Last fortnight DRI partner Glen Cussen presented a briefing on
"other peoples' money"' focusing on the recent
Federal Court decision in Kitay v South West
The focus was on the rights of a liquidator to deal with trust
assets and we drew attention to the 'watch this space' area
It hasn't taken long, but the Supreme Court has now
delivered a contrary judgment in Stansfield DIY Wealth
Pty Limited  NSWSC 1484
In an application for directions by the liquidator of the
trustee of a superannuation fund, the Court in Stansfield held:
The Liquidator does have a right of indemnity and a lien to
secure the equitable interest;
The statutory power in s477(2)(c) of the Corporations Act
enabling a liquidator to sell property of the company does
not extend to trust property (other than the bare legal
interest in that property) (contrary to South West
An insolvent trustee cannot, under the Superannuation Industry
(Supervision) Act, act as trustee of the superannuation fund, and
The Court noted that the remedy otherwise available to a
liquidator in these circumstances is to apply to be appointed as
Receiver of the trust assets, with the powers that a liquidator has
in respect of property of a company under section 477(2), for the
purpose of enforcing the Company's right of indemnity as
trustee of the fund.
While not making a carte blanche order for remuneration, Justice
Brereton granted the Liquidator, as the appointed Receiver, liberty
to apply for approval of his remuneration upon realisation of the
property of the super fund.
Consistent with the discussion at our briefing,
Stansfield was another case where the trustee was in
liquidation, though had not been replaced. More applications are
likely, and will be contested, where a new trustee has been
appointed to the trust assets.
The particular circumstances of SMSFs and the SIS Act raise
additional considerations for insolvency practitioners and those
The bottom line for a liquidator of a trust though, given
Corporations Act obligations, is to seek to pay or satisfy the
trustee's liabilities, incurred as trustee. A question was
posed at our briefing whether trust structures are still
The decision in South West Kitchens indicated that
direct sale of trust assets was available to a liquidator, under
the Corporations Act.
Whilst the decision in Stansfield disagrees, the Court
resolved the liquidator's dilemma, by appointing the liquidator
as Receiver, with a power of sale of the trust assets.
The ultimate result is accordingly the same, namely, that the
insolvency practitioner is able to realise the trust assets to pay
the trustee's liabilities – that is, sell 'other
The Court in Stansfield specifically noted in the
The object of the appointment ... (as Receiver) ... is
enable the [Receiver] to realise trust assets to enforce
the ... indemnity, and apply the proceeds to discharge the
liabilities of the [trustee company] ... in accordance with ... the
Corporations Act ...; and
enable the [Receiver} to recover the costs of the
receivership and, because the [trustee company's] sole function
was to act as trustee of the Super Fund, the general costs of the
Liquidators and Trustees still need to take care in the terms of
their appointment. Practitioners need to be more circumspect having
regard to the recent decision in Stansfield, at least
until the issue of competing views is addressed in the future by a
Full Court or Appeal Court.
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.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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When determining if a DOCA is to be terminated, public interest can, and often will, outweigh any benefit to creditors.
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