Lawyer urges Timbercorp scrutiny before wind-up

A lawyer representing Timbercorp investors has called for proper scrutiny of the schemes before any attempt is made to wind them up.

Administrator Korda Mentha is planning to go to the Melbourne Supreme Court to wind up some of the agribusiness schemes.

Macpherson Kelley principal Ron Willemsen said his clients want a proper independent review of the schemes first.

“Our clients would accept a proper analysis of each project [that takes] into account the large amount of expenses the MIS (managed investment scheme) operator took,” he said.

“That way each project could be assessed looking at the outcomes of the options going ahead.”

Willemsen said if there was an independent report, the investors could make up their minds as to the viability of the projects.

“An independent report could be produced that would look at the interests of the growers and not just the banks,” he said.

The problem with both Timbercorp and Great Southern is the responsible entity of the projects, which in both cases were subsidiaries of the parent company, are in administration.

Typically, if the investors are dissatisfied with a responsible entity’s performance, they can vote to change them, and usually there is an alternative to vote on.

In Great Southern and Timbercorp’s situation, the responsible entities are in financial difficulties and it might prove hard to find an alternative.

The danger for investors in the projects is if no alternative responsible entity is found, the administrator has no option but to wind them up.

This happened with MIS operator Palandri Wines, which was liquidated last year, leaving investors with nothing after the vineyards were sold.

It was the same situation with Environinvest, where the receivers, Korda Mentha, said the responsible entity was insolvent. Investors could not produce any evidence to the contrary, so the projects were liquidated.

“Now we are seeing the same situation with Timbercorp and Great Southern,” Willemsen said.

“The investors could take action in the courts to seek a replacement responsible entity and explain how the projects would be recapitalised,” he said.

“But clients of these companies come from a wide spectrum and while some might be willing to invest further, other will want to cut their losses.”

Alternatively, Willemsen said the Australian Securities and Investments Commission could also go to court to appoint a new responsible entity to protect investors.

Money Management asked the regulator if it was looking at this course of action, but a spokeswoman declined to comment.

Macpherson Kelley is looking at a class action against both failed managers on the basis that the investors were not kept informed of the two company’s perilous financial situation.

“We believe we have strong grounds for clients to be excused from making further payments to projects, as not all relevant material information was disclosed to them,” Willemsen said.

“Our investigations revealed disclosures on the company’s financial situations were not properly [made].”