in relation to Timbercorp's situation from February 2007 onwards and that Timbercorp management failed to disclose the "adverse matters" as described above after they occurred, as a substantial risk in connection with each scheme.

"The first part of the allegation was not supported by the evidence; and I have found that Timbercorp Securities was not required to disclose the information about the adverse matters as formulated by the plaintiff," he said.

The judge also said that the investors' claims that if they had known about the risks they would not have invested, to "lack credibility", that their witness statements "contained formulaic incantations" and that their evidence that they were more focused on long-term investment objectives than on tax benefits was "implausible".

Between its original incorporation in 1992 and its collapse in 2009 Timbercorp invested more than $2 billion in agribusiness projects on behalf of about 18,500 investors, the judge said. He also noted that at the time the group collapsed, an associated company called Timbercorp Finance (also a defendant) had outstanding loans to 14,500 investors totalling $477.8 million.

He said that one purpose of the legal action was"an attempt by borrowers to avoid their legal obligations".

Criticisms levelled elsewhere at the schemes have noted that ordinary shareholders lost all their equity and that grower investors who invested specifically in the schemes had modest rights in that they neither owned the land nor the horticultural business planted on them, but just a share in the crop proceeds. In the case of the timber schemes, they did own the trees but also had an obligation to pay for their upkeep until they were harvested.