SUPREME COURT OF QUEENSLAND

CITATION:	Salayog Super Nominees Pty Limited v Purchas [2024] QSC 317	
PARTIES:	SALAYOG SUPER NOMINEES PTY LIMITED
(plaintiff)
v
IAN PURCHAS
(first defendant)
SALAYOG BARE INVESTMENTS PTY LTD ACN 641 764141 (IN LIQUIDATION)
(second defendant)	
FILE NO:	BS1229 of 2024 	
DIVISION:	Trial Division 	
PROCEEDING:	Claim 	
ORIGINATING COURT:	Supreme Court at Brisbane	
DELIVERED ON:	17 December 2024	
DELIVERED AT:	Brisbane 	
HEARING DATE:	6 September 2024	
JUDGE:	Hindman J	
ORDERS:	1.	Paragraphs 3 to 9 of the defendants’ application filed 24 April 2024 are granted.  
2.	The plaintiff’s claim is dismissed.  
3.	The plaintiff pay the defendants’ costs of the defendants’ application and of the proceeding on the standard basis. 	
CATCHWORDS:	Where the first defendant is the liquidator of the second defendant – where the second defendant’s business encompassed acting as the corporate trustee of two separate trusts – where the second defendant owned two real properties as trustee – where the defendants have applied for orders that the first defendant be appointed as receiver of the assets of both trusts – where the first defendant’s appointment arose form a default relevant to one of the trust properties only - whether the first defendant is entitled to seek payment of its general winding up costs by accessing the equity in the non-defaulting trust  
Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 268 CLR 524
Cremin, in the matter of Brimson Pty Ltd (in liq) [2019] FCA 1023 
Kelly v Dun-Movin’ Holdings Pty Ltd (in liq) as trustee for Dun-Movin’ Trust [2023] QSC 186
Lane (trustee), in the matter of Lee (bankrupt) v Deputy Commissioner of Taxation [2017] FCA 953
Re Suco Gold (1983) 33 SASR 99
In the matter of Stansfield DIY Wealth Pty Ltd (in liquidation) [2014] NSWSC 1484	
COUNSEL:	T Hall (solicitor) for the plaintiff
B O’Sullivan for the defendants 	
SOLICITORS:	Hall Partners for the plaintiff 
Grace Lawyers for the defendants 

Synopsis 
[1]	The resolution of the remaining parts of the plaintiff’s proceeding (after some parts were previously dismissed) and the defendants’ application are agreed by the parties to turn on one legal issue in dispute – does the liquidator of a company whose entire business is to act as the trustee of two different trusts, in circumstances where there are no non-trust assets, have a right of indemnity to his fees (not specific to any of the trusts) against the assets of both trusts, when the default that led to the appointment of the liquidator arose in respect of one of the trusts only.  
[2]	The plaintiff submits that the answer to that question is no, and therefore seeks to avoid the liquidator being appointed as receiver and manager over the property of the “non-defaulting” trust (so as to avoid the property of that trust being used to pay the liquidator’s fees that are not specific to either trust).  
[3]	The plaintiff’s submission is rejected.  It is contrary to clear High Court authority.    
[4]	The defendants’ application succeeds.  The plaintiff’s proceeding will be dismissed.  Subject to any submissions to the contrary, costs should follow the event.
Background facts 
[5]	The second defendant (Company) is a company in liquidation.  The only business of the Company was to act as the corporate trustee of two separate trusts – Salayog Bare Trust No. 1 (SBT1) and Salayog Bare Trust No. 2 (SBT2).  The Company owned two real properties as trustee – one at Redbank Plains (the RP Property) for SBT1 and one at Woodridge (the Woodridge Property) for SBT2.  Each of those properties is subject to a first registered mortgage.    
[6]	The first defendant is the liquidator of the Company.
[7]	The first defendant was appointed as liquidator of the Company in circumstances where: 
(a)	the body corporate of the Woodridge Property obtained a judgment on 10 October 2022 against the Company on account of unpaid body corporate fees relating to the Woodridge Property; 
(b)	as a consequence of that unpaid judgment, the court ordered the winding up of the Company in insolvency on 23 March 2023; 
(c)	the Company has no assets other than the properties that it holds on trust (that is, it has no non-trust assets); 
(d)	ignoring the position of the first defendant, the Company has no non-trust creditors. 
[8]	Since appointment as liquidator to the Company: 
(a)	the first defendant has incurred certain costs in the winding up – approximately $20,000 specifically in respect of SBT2, $40,000 specifically in respect of SBT1 and $60,000 in respect of general winding up costs said to not be attributable specifically to either trust; 
(b)	the parties have agreed to the first defendant being appointed as receiver and manager to the property of SBT1, and the Woodridge Property is to be sold; 
(c)	the net available proceeds from that sale will not be sufficient to meet all of the general costs (outlined above) that the first defendant has incurred about the winding up; 
(d)	the RP property remains the subject of a first registered mortgage; there has not been any default under that mortgage; the mortgage is being paid from rental receipts from the property;
(e)	the only other potential source of funds to pay the first defendant’s costs incurred about the winding up would come from a sale of the RP Property (which would allow the first registered mortgage to be paid out, net proceeds received and the liquidation of the Company then finalised).    
The legal issue 
[9]	As identified above, the legal issue to here be resolved is whether the first defendant is entitled to seek payment of its general winding up costs (not specific to either trust) by accessing the equity in the RP Property.  Or must the first defendant only recover those costs by accessing the equity in the Woodridge Property (which will inevitably result in a shortfall), in circumstances where it was default in relation to the Woodridge Property (SBT2) that resulted in the winding up order being made.  
[10]	The parties agree that the key High Court decision to be applied is Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 268 CLR 524.  The parties disagree as to the principles to be taken from that case.  
[11]	I summarise the relevant principles I take from that case as follows: 
(a)	a trustee has what can be variously described as a right of indemnity or a power of exoneration or a right of recoupment from trust assets to meet authorised liabilities incurred in the execution of the trust (giving an equitable charge or lien over the trust assets); 
(b)	a liquidator of a trustee company is treated as a trust creditor in respect of the liquidator’s expenses on the basis that the company’s obligation as trustee to pay the debts incurred in carrying out the trust cannot be performed unless the liquidation proceeds; 
(c)	those trustee rights take priority over those of the beneficiaries of the trust; 
(d)	in the circumstances of a company in liquidation acting as trustee of multiple trusts (and there being no non-trust assets), where certain of the liquidator’s expenses are not attributable to any particular trust, some form of apportionment against the trusts will be required – a liquidator can apply for directions from the court if there are practical difficulties with apportionment. 
[12]	Those principles have been applied in cases such as Cremin, in the matter of Brimson Pty Ltd (in liq) [2019] FCA 1023 and Kelly v Dun-Movin’ Holdings Pty Ltd (in liq) as trustee for Dun-Movin’ Trust [2023] QSC 186 at [13], [15]-[18].  The latter confirms that it is well established that liquidators of a corporate trustee may properly be appointed as receivers of the property of the trust in order to effect a sale enforcing a trustee’s equitable charge over the trust assets (see at [16]).  
[13]	Accordingly I conclude that the liquidator of a company whose entire business is to act as the trustee of two different trusts, in circumstances where there are no non-trust assets, has a right of indemnity to his fees (not specific to any of the trusts) against the assets of both trusts, even when the default that led to the appointment of the liquidator arose in respect of one of the trusts only.  In this case that means that the defendants’ application ought be granted and the plaintiff’s proceeding dismissed.  
[14]	The plaintiff seeks to rely upon the following passages of the following cases as supporting its submission that the liquidator’s fees, not specific to a particular trust, can only be obtained through the trust assets of the “defaulting” trust, and not any “non-defaulting” trust.  
[15]	From Re Suco Gold (1983) 33 SASR 99 specific reference was made by the plaintiff to 109-110 per King CJ (emphasis added by the plaintiff): 
“The liquidator is bound by the provisions of s 292 [of the Companies Act, now s 556 of the Corporations Act] with respect to the payment of the company’s debts. He must therefore endeavour to pay the debts in accordance with the order of priority set out in that section. To the extent that each priority debt has been incurred in the performance of a particular trust he should have recourse to the property of that trust for the purpose of paying it. If there is a residue of assets of a particular trust after payment of the priority debts incurred in the performance of that trust, that residue should be applied to the payment of the other debts applicable to that trust. If there is a deficiency in the assets of a particular trust, the non-priority debts applicable to that trust would have to rank pari passu. The unpaid balance would, of course, rank for dividend out of the general assets of the company.”
[16]	I have no hesitation in accepting the above as accurate.  It says nothing though about the issue here to be determined.  
[17]	From Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 268 CLR 524 specific reference was made by the plaintiff to [24] – [36], [82] – [83], [95] – [96], [169] – [170].  Again, I have no hesitation in accepting those passages as statements of the law.  But again, those passages say nothing though about the issue here to be determined.  
[18]	Insofar as in Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth at [170] quotes from Re Suco Gold (1983) 33 SASR 99 at 110 per King CJ (emphasis added by the plaintiff): 
“On these principles which I have discussed, the liquidator is entitled to have recourse to the property of each trust for the purpose of meeting the costs and expenses of winding up, the petitioner's costs and the liquidator's remuneration, so far as they are incurred in relation to each trust. As there are no non-trust assets or liabilities, all the expenses are attributable to one or other of the trusts and must be apportioned between them. The liquidator will be able to make an estimate of the work and expense involved in the liquidation so far as it relates to each trust. Where no apportionment is possible, the maxim that equality is equity should provide the solution to the problem of apportionment.”
that should be the approach adopted here by the liquidator and if there be any concern (for example, if apportionment is not possible and there is not sufficient equity in each trust to apportion equally the general winding up costs), then the liquidator can seek directions from the court should he consider it necessary to do so.
[19]	From Lane (trustee), in the matter of Lee (bankrupt) v Deputy Commissioner of Taxation [2017] FCA 953 specific reference was made by the plaintiff to [96], [103, [105], [107], [117], [131]-[134], [181]-[184], [186], [194].  Those passages are not on point.  
[20]	From in the matter of Stansfield DIY Wealth Pty Ltd (in liquidation) [2014] NSWSC 1484 specific reference was made by the plaintiff to [7], [17], [29] – [31], [43].  Again, those passages do not support the plaintiff’s submission.  
[21]	There is no principle that I can divine from the case law that in circumstances such as these the general winding up costs, not attributable to any specific trust, should be taken as being attributable only to (or occasioned by reason of) the “defaulting trust” and no recourse against the assets of the “non-defaulting trust” is available.