No evidence of a loan
advance sinks the Bendigo Bank’s loan recovery action
against a Great Southern investor
When Michael Howard invested in the Great Southern 2006
Organic Olives Income Project, he was confident it would
prove to be a fine investment. So confident, that he
borrowed the total cost from Great Southern Finance (GSF).
Little did he expect that 12 years later he would be
defending a loan recovery action by the Bendigo and Adelaide
Bank Limited (Bendigo Bank) for a large debt in a project
which never paid a return and was wound up early because it
had run out of funds.
His defence was upheld because the Bendigo Bank failed to
prove it made a loan advance, and was ordered to pay his
legal costs in defending the action.
The decision is Bendigo and Adelaide Bank Ltd v Howard
 NSWSC 383, a decision of Justice Davies in the
Supreme Court of New South Wales on 28 March 2018.
- In June 2006, Mr Howard signed an Investment
Application to purchase 3 ‘grovelots’ (there were 33
trees in a ‘grovelot’) in the Great Southern 2006
Organic Olives Income Project at a total cost of
- In the Product Disclosure Statement, the net harvest
proceeds projected over the life of the scheme would see
a return of funds invested and income.
- Mr Howard signed a Finance Application to borrow the
total cost from Great Southern Finance Pty Ltd (GSF). He
selected a loan from GSF for a term of 10 years, with 3
years interest only, followed by 7 years principal and
interest. He did not notice that the Product Disclosure
Statement offered this type of loan only for the
purchase of woodlots. For the purchase of ‘grovelots’ he
needed to have selected a loan with ABL Nominees Pty Ltd
(ABL), which was a principal and interest loan over 10
- GSF used the power of attorney which Mr Howard
granted to GSF in his Finance Application to nominate
ABL as lender, a company associated with what became
Bendigo Bank, to enter into a loan deed with Mr Howard
- Howard signed a direct debit request in favour of GSF.
The first three years of payments were debited and made
to GSF. The remaining seven years of payments were not
- In January 2010, the 2006 Organic Olives Income
Project was wound up because the manager of the project,
Great Southern Management Australia Ltd (GSMAL), was
insolvent. GSMAL’s Receiver and Manager was unable to
raise funds to continue to cultivate the olive
plantations because the operating cash projections
showed a shortfall.
- Between 2009 and 2014, many investors in the Great
Southern Projects who funded their investment with loans
offered through GSMAL pursued a class action against
Bendigo Bank for relief from their loans. Their claim
that the Product Disclosure Statements were defective
- In June 2016, Bendigo Bank commenced a loan recovery
action against Mr Howard in the Local Court. By then,
the loan had grown with interest to $66,569.32.
- On 23 August 2017, Local Court Magistrate JA Soars
ruled that Bendigo Bank could not recover the loan.
- Bendigo Bank appealed to the Supreme Court of NSW.
Why was Bendigo Bank keen to
pursue the appeal?
His Honour was intrigued by the sight of senior counsel and
junior counsel at the bar table for both parties. The
significance of the appeal as a precedent was made clear by
an exchange which took place early in the oral submissions:
HIS HONOUR: Does this case have some sort of general
importance that so much money seems to be being spent on it?
COUNSEL FOR THE BANK: It does insofar as the same set of
documents and the same transactions and transaction
mechanisms, apply, as I say, to many thousands of
transactions. Curiously, there is, and we have given a
reference in our list of authorities, ABL Custodian Services
v Kunz which is reported in citations  SADC 145 is in
a sense the reverse of this case.
There the person ticked ‘grovelots’ when they intended
woodlots, but otherwise the transaction documents and
descriptions and so forth that the learned judge is dealing
with, your Honour will find remarkably familiar because
unsurprisingly it is essentially the same documents stream.
HIS HONOUR: Yes.
The reasons why the appeal
was dismissed / the loan recovery action failed
Justice Davies dismissed the appeal on all 23 grounds put
forward by Bendigo Bank. The principal reasons were:
- No evidence of a loan advance
There were … no documents from ABL [as lender] …
to show that it paid funds [for the purchase of
the ‘grovelots’ by Mr Howard] … to GSMAL. (para
The documents produced, namely a loan deed in which ABL
agreed to make a loan to Mr Howard, and evidence that
three ‘grovelots’ were allocated to Mr Howard, were not
sufficient to prove a loan.
None of those matters proves from whence the funds
came (para 101, judgment).
…that the plaintiff did not prove that ABL advanced
the funds, is determinative of the whole claim because
the loan to the defendant [Mr Howard] cannot form
part of what was purportedly assigned to Bendigo
Bank. (para 106, judgment)
- The loan deed was not validly entered into by ABL
/ Bendigo Bank
GSF was not authorised under the power of attorney in
the Finance Application to nominate ABL to enter into
the loan deed with Mr Howard in the face of the fact
that Mr Howard had selected GSF as the lender in his
Not only did the defendant indicate on the Finance
Application that he selected GSF, he also completed the
Direct Debit request which was addressed to GSF and was
also expressed to be used “ONLY…IF USING GSF”. (para
In doing so, the Court rejected Bendigo Bank’s argument
that Mr Howard’s loan selection with GSF was a misnomer,
which the Court could correct by recognising ABL as the
It was no more allowable for GSF to select ABL as the
financier than it would have been for it to allocate
woodlots instead of grovelots to the defendant. (para
The Court held further that ABL was fixed with knowledge
GSF had about the limits upon its power to nominate ABL
as lender, when GSF acted as ABL’s agent. (paras 55 &
Finally, the Court held that, in circumstances where no
loan deed was validly executed, no proceedings would be
maintainable for recovery of a loan advance because they
were barred by operation of the statute of limitations.
(para 73, judgment)
Note: A longer limitation period is applicable to
a claim under a deed than the 6 year limitation period
which is applicable to a simple action for the recovery
of a debt.
Throughout the judgment, Justice Davies was at pains to make
clear that he could only decide questions of law, because
this was an appeal under Section 39 of the Local Court Act
2007 and because Bendigo Bank had not sought leave (under
Section 40 of the Act) to appeal on questions of mixed law
and fact. To the extent he did consider questions of mixed
law and fact, he was not inclined to disturb the findings of
fact made by the Magistrate.
Finally, in the opinion of Justice Davies, Kunz is
entirely distinguishable from this case. The issues in
ABL Custodian Services Pty Ltd v Kunz were whether to
correct the ‘minor clerical error’ in ticking the ‘grovelots’,
not the woodlots box; and the consequences flowing from the
fact that Kunz was a member of the class action. (paras 51 &
Mr Howard’s case was fairly and squarely based on putting
Bendigo Bank to proof that a loan advance was made and that
Bendigo Bank was the successor in title to from the original
lender. The evidence of Bendigo Bank was found wanting in
The Bank’s Senior Counsel indicated in his oral submissions
that the decision in this case had wider application. Its
value as a precedent to assist borrowers will become
apparent when future actions are heard.