Quintis subsidiary Arwon Finance has won a Supreme Court ruling against its former chief executive Frank Wilson requiring him to repay a $13.2 million loan taken out in 2014.
Quintis subsidiary Arwon Finance has won a Supreme Court ruling against its former chief executive Frank Wilson requiring him to repay a $13.2 million loan taken out in 2014.
In his ruling, handed down on Friday, Justice Kenneth Martin concluded that Mr Wilson had made commercially naive and unreasonable assumptions about Arwon’s response to a default.
Mr Wilson was the founder of sandalwood investment group Quintis and also ran Arwon at the time he took out the loan.
He left the ASX-listed group in March 2017 ahead of Quintis being placed into administration. It has subsequently been recapitalised and operates as an unlisted company.
Like other Quintis investors, Mr Wilson used the loan funds to make a tax-effective investment in Indian sandalwood plantations. He holds 215 hectares of plantations but stopped making loan repayments in January 2017.
Justice Martin said Mr Wilson, who was represented by McInnes Wilson Lawyers, had pleaded out multiple, diverse defences since Arwon (represented by Allens) commenced legal action against him.
The sole remaining defence after the trial was under way was Mr Wilson’s belief that Arwon had promised to limit its loan recovery options against him to only foreclosing upon the security it held over his plantation investment.
“Mr Wilson says Arwon should be barred from proceeding personally against him as it now does for the full amount of his unrepaid loan indebtedness - until it first exercises the foreclosure rights it holds against his sandalwood trees and credits his loan debt with the proceeds,” Justice Martin explained.
Mr Wilson contended that his interest in sandalwood plantation trees was worth more than $18 million, well in excess of his indebtedness to Arwon.
Justice Martin said if that was the case, then Mr Wilson “has not provided a persuasive basis to suggest how he is disadvantaged by this debt recovery action”.
“To the contrary, he looks to be more disadvantaged under a foreclosure scenario to Arwon which would then deny him an opportunity to reap approximately $6 million in surplus profit,” the judgement stated.
Justice Wilson said even if Mr Wilson had persuaded himself (based upon his 20 years of Quintis insider knowledge) that Arwon would not pursue him personally, such an assumption was nevertheless uncommercial and unreasonable.
“It was commercially naive for Mr Wilson to make that assumption, absent some clearer express written commitment by Arwon confirming such a future position and issued by someone for Arwon other than himself (due to an obvious conflict of interest),” the judgement stated.
“But Mr Wilson never discussed obtaining such a written commitment with anyone else at Arwon/Quintis.
“He never got one. In truth, he simply ignored or took a gamble on the future, in circumstances where he had already obtained a significant tax benefit arising out of this investment by using the proceeds of the loan he received from Arwon.”
