Break Fast Investments Pty Ltd v Sclavenitis

In Break Fast Investments Pty Ltd v Sclavenitis, the court considered the assignment of a debt by a former corporate trustee, the powers of bare trustees, and the right of indemnity. The case involved Break Fast Investments Pty Ltd, which held a trust over certain property, and Sclavenitis, a bare trustee of the trust. The dispute arose from an assignment of a debt from a company that had been a corporate trustee of the trust, and the subsequent sale of the trust property by a liquidator.

The primary legal issues before the court were whether the assignment of the debt by the former corporate trustee was a breach of trust, and if so, whether the assignment was a nullity. The court also had to determine whether the assignee of the trustee's right of exoneration had standing to file a proceeding to enforce the debt, and whether the liquidator of the former corporate trustee had the authority to sell the trust asset under section 477 of the Corporations Act 2001 (Cth).

The court held that the assignment of the debt by the former corporate trustee was a breach of trust, as the bare trustee had no power to assign the debt without the consent of the beneficiary. However, the court found that the assignment was not a nullity, as the assignee had acquired an equitable interest in the debt. The court also held that the assignee of the trustee's right of exoneration had standing to enforce the debt, as the right of exoneration was assignable. Finally, the court found that the liquidator of the former corporate trustee did not have the authority to sell the trust asset under section 477 of the Corporations Act, as the sale was in breach of trust.

The court ordered that the sale of the trust property by the liquidator be set aside, and that the proceeds of the sale be held on trust for the beneficiary. The court also ordered that the assignee of the trustee's right of exoneration be permitted to enforce the debt against the debtor, subject to certain conditions.