Federal Court confirms trust assets can pay fees

Cor Cordis duo Sam Kaso and Bruno Secatore will be relieved following a decision of the Federal Court delivered this week in Kaso (administrator), in the matter of Sanitation Maintenance Services Pty Ltd (administrators appointed) [2023] FCA 418.

The pair were appointed administrators of Sanitation Maintenance Services and three related companies in July 2022.

“It may be accepted that the ability of a bare trustee (or its officers) to deal with trust property, including to satisfy claims of trust creditors, is limited in the absence of a Court order.” Justice Tim McEvoy.

At that time the property held by each of the companies was held as trustee of the relevant trust, rather than by each of the companies in its own right.

The consequence of the appointment of the administrators was to strip each entity of its status as trustee of the relevant underlying trust and render each a bare trustee.

Subsequently, a Deed of Company Arrangement (DoCA) approved by creditors in November saw the trust property either returned to the control of the directors, along with control of the companies, or located in the pool of assets that comprises the DOCA Fund for distribution to creditors in accordance with the DOCA terms.

Given those terms, the pair needed the court’s okay to relieve them from liability for past dealings with trust property; to allow them to deal with trust property in the execution of the DOCA and to approve payment of their remuneration and expenses of the trust property.

As Justice Tim McEvoy said, “It may be accepted that the ability of a bare trustee (or its officers) to deal with trust property, including to satisfy claims of trust creditors, is limited in the absence of a Court order.

“Therefore, by this application the Administrators seek relief relating to the manner in which they have already dealt with the Trust Property, including through the trading of the Companies’ businesses since their appointment, and their proposed future dealing with cash reserves referable to Trust Property (in accordance with the provisions of the DOCA).”

Whilst the DoCA allowed for the administrators and deed administrators remuneration and expenses to be paid Kaso and Secatore still needed the court to approve it and his honour, after referencing the existing cases late, was happy to oblige.

“I accept that in all the circumstances the remuneration, costs and expenses incurred by the Administrators in the administration of the Companies, including the administration of the DOCA, should properly be borne by the Trust Property,” he said.

“I also accept, as is submitted, that it is appropriate for the costs of and incidental to this application be met from the Trust Property.”