Corporate Trustees And Their Liquidator's Remuneration

RE DALEWON PTY LTD [2010] QSC 311

The recent case in Re Dalewon highlights the conditions in which a liquidator of a corporate trustee is allowed to turn to trust assets to reclaim their fee and other expenses. In such a situation, the liquidator must produce clear proof which states that work carried out by the liquidator relates to a specific trust.

FACTS

The Dalewon Pty Ltd (the Company) was the trustee and the lawful owners of two trusts were namely Topmoor Superannuation Trust and Topmoor Investing Trust. The Company was wound up as it failed to comply with a statutory demand made by Brisconnections Management Company Ltd (Brisconnections). Proceedings were initiated to terminate the winding up of Dalewon based on the debt owed to Brisconnections. The liquidators of the Company intended to utilise the assets of both the trusts to pay for the termination proceedings.

The liquidators claimed that their legal expenses, which included the legal fees, amounted to nearly two hundred thousand dollars. The liquidators applied for a claim in a statement which entitled them to the payment from the trust assets.

ASSESSMENT

The Court made it clear that a liquidator’s right to have his fees and expenses paid from trust funds would depend on the remunerations and costs being incurred for administering the trust. A distinction needed to be drawn from the work devoted to the winding up. Therefore, the Court affirmed that where a trustee is managing multiple trusts, the liquidator has to prove the nexus between the fees and costs sought for the distinct trusts.

Although the court estimated that the liquidator’s work related to the administration of one of the two trusts, it was not keen to approve the claim put forth by the liquidators for the following reasons: The costs sought by the liquidators surpassed the actual worth of the trust assets. Therefore, there was a possibility for a costs order to be made with regard to proceedings which would have an impact on the costs sought.

The creditors had not approved the amount that was sought by the liquidators.

THOUGHTS ON THE DECISION

This judgment proves that when liquidators who manage several trusts are applying for their fees and costs, the liquidators must clearly identify the trust to which the costs were incurred from. Where there is no clear connection between the work done and the management of a particular trust, it may be hard for the liquidators to reclaim their expenses for that work from the property of each trust.