The High Court has allowed an appeal from the Victorian Court of Appeal relating to an investment scheme in various forestry companies that have since been liquidated. The trustee of the investment scheme argued that a 1964 trust deed should limit the interests of investors to those proceeds from the scheme that were transferred to the trustee. The VSCA by majority upheld the trial judge’s conclusion that the parties intended the proceeds from timber sales to be held on trust for investors who applied for covenants issued through a prospectus. Later prospectuses meant those proceeds were held by the companies on trust for the investors. Central to the VSCA decision was the majority’s approach to the notion of ‘commercial necessity’; that the investors only took on risks related to the forestry operations, and it was a matter of necessity that the timber investments not be at risk from the companies’ other operations (see at [30]–[35]). On appeal, the respondent did not seek to support that conclusion, but did say that the scheme manifested an intention to protect the investors by keeping their investment separate from the general business of the companies (Keane J at [134]).

The Court unanimously allowed the appeal in separate judgments (French CJ, Hayne and Kiefel JJ, Gageler J, and Keane J), on the basis that the scheme’s documentation, when placed in its commercial and regulatory context, did not support the existence of a trust over the timber and land sales proceeds. French CJ treated the scheme as being ‘at least analogous’ to a multilateral agreement between all the parties (at [51]) and that while the creation of a trust might be commercially advantageous, it did not reflect the joint intention of the promisors and promisees (at [53]). Hayne and Kiefel JJ emphasised that the dealings between the companies and the investors reflected contractual obligations rather than obligations as trustee (at [79]–[83]) and that the documents did not suggest that the investors’ interests were to be specially preferred or protected against commercial adversity (at [85]–[87]). In Gageler J’s view, the decisive omission from the agreement was that the companies should hold the proceeds separate from their own money; as the ‘hallmark duty of a trustee’ that indicated there was no intention to hold the money on trust: [110]–[111]. Keane J held that no trust arose on the basis that the documents did not make an express provision for a trust over the investment money (but did expressly provide for other funds to be held on trust) and that the documents showed the investors’ contributions would not be separated from the general funds of the companies (at [136], and [204]ff).