High Court Rejects Imputed Trust: Korda v Australian Executor Trustees (SA) Ltd [2015] HCA 6
Wednesday 4 March 2015 @ 12.32 p.m. | Legal Research
The High Court has unanimously overturned a decision of the Victorian Court of Appeal in Korda v Australian Executor Trustees (SA) Limited [2015] HCA 6. In separate but concurring judgments, the Court found that there was no express trust over the proceeds of the sale of standing timber and scheme land in favour of investors in a timber plantation scheme.
Facts
The third appellant, SEAS Sapfor Forests Pty Ltd (“the Forest Company”), planted pine trees, which were felled, milled, marketed and sold, by the fourth appellant, (“the Milling Company”). The Milling Company would then pay certain money to the Forest Company.
The companies sought investors, who were referred to as “Covenantholders” and entered into agreements called “Covenants” with the Forest Company. Under the covenants in question, a holder was entitled to “the net proceeds from the timber apportionable” to a particular area planted by the Forest Company.
The Forest Company entered into an agreement with Australian Executor Trustees (“the Trustee Company”) to perform various terms and conditions of the covenants. The agreement required the Forest Company to pay part of the proceeds from the sale of timber it received from the Milling Company into an account opened by the Trustee Company. However, there was no reference to the Forest Company as a trustee.
Both the Forest and Milling Companies were taken over by Gunns in 2008. In March 2012, the companies sold the trees and scheme land. In September 2012, the first and second appellants were appointed as the joint receivers and managers of the each of the companies. The Trustee Company initiated proceedings on the behalf of the Covenantholders.
Decision
The High Court had to decide whether the proceeds of a sale of timber and a sale of land were subject to the receivership or held on trust by the Forest & Milling Companies for the Convenantholders. At [17], French CJ explained:
“The Trust Deed created an express trust, in the hands of AET, of the net proceeds of the sale of milled timber and "land value" payments made by the Forest Company to AET.
The principal issue for determination in the Supreme Court and in this Court was whether an intention to create a trust in favour of the Covenantholders was to be imputed in relation to the timber and land sale proceeds in the hands of the Forest Company and the Milling Company. AET sought to support the decision of the Court of Appeal in this Court on the basis of a trust of both sets of proceeds, evidently underpinned by a trust or trusts of the planted trees and the scheme land.”
However, the High Court determined there was no trust, contrary to the earlier decision by the Victorian Court of Appeal. Their Honours determined there was not enough clarity or evidence in the documentation to support such an imputation. They were also particularly struck by the contrast between the clearly expressed trust provisions in relation to the Trustee Company trust, and the complete absence of trust provisions in relation to the Forest and Milling Companies. The Court ordered that the Trustee Company and the Covenantholders were not entitled to any of the proceeds from either sale.
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Sources:
Korda v Australian Executor Trustees (SA) Limited [2015] HCA 6 (4 March 2015) & judgment summary
