The South Australian division of Australian Executor Trustees is being sued for $55 million over claims it mismanaged a forestry investment scheme. Source: The Advertiser
Australian Executor Trustees (SA) is facing a $55 million lawsuit over management of Auspine forestry assets Litigation funder IMF Bentham is backing a lawsuit against AET (SA) for negligence and breach of trust, on behalf of 4500 covenant holders in a scheme which invested in forests in the green triangle region of southeast South Australia.
Law firm Piper Alderman has brought the claim which alleges the SEAS Sapfor (Southern Australian Perpetual Forests) scheme was mismanaged.
“The scheme was first established in the 1930s,’’ IMF said. “For generations it was marketed as a secure long term investment suitable for retail investors, who would subscribe money for a share of proceeds from timber growing in South Australia’s green triangle.
“The scheme was operated by SEAS Sapfor companies, commonly referred to as ‘Auspine’. It was AET’s job to oversee Auspine’s forestry management and to ensure that investors received proceeds from the sale of scheme timber.
“In January 2008 Auspine was bought by the Gunns Group. In February 2010, in breach of the prohibition against charging scheme assets, and unbeknown to AET and the covenant holders, Gunns granted its principal creditor, ANZ Bank, a charge over the entirety of the Auspine scheme assets as collateral for further borrowing.
“In March 2012, in an attempt to repay its massive debts, Gunns sold the scheme trees and land for $39m. Extraordinarily, as part of the sale of the scheme assets AET consented to the statutory mortgages in favour of covenant holders being discharged but received nothing in return.
“The consequence of this was that none of the purchase price for the scheme timber reached the covenant holders. Instead of the money being paid to the covenant holders the proceeds became subject to the ANZ charge and were paid straight into Gunns’ overdraft account. In September 2012 Gunns was insolvent and receivers and administrators were appointed to take over the company.
“Having had their security forfeited by AET the covenantholders were rendered unsecured creditors in the Gunns’ liquidation.
“The result was a disaster, as around 4500 covenantholders lost the entirety of their investment.’’
IMF said proceedings would be issued in the Supreme Court of NSW.
AET (SA) owner IOOF said: “To the best of our knowledge there is no action”.
IMF has previously told the ASX that it was seeking to fund the case, being led by David Kerr of RSM.
Any covenant holders with covenants from the 1980 to 1985 planting years are encouraged to contact IMF on imf.com.au/aet or call 1800 016 464.