Covenantholders v AET (Seas SAPFOR Litigation)

Oliver Gayner
Senior Investment Manager | +61 2 8223 3509 | [email protected]

  • Legal proceedings commenced today in NSW Supreme Court
  • Another IOOF group company facing a substantial damages claim
  • One step closer to justice for thousands of family investors

SYDNEY, 1 Jun 2017: IMF Bentham Ltd (ASX: IMF) refers to its ASX announcements dated 10 May 2017 and 8 December 2016 regarding the claims it is funding against Australian Executor Trustees (SA) Ltd (AET) for negligence and breach of trust.

The claims arise as a result of AET’s conduct as the trustee of the SEAS Sapfor (Southern Australian Perpetual Forests) scheme, and are being brought on behalf of around 4500 scheme investors (known as the Covenantholders) by Mr David Kerr of RSM as the court-appointed additional trustee of the scheme. Simon Morris of Piper Alderman lawyers in Sydney is acting for Mr Kerr, instructing Alan Sullivan QC of Eleven Wentworth Chambers, David Sulan of Banco Chambers and Sebastian Hartford Davis of Tenth Floor Chambers.

On 1 June 2017, the case reached an important landmark as proceedings were issued in the Supreme Court of New South Wales, Equity Division, Commercial List, seeking compensation for the losses suffered by Covenantholders (which are estimated to exceed $55m plus interest).


The Southern Perpetual Australian Forests scheme was first established in the 1930s. 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. AET is a subsidiary in the IOOF Group. AET as the security trustee for the scheme had a duty to protect Covenantholders’ interests.

One of the features of the stability of the investment was that AET held a statutory mortgage over the scheme land securing Auspine’s obligation to pay proceeds of timber sales to Covenantholders. Another feature of the stability of the investment was that Auspine was prohibited from charging scheme timber and land.

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 Covenantholders, 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 Covenantholders being discharged but received nothing in return. The consequence of this was that none of the purchase price for the scheme timber reached the Covenantholders.

Instead of the money being paid to the Covenantholders 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.

With Gunns insolvent and AET denying responsibility, many Covenantholders had given up hope of ever getting their money back.


Simon Morris of Piper Alderman took up the case when he was contacted by a Covenantholder in 2015. “It was clear that something had gone seriously wrong. Security trustees are paid to protect the scheme assets, and that is exactly what AET had failed to do. But at the outset we were faced by many obstacles. AET denied liability and refused to provide us with documents, claiming that complete records from that long ago were no longer available”, said Mr Morris.

Piper Alderman applied to the NSW Supreme Court to have a new trustee appointed, and in June 2016 David Kerr of RSM was appointed with the power to investigate the scheme’s affairs. “That was the gamechanger”, said Mr Morris. “Over 2000 documents were then provided. The disclosure confirmed our theory that this trustee was effectively asleep on the watch and failing in its duty to protect Covenantholders - despite massive warning signs that Gunns was going under.”

With IMF’s backing, the Covenantholders can now finally pursue their claims knowing that they have Australia’s largest litigation funder behind them. Oliver Gayner of IMF said: “Many Covenantholders have told us that they lost their retirement funds when this scheme went under, but when they tried to enquire what had happened they were met with a ‘wall of silence’. IMF is proud to be standing behind David Kerr and the Covenantholders, and we hope our intervention will help to see justice served.”

Eligible Covenantholders – Contact Details
IMF is operating a customer contact centre and RSM is providing an information website for all eligible Covenantholders. Any Covenantholders in the SEAS Sapfor scheme with covenants from the 1981 to 1985 planting years who have not yet provided their up to date contact details to IMF should:

Go to
Or call IMF on 1800 016 464


For more information about the AET matter, including the contact details of Covenantholders who are willing to speak to the press, please contact: Oliver Gayner, Investment Manager, Sydney, +61 2 8223 3509, [email protected]