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Australian Executor Trustees (SA) Limited v Kerr

Australian Executor Trustees (SA) Limited v Kerr

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Case Copied 4 February 2021 48 min read

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Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation: Australian Executor Trustees (SA) Limited v Kerr [2021] NSWCA 5
Hearing dates: 2 and 3 April 2020
Date of orders: 4 February 2021
Decision date: 04 February 2021
Before: Gleeson JA at [1]
Leeming JA at [336]
Emmett AJA at [337]
Decision:
(1)   Appeal against the first respondent (Mr Kerr) dismissed.
(2)   Appeal against the second to sixty-first respondents (Sparke Helmore) dismissed.
(3)   Cross-appeal by Mr Kerr dismissed with no order as to costs.
(4)   The appellant is to pay the first respondent’s costs of the appeal.
(5)   The appellant is to pay the second to sixty-first respondents’ costs of the appeal.

Catchwords:
EQUITY – trusts and trustees – professional trustee company trustee – where beneficiary “covenantholders” invested money in forestry scheme – where covenantholders entitled to share in proceeds of sale of timber – where scheme land subject to encumbrances securing covenantholders’ interests – where encumbrances trust property – where scheme land and standing timber sold to third party – where trustee acted in breach of trust by releasing encumbrances
CONTRACTS – solicitors – where law firm retained to advise trustee concerning release of encumbrances over scheme land – where advice found to be negligent – whether advice causative of loss to covenantholders occasioned by trustee’s breach of trust
EQUITY – equitable remedies – equitable compensation – causation – whether award of equitable compensation should be limited to the value of the scheme land – where challenge to factual findings relating to Payout counterfactual – whether award of equitable compensation should be reduced by certain adjustments and deductions
EQUITY – equitable remedies – equitable compensation – whether defaulting trustee entitled to apportion loss to law firm – whether South Australian or New South Wales proportionate liability legislation applied – where South Australian law lex loci delicti – whether apportionment provisions procedural in nature or substantive

Legislation Cited:
Civil Liability Act 2002 (NSW), ss 5A, 5D(3), 5R, 34, Pt 4
Civil Procedure Act 2005 (NSW), s 100
Competition and Consumer Act 2010 (Cth), Pt VA, Sch 2 (Australian Consumer Law, ss 18, 236)
Corporations Act 2001 (Cth), s 180, Ch 5C
Judiciary Act 1903 (Cth), ss 39(2), 79, 80
Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), ss 3, 4, 8
Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 9
Real Property Act 1886 (SA), Sch 10
Transfer of Land Act 1958 (Vic)
Uniform Civil Procedure Rules 2005 (NSW), rr 51.36(2), 42.1

Cases Cited:
Aboody v Ryan (2012) 17 BPR 32,359; [2012] NSWCA 395
Addenbroke Pty Ltd v Duncan (No 2) [2017] FCAFC 76; (2017) ALR 1
Adrenaline Pty Ltd v Bathurst Regional Council (2015) 97 NSWLR 207; [2015] NSWCA 123
Agtrack (NT) Pty Ltd v Hatfield (2005) 223 CLR 251; [2005] HCA 38
Ahrkalimpa Pty Ltd v Schmit (No 3) [2019] VSC 197
Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] NSWCA 5
Decision Date: 04 February 2021

CaseChat Overview and Summary

Australian Executor Trustees (SA) Limited (the appellant) appealed a decision concerning a breach of trust and negligent advice. The dispute arose from a forestry scheme where beneficiaries, referred to as "covenantholders," invested money and were entitled to a share of timber sale proceeds. The scheme land was encumbered to secure these interests, and these encumbrances constituted trust property. The appellant, acting as trustee, released these encumbrances when the scheme land and standing timber were sold to a third party, an action found to be a breach of trust. The appellant also sought to apportion loss to a law firm (the second to sixty-first respondents) whose advice concerning the release of encumbrances was found to be negligent. The case was heard in the Court of Appeal of New South Wales.

The primary legal issues before the Court of Appeal were whether the appellant's breach of trust in releasing the encumbrances caused the loss suffered by the covenantholders, and whether any award of equitable compensation should be limited or reduced. Specifically, the court considered whether the compensation should be confined to the value of the scheme land and whether certain adjustments and deductions should apply, including a challenge to factual findings regarding a "payout counterfactual." Furthermore, the court had to determine if the defaulting trustee was entitled to apportion the loss to the negligent law firm, and if so, whether South Australian or New South Wales proportionate liability legislation applied, considering whether these provisions were substantive or procedural and the relevance of *lex loci delicti*.

The Court of Appeal reasoned that the appellant's breach of trust in releasing the encumbrances was causative of the loss suffered by the covenantholders. The court upheld the findings regarding the quantum of equitable compensation, including the payout counterfactual, and rejected arguments for limiting or reducing the award. Regarding the apportionment of loss, the court found that the relevant proportionate liability legislation was that of New South Wales, not South Australia, as the advice was given and acted upon in New South Wales. The court concluded that the appellant was not entitled to apportion the loss to the law firm under the applicable legislation.

The Court of Appeal dismissed the appeal against Mr Kerr and the appeal against Sparke Helmore. The cross-appeal by Mr Kerr was also dismissed. The appellant was ordered to pay the costs of both Mr Kerr and Sparke Helmore in the appeal.

Orders

Orders of the court

(1) Appeal against the first respondent (Mr Kerr) dismissed.

(2) Appeal against the second to sixty-first respondents (Sparke Helmore) dismissed.

(3) Cross-appeal by Mr Kerr dismissed with no order as to costs.

(4) The appellant is to pay the first respondent’s costs of the appeal.

(5) The appellant is to pay the second to sixty-first respondents’ costs of the appeal.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Medium Neutral Citation:	Australian Executor Trustees (SA) Limited v Kerr [2021] NSWCA 5
Hearing dates:	2 and 3 April 2020
Date of orders:	4 February 2021
Decision date:	04 February 2021
Before:	Gleeson JA at [1] Leeming JA at [336] Emmett AJA at [337]
Decision:	(1) Appeal against the first respondent (Mr Kerr) dismissed. (2) Appeal against the second to sixty-first respondents (Sparke Helmore) dismissed. (3) Cross-appeal by Mr Kerr dismissed with no order as to costs. (4) The appellant is to pay the first respondent’s costs of the appeal. (5) The appellant is to pay the second to sixty-first respondents’ costs of the appeal.
Catchwords:	EQUITY – trusts and trustees – professional trustee company trustee – where beneficiary “covenantholders” invested money in forestry scheme – where covenantholders entitled to share in proceeds of sale of timber – where scheme land subject to encumbrances securing covenantholders’ interests – where encumbrances trust property – where scheme land and standing timber sold to third party – where trustee acted in breach of trust by releasing encumbrances CONTRACTS – solicitors – where law firm retained to advise trustee concerning release of encumbrances over scheme land – where advice found to be negligent – whether advice causative of loss to covenantholders occasioned by trustee’s breach of trust EQUITY – equitable remedies – equitable compensation – causation – whether award of equitable compensation should be limited to the value of the scheme land – where challenge to factual findings relating to Payout counterfactual – whether award of equitable compensation should be reduced by certain adjustments and deductions EQUITY – equitable remedies – equitable compensation – whether defaulting trustee entitled to apportion loss to law firm – whether South Australian or New South Wales proportionate liability legislation applied – where South Australian law lex loci delicti – whether apportionment provisions procedural in nature or substantive
Legislation Cited:	Civil Liability Act 2002 (NSW), ss 5A, 5D(3), 5R, 34, Pt 4 Civil Procedure Act 2005 (NSW), s 100 Competition and Consumer Act 2010 (Cth), Pt VA, Sch 2 (Australian Consumer Law, ss 18, 236) Corporations Act 2001 (Cth), s 180, Ch 5C Judiciary Act 1903 (Cth), ss 39(2), 79, 80 Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), ss 3, 4, 8 Law Reform (Miscellaneous Provisions) Act 1946 (NSW) Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 9 Real Property Act 1886 (SA), Sch 10 Transfer of Land Act 1958 (Vic) Uniform Civil Procedure Rules 2005 (NSW), rr 51.36(2), 42.1
Cases Cited:	Aboody v Ryan (2012) 17 BPR 32,359; [2012] NSWCA 395 Addenbroke Pty Ltd v Duncan (No 2) [2017] FCAFC 76; (2017) ALR 1 Adrenaline Pty Ltd v Bathurst Regional Council (2015) 97 NSWLR 207; [2015] NSWCA 123 Agtrack (NT) Pty Ltd v Hatfield (2005) 223 CLR 251; [2005] HCA 38 Ahrkalimpa Pty Ltd v Schmit (No 3) [2019] VSC 197 Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan…