The High Court has ruled that the documentation for a timber plantation investment scheme did not support the existence of an express trust in favour of the scheme investors over the sale proceeds from the timber and land: Korda & Ors v Australian Executor Trustees (SA) Limited  HCA 6. In so finding, the High Court unanimously allowed the appeal from the Victorian Court of Appeal which had held that the scheme investors were beneficially entitled to the sale proceeds. Accordingly, the High Court held that the sale proceeds from the timber and land were available to the receivers and mangers of the scheme entities, and not subject to an express trust in favour of the investors.
While the trust deeds establishing the managed investment scheme imposed various obligations on the entities operating the scheme, the High Court found that the deeds contained no provision expressly declaring that these entities were acting as trustees for the covenantholders (ie investors). Interestingly, the High Court considered that the taxation benefits offered under the scheme prospectus were not determinative of this issue but tended against an imputation of an intention to create a trust.
The High Court also noted that the creation of a security interest does not import the creation of a trust. The High Court said that the caveat provisions and the prohibitions on alienation and encumbrance which appeared in the trust deed were not indicative of an intention to create a trust over the land or trees, or their proceeds in the hands of the entities operating the scheme.