The ephemeral nature of a corporate trustee’s right of indemnity continues to bedevil those charged with the winding up of a trustee company’s affairs.
Trust deeds allow for the appointment of new trustees whenever an incumbent is insolvent or anticipated to shortly become so.
Those wielding the power to appoint a replacement rarely decline to exercise it.
And those controlling those newly appointed trustees are frequently unsympathetic to the enduring right of indemnity to which former trustees, their creditors and external administrators are generally entitled.
For Hall Chadwick father and daughter team John and Kathleen Vouris that indifference has manifested in full in respect of their appointment as administrators and then liquidators of Jacks Corner Pty Ltd (Jacks) earlier this year.
Jacks was trustee of the Jacks Corner Property Trust and owns a stonking great spread of prime riverside foreshore in Kangaroo Valley upon which resides a predictably ostentatious pile.
Well, in truth non-bank lender Prime Capital owns the property, given it has a secured mortgage and is owed in excess of $5 million.
Prime in fact got this whole right of indemnity dispute rolling when the notice of default it issued led to the appointment of the administrators of Jacks on May 7. Creditors resolved to wind up the company on June 22, 2022.
But at a meeting of the trust’s unit holders on June 13 it was resolved that CR Operations Pty Ltd should replace Jacks as trustee of the trust.
Incorporated less than 12 months ago, CR Operations is an entity controlled by self-described fashion business entrepreneur Christopher Ristevski.
At the same meeting it was further resolved that units should be issued to one of the unit holders, who the administrators had described in the Minutes of the first meeting of creditors held on May 27 as “disgruntled”.
The minutes of the second meeting on June 26 detail how after obtaining legal advice in respect of the demand to issue trust units the administrators agreed.
Clan Vouris also acceded to the new trustee’s demand that any money they collected whilst operating the Jacks Corner property during the period the company was in administration should be transferred to CR Operations.
But in return they wanted the new trustee to acknowledge Jacks’ right of indemnity and deliver to them a proposal outlining how CR Operations would deal with the $800,000 or so in debts owed to Jacks’ unsecured creditors.
The most recent liquidators’ report dated September 21 shows that no acknowledgement or proposal has so far been forthcoming.
Not only that, the liquidators warned creditors that the new trustee was of the view that certain creditors had no claim to a right of indemnity. Further, it would also oppose the appointees’ claims for remuneration generated during their tenure as administrators.
When the Hall Chadwick duo applied to the court for orders appointing them as receiver managers of the Jacks Corner property CR Operations intervened and this week it became clear that the new trustee’s opposition has not wavered.
On Monday the NSW Supreme Court heard that the appointment of John and Kathleen Vouris as receiver managers is opposed because there is no right of indemnity supporting it. The matter returns to court on December 5.