Federal Court of Australia

Walley, in the matter of Royal National Capital Alliance Ltd (Administrators Appointed) (No 2) [2026] FCA 1383

ORDERS

THE COURT ORDERS THAT:

1.    The first plaintiffs are justified in paying the following costs and expenses from the Southport Proceeds:

(a)    to Clayton Utz in the amount of $9,655 plus GST; and

(b)    to McCullough Robertson in the amount of $225,143.59 plus GST.

2.    The first plaintiffs are justified in paying Daniel Walley and Derrick Vickers of Teneo the amount of $135,322.50 plus GST in respect of the first plaintiffs’ remuneration as liquidators of the second plaintiff and receivers of the Royal JC Fund, from the Southport Proceeds.

3.    The first plaintiffs are justified in:

(a)    not applying to conduct, or conducting, a public examination of the guarantors nor any other relevant person involved with the examinable affairs of the second plaintiff;

(b)    not pursuing the Hope Island Proceedings and discontinuing those proceedings; and

(c)    distributing the property of the Royal JC Fund after payment of all costs, expenses and remuneration in accordance with the Orders of Justice Reeves dated 4 March 2021 (2021 Orders) and these orders and all claims of creditors, to Members as follows:

(i)    in amounts limited to the realised specific and particular Assets in which that Member has invested; and

(ii)    as between Members who have invested in the same Asset, in proportion to their Application Money paid.

4.    The first plaintiffs have recourse to the property of the Royal JC Fund for the payment of their costs, expenses and remuneration in accordance with the 2021 Orders and these orders for the work carried out pursuant to paragraph to 3(c) above.

5.    The first plaintiffs, in their capacity as receivers of the Trust Property or in their capacity as administrators and liquidators of the Company, may have recourse to the Trust Property for their costs, expenses and remuneration in relation to the proper performance of the Company’s duties in respect of the Trust, insofar as such costs, expenses and remuneration do not relate to work performed by them in respect of a specific Mortgage Investment, at the remuneration calculated in accordance with the rates set out in paragraph 37 of the affidavit of Derrick Vickers affirmed on 23 April 2020.

6.    The costs of this application be costs in the winding up of the second plaintiff and the first plaintiffs are justified in paying those costs from the Southport Proceeds.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    This is an application by the liquidators of Royal National Capital Alliance Ltd (the “Company”), Messrs Daniel Walley and Derrick Vickers, for directions in relation to the distribution of assets of an investment trust (the “Royal JC Fund”) of which the Company is a trustee. In broad terms, they seek directions that:

(a)    they are justified in not conducting a public examination and not pursuing recovery proceedings in the Supreme Court of Queensland; and

(b)    they may have recourse to the trust property for their costs, expenses and remuneration incurred in their capacities as receivers of the trust property, or as administrators and liquidators of the Company.

2    The second aspect of the application is opposed by a group of interested persons, referred to as the “Southport Members”, who invested in the Royal JC Fund.

3    The application is attended by some difficulty, because the liquidators’ powers in relation to the trust assets have been the subject of a prior determination. To some extent, the success of this application turns upon an interpretation of those prior orders. Nevertheless, for the reasons which follow, the orders sought by the liquidators should be made.

Background

The Royal JC Fund

4    The Company was appointed trustee of the Royal JC Fund (the “Trust”) pursuant to a Trust Deed dated 20 April 2015. It appears that it has only ever acted as a trustee, such that no issues arise relating to debts incurred or assets acquired by it in any other capacity.

5    Its business as trustee involved attracting investments from persons who were to be “Members” of the Trust, with a view to those Members securing a particular category of investment visa to enable them to immigrate to Australia.

6    Upon the accumulation of sufficient funds, they were invested by the Company into “Mortgage Investments” relating to three property developments, namely:

(a)    a development on Scarborough Street in Southport, Queensland, in which $15 million was invested (Southport Property);

(b)    a development on Santa Barbara Road in Hope Island, Queensland, in which $18 million was invested (Hope Island Property); and

(c)    a development on Orchid Avenue in Surfers Paradise, Queensland, in which $15.24 million was invested (Surfers Paradise Property).

7    For the avoidance of doubt, the “Southport Members” comprise those Members who invested funds in respect of the Southport Property Mortgage Investment.

8    At the time of the liquidators’ appointment to the Company (then as voluntary administrators) on 18 February 2020, its principal asset was a mortgage over the Southport Property. It subsequently realised that security and received approximately $5.2 million (Southport Proceeds). That is the only return which it has realised from the three Mortgage Investments, and the only funds of which the liquidators are possessed.

9    Otherwise, the Company holds guarantees in respect of the Mortgage Investments, namely:

(a)    in relation to the Hope Island Property, guarantees granted by Mr Wayne Roddenby and Mr Gregory de Courcy Bell which guarantee a debt of approximately $18 million; and

(b)    in relation to the Southport Property, guarantees granted by Mr Roddenby and Captain Enterprise Holdings Pty Ltd, which guarantee a debt of approximately $9 million.

10    On 31 May 2024, the liquidators commenced proceedings in the Supreme Court of Queensland against Mr Roddenby and Mr de Courcy Bell, seeking to enforce their guarantees in respect of the Hope Island Property (the “Hope Island Proceedings”). However, Mr Roddenby has since become a bankrupt, on his own petition, and Mr de Courcy Bell has apparently committed an act of bankruptcy by failing to comply with a bankruptcy notice.

11    By the current application, the liquidators seek, inter alia, directions as to the future conduct of the liquidation. They initially sought orders that they are justified in: (a) conducting public examinations of the guarantors of the Mortgage Investments and others involved in the examinable affairs of the Company; and (b) pursuing the Hope Island Proceedings. However, given Mr Roddenby’s bankruptcy, Mr de Courcy Bell’s likely bankruptcy, and the limited funds available to pursue recovery proceedings, they now seek an order that they are justified in not taking the steps just described, and in distributing the remaining property of the Trust. This order is not opposed by the Southport Members.

12    Additionally, the liquidators also seek the approval of their fees and disbursements incurred in both the conduct of the liquidation and in the receivership of the assets of the Trust. That gives rise to some difficulties, because the assets of the Trust are limited to the Southport Proceeds. Though the liquidators contend that those proceeds are available to meet the general fees and expenses incurred in their respective capacities, the Southport Members submit that only one third of the fees and expenses may be recovered from them.

Relevant terms of the Trust Deed

13    For present purposes, the relevant terms of the Trust Deed include:

(a)    clause 3.2, which declares that the Company holds the “Trust Property” on trust for the Members;

(b)    clause 4.12, which provides that a Member’s interest is held as tenant-in-common with all other Members in the proportion of their “Application Money”;

(c)    clause 4.13, which provides that each Member has a beneficial interest only in the specific and particular “Assets” determined in accordance with the Trust Deed, in which they have invested, and not in the Assets as a whole;

(d)    clause 4.15, which provides that moneys held by the Company may only be invested in, relevantly, a bank account, a Mortgage Investment or in property;

(e)    clause 7.1, which makes provision for the Company to be paid fees from Trust Property;

(f)    clause 7.2, which relevantly provides that:

(i)    all costs, charges and expenses incurred by the Company in relation to the proper performance of its duties in respect of the Trust are payable or reimbursable out of the Assets to the extent not prohibited by law;

(ii)    the Company shall be indemnified out of Trust Property for liabilities or expenses incurred in relation to the proper performance of its duties;

(g)    clause 7.5, which provides that the Company is entitled to recover fees and expenses from the Trust provided they have been incurred in accordance with the Trust Deed and the law;

(h)    clause 7.7, which provides that any expenses incurred by the Trust are to be “appropriately allocated to the specific Mortgage Investment which caused the expense to be incurred”;

(i)    clause 10.2, which makes provision as to the occasion of the winding up of the Trust, which can only occur if the Company considers there are no outstanding Investments or Mortgage Investments and there are no other moneys which are or will become payable by the Trustee to any Member; and

(j)    clause 10.6, which requires the Company to use its best endeavours to ensure that all Members’ funds are redeemed at the expiration of each Mortgage Investment and returned to the Members together with any income earned from the Mortgage Investment and not distributed less any expenses of the Trust payable by the Member.

Directions in relation to the recovery actions against security providers

14    The first matter for consideration is whether directions ought to be made, pursuant to s 90-15(1) of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Corporations Act 2001 (Cth)) (IPS), that the liquidators are justified in:

(a)    not applying to conduct, or conducting, a public examination of Messrs Roddenby or de Courcy Bell, nor any other relevant person involved in the examinable affairs of the Company; and

(b)    not pursuing, and discontinuing, the Hope Island Proceedings.

Principles in relation to the giving of directions under IPS s 90-15

15    The principles which ought to be applied in the exercise of power under IPS s 90-15(1) were thoughtfully articulated by Stewart J in Re Krejci, Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111 in the following terms:

[7]    A court is empowered by s 90–15(1) of the Insolvency Practice Schedule to “make such orders as it thinks fit in relation to the external administration of a company”. The power conferred by s 90–15(1) is “very broad”: Kelly (in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 8) [2020] FCA 533; 144 ACSR 292 at [51] (Gleeson J). It includes a power to make orders determining any question arising in the external administration of a company: s 90–15(3)(a). An administrator of a company may apply for such an order: s 90–20(1)(d), read with s 9 of the Act (paragraph (d) of the definition of “officer”).

[8]     The court’s power under s 90–15(1) includes a power to give directions about a matter arising in connection with the performance or exercise of an administrator’s functions or powers: Reidy, in the matter of eChoice Ltd (Administrators Appointed) [2017] FCA 1582 at [26] – [27] (Yates J). In this respect, s 90–15(1) confers a power to give directions that was previously conferred by ss 447D(1) and 479(3) of the Act concerning administrators and liquidators, respectively: see Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; 93 ALJR 807 at [166] (Gordon J); Reidy at [27] (Yates J); and Kelly (liquidator), in the matter of Australian Institute of Professional Education Pty Ltd (in liq) [2018] FCA 780 at [30] (Gleeson J). The principles governing directions to administrators and those governing directions to liquidators are relevantly analogous: Re Ansett Australia Ltd (No 3) [2002] FCA 90; 115 FCR 409 at [43] (Goldberg J).

[9]     The function of a judicial direction of this kind is not to determine rights and liabilities arising out of a particular transaction, but to confer a level of protection on the administrator. An administrator who acts in accordance with a judicial direction, having made full and fair disclosure to the court of the material facts, has “protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision or undertaking the conduct” proposed: Ansett at [44].

[10]     A court may give a direction on an issue of “substance or procedure” or “of power, propriety or reasonableness”: Ansett at [65]. Although a court will not give a direction on a decision that is purely commercial, a direction may be provided where there is a “particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought”: Ansett at [65]. As Black J observed in In the matter of RCR Tomlinson Ltd (administrators appointed) [2018] NSWSC 1859 , a decision may have a “commercial character” but nonetheless be amenable to judicial direction. His Honour said (at [14]) of the application before him (which sought a direction as to whether a company should borrow loan funds):

The Court has been prepared to give directions of this kind, where the decision is a complex one, and where it has to be made, as here, under circumstances of time pressure, in respect of a very large corporate group, and by balancing different interests. The Court’s preparedness to grant such a direction in those circumstances reflects the intrinsic unfairness of leaving a voluntary administrator to be at risk of liability, in respect of a complex decision of that kind, where any decision that is made, including making no decision, will have inevitable risks for some or all of the affected constituencies.

[11]    Because the effect of a direction under s 90–15 is to exonerate the liquidator or administrator if full disclosure is made, it will usually necessitate consideration by the court of the liquidator’s or administrator’s reasons and decision making process: see Re ONE.TEL Ltd [2014] NSWSC 457; 99 ACSR 247 at [36] per Brereton J (referring to former s 511 of the Act).

Should the directions be made?

16    In the circumstances with which the liquidators are confronted, it is appropriate that the directions sought should be granted. The following matters are relevant to that conclusion.

17    Firstly, the Southport Members oppose the liquidators’ further prosecution of public examinations and the Hope Island Proceedings, if doing so requires expenditure of the Southport Proceeds. That is significant in circumstances where it appears that the individual Members made their investments on the understanding that Trust expenses would be “appropriately allocated to the specific Mortgage Investment which caused the expense to be incurred”, in accordance with cl 7.7 of the Trust Deed.

18    Second, without the Southport Proceeds, the liquidators have insufficient funds to pursue any recovery action.

19    Third, whilst the Company as trustee has a duty to gather in the property of the Trust, which would ordinarily require it to pursue the guarantors, its obligation under cl 10.6 of the Trust Deed to “ensure that all Members’ funds are redeemed at the expiration of each Mortgage Investment” is qualified by the stipulation that they employ their “best endeavours” to do so. That involves, in this instance, a requirement that the trustee undertake a rational analysis of the value of pursuing the third-party sureties. To that end, even if the trustees had sufficient funds to undertake public examinations or pursue litigation, in light of the known facts as to the solvency of the potential targets, those avenues would appear to be of little utility.

20    In these circumstances, one might take the view that the discontinuance of public examinations and recovery proceedings is somewhat axiomatic, and a decision that the liquidators ought to have made without a direction of the Court. However, it is important to appreciate that the liquidators’ position is complicated by the other Members who invested in the Hope Island Property or the Surfers Paradise Property. By taking the proposed action, it will necessarily follow that they are not likely to receive a return on their investment. That will undoubtedly cause disappointment. With that additional context, it is appropriate to make the orders sought so as to reduce the likelihood of any future controversy.

21    Therefore, it is appropriate to direct, pursuant to IPS s 90-15(1), that the liquidators are justified in not pursuing the public examinations and the Hope Island Proceedings.

The liquidators’ entitlement to be exonerated from the Trust Property

22    The second, and more controversial, issue concerns the entitlement of the liquidators to recover their costs, expenses and remuneration from the pool of funds constituted by the Southport Proceeds.

23    In broad terms, the liquidators seek an order permitting them to have recourse to the Trust Property for their general costs, expenses and remuneration incurred in their capacities as administrators, liquidators and receivers. Resolution of that issue requires consideration of an order made by Reeves J on 4 March 2021, which makes provision for the recovery from the Trust Property of certain costs, expenses and remuneration incurred in relation to specific Mortgage Investments.

The 2021 Orders

24    In March 2020, the liquidators commenced proceedings in this Court seeking a variety of orders. Relevantly, they sought declarations as to the Company’s entitlement to be exonerated from the Trust assets and orders appointing the liquidators as receivers of the Trust assets. The application was heard by Reeves J on 3 August 2020, and his Honour delivered reasons on 29 October 2020: Walley, In the matter of Royal National Capital Alliance Ltd (Administrators Appointed) [2020] FCA 1574 (2020 Judgment). In those reasons, he noted that the parties before him had failed in several respects to consider the circumstances surrounding the application, including the relevant rights and obligations created by the Trust Deed. Consequently, no orders were made, and further submissions were invited on the matters which his Honour identified.

25    It appears that, on 4 March 2021, the parties appeared before his Honour for what was listed as a case management hearing, at which they advanced further submissions. Following that hearing, the substantive orders sought were made (the “2021 Orders”), but no additional written reasons were published.

26    It is relevant that the 2020 Judgment reveals that his Honour was particularly concerned with the allocation of the general expenses of the Trust, and the expenses associated with each Mortgage Investment. In addition, he was careful to distinguish between the capacities in which the parties were entitled to have recourse to assets of the Trust. Both of these considerations were reflected in the orders subsequently made.

27    Order 1, a declaration, was concerned with the right of exoneration of the Company, in its capacity as trustee, for costs and expenses incurred. It provided:

It is declared that Royal National Capital Alliance Ltd ACN 601 566 803 (in liq) (the Company) has a right of exoneration from the Trust Property of the Royal JC Fund (the Trust) in respect of all costs, charges and expenses incurred by the Company as trustee for the Trust (the Trustee) in relation to the proper performance of its duties in respect of the Trust, including expenses incurred by the Trustee that relate to the Trust in general, and expenses incurred by the Trustee in respect of a particular Mortgage Investment, which are provable in the Company’s liquidation and to the extent that:-

(a)     a debt that was incurred in respect of a particular Mortgage Investment may only be satisfied from property or proceeds in respect of the same Mortgage Investment;

(b)     a debt that was incurred in respect of a particular Mortgage Investment may not be satisfied from property or proceeds in respect of a different Mortgage Investment.

28    Similarly, by Order 2, his Honour indicated that the liquidators were entitled to treat the proceeds of Trust Property as available for payment to creditors of the Trust pursuant to the right of exoneration, but with the qualification that debts incurred in relation to a specific Mortgage Investment may only be satisfied from the proceeds or property of that investment.

29    Pausing there, on a plain reading of those orders and the 2020 Judgment, it is apparent that his Honour intended to distinguish between two types of liabilities incurred by the Company as trustee: firstly, the costs, charges and expenses relating to the general operation and management of the Trust; and second, the expenses incurred in respect of a particular Mortgage Investment. His Honour identified that, in respect of the former, the Company had a right of exoneration from the general assets of the Trust, while in respect of the latter, the Company’s right of exoneration was qualified to the extent that the expenses must be met by the proceeds of the Mortgage Investment for which they were incurred.

30    With respect to his Honour, it is difficult to understand the basis upon which to impose such a limitation. It seems to have arisen from the parties’ reference to cl 7.7 of the Trust Deed, which provides that:

As some of the expenses incurred by the Trustee will relate to the Trust in general and some will be incurred only in respect of a particular Mortgage Investment, any expenses incurred by the Trust are to be appropriately allocated to the specific Mortgage Investment which caused the expense to be incurred.

31    On its face, this clause appears to be directed to the internal accounting of the Trust, particularly in relation to the valuation of Members’ interests in the fund at any one time. In this sense, the effect of the clause appears to be that, where an expense is incurred in respect of a particular Mortgage Investment, the expense is allocated to that investment so as to reduce the value of the beneficial interests of the Members who have invested in it.

32    However, cl 7.7 says nothing about the entitlements of third-party creditors, and no sub-trusts are created by the Trust Deed. That being so, in the ordinary course, the Company’s creditors would not be limited to recovery from the proceeds of the specific Mortgage Investment in respect of which the debt to them was incurred. The same must apply for the trustee’s right of indemnity. In this regard, cll 7.1 and 7.2 of the Trust Deed provide:

7.1    The Trustee is entitled to be paid fees from Trust Property in accordance with this clause 7.

7.2    All costs, charges, and expenses incurred by the Trustee in relation to the proper performance of its duties in respect of the Trust are payable or reimbursable out of the Assets to the extent that such reimbursement is not prohibited by the law …

… and shall be indemnified out of Trust Property for liabilities or expenses incurred in relation to the proper performance of its duties

33    One would have thought that if there were to be any limitation imposed on the trustee’s right of exoneration or indemnity, it would have been clearly set out in those provisions. Although cl 7.7 is part of cl 7, there is nothing in its terms which suggests that its concern is greater than the mere internal accounting of expenses as between the Members.

34    Notwithstanding, it appears that Reeves J saw it appropriate to impose a qualification on the Company’s right of exoneration, by requiring expenses to be paid out of the proceeds of the Mortgage Investment for which they were incurred.

35    By Orders 3, 4 and 5, Reeves J ordered that the liquidators be appointed as receivers and ancillary orders were made as to their powers and the need to provide a guarantee.

36    By Order 7, his Honour addressed the issue of remuneration. Ordinarily, a receiver of trust property is entitled to recover their costs, expenses and remuneration from the proceeds of the realised assets, and Order 7 made provision for that. However, it went further and made provision for the payment from the Trust Property of the costs, expenses and remuneration of Messrs Walley and Vickers in their capacity as administrators and liquidators of the Company. Relevantly, Orders 7 and 8 provide:

7    The First Plaintiffs, in their capacity as receivers of the Trust Property or in their capacity as administrators and liquidators of the Company, may have recourse to the Trust Property for their costs, expenses and remuneration in so far as the property or proceeds therefrom relates to costs, expenses and remuneration for work performed by them in respect of a specific Mortgage Investment and at the remuneration calculated in accordance with the rates set out in paragraph 37 of the affidavit of Derrick Vickers affirmed on 23 April 2020, and otherwise as ordered by the Court.

8     The work referred to in paragraph 7 is to include work relating to:

(a)     the identification of Trust assets and liabilities;

(b)     the identification of Trust creditors;

(c)     the ascertaining of the state of the accounts between the beneficiaries and the trustee;

(d)     the recovering or attempting to recover Trust assets for the purposes of meeting the right of exoneration;

(e)     the realisation or the attempted realisation of the Trust assets for the purposes of meeting the right of exoneration;

(f)     the securing of Trust assets (or their value) to meet the right of exoneration and their application to the Trust creditors;

(g)     the distribution of funds which are the subject of the right of exoneration to those who are entitled to them; and

(h)     any matter in the administration or liquidation of the Trust which is reasonably ancillary to the above to the extent to which it had been undertaken for the purposes of the identified tasks.

37    As with the Company’s right of exoneration from the proceeds of the Trust Property, it appears that his Honour saw it appropriate to qualify the liquidators’ right to recovery of their costs, expenses and remuneration to the extent that they were incurred in respect of a particular Mortgage Investment. Although there was no discussion in the 2020 Judgment as to the basis for imposing such a limitation, it appears to be premised upon the parties’ – and, in turn, his Honour’s – understanding of the operation of cl 7.7 of the Trust Deed. For the reasons given above, that understanding may not have been correct.

The present application

38    It is the operation of Order 7 of the 2021 Orders with which this application is concerned. Whilst the liquidators do not cavil with the validity of the restriction imposed by that order, they contend that it does not extend to their general costs, expenses and remuneration which cannot be allocated to a particular Mortgage Investment. They accordingly seek additional orders as to their entitlement to recover such costs from the assets of the Trust (being the Southport Proceeds).

39    Whilst that is an appropriate course, it is not beyond reasonable argument that the limitation in Order 7 lacks a legitimate basis. Indeed, it is arguable that, since cl 7.7 does not operate in the manner which the parties had assumed before his Honour, it is open to the Court to order that the liquidators may recover all their costs, expenses and remuneration, irrespective of whether they may or may not be attributable to any Mortgage Investment. Nevertheless, by this application, the liquidators merely seek an order allowing them to recover their general costs, expenses and remuneration incurred in their respective capacities.

40    Such an order is opposed by the Southport Members, who contend that, properly construed, Order 7 covers all of the liquidators’ costs, expenses, and remuneration. They submit that any general costs, expenses, and remuneration should be apportioned equally between the three Mortgage Investments, such that the liquidators may only recover one third of such costs from the Southport Proceeds. In response, the liquidators contend in the alternative that, if Order 7 has such an operation, it should be varied pursuant to the “slip rule” in r 39.05 of the Federal Court Rules 2011 (Cth).

Interpretation of Order 7

41    For the following reasons, the interpretation of Order 7 for which the Southport Members contend should be rejected.

42    The 2021 Orders are to be construed as any other document and, in that respect, they must be construed according to their terms and read as a whole. Regard may be had to extrinsic material, but not to deny the effect of the words of the orders: P Herzfeld and T Prince, Interpretation (Thomson Reuters, 3rd ed, 2024) [36.70]. It is axiomatic that, in construing orders, regard may – and, indeed, should – be had to the reasons to which the orders are intended to give effect: Repatriation Commission v Nation (1995) 57 FCR 25, 33 – 34. It appears that consideration may also be had to a transcript of the hearing which resulted in the orders which may be instructive, even if it is far from determinative: Lim v Comcare (2019) 165 ALD 217, 226 – 228 [40] – [43].

43    On its face, Order 7 does not deal with the liquidators’ right of recovery generally. Rather, it concerns their recovery, from the property or proceeds of a particular Mortgage Investment, of costs, expenses and remuneration incurred in respect of that investment. It does not address general costs, expenses and remuneration which cannot be so attributed. Indeed, it appears that such amounts may have been left for a later order, as appears from the concluding words, “and otherwise as ordered by the Court”. This is a sufficient basis on which to conclude that the liquidators’ general costs, expenses and remuneration are not within the remit of Order 7.

44    This interpretation is supported by the transcript of the case management hearing which occurred on 4 March 2021, after the delivery of the 2020 Judgment. There, Reeves J relevantly observed in relation to Order 1:

So have I made myself clear? The introductory words [in order 1] should refer to general expenses and then (a) and (b) make that quite clear that there is a distinction between general expenses and particular mortgage investment expenses. Then, in – so 2(c)17 simply should be amended to pick up the same changes. In – in line 2 of 2, it should, as I – similarly to 1 – refer to trust property as defined so it picks up the definition in the trust deed… …

7 is now agreed, I think. I won’t repeat that – this terminology should be made consistent throughout so it refers to the same – where appropriate, to the same terminology as the trust deed. So, in 7, in the first line, instead of the property of the trust, it should be the trust property, etcetera…

45    That follows an earlier comment by his Honour in relation to Order 7:

In my view, clause 7 gives the trustee a right of exoneration, indemnity, etcetera, from the trust property as defined in the trust deed. The provisions of clause 7.7 would operate if there was evidence that some of the expenses claimed by the liquidators only related to particular mortgage investments. Since there’s no such evidence, I think they fall within the first words of clause 7.7, namely they are expenses incurred by the trustee relating to the trust in general. So I think 1(c) and 2(c) should not be included in the orders. Mr Freeman, that doesn’t exclude the possibility for your clients, if they want to pursue the issue, to do so separately from this issue. Just, probably as I’ve said a couple of times before, the more appropriate course if they think there is evidence that some of these – if they think they can establish that there is evidence that some of these expenses are related to one or more of the three mortgage investments…

(emphasis added)

46    It would appear that the second sentence in bold is a reference to the general power of the Company to recover its costs and expenses from the Trust Property. Therefore, it is apparent that his Honour understood Order 7 to be concerned only with the costs, remuneration and expenses that could be specifically allocated to a Mortgage Investment.

47    Accordingly, there is nothing in Order 7 which could prevent Messrs Walley and Vickers from seeking to recover their general costs, expenses and remuneration incurred in the course of the winding up, the administration and the receivership. As such, there is no need to invoke the slip rule to modify its terms.

The scope of the appropriate order

48    The remaining issue is whether the Court should order that the liquidators may have recourse to the Trust Property for their costs, expenses and remuneration incurred in their capacity as receivers of the Trust Property or in their capacity as administrators and liquidators of the Company. This involves two considerations: firstly, the basis upon which such an order can be made; and second, the quantum of any order.

General principles on the recovery of liquidators’ costs and expenses from trust property

49    The entitlement of liquidators and administrators to recover their costs, expenses and remuneration from the assets of trusts of which the company under their control is a trustee is not entirely settled. That said, some clarity is provided by the erudite and thoughtful analysis of Brown J in Herrett, Colbran & Stone in their Capacity as Joint and Several Admins of PBS Building (Qld) Pty Ltd v Queensland Building and Construction Commissioner (2024) 20 QR 162 (Re PBS Building), where her Honour examined the several ways in which Courts have permitted recovery by administrators and liquidators. After a careful consideration of the competing views, her Honour observed at 201 – 202 [89]:

… A right of indemnity out of trust assets is supported by an equitable lien over those assets and has priority over the interests of the beneficiaries. Generally, a trustee is entitled to exercise any right of indemnity by reimbursing itself out of trust assets and by applying the trust funds in direct satisfaction of liabilities, supported by the equitable lien. While there are authorities which recognise that a liquidator (or administrator) may directly claim payment and remuneration and expenses from trust property, where the only business of the company is to carry on business as trustee of a trust, that would not apply in the present case, notwithstanding the small amount of assets so far identified by the applicants which are not the subject of project retention trusts. If work done by a liquidator is solely concerned with the winding up, and not with the performance of duties as trustee, the costs are not ordinarily chargeable against trust assets, although it is often difficult to draw such bright-line distinctions and it has been recognised that some activities may be for both purposes or that, if the trust assets are the only assets, the costs are indistinguishable. If there is more than one trust, any indemnity would be confined to the costs incurred and remuneration for work undertaken in relation to each trust. If there are no non-trusts assets they are apportioned between the trusts.

(Footnotes omitted).

50    Later, her Honour referenced the several approaches taken to allowing a liquidator to recover costs, expenses and remuneration from trust assets, particularly in cases where the company in liquidation acted solely as a trustee, for example In re Universal Distributing Co Ltd (In Liquidation) (1933) 48 CLR 171, In re Berkeley Applegate (Investment Consultants) Ltd (in liq) [1989] Ch 32 and In re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99 (Re Suco): see Re PBS Building 202 – 204 [90] – [97]. In particular, in Re Suco, King CJ held that since the company’s obligation as trustee to pay the debts incurred in carrying out the trust could not be performed unless the liquidation proceeded, it was appropriate to regard the liquidators’ expenses as debts of the company incurred in discharging the duties imposed by the trust, and therefore as covered by the trustee’s right of indemnity. That is particularly relevant to the present case, since Reeves J directed Messrs Walley and Vickers, in their capacities as liquidators and receivers of the Trust assets, to wind up the Trust pursuant to the Trust Deed. In this respect, there is little difficulty in treating their costs, expenses and remuneration as being incurred by them as a trustee.

51    Her Honour later observed, at 215 – 216 [127], that this approach was adopted by Campbell J in Re Application of Sutherland (2004) 50 ACSR 297, though it was not available in that case because the company in liquidation had not acted solely as trustee:

[127]     In Re Application of Sutherland, Campbell J stated that the court’s “inherent jurisdiction” to allow remuneration to a trustee is “wide”. His Honour referred to the authorities which permitted remuneration to a liquidator who administers trusts and found that “[t]hose cases implicitly accept that the inherent jurisdiction of the court to allow remuneration in connection with the administration of a trust fund is one which can apply so as to allow remuneration not only to a trustee, but also to someone who is for practical purposes controlling a trustee”… .

52    The foregoing authorities were not addressed in the parties’ submissions before this Court. However, passing reference was made to the observations of Brereton J in Re AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004 at [13], where it was said:

[13]        As to the first, the applicable principles may be stated as follows:

(1)     Where the company is trustee of a trading trust and has no other activities, the liquidators are entitled to be paid their costs and expenses, whether for administering the trust assets or for “general liquidation work”, out of the trust assets.

…

(Citations omitted).

(See also 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377, 385; Lawrence (in their capacity as liquidators of Ozifin Tech Pty Ltd) (in liq) v AGM Markets Pty Ltd (in liq) [2022] FCA 1478 [220]).

53    There is no need to further consider the interesting issue of how Courts justify ordering the payment of liquidators’ costs, expenses and remuneration from the assets of trusts of which the insolvent company is a trustee. The foregoing principles were not contested, nor considered in any detail, by the parties in the present proceedings. Whilst it is fair to say that the outcome is undoubtedly a rational and pragmatic one, its doctrinal purity may be open to question. Nevertheless, it seems that the result is one which is now widely accepted.

Application to the present case

54    In this case, the evidence shows that the Company acted solely as trustee, in that it neither engaged in business nor incurred debts on its own behalf. It was used only as a corporate trustee in the Royal JC Fund investment scheme, into which investors paid money to be held on trust pursuant to the Trust Deed.

55    In those circumstances, it can be said that all the Company’s expenses were incurred as part of the investment scheme, for the purposes of investing and maintaining the Trust Property. It follows that the general costs of the administration, receivership and liquidation should be paid out of the Trust Property, as the winding up of the Company is part and parcel of the administration and winding up of the Trust. Though it may be that because the Court ordered that the liquidators were required to cause the Company to wind up the Trust, the fees and expenses relating to that work should technically flow through the Company’s account, that is rendered redundant by the liquidators’ priority.

56    Overall, then, it is appropriate to order that Messrs Walley and Vickers, in their capacity as receivers of the Trust Property or in their capacity as administrators and liquidators of the Company, may have recourse to the Trust Property for their costs, expenses and remuneration in relation to the proper performance of the Company’s duties in respect of the Trust.

Quantum

57    As to quantum, evidence was adduced from Mr Vickers as to the amounts constituting their costs, expenses and remuneration. From his affidavit, it is apparent that there has been a careful analysis of the costs, expenses and remuneration which fall within the scope of the order to be made. Mr Vickers was not cross-examined, though some criticism of his analysis was advanced in the course of submissions. That criticism was not sustainable.

58    Ultimately, the evidence shows that Messrs Walley and Vickers, in their capacity as liquidators and receivers, have incurred costs, expenses and remuneration:

(a)    specifically in respect of the Southport Property – in the amount of $16,591;

(b)    specifically in respect of the Hope Island Property – in the amount of $41,024.44;

(c)    otherwise, in respect of the Trust generally, in the amount of $353,530.09.

59    It should be noted that no recovery is sought in relation to the Hope Island Property. Excluding that amount, the total sought is $370,121.09, comprising $234,798.59 in costs and expenses, and $135,322.50 in remuneration.

60    In the circumstances, it is appropriate to order that Messrs Walley and Vickers be paid those amounts from the Southport Proceeds.

Costs

61    Messrs Walley and Vickers seek an order that their costs of this application be costs in the winding up of the Company, to be paid out of the Southport Proceeds. The Southport Members oppose such an order, on the basis that the application related to the entire Trust and therefore must be apportioned between the respective Mortgage Investments. For the reasons given, there is no basis in the Trust Deed, nor in the 2021 Orders, for doing so. It is appropriate to make the orders sought by the liquidators.

Associate:    

Dated:    21 September 2026