Cuthbert and Cuthbert and Ors

Bennett J of the Supreme Court of New South Wales considered applications by a liquidator (the Second Respondent) concerning the administration and winding up of a trust. The proceedings involved settlements with Ms Cuthbert, Mr Cuthbert, and Mr Cotter, as well as the Australian Taxation Office. The core of the dispute revolved around the justification and approval for the liquidator to enter into deeds of settlement and compromise debts owed to the trust.

The court was required to determine whether the Second Respondent, in his capacity as liquidator and trustee, was justified in entering into and performing deeds of settlement with Ms Cuthbert, Mr Cuthbert, and Mr Cotter, and whether he had the court's approval to compromise debts under these settlements. Furthermore, the court needed to decide on the justification for treating certain real property as trust property, liabilities incurred by a company purporting to act as trustee as true trust liabilities, and the overall winding up of the trust. The court also had to direct the order of priority for payments during the winding up process, including the costs of the liquidator, unsecured creditors, settlement obligations, and the Australian Taxation Office.

In reaching its decision, the court applied sections 511, 477(2A), and 477(2B) of the Corporations Act 2001 (Cth) and section 63 of the Trustee Act 1925 (NSW). Section 511 of the Corporations Act allowed the court to direct that a liquidator is justified in entering into and performing agreements. Sections 477(2A) and 477(2B) provided the court's approval for compromising debts and entering into agreements where performance might extend beyond three months. Section 63 of the Trustee Act permitted the court to direct a trustee regarding the administration and winding up of a trust. The court granted directions for the settlements with Ms Cuthbert, Mr Cuthbert, and Mr Cotter, approved the compromise of debts, and authorised the entry into the deeds of settlement. It also directed that specific real property be treated as trust property, certain liabilities be considered true trust liabilities, and authorised the winding up of the trust.

The court ordered that the Second Respondent, as liquidator and trustee, was justified in entering into and performing the deeds of settlement with Ms Cuthbert, Mr Cuthbert, and Mr Cotter, and was approved to compromise the debts under those deeds. The court further directed that the Second Respondent was justified in treating the specified real property as trust property, the liabilities incurred by D Pty Ltd as true trust liabilities, and in winding up the trust. The administration of the winding up was directed to follow a specific order of priority: firstly, the costs of the liquidator/trustee; secondly, unsecured creditors (excluding the ATO); thirdly, obligations under the settlement deeds; and finally, payment to the ATO. Liberty was granted to the Second Respondent to apply to the court on short notice, and all extant applications were dismissed.