Australian Executor Trustees Limited v Provident Capital Limited (Receivers and Managers Appointed) (In Liq)

Australian Executor Trustees Limited (the trustee) sought an interlocutory process against Provident Capital Limited (Receivers and Managers Appointed) (In Liquidation) (the company) to determine if it could continue to act as trustee of a debenture trust. The trustee was concerned that its position may conflict with its duties due to ongoing proceedings in Victoria and New South Wales, as well as an investigation by liquidators acting as special purpose receivers. The court was required to decide whether the trustee could continue to act as trustee under the debenture trust deed, whether it was obliged to retire under clause 9 of the trust deed, and if it could seek indemnity from the trust fund without prior court direction.

The court considered the statutory duty of a trustee under s 283AC(2) of the Corporations Act 2011 (Cth), which replicates the duty in clause 9 of the trust deed. The court examined the trustee's proprietary right to indemnity or exoneration from the trust fund, as established in Chief Commissioner of Stamp Duties for New South Wales v Buckle (1998) 192 CLR 226. The court found that the mere existence of this right did not create a conflict of interest or duty, as the beneficiaries had consented to the trustee acting in this capacity. The court also noted that the statutory prohibition under s 283AC(2) required an actual conflict of interest or duty, rather than a real and sensible possibility of conflict.

The court concluded that the trustee was not disqualified from continuing to act as trustee under s 283AC(2) and was not obliged to retire under clause 9 of the trust deed. However, the trustee could not seek indemnity or exoneration from the trust fund without first obtaining court direction. The court also noted that the trustee was justified in recovering its costs from the trust fund.

ORDERS:
1. The trustee is not disqualified from continuing to act as trustee under the trust deed under s 283AC(2) of the Corporations Act 2011 (Cth).
2. The trustee is not justified and is not obliged to retire as trustee of the debenture trust under cl 9 of the trust deed, provided that it does not seek to avail itself of any right of indemnity or exoneration from the assets of the Provident debenture trust without first obtaining a direction of the Court that it would be justified in doing so.
3. The trustee is justified in recovering its costs of the interlocutory process from the assets of the Provident debenture trust.