In the recent decision of EC Investment Holding v Ridout Residence, the High Court of Singapore examined an important area of trust law that has yet to be the subject of a determination by an Australian court. The decision is an important one which will no doubt be influential when the issue arises here.
In EC Investments the Singaporean High Court was asked to determine how limited trust property was to be distributed among three competing creditors of a trustee which had incurred the liabilities on behalf of a trust.
The Court found no existing authority directly on point either in Singapore, the United Kingdom or Australia. In reviewing the commentary on the subject the Court identified two possible schemes of priority: pari passu distribution or rank in order of time (so that the liability which arose first would be met first). The Court determined that the creditors should be paid on a pari passu basis and noted that the Australian case of Re Suco Gold suggested a preference for this course.
The case provides useful guidance on an issue which has not been directly addressed in Australia, and will be of assistance to trustees, liquidators, and bankruptcy trustees who deal with trust assets of an insolvent trust estate.
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