INVESTORS in failed managed investment scheme Great Southern face bankruptcy and losing their homes in the weeks following Christmas, after a Supreme Court approved a $23 million settlement between investors and financier Bendigo and Adelaide Bank.
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The settlement was approved despite more than 1300 investors opposing it and a Senate economics committee asking the corporate regulator to intervene.
Justice Clyde Croft said while the collapse of Great Southern in 2009 was a tragedy for many people, the application for a settlement was successful.
While the settlement would provide investors with a modest payment, to say the least, they stood to gain nothing if the class action had proceeded to judgment, he said.
In a warning to the government, Justice Croft said policymakers needed to consider carefully the role of the managed investment scheme regime and the behaviour of financial advisers.
"The Great Southern collapse has been tragic for all concerned," he said. "Constructive outcomes may yet follow, if governments and legislators consider carefully the MIS regime and the role and regulation of financial advisers."
Great Southern collapsed in 2009, owing its creditors $800 million. About 47,000 investors sunk more than $1.8 billion into the forestry scheme before it fell over.
Justice Croft requested the banks not to recall the loans until after Christmas.
He read an email to the court from an investor to acknowledge the "human element" of the settlement.
In the email, the investor described the financial hardship some buyers would face, saying many were at breaking point and some would be pushed over the edge.
"Now is the time for compassion and understanding in [Great Southern's] aftermath," Justice Croft said.
As part of the settlement, Justice Croft agreed to release the reasons for judgment in the class action case. Many investors saw the release of the reasons as the only way to get a verdict on the conduct of Great Southern directors.
Of the $23 million, $20 million will go to law firm M+K to cover legal costs for the class action.
This leaves just $3.5 million spread among up to 50,000 former investors as far back as 1998 - or about $16 for every $10,000 invested.
The case revolved around any misleading statements in the scheme's product disclosure statement.
In return for the settlement, investors admit more than $320 million in loans and interest to Bendigo and Javelin Asset Management are valid and due.
Bendigo and Adelaide Bank chief executive Mike Hirst said they would prefer borrowers started repaying the loans now, but would wait 30 days before trying to recover them.
