JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	19 December 2012
DATE OF JUDGMENT:	6 February 2013
CASE MAY BE CITED AS:	Australian Executor Trustees (SA) Ltd v Korda & Ors
MEDIUM NEUTRAL CITATION:	[2013] VSC 7

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EQUITY – Trusts – Whether express trust should be inferred – Test for intention to create an express trust – Whether necessary intention established by relevant documents and surrounding circumstances.

EVIDENCE – Admission – Relevance of subsequent admissions as to the existence of a trust.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J R J Lockhart SC with Mr M I Borsky	Sparke Helmore
For the Defendant	Mr P D Crutchfield SC with Mr R G Craig	Ashurst for First, Second and Sixth to Eighth Defendants

TABLE OF CONTENTS

A. Introduction......................................................................................................................... 1
B. Relevant Background......................................................................................................... 2

Relevant Documents............................................................................................................... 2
Flow of Funds.......................................................................................................................... 7
The Timber and Land Sale Proceeds................................................................................... 9

C. Summary of Issues and Conclusion............................................................................... 10
D. Trust or Contract?.............................................................................................................. 11

Plaintiff’s Submissions.............................................................................................................. 11
Defendants’ Submissions.......................................................................................................... 16
Relevant Legal Principles......................................................................................................... 21
Decision.................................................................................................................................... 25

E.      The Admissions................................................................................................................. 32
F.      Quistclose Trust................................................................................................................ 35
G.     Disposition and Orders.................................................................................................... 35

HIS HONOUR:

A. Introduction

The Forest Company Pty Ltd (“Forest Company”) and the Milling Co Pty Ltd (“Milling Company”) are in receivership. Mark Korda and Bryan Webster were appointed joint and several receivers and managers on 25 September 2012 (“the Receivers”).

For many years the Forest Company acquired, developed and managed various tree plantations. It obtained funding directly from investors (called Covenantholders) through the issue of prospectuses from time to time.

The Milling Company, a related company was engaged to provide felling and milling services and also to market and sell the timber derived from the plantations. Each of the Forest Company and the Milling Company had a defined role. Any proceeds received by the Milling Company from the sale of timber was, subject to some deductions, to be paid to the Forest Company. After making its own deductions, the Forest Company was required to pay the net proceeds to the Plaintiff for the benefit of Covenantholders.

The Plaintiff (“AET” or “the Trustee”) is and has at all times been trustee of the Covenantholders. AET is the trustee of the Southern Australia Perpetual Forests Trust (Trust). The Trust is governed by a trust deed entered into by AET and Forest Company on 6 March 1964 (“Trust Deed”). On the same day, AET entered into a Tripartite Agreement with the Forest Company and the Milling Company.

After the Forest Company and the Milling Company were effectively taken over by Gunns Limited, each company encumbered its assets (by way of a fixed and floating charge) to Lenders to the Gunns Group.[1] The Lenders appointed the Receivers and assert an interest…

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.

Continue reading Australian Executor Trustees (SA) Ltd v Korda

Details

AGLC: Australian Executor Trustees (SA) Ltd v Korda [2013] VSC 7
Case: [2013] VSC 7
Decision Date: 6 February 2013

CaseChat Overview and Summary

The case of Australian Executor Trustees (SA) Ltd v Korda concerned the interpretation of a trust arrangement within the context of the deceased's estate. The primary issue was whether an express trust should be inferred from the documents and circumstances surrounding the estate. The court was tasked with determining the intentions of the parties involved, particularly whether the necessary intention to create an express trust was established by the relevant documents and the surrounding circumstances.

The legal issues at hand revolved around the principles of equity and trusts, specifically the test for establishing an intention to create an express trust. The court needed to assess whether the intention to create a trust was adequately demonstrated by the documents in question and the context in which they were created. Additionally, the relevance of subsequent admissions made by the parties about the existence of a trust was considered. The court had to examine whether these admissions could be used as evidence to infer the existence of a trust, particularly in light of the documentary evidence and the surrounding circumstances.

The court concluded that the necessary intention to create an express trust was not sufficiently established by the documents or the surrounding circumstances. The evidence provided, including the subsequent admissions, was not deemed sufficient to infer the existence of an express trust. The court held that the onus was on the party claiming the existence of a trust to prove it, and in this instance, the evidence fell short of meeting this burden. The court ultimately determined that no express trust was created and dismissed the claim.

The final orders of the court reflected its determination that no express trust had been established. The claim by Australian Executor Trustees (SA) Ltd was dismissed, and the court ruled that the relevant assets should be distributed according to the terms of the will or the intestacy rules, as applicable. The admissions made by the parties were not sufficient to alter this outcome.

Orders