Baymill Investments Pty Ltd v Drewlock Pty Ltd

Baymill Investments Pty Ltd, as trustee of a unit trust, sought judicial advice from the Supreme Court of Victoria regarding a charge over units held in the trust. The dispute arose when the entity registered as the unit holder charged the units in favour of the trustee in its personal capacity, only for the unit holder to be subsequently deregistered. Drewlock Pty Ltd, the defendant, claimed that the units had been transferred to it prior to the deregistration. The uncertainty as to the ownership of the units led to a settlement agreement between the parties, which was conditional upon the trustee obtaining judicial advice on whether it was justified in enforcing its charge over the units and amending the register of unit holders to reflect the trustee or its nominee as the registered holder.

The legal issues before the court involved determining whether the trustee, in its capacity as chargee, could enforce its charge over the units, particularly in light of the potential conflict between its duties as trustee and its interests as chargee. The court needed to consider the nature of the trust, the effect of the charge, and the implications of the deregistration of the unit holder. Furthermore, the court had to assess the validity of the settlement agreement, which was contingent upon the trustee obtaining judicial advice.

The court concluded that the trustee could enforce its charge over the units, as there was no conflict between its duties as trustee and its interests as chargee. The court found that the trustee's actions were in line with the terms of the charge and the trust deed. The court also determined that the settlement agreement was valid, as the condition precedent of obtaining judicial advice had been met. The court advised that the trustee was justified in enforcing the charge and amending the register of unit holders to reflect the trustee or its nominee as the registered holder.

The final orders of the court confirmed the validity of the settlement agreement and authorised the trustee to enforce its charge over the units and amend the register of unit holders accordingly. The court's decision provided clarity on the enforcement of charges over trust units and the resolution of disputes arising from deregistrations, reinforcing the importance of obtaining judicial advice in complex trust matters.