(1) Pursuant to s 63 of the Trustee Act 1925 (NSW), the plaintiff is justified in distributing the judgment sum awarded pursuant to the judgment of Stevenson J in Kerr v Australian Executor Trustees

(1) Pursuant to s 63 of the Trustee Act 1925 (NSW), the plaintiff is justified in distributing the judgment sum awarded pursuant to the judgment of Stevenson J in Kerr v Australian Executor Trustees - [2022] NSWSC 612 - NSWSC 2022 case summary — Zoe

[3]

Background

Mr Kerr was appointed an additional trustee for the purpose relevantly of seeking equitable compensation from Australian Executor Trustee (SA) Ltd (AET) for alleged breaches of duty by it as trustee of the Scheme. The beneficiaries of the Scheme (the Beneficiaries) are persons who acquired and held timber covenants and land covenants that granted them an interest in the Scheme's timber and land assets.
The claim advanced against AET was that it had acted in breach of duty by consenting to the sale of the assets of the Scheme (standing timber and land on which the timber was planted), on terms that involved AET releasing encumbrances over the land without AET first receiving payment of the amounts that were owing or would become due to the Beneficiaries. The claim related principally to Beneficiaries who had invested in the Scheme between 1980 and 1985. In all, there are approximately 4,500 such Beneficiaries.
For the purposes of pursuing the proceedings, Mr Kerr entered into a litigation funding agreement with Omni Bridgeway Ltd (formerly IMF Bentham Ltd). The Court had already given judicial advice in relation to the entry into that agreement.
On 22 October 2019, Stevenson J ordered AET to pay equitable compensation to Mr Kerr as trustee in the amount of $76,619,978.42 (inclusive of pre-judgment interest). That amount comprised the following: 1. $30,718,516.20 relating to the sale of standing timber on the land; 2. $4,882,380.58 relating to the sale of the land; 3. $11,051,041.49 from the proceeds of sale of the Beneficiaries' timber that was harvested in 2011, comprising $4,952,579.60 of proceeds that were paid to AET and $6,098,461.89 of proceeds that were never paid to AET; 4. $5,148,552.31 for the proceeds of the sale of the Beneficiaries' timber harvested in 2012 for which AET received no payment; 5. $371,976.90 for the amounts paid out of funds belonging to the Beneficiaries by AET arising from the proceedings to appoint Mr Kerr as an additional trustee; 6. $270,757.94 for amounts paid out of funds belonging to the Beneficiaries by AET arising from various applications for judicial advice; 7. $24,176,753 of interest from the date of breach accruing on the amounts referred to in (a) to (d).
AET was also ordered to pay Mr Kerr's costs of the proceedings on the ordinary basis up to and including 19 December 2018 and on an indemnity basis thereafter.
An appeal to the New South Wales Court of Appeal was dismissed with costs: Australian Executor Trustees (SA) Ltd v Kerr [2021] NSWCA 5; 151 ACSR 204.
In addition to the judgment sum, Mr Kerr has received amounts for post-judgment interest and payment of his legal costs totalling $3,398,331.56. He has also received $235,244.84 in bank interest, making a total of $80,284,255.96. There are slight discrepancies between the figures contained in the judgment of Stevenson J, the statement of facts relied on for the purposes of the application and the figures contained in a spreadsheet prepared by Mr Kerr which is Annexure A (75992, pdf) to this judgment. However, those discrepancies are sufficiently small that they can be ignored for the purposes of giving the advice sought.
Of the total amount available for distribution, Mr Kerr has paid Omni Bridgeway $42,485,206.68 pursuant to the litigation funding agreement approved by the Court on 9 May 2017, leaving $37,599,019.28 available before distribution costs. The distribution costs are estimated to be $1,031,650.80 (the Distribution Costs). That leaves an amount to be distributed of $36,567,368.48.
Notice of the application has been given to the Beneficiaries by posting a letter to the website through which Mr Kerr has kept beneficiaries informed of the litigation. Mr Kerr has not received notice of any objection to the application.
Mr Kerr proposes to distribute the amount of $36,567,368.48 in accordance with Annexure A. Annexure A was prepared having regard to a report dated 20 December 2021 which was prepared by Mr Graham Dent. Mr Dent was the person who was responsible for financial reporting, profit analysis and management accounting duties at Auspine Limited, a major investor in the Scheme.

[4]

Consideration

The Distribution Costs consist of: 1. $375,000 in trustee remuneration; 2. $248,304.80 in legal costs relating to the distribution; 3. $332,971 in administration costs (including the cost of hiring a third party to administer the distribution); 4. $10,375 for the costs of retaining Mr Dent; and 5. $75,000 in contingencies.
Mr Kerr is entitled to be indemnified for expenses properly incurred in the administration of the trust: Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524; [2019] HCA 20 at [83] per Bell, Gageler and Nettle JJ. Each category of cost appears to be reasonable. The proper administration of the trust is complicated by the complexity of the distribution, the number of beneficiaries involved and the fact that the Beneficiaries made their investments 37 to 42 years ago. The costs appear to be proportionate to the amount to be distributed. It is appropriate to make an allowance for contingencies having regard to those complexities and the fact that it is intended to distribute the whole amount of the trust fund.
As to Mr Kerr's own remuneration, the Court has power in its inherent jurisdiction to allow remuneration to a trustee which "extends to the approval of remuneration for future work done, as well as past work done in administering the trust": see In the matter of Creditors' Trust of Jackgreen (International) Pty Ltd [2011] NSWSC 748 at [42] per Ward J and the cases cited there. The remuneration claimed by Mr Kerr includes $139,474 for tasks that he has been performing. Those tasks are set out in detail in an affidavit sworn by Mr Kerr on 17 March 2022. It also includes $201,675 for tasks that Mr Kerr will be required to complete together with $33,851 in contingencies. Again, Mr Kerr has provided a detailed budget in his affidavit. The amounts appear to be reasonable and are proportionate to the amount to be distributed.
In his affidavit, Mr Kerr also sets out how the amount of $36,567,368.48 is to be distributed between the Beneficiaries. The calculations, which are largely contained in a report prepared by Mr Dent, are complicated. In essence, they seek to divide the balance of the amount recovered between the categories of recovery referred to above in the proportions that the amounts recovered in each category bear to the total amount recovered. They then seek to divide that head of recovery between the Beneficiaries who have an interest in it in proportion to the value of their interests. So, for example, the amount referable to the amount recovered in respect of standing timber of $30,718,516.20, together with pre-judgment interest on that amount, is to be distributed in proportion to the value attributed to the Beneficiaries' interests in the standing timber by grower years as determined by a valuation undertaken by VDFC Forestry Consultants as at 30 June 2011. Mr Dent explains why in his opinion that valuation provides a reliable foundation for determining the value of standing timber belonging to each of the Beneficiaries. The amount recovered in respect of land sale proceeds and the 2011 and 2012 harvest proceeds are dealt with in similar ways. The general categories of recovery (costs and post judgment interest) are divided between the other categories in the proportions that the amounts to be distributed in respect of each of those categories bear to the total of the amounts in those categories to be distributed.
I am satisfied that Mr Dent has the appropriate qualifications and experience to undertake the necessary calculations and that the approach of seeking to allocate the amount recovered in proportion to the interest of each of the Beneficiaries in the land or standing or harvested timber is a reasonable approach to take. Consequently, I am satisfied that it is reasonable for Mr Kerr to adopt Mr Dent's approach and calculations.
Mr Kerr gives evidence that, having regard to the available information, the most efficient way of distributing the settlement proceeds is by cheques posted to the Beneficiaries' last known addresses. In view of the passage of time, some of those cheques may be returned or may not be cashed. I accept that the question of what should happen to that money is best determined once it is known how much is involved. Accordingly, I accept that no advice should be given in relation to the distribution of that amount now and that the matter should be reconsidered 12 months after the distributions have been made.
Finally, I accept that Mr Kerr is entitled to the costs of the current application.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (6 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (5)