Case Analysis : Korda V Australian Executor Trustees ( Sa ) Ltd

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INTRODUCTION In Korda v Australian Executor Trustees (SA) Ltd , the High Court unanimously allowed an appeal and overturned the Victorian Supreme Court of Appeal decision finding that the proceeds of a forestry investment scheme were not subject to an express trust for the investors by the operators of the scheme. BACKGROUND SEAS Sapfor Forests Pty Ltd (“the Forest Company”) acquired, developed and managed timber plantations. The trees were felled, milled, marketed and sold by SEAS Sapfor Harvesting Pty Ltd (“the Harvesting Company”). On 6 March 1964, the Forest Company entered into a Trust Deed with Australian Executor Trustees (SA) Limited (“AET”) under which AET would act as trustee for investors who wished to participate in timber plantation schemes undertaken by the Companies. At the same time, AET and the Companies entered into a Tripartite Deed, which, together with the Trust Deed, provided that the Milling Company would pay the proceeds of selling the timber, subject to certain deductions, to the Forest Company. The Forest Company was required to pay those proceeds, and also any proceeds from selling plantation land, subject to certain deductions, to AET, who would hold the proceeds on trust for the investors. Prospectuses were issued seeking investment in the scheme. Investors, referred to as “Covenantholders”, entered into agreements called “Covenants” with the Forest Company under which they agreed to be bound by the Trust Deed and the Tripartite Deed. Each
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