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Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related policy and law reform, in Australia and internationally. No legal advice is offered or given.

Trusts and liquidators’ rights of indemnity – whose decision is “universally regarded as incorrect?”

In determining that liquidators had a right of indemnity, and priority, over trust property for payment of their remuneration and expenses, the Victorian Supreme Court has said it was “bound to follow” the long established South Australian decision in Re Suco Gold, and to decline to follow the recent NSW decision in Independent Contractor Services.

In addition, the statutory priorities under the Corporations Act applied; the liquidators’ remuneration was ordered to be paid “once and for all”; and the liquidators’ legal costs were to be paid on an indemnity basis: see Re Pharmore [2016] VSC, 15 November 2016.

As the Supreme Court rather pointedly explained:

  • The company operated a business as trustee of a trust.
  • The company accounted for its liabilities to employees as being liabilities of the trust.
  • The employees provided services to the company in its capacity as trustee of the trust.
  • The assets of the company were trust property.

In making its finding in favour of the liquidators, the Court said it was bound to follow the established decision in Re Suco Gold (1982) 33 SASR 99, and the Court pointedly said that it did not follow Independent Contractor Services (No 2) [2016] NSWSC 106. 

The trust property in question was subject to the statutory priorities under s 556(1)(a) of the Corporations Act and was available for the liquidators’ remuneration and disbursements.   

The remuneration was ordered “once and for all” to be determined according to Freelance Global v Bensted [2016] VSC 181. In that case, the Court directed that the liquidators were entitled to be indemnified for all remuneration to which they were entitled, or would become entitled, as fixed pursuant to the Act. That Court also accepted the decision in Re Suco Gold.  

“universally accepted to be incorrect”

The decision in Re Suco Gold was said in Independent Contractor Services to be “virtually universally accepted to be incorrect”. That itself appears to be incorrect, as these two Victorian decisions show.

Also, the WA Supreme Court in Winter Holdings (WA) Pty Ltd [2015] WASC 162 recently reviewed and accepted a number of authorities supporting the Suco Gold principle. And since Independent Contractor Services, the principle has been accepted in Bendigo and Adelaide Bank Limited, in the matter of Reborn Enterprises Pty Ltd (Trustee) [2016] FCA 1197.

On the basis of Marlborough Gold Mines v ASC, the majority acceptance of Suco Gold around the courts should be adopted and followed. The alternative is to refer a case to the High Court, not on trust principles, or remuneration, but on the need to control the interminable and parochial judicial squabbles infecting our ‘national’ court system. 

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