Well the champagne corks would’ve been popping down in the Canberra offices of FEG Recovery Czar Henry Carr this week – metaphorically of course – after the decision of the Victorian Supreme Court’s Court of Appeal in Commonwealth v Byrnes and Hewitt  VSCA 41 (28 February 2018), more commonly known as Amerind.
As was succinctly articulated by Melbourne barrister Carrie Rome-Sievers, the decision puts to rest the question “as to whether receivers and liquidators should apply the statutory priorities under sections 433, 556 and 560 of the Corporations Act when distributing the assets of corporations who have conducted their businesses through trading trusts. They should; the statutory scheme of priority applies. The fact that the funds are the proceeds of trust assets does not displace the priority regime,” she said.
Rome-Sievers snapshot of the key issues is also helpful:
- A corporate trustee’s right of indemnity from trust assets is property of the trustee company within the meaning of s 433 of the Corporations Act. Not property of the trust, as Robson J had held at first instance.
- The statutory scheme of priority applies to distribution of the relevant property, being the receivership surplus subject to the right of indemnity. This had the result that the Commonwealth’s claim to priority in the distribution of the receivership surplus by virtue of the payments it had made of employee entitlements under FEGS was vindicated.
- (In the second part of the judgment – certain assets in dispute fell within the ambit of property secured by a ‘circulating security interest’. Their Honours held that the relevant assets in this context was not the right of indemnity but the trust assets. The correct date for assessing whether property is subject to a circulating security interest under s 433 is the date the receiver is appointed and takes possession.
- The Court also held that on the proper construction of s 340(1) of the PPSA the two limbs (a) and (b) are alternatives. Either may be satisfied to bring property within the definition of a ‘circulating asset’.)
You can read her assessment in its entirety at: The Amerind appeal – trading trusts, statutory regime of priority applies on receivership of the trustee, employee entitlements protected but the judgment leaves SiN wondering how many receivers have made distributions which are as of last Wednesday based on an erroneous interpretation of the law, at least as it now stands in Victoria?
No doubt Carr will know how many, how much is now potentially the property of the Commonwealth and which banks will need to write him cheques.