NSW claimants win right to sue

The case involves about 300 investors who lost money after agricultural schemes tied to Great Southern failed in 2009. Bendigo and Adelaide Bank sued the investors in September 2010 after they refused to repay loans used to buy those investments. The investors have sought to file a cross-claim alleging the bank may be liable for misconduct connected to Great Southern.

ERA Legal is advising the investor group. The firm has tried multiple times to formulate an acceptable cross-claim — yesterday’s ruling was the investors’ fifth attempt after earlier efforts, including a fourth attempt that was dismissed in June.

Associate Justice Richard Macready allowed the NSW class action to file a cross-claim, but on narrower grounds than the investors originally sought. He found there was enough substance in some claims to warrant further investigation, so the class action was given leave to pursue specific legal avenues.

The judge gave the investors 14 days to file a claim under the consumer protection provisions of the NSW Contracts Review Act alleging the loan deeds were unjust. He also allowed them to pursue a claim under the product disclosure provisions of the Corporations Act, which can lead courts to declare financial product contracts void. However, the court refused to let the investors pursue allegations of unconscionable conduct or breach of fiduciary duty by the bank.

A key issue is whether the bank, as an arm’s‑length lender (not a related party to Great Southern), could be legally treated as having notice of alleged misrepresentations in Great Southern’s product disclosure statement. Justice Macready said there was some substance to claims that certain representations in the disclosure were false, which supports limited product disclosure claims under the Corporations Act.

A Victorian County Court decision in August struck out similar claims brought by another group of ERA Legal clients. Justice Macready noted that Judge Paul Lacava’s Victorian judgment isn’t binding on the NSW investors, but he read it carefully because the cases are similar. Despite the Victorian ruling, the NSW court allowed more limited claims to proceed.

Justice Macready gave the investors 14 days to file a claim under the consumer protection provisions of the NSW Contracts Review Act. They also received leave to pursue claims under the Corporations Act product disclosure provisions, subject to the court’s further directions.

The decision shows that courts may permit limited legal avenues when investors allege false or misleading representations in product disclosure statements. In this case, the NSW court allowed claims under consumer protection laws and the Corporations Act’s product disclosure provisions, though it curtailed other allegations like unconscionable conduct. It highlights that investors can sometimes seek to challenge loan deeds and financial product contracts, but success depends on whether the pleadings show sufficient substance and legal basis.