FEDERAL COURT OF AUSTRALIA

Barnet, in the matter of Fulkoto Pty Ltd (in Liquidation) [2013] FCA 595

IN THE MATTER OF FULKOTO PTY LTD (IN LIQUIDATION)

THE COURT ORDERS THAT:

1.    the applicant pay the respondent’s costs of the proceedings and that they be costs in the liquidation; and

2.    the parties have liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF FULKOTO PTY LTD (IN LIQUIDATION)

REASONS FOR JUDGMENT

1    The matter before me arises out the liquidation of a company which had, prior to its liquidation acted solely as the trustee of a trading trust. It seems that as a result of some confusion in the office of the liquidator the full significance of the fact that the company was acting solely as a trustee was not realized, and this has caused a series of difficulties in connection with the winding up, which the present proceedings are designed to resolve. The applicant initially gave notice of the application to a group of substantial creditors but not all creditors.

2    I subsequently ordered that relevant information be placed on a website, and that all creditors be advised of the website and invited to determine whether or not they wished to participate in these proceedings. It seems that, for one reason or another, the original creditors who had previously been served were not served in the way contemplated by the order. I formed the view that those creditors had indicated an intention not to participate in the proceedings. Such changes as have occurred in the nature of the proceedings are not so substantial as to require that they be served further. In those circumstances I am satisfied to accept that there has been substantial compliance with the requirement of the order as to service and to hold that there has been appropriate service on all relevant creditors. One of the issues which arises is as to whether or not a bare trustee has a power of sale over trust assets. Commonly, a trustee does provided that a corporate trustee, which goes into liquidation immediately ceases to be a trustee. However such a trustee remains as bare trustee for as long as legal title to an asset remains with it. A bare trustee has certain powers and duties.

3    The conventional wisdom in the texts seems to have been that a bare trustee does not have a power of sale. However it is submitted that at least in Queensland, by virtue of the Trusts Act 1973 (Qld) (the “Trusts Act”), the bare trustee has a power of sale. This flows from ss 4, 5, 31 and 32 of the Trusts Act. In my view those sections give a bare trustee a power of sale. It appears from the Law Reform Commission report upon which the Trusts Act was based, that this was the intention. I hold that in Queensland, a bare trustee has a power of sale of trust assets. Other issues in dispute have been resolved between the parties, save as to the costs of the first respondent.

4    I am satisfied to make orders in accordance with the orders that have been agreed. Although the liquidator should perhaps have been more familiar with the consequences of the winding up of a trustee company, than he apparently was, he acted honestly. There is no reason to believe that creditors or others have suffered any significant loss as a result of his conduct. The only outstanding question, then, is the costs of the first respondent who is, in fact, the new trustee of the trust. In the end I consider that the participation by the first respondent in the proceedings has had the effect of producing a result more favourable to creditors than would otherwise have been the case. The amount to be paid out of the company’s assets to the liquidator and in respect of the liquidator’s legal expenses has been reduced.

5    I order:

(1)    that the applicant pay the respondent’s costs of the proceedings, and that they be costs in the liquidation; and

(2)    the parties have liberty to apply.

Associate:

Dated:    20 March 2014