On 4 February 2013, Stansfield DIY Wealth Pty Ltd (in
liquidation) was wound up, and a liquidator was appointed. At that
time, the only function of the company was acting as trustee of a
self-managed superannuation fund. It had no assets or liabilities,
save in its capacity as trustee of the super fund.
The liquidator sought directions from the Court as to whether he
was permitted to sell or otherwise deal with the trust assets of
the super fund in order to discharge the company's liabilities
and to recover the liquidator's remuneration and expenses.
The Court confirmed that if a company in liquidation remains as
trustee of a trust, the liquidator of that company is entitled to
administer the trust (including any powers under the trust deed to
deal with trust assets) and be indemnified out of the trust assets
for all costs incurred by it in its capacity as trustee.
In this case, although not prevented by the trust deed from
doing so, the Court said that the company should not continue to
act as trustee as it was in breach of s 126K of the
Superannuation Industry Supervision Act. This section
prohibits companies in receivership, administration or liquidation
from being or acting as trustees of superannuation entities.
The Court, therefore, recommended that the company immediately
resign as trustee.
The Court then considered the liquidator's rights over trust
assets in circumstances where the company in liquidation has ceased
to be trustee. Interestingly, previous cases suggested that the
liquidator of a corporate trustee which held legal title to trust
property, in which it also had an equitable interest, could sell
that property pursuant to the power of sale conferred by s 477 of
the Corporations Act 2001 (Cth), and that this power
survived the removal and replacement of the trustee.
Justice Brereton, however, held that as a consequence of ceasing
to be the trustee, the powers of sale under the trust deed were no
longer available and s477(2)(c) did not provide an alternative
source of power of sale to the liquidator. This is because the
trust assets, whilst legally owned by the former trustee, were not
"property of the company". As such, the company in
liquidation (former trustee) only had an equitable charge over the
Nonetheless, this did not leave the liquidator without any
remedy. The Court advised that where a corporate trustee has been
removed and no power of sale is available to the liquidator, the
liquidator should seek orders for it to be appointed as receiver
and manager of the trust assets by way of enforcement of the
equitable lien of the former trustee.
This would enable the liquidator, as receiver, to realise trust
assets to discharge the liabilities of the former trustee and
recover its own costs.
This decision confirms that liquidators face additional
challenges and costs when winding up a corporate trustee of a
superannuation fund or a corporate trustee that, by reason of its
insolvency, lost the benefit of the sale powers in the trust
Section 477(2)(c) does not empower a liquidator to sell the
beneficial interest in trust property, even if the company in
liquidation has an equitable charge over the property, because the
property is not "property of the company" within the
meaning of the section.
In the event that the company is no longer trustee, or might be
acting in breach of a trust instrument or statute in selling trust
property, the liquidator should apply to the court to be appointed
as receiver of the trust assets so as to recoup the benefit of the
company's indemnity out of those assets.
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.
Most awarded firm and Australian deal of
Australasian Legal Business Awards
Employer of Choice for
Equal Opportunity for Women
in the Workplace (EOWA)
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
When determining if a DOCA is to be terminated, public interest can, and often will, outweigh any benefit to creditors.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).