Bendigo and Adelaide Bank has lost another case in its pursuit of outstanding loans taken out by investors in the failed agribusiness scheme operator Great Southern Plantations.
In Bendigo and Adelaide Bank Ltd & Ors v Kenneth Ross Pickard & Anor, the Supreme Court of South Australia has ruled that the loan was not validly executed and that the loan deed was not enforceable as a valid contract.
Bendigo and Adelaide Bank has had three Great Southern loan recovery actions thrown out of court in the past year, each time because of errors in the loan origination process.
A number of Great Southern investors who funded their investments with loans pursued a class action against Bendigo and Adelaide for relief from their loans. However, the claim that the product disclosure statements were defective failed. In June 2016, Bendigo started loan recovery action against borrowers.
In the latest case, in 2007 Kenrop Pty Ltd, trustee for the K & A Pickard Family Trust, borrowed $505,000 from ABL Nominees, a subsidiary of Bendigo and Adelaide Bank. Kenneth and Ann Pickard were personal guarantors of the loan.
A total of $988,000 was invested in three agribusiness schemes run by Great Southern Plantations. When the projects failed in 2009, Kenrop stopped repaying the loan. It had made payments of $350,000 up to that point.
ABL demanded repayment and in 2016 commenced proceedings against the guarantors.
The Pickards defended the proceedings by disputing the validity of the loan and guarantee documents.
The court ruled in favour of their claim that the documents were not executed validly and that their personal guarantees could not be enforced.
The question in dispute was whether the Pickards signed the loan application only in the name of the borrower Kenrop or also personally as guarantors
The loan deed that contained the guarantees was signed on behalf of the Pickards by Great Southern Finance under a power of attorney contained in the loan application.
Bendigo and Adelaide argued that a valid loan deed was executed for Kenrop and the Pickards as guarantors.
“In issue is whether the defendants granted the power of attorney to permit that to occur,” the court said.
It found: “ABL advanced funds in relation to Kenrop’s acquisition of units in the project in June 2007. The loan deed was brought into existence in November 2008. The entry of ABL into the loan deed at that time could not have amounted to valuable consideration.”
For these reasons it ruled that ABL could not prove that the loan deed was validly executed
The court said that Great Southern board resolutions were limited to formally accepting finance applications and did not go so far as authorising the placement of signatures on loan deeds.
It also ruled that the officers whose signatures were affixed to the document had not turned their attention to and approved a particular loan document to which their signatures were required.