Investors prepare for significant Great Southern vote

Key points

• Grower investors vote on Gunns proposal tomorrow
• Prospects for M+K class action against Timbercorp Finance described as ‘gloomy’
• ASIC dismisses M+K complaint against Bendigo and Adelaide Bank
• Debt collection process will continue with Great Southern grower investors

Grower investors in various Great Southern Managed Investment Schemes (MIS) will vote on a proposal from Gunns Limited to take over the schemes at a meeting to be held tomorrow in Sydney.

The meeting comes at a time that a judge in the Supreme Court of Victoria indicated that the prospects of the claims made against Timbercorp Finance Pty Ltd in a class action launched by law firm Macpherson + Kelley (M+K) were ‘gloomy’; and as ASIC has cleared Bendigo and Adelaide Bank of any wrongdoing in its debt collection program involving grower investors in Great Southern MIS.

These developments will serve as a watershed for grower investors. In particular, those who have followed class action lawyers’ advice to cease paying their loans, may need to reassess their decision.

BEN Managing Director Mike Hirst said growers should ensure any advice they received took into account their full rights and obligations.

“We feel vindicated that the complaint by M+K to ASIC was dismissed, and note with interest that M+K’s prospects, based on their court documents against Timbercorp Finance are, in the words of the judge, ‘gloomy’,” Mr Hirst said.

Given BEN's position as a third party financier outside the Great Southern Group, the difficulties faced by M+K in the Timbercorp class action may well be magnified in any class action that M+K may seek to bring against the Bank.

“We remain concerned that M+K is not adequately advising its clients as to the risks and potential consequences of its recommended course and that this in turn will compound financial penalties for those clients,” Mr Hirst said.

Under debt collection guidelines banks are required to correspond with customers via their lawyers – once the bank has been notified that the customer has retained legal representation.

“We take our responsibilities under debt collection guidelines very seriously, and look to deal with all borrowers in a manner that is consistent with both the letter and the spirit of the law,” Mr Hirst said.

“Unfortunately in the case of M+K, our correspondence to defaulting customers sent via M+K was tampered with, in that it had details removed and was issued to customers to whom it was not directed (including those not in arrears), with the result that the position of the bank was misrepresented.

“This also meant M+K was withholding vital information from its clients about their loan balances, loan arrears and interest that was being applied.

“Once we became aware of M+K’s behaviour, we recommenced communication directly with our customers and our decision to do so has since been vindicated by ASIC. We will continue this course of action for customers represented by M+K,” Mr Hirst said.

BEN reminds customers that loans to MIS investors are full recourse loans. A borrower’s obligation to repay their loan is not affected by the receivership or administration of any company in the Great Southern Group.