Nine months might seem a fair old span to let pass before asking a court to declare that you’ve acted reasonably in trading on a bare trustee but as former Prime Minister John Howard likes to remind us, context is everything.
To begin with, knowing that the sole function of the company to which you’re appointed was to act as a corporate trustee of a trust is of little practical assistance if you don’t have the trust deed.
Sure you can suspect but you can’t assume the deed’s loaded with one of those incendiary ipso facto clauses that render it a mere bare trustee the moment you, the external administrator, was appointed.
And then there’s the other, unique circumstances that apply. In this case the company, which operated large equipment, had a tenancy agreement on the verge of expiry when the liquidators were appointed.
Moving that gear would’ve been expensive and with no funds wasn’t an option. Selling it in situ however made sense, despite the uncertainty about the appointees’ entitlement to do so.
That quandary however didn’t seem to occur to Supreme Court of Victoria associate justice Simon Gardiner yesterday when he heard an application brought by the liquidators of Airport Commercial Joinery Pty Ltd (ACJ).
Shortly after the commencement of the hearing the judge described as “unsatisfactory” the fact that Dye & Co’s Nicholas Giasoumi and Shane Deane hadn’t sought to “regularise” their appointment until some nine months after they were appointed via a resolution of AJC’s members on August 23, 2022.
The liquidators, who iNO understands were initially frustrated in their attempts to obtain the trust deed, had instead focussed on auctioning off the assets before the landlord evicted them.
iNO understands the business had been purchased by the current director from a former director and after the pair fell out, recovering the relevant trust deed became more difficult.
This however meant that they realised the assets and banked the funds before they were technically entitled to deal with them. Judges might be critical of such a pathway. Creditors perhaps not so much.
Bluster aside the judge was in the end quite prepared to make the orders ought, in essence agreeing to backdate the pairs’ appointments as receivers and managers to the appropriate date and thereby regularising their acts so as to comply with laws which this case and many others show are in urgent need of reform.
It never ceases to amaze me that people who are appointed to take control of a trust do not familiarise themselves with the terms of the trust instrument – remembering that quite often there are different clauses regulating the position of a trustee and/or appointment of a trustee which can be described as “ipso facto” clauses. It is quite often said that” the devil is in the detail”. Unfortunately universities are not spending much time on trust law even though most business activities now are conducted through the auspices of the economic entity being a trust but in the name of the legal entity being the trustee with a right of indemnity. The courts are sympathetic to this position to assist the external controller, receiver or External Administrator, in particular.