ASIC may step in over Great Southern plantations settlement by:...

ASIC may step in over Great Southern plantations settlement

• by:
• From: The Australian
• October 27, 2014 4:45PM

Tall timber: A timber plantation once owned by Great Southern. Source: Supplied
THE corporate watchdog has flagged the prospect of intervening in a controversial settlement between banks and lawyers that will result in investors who lost $1.8 billion in the failed Great Southern plantation schemes receive a “minuscule” dividend and face the loss of their homes.
The Australian Securities and Investments Commission (ASIC) was today granted leave by Supreme Court of Victoria judge James Judd to appear as a “friend of the court” in a case to determine the fairness of otherwise of an 11th hour deal between a law firm representing 2000 investors and the liquidators of Great Southern, and the Bendigo and Adelaide Bank.
Counsel for ASIC said while the regulator was initially content to appear as a friend of the court, “that may change as the application develops” and it may seek to become a “contradictor”.
The move comes amid heavy pressure from parliamentarians for ASIC — which is under fire over its handling of a string of corporate frauds and collapses — to fully investigate the collapse of Great Southern and the predicament in which it had left investors.
Up to $400 million is still owed by investors who borrowed money to invest in Great Southern’s failed tree plantations, in which 43,000 investors lost $1.8 billion and up to 23,000 now face losing their homes.
Lawyers for Bendigo and Adelaide Bank are urging Justice Judd to approve the $23m settlement between the bank and the 2000 investors represented by Macpherson and Kelley Lawyers, and ignore a judgment on the matter reached by another of the court’s justices, Clyde Croft, but never handed down because of the settlement.
But Justice Judd said it was a “very usual” case in which he could not rely on his colleague’s 2000 page ruling to assess the fairness of the settlement. He had previously noted investors could potentially receive a higher payout under Justice Croft’s judgment, although he has not seen the ruling.
“There is something absurd about my ability to make a high level assessment … when locked away in a cupboard of another judge out of reach of anybody is his decision,’’ Justice Judd told the court.
The controversial settlement is being opposed by more than 1000 other Great Southern investors as it offers “minuscule” compensation and leaves them bound to honour loans held by the banks, which would bankrupt many of them.
The settlement would reportedly see investors receive a return of $3.35m, or about 0.16c in the dollar, while Macpherson and Kelley would receive almost $20m.
The banks, liquidators and the law firm reached a settlement last month just as Justice Croft was due to hand down his judgment in the long-running and controversial litigation.
Today, counsel for the banks and Macpherson and Kelley were before Justice Judd asking him to approve the settlement as fair and reasonable.
But right from the start of proceedings, Justice Judd made it clear he was uncomfortable forming a view on this without seeing the reasons for judgment issued by Justice Croft at the end of a 12-month trial that saw 90 days of evidence given in court.
He said he was worried it could expose the court to criticism.
“There are more than 1000 objectors to the approval. There is a subgroup, at least one, making an application to opt out at this stage. As the parties are aware the dividend to group members may be described as minuscule,’’ he said.
“The terms of the settlement seek to bind members in terms of their liability to third party banks.”
But counsel for the Bendigo and Adelaide Bank, Philip Crutchfield QC, said Justice Judd could approve the settlement without seeing Justice Croft’s decision as “the judgment might be wrong”.
The bank’s position was supported by the liquidators of Great Southern as well as counsel for the Macpherson and Kelley investors, counsel representing Great Southern’s former management team and lawyers acting for the financier Javelin.
However, counsel for a group of Great Southern investors represented by ERA Legal are pushing for Justice Judd to have access to his colleague’s ruling and flagged that they might be instructed “very shortly” to make an application to Justice Croft for the parties before Justice Judd to have access to the decision