Kerr v Australian Executor Trustees (SA) Ltd

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.