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Kerr v Australian Executor Trustees (SA) Ltd

Kerr v Australian Executor Trustees (SA) Ltd

Case [2019] NSWSC 1279 26 September 2019

Breach of Trust

Equitable Compensation

Causation

Advice to Trustee

Retention of Solicitors

Trusts & Equity

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Supreme Court

New South Wales

Summary available
Amendment notes

Medium Neutral Citation: Kerr v Australian Executor Trustees (SA) Ltd; Australian Executor Trustees (SA) Ltd v Fuller and others trading as Sparke Helmore Lawyers [2019] NSWSC 1279
Hearing dates: 1-3 and 8-10 July 2019; further submissions 12 and 23 July and 13 September 2019
Decision date: 26 September 2019
Jurisdiction: Equity - Commercial List
Before: Stevenson J
Decision:
Plaintiff entitled to equitable compensation from the first defendant for breach of trust. First defendant’s cross claim against second to sixty-first defendants to be dismissed.

Catchwords:
EQUITY – trusts and trustees – breaches of trust –professional trustee – pine plantation investment scheme – whether trustee acted in breach of trust by surrendering security without receiving amount due to covenantholders or alternative security – what equitable compensation should be awarded

EQUITY – equitable remedies – equitable compensation – causation – whether retainer of solicitors by trustee an answer to claim for breach of trust – nature of advice given to trustee by solicitors – whether a reasonable trustee would have relied on the advice given
CONTRACTS – solicitors – retained by trustee to advise whether transaction documents contained onerous or unusual provisions and whether documents in order for execution – whether such advice was an adequate response to the retainer – whether trustee would have entered transaction in any event
Legislation Cited: Civil Liability Act 2002 (NSW)
Corporations Act 2001 (Cth)
Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA)
Real Property Act 1886 (SA)
Transfer of Land Act 1958 (Vic)
Trustee Act 1925 (NSW)
Trustee Act 1936 (SA)
Cases Cited: Ahrkalimpa Pty Ltd v Schmidt (No 3) [2019] VSC 197
Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 360 ALR 1
Armory v Delamirie (1722) 1 Stra 505; (1722) 93 ER 664
Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; [1995] FCA 1663
AVWest Aircraft Pty Ltd as trustee for AVWest Aircraft Trust v Clayton UTZ (A firm) (No 2) [2019] WASC 306
Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664
Breen v Williams (1996) 186 CLR 71; [1996] HCA 57
Bristol and West Building Society v Mothew [1998] Ch 1
Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd (2007) 35 WAR 27; [2007] WASCA 179
CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174; [2010] HCA 26
Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398
Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325
Dominic v Riz [2009] NSWCA 216
Elder’s Trustee & Executor Co Ltd v Higgins (1963) 113 CLR 426; [1963] HCA 48
Fischer v Nemeske Pty Ltd (2016) 257 CLR 615; [2016] HCA 11
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
Howe v Earl of Dartmouth (1802) 32 ER 56
John Pfeiffer Pty Ltd v Rogerson (2000) 203…

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 Kerr v Australian Executor Trustees (SA) Ltd

Details

AGLC: Kerr v Australian Executor Trustees (SA) Ltd; Australian Executor Trustees (SA) Ltd v Fuller and others trading as Sparke Helmore Lawyers [2019] NSWSC 1279
Case: [2019] NSWSC 1279
Decision Date: 26 September 2019

CaseChat Overview and Summary

Kerr and others sought relief from the Supreme Court of South Australia against Australian Executor Trustees (SA) Ltd, the executor of a trust. The dispute centred around the management of a pine plantation investment scheme, with the plaintiffs alleging that the trustee had acted in breach of trust by surrendering security without receiving the amount due to covenantholders or securing alternative security. The plaintiffs also sought equitable compensation for the alleged breach.

The court was tasked with determining whether the trustee had indeed acted in breach of trust and, if so, what equitable compensation should be awarded. This involved assessing whether the retainer of solicitors by the trustee was sufficient to counter the plaintiffs' claims of breach of trust. The court also needed to consider the nature of the advice provided by the solicitors to the trustee and whether a reasonable trustee would have relied on that advice. Furthermore, the court had to decide if the trustee's decision to enter into the transaction was influenced by the solicitor's advice or if it would have proceeded regardless.

The Supreme Court found that the trustee had acted in breach of trust by surrendering security without securing the amount due to the covenantholders or obtaining alternative security. The court ruled that the retainer of solicitors did not absolve the trustee of liability for the breach. The advice given by the solicitors was deemed inadequate as it did not address the essential issues regarding the onerous or unusual provisions in the transaction documents or whether they were in order for execution. The court concluded that a reasonable trustee would not have relied on the advice provided. Consequently, the trustee was ordered to pay equitable compensation to the plaintiffs. The exact amount of compensation was to be determined by further proceedings.

In summary, the court held that the trustee was liable for the breach of trust and ordered equitable compensation to be paid to the plaintiffs. The precise amount of compensation was left to be determined in subsequent proceedings.

Orders