Investors involved in a class action against parties linked to the Timbercorp group of companies claim the group’s management was aware of the risks associated with the group failing before the agribusiness schemes reached completion.
In an update from the legal representatives of Timbercorp investors, Macpherson + Kelley (M+K), the investors alleged the risks were not disclosed in the product disclosure statements (PDS) given out ahead of investment decisions being made by the investors.
“This is said by investors to have breached consumer protection provisions of the Corporations Act, including section 1013D, which requires the disclosure of information about any significant risks associated with holding interests in the schemes,” M+K said.
The investors also alleged the PDS did not contain information about “Timbercorp’s critical dependence” on its ability to maintain and increase its borrowings, continue raising equity and selling assets in a timely manner.
“Exposure to these risks left the Timbercorp Group financially fragile. Julian Burnside QC for the investors also submitted that information about the risk to Timbercorp of a tightening of capital and credit markets should have been given because that constituted ‘information about a significant risk’ for those who would become investors in the long-term schemes,” M+K said.
“These financing risks were said to have been known by the Timbercorp Group since at least 2005.”
Between 2006 and 2008, Timbercorp Group’s total debt ballooned from $522.4 million to $903.1 million.
The case, which has been running for seven weeks, is against Timbercorp Securities Ltd, Timbercorp Finance Pty Ltd and the directors Sol Rabinowicz, Robert Hance and Gary Liddell.
The closing submissions were completed on 7 July and judgment has been reserved.
