With the recent decision in Condon v Lewis [2013] NSWCA whose basic facts involved:-
Allowing an appeal from a beneficiary of a trust (that was purportedly created to “deceive her (the bankrupt’s) former husband, the Family Court and to avoid tax”) primarily to ensure property was part of the Kenthurst investments Trust and to enable the bankrupt as appointer to appoint a Trustee who was not the Trustee in Bankruptcy.
It has reignited the debate in my mind around the difficulty of trusts in general and the uncertainty surrounding the steps to be taken by an insolvency practitioner who is appointed over a company or individual acting as Trustee.
One of the first issues is the practical power to sell the assets, (besides the commercial position of the property) is whether or not the practitioner needs court approval to sell the property.
Apostolou (the case of) – suggested that in circumstances where the trust instrument grants the power of sale and in conjunction with the general power of s477(2)(c), the liquidator may not need judicial orders to sell, given the issues in this particular matter stated in p 53 of the judgement:-
“VA Corporation had purported to transfer the property to Ms Apostolou The transfer had been lodged in the Stamps Office and had been assessed to duty. That assessment was being challenged. Second, Mr Vasiliou had informed the liquidators that VA Corporation had no right to remain as the registered proprietor of the property. Third, Mr Vasiliou also denied that the trustee had a right of indemnity. Fourth, Mr Vasiliou was making a variety of complaints about the liquidators’ conduct. Finally, the liquidators were acting on their solicitors’ advice regarding matters which were not legally straightforward.”
Even though it was not necessary, it was “proper”, for the liquidator to do so.
The Lemery Holdings case appears to take a different tact, with different facts it notes “It is also universally accepted that the only remedy of the trustee against the trust assets is judicial sale or appointment of a receiver”. Ie it is necessary for the insolvency practitioner to go to court.
Insolvency Practioners Remuneration and Disbursements
An issue close to most insolvency practioners hearts is the indemnity from trust assets for fees and how far that indemnity extends. Without going into too much detail, it appears to me that the court is generally favourable to the right of indemnity extending to the protection and realisation of trust assets (“protection umbrella”). See the case Re Suco gold.
The obvious question is then how many, if not all of the statutory tasks required by a liquidator would be accepted to fall under the protection umbrella. My thoughts are probably all, should any of the Liquidator’s statutory requirements not be completed (“from appropriately report to creditors to having the property valued”) it could put in jeapordy the liquidator’s position and ability to protect and realise the trust assets.
I am sure everyone has a different view on what is involved under the protection umbrella and would enjoy any thoughts from readers on the above.
I have to thank John Tanna and the team at Jones Partners as their thoughts are have provided significant input in the above. I would also like to apologize for my first blog being on quite a heavy reading topic, I will try to mix it up with a range of different matters in the future.
