In Kitay, in the matter of South West Kitchens (WA) Pty
Ltd  FCA 670, Mr Kitay was appointed liquidator of South
West Kitchens (WA) Pty Ltd (SW Kitchens) by
voluntary winding up. SW Kitchens was trustee of a trust and owned
all its assets as trustee of that trust. The trust deed provided
that SW Kitchens was disqualified from acting as trustee if it was
The liquidator wished to sell the trust assets of SW Kitchens in
the ordinary course of the winding up under s 477(2)(c) of the
Corporations Act which empowers a liquidator, subject to
the section, "to sell or otherwise dispose of, in any manner,
all or any part of the property of the company".
The liquidator was, however, concerned as to his power to sell
the company's assets under s 477(2)(c) given that:
SW Kitchens had been disqualified from acting as trustee;
a removed or disqualified trustee retains its right of
indemnity and has the benefit of an equitable lien over trust
assets as a means of securing that right; but
the equitable lien securing the right of indemnity does not
give the removed trustee a power of sale but must be enforced by a
Court-ordered sale or the appointment of a receiver.
The question was therefore whether the liquidator had a
statutory power under s 477(2)(c) to sell the trust assets which
was over and above the rights the company had under the trust deed.
As the company was disqualified from acting as trustee by virtue of
its liquidation, if the liquidator had no separate power of sale
under s 477(2)(c), it would be limited to enforcing the
company's right of indemnity / equitable lien by way of Court
McKerracher J considered competing authorities. His Honour
preferred the reasoning in an earlier case of Apostolou
where the court held that:
in addition to a trust instrument, a liquidator has a separate
authority to sell property which is conferred by s 477(2)(c) of the
there is no reason why the liquidator's statutory power of
sale under s.477(2)(c) cannot be used by the liquidator to satisfy
the right of indemnity which passes from the company to the
the power of sale under s 477(2)(c) can be exercised in respect
of property in which the company in liquidation has an equitable
interest (eg by way of right of indemnity / equitable lien),
provided the liquidator has legal title to dispose of the asset;
the statutory power of sale may be exercised by a liquidator
even where the trust instrument itself does not confer a power of
McKerracher J saw no reason why the liquidator's power of
sale should be limited by the terms of a private trust agreement.
His Honour considered that a liquidator could rely upon the
statutory power of sale under s 477(2)(c) to sell assets held by a
company on trust without having to seek Court approval on every
occasion a sale was proposed. His Honour did, however, recognise
that it would be appropriate in complicated cases for a liquidator
to seek the protection of a Court order before proceeding with a
As this was a straightforward winding up with no further
complicating factors, the Court declared that the liquidator had
the power under s 477(2) to deal with the trust assets in the
course of winding up.
This decision confirms that liquidators have the power to sell
assets held by a company on trust where the liquidator has legal
title to those assets and the company in liquidation has an
equitable interest in respect of those assets. It gives liquidators
greater certainty to sell trust assets of a corporate trustee in
liquidation without having to incur the time and cost associated
with obtaining court approval of any sale.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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