In the matter of Creditors' Trust of Jackgreen (International) Pty Ltd

Case •

[2011] NSWSC 748

•

18 July 2011

Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: In the matter of Creditors' Trust of Jackgreen (International) Pty Ltd [2011] NSWSC 748
Hearing dates:12 July 2011
Decision date: 18 July 2011
Jurisdiction:Equity Division
Before: Ward J
Decision:

Order that trustees are entitled to remuneration out of the trust fund as sought

Catchwords: JUDICIAL ADVICE - application for judicial advice pursuant to s 63 of the Trustee Act 1925 (NSW) - in the alternative, application for trustees to be further remunerated pursuant to s 81 of the Act or the Court's inherent jurisdiction - HELD - order that the trustees are entitled to further remuneration out of the trust fund pursuant to s 81 or the Court's inherent jurisdiction
Legislation Cited: Corporations Act 2001 (Cth)
Electricity Supply Act 1995 (NSW)
Trustee Act 1925 (NSW)
Cases Cited: Application of Macedonian Orthodox Community Church St Petka Inc (No 2) [2005] NSWSC 558; (2005) 63 NSWLR 441
Arakella Pty Ltd v Paton (As Representatives of the Unitholders of GNS Trading Trust) [2004] NSWSC 13; (2004) 60 NSWLR 334
Cuesuper Pty Ltd [2009] NSWSC 981
In re Freeman's Settlement Trusts (1887) 37 Ch D 148
In re Keeler's Settlement Trusts [1981] Ch 156
Leonard Thomas Hinde [2007] NSWSC 640
Lock v Westpac Banking Corp (1991) 25 NSWLR 593
Macedonian Orthodox Community Church St Petka Inc v Petar (2006) 66 NSWLR 112
Macedonian Orthodox Community Church v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66
Marshall v Holloway (1820) 2 Swan 432, 36 ER 681
Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587; [1991] 2 All ER 513
Nissen v Grunden (1912) 14 CLR 297
Parbery and Others (in their capacity as joint and several administrators of Trio Capital Ltd (admins apptd) and Others) v ACT Superannuation Management Pty Ltd and Others [2010] NSWSC 941
Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd [1999] 2 Qd R 524
Re application of Sutherland (2004) 50 ACSR 297
Re Cox's Will (1890) 11 LR (NSW) Eq 124
Re Duke of Norfolk's Settlement Trusts [1982] Ch 61; [1981] 3 All ER 220
Re Gulbenkian's Settlements [1970] AC 508 at [522]; [1968] 3 All ER 785
Re White; Tweedie v Attorney-General (2003) 7 VR 219
Riddle v Riddle (1952) 85 CLR 202
Texts Cited: Ford & Lee, The Law of Trusts
Heydon, J D and Leeming M J, Jacobs' Law of Trusts in Australia (7th edn)
Category:Procedural and other rulings
Parties: Atle Crowe-Maxwell and John Frederick Lord in their capacity as Trustees of the Creditors' Trust of Jackgreen (International) Pty Ltd (Plaintiffs)
Representation: Counsel
W M Addison (Solicitor) (Plaintiffs)
Solicitors
DibbsBarker (Plaintiffs)
File Number(s):11/191535

Judgment

  1. HER HONOUR : The plaintiffs have sought judicial advice, in their capacity as the trustees of the Creditors' Trust of Jackgreen (International) Pty Limited (JGI), as to their entitlement to remuneration, costs and expenses (in the sum of $50,000 plus GST) for administering the Trust in the period from 15 November 2010 to the termination of the Trust.

  1. The advice is sought pursuant to s 63 of the Trustee Act 1925 (NSW) or alternatively, an order is sought for the payment of the remuneration pursuant to s 81 of the Act or in the Court's inherent jurisdiction.

Background

  1. On 18 December 2009, Messrs Atle Crowe-Maxwell and John Frederick Lord were appointed joint and several voluntary administrators of Jackgreen International pursuant to s 436A of the Corporations Act 2001 (Cth).

  1. On 23 December 2009, Messrs Sule Arnautovic and John Kukolovski of Jirsch Sutherland were appointed joint Receivers and Managers of the company by a secured creditor of Jackgreen International.

  1. A Deed of Company Arrangement was entered into following approval of the creditors at the second creditors' meeting on 28 June 2010. The creditors also resolved at that meeting to approve the future maximum remuneration of the plaintiffs (the Deed Administrators and now trustees) in the sum of $150,000 (plus GST) for work to be performed in the course of the Deed and for the Trust that was to be established for the creditors of the company pursuant to the terms of the Deed. The plaintiffs based their estimate of the costs for this period on an anticipated retirement date of the Receivers of 31 July 2010.

  1. The retirement of the Receivers was a condition precedent to the operation of the Deed of Company Arrangement (clause 2.1). However, the Receivers refused to retire on 31 July 2010 (apparently due to an issue as to their potential liability for matters prior to their appointment). As a result, the condition precedent to the Deed of Company Arrangement was not met. Additional work was then carried out by the plaintiffs (which had not been anticipated as at 28 June 2010) as set out in Mr Crowe-Maxwell's affidavit of 10 June 2011 (at [7]).

  1. On 13 August 2010, the Committee of Creditors of Jackgreen International, pursuant to s 449E(1)(a) of the Corporations Act, approved additional remuneration of $150,000 (plus GST) for work to be performed by the plaintiffs as Deed Administrators. The plaintiffs based their estimate of that additional anticipated remuneration on the fact that a final release would be negotiated in the short term and the Receivers would retire shortly thereafter.

  1. Mr Atle Crowe-Maxwell has deposed that at this time negotiations were taking place (with the Receivers, the proposed purchaser of the company's assets under the deed of Company Arrangement and the secured creditor which had appointed the Receivers) as to the terms of a release indemnifying the Receivers from liability during the receivership. Mr Crowe-Maxwell refers to the meeting held on 13 August 2010, the minutes of which note that an "amended Deed of Indemnity is currently with the Receivers, awaiting their comments on the final changes".

  1. However, Mr Crowe-Maxwell deposes that following that meeting, further unanticipated events caused additional work to be carried out by the plaintiffs (as outlined at [8] - [10] and [15]).

  1. In particular, an issue arose in relation to an allegation that the company had failed to pay licence fees in contravention of the Electricity Supply Act 1995 (NSW) leading to the concern that those licences (a key component of the purchase contemplated by the Deed of Company Arrangement) would be terminated. Mr Crowe-Maxwell deposes that the plaintiffs undertook further unanticipated work in their capacity as deed administrators, liaising with the Minister and legal representatives so that the licences would be preserved.

  1. A Deed of Release was executed on 2 November 2010 with the Receivers.

  1. The Receivers then retired on 5 November 2010, this satisfying the condition precedent to the operation of the Deed of Company Arrangement (pursuant to clause 2.1(a) of the Deed).

  1. The Deed of Company Arrangement was then completed and the Trust came into effect on 15 November 2010.

  1. The total value of work performed by the plaintiffs as Deed Administrators during the period that the Deed of Company Arrangement was in operation was $182,504 (being $150,000 plus GST and $32,504 plus GST in the period 21 July to 15 November 2010) as set out in Mr Crowe-Maxwell's affidavit at [11].

  1. Pursuant to clause 15.2(a) of the Creditors' Trust Deed, one of the two dates by which the Trust was to terminate was 28 February 2011. However, the Trust has not yet come to an end.

  1. Due to the delays before the Deed of Company Arrangement came into operation (referred to above), Mr Crowe-Maxwell explains that significantly more work was undertaken by the plaintiffs as deed administrators than had been anticipated, which meant that there was less of the approved funds available to meet the fees, remuneration and expenses of the plaintiffs as trustees of the Creditors' Trust. The level of remuneration and expenses approved by the creditors at the 28 June 2010 meeting ($150,000 plus GST) and by the Committee of Inspection at the 13 August 2010 meeting ($150,000 plus GST) was exceeded. The total value of work performed by the trustees over the trust period (from 16 November 2010 to the date of Mr Crowe-Maxwell's affidavit) was $117,496 plus GST and there remains work to be performed before the Trust Fund can be properly distributed to the beneficiaries (those being the creditors of Jackgreen International) and the Trust is finally terminated.

  1. The trustees rely upon Work In Progress reports which evidence the costs incurred through the period of their appointment. In addition to the additional work referred to in the affidavit of Mr Crowe-Maxwell, the trustees have given evidence as to the recovery of refunds of GST following an audit by the ATO as to $68,839.54 for the voluntary administration period (received on 28 February 2011); $9,071 for the Trust period from 15 November 2010 to 31 December 2010, (received on 2 March 2011); and $11,135 for the Deed of Company Arrangement period, (received on 14 March 2011) and anticipate that a refund of a further $16,005 for the period from 1 January 2011 to 31 March 2011 is anticipated following the lodging of a BAS on 28 April 2011. (See [20] - [21] of Mr Crowe-Maxwell's affidavit.)

Trust Deed

  1. Clause 15.2 of the Trust Deed provides as follows:

(a) Subject to clause 15.2(b), the Trust shall terminate on the first of the following:
(i) 28 February 2011; or
(ii) the date:
(A) when the Beneficiaries pass a Resolution terminating the Trust at a meeting of the Beneficiaries; and
(B) if the Trustee has applied all of the Trust Fund in accordance with clause 11, on the 30th day after the Trustee has advertised its last notice to the Beneficiaries of that fact in newspapers circulating generally in each State and Territory of Australia,
on which the Trust Termination Date shall become the date the Trust is terminated.
(b) The Trust Deed and the Trust shall not terminate under clause 15.2(a) unless the Trustees have received payment for all remuneration and costs to which they are entitled pursuant to clause 18, of this Trust Deed.

  1. The termination of the Trust is therefore subject to the payment of all remuneration and costs to which the trustees are entitled under clause 18 of the Deed.

  1. Clause 18.1 of the Trust Deed provides that the Trustees must be:

(a) remunerated from the Trust Fund in respect of any work done by the Trustees, their partners and staff, in their former capacities as administrators or deed administrators of the DOCA (subject to clause 13 of the DOCA) or in connection with the Trust or their role as Trustees, in accordance with the hourly rates charged by PKF; and
(b) reimbursed from the Trust Fund in respect of all costs, fees and expenses incurred in connection with the performance of their duties, obligations and responsibilities in their former capacity as administrators or deed administrators of the DOCA (subject to clause 13 of the DOCA), or in connection with the Trust or their role as Trustees, including any GST payable in respect of their remuneration of such costs, fees and expenses.

  1. Clause 18.2 provides that remuneration and costs (plus any GST payable in respect of their remuneration and costs) will be paid, subject to clause 13 of the Deed of Company Arrangement, at the end of each calendar month and that "the Trustees shall be entitled to draw their remuneration and costs from the Trust Fund to the limits approved by the Creditors of Jackgreen by resolution at the section 439A meeting held on 28 June 2010."

  1. Clause 13.1 of the Deed of Company Arrangement provides that, subject to the approval of the Creditors, or a Court pursuant to section 449E of the Act, the remuneration of the Administrators, their partners and staff will be calculated on a time basis at the hourly rates usually charged by the Administrators, their partners and staff for insolvency related matters together with rates charged by other services lines in accordance with the hourly rates charged for such service lines.

Section 63 of the Trustee Act

  1. Section 63(1) of the Trustee Act provides for an application by trustees to the Court "for an opinion, advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument."

  1. The present application for judicial advice was brought ex parte (as is recognised will typically be the case: Arakella Pty Ltd v Paton (As Representatives of the Unitholders of GNS Trading Trust) [2004] NSWSC 13; (2004) 60 NSWLR 334). Mr Addison, the solicitor appearing for the plaintiffs, notes that s 63(4) of the Act does not require service of the notice on any party as the present application does not involve "the question ... [of] who are the beneficiaries or what are their rights as between themselves"). Mr Addison did, however, inform me that creditors have been informed that the trustees intended to make this application.

  1. An opinion, advice, direction or order on beneficiaries given pursuant to s 63 has been held to be as if the advice or direction had been given or made in proceedings to which the person was a party (s 63(11) of the Act as explained in Macedonian Orthodox Community Church St Petka Inc v Petar (2006) 66 NSWLR 112 per Beazley and Giles JJA at [8]).

  1. In Application of Macedonian Orthodox Community Church St Petka Inc (No 2) [2005] NSWSC 558; (2005) 63 NSWLR 441 Palmer J said at [23]:

The advisory jurisdiction is an exception to the Court's ordinary function of deciding disputes between competing litigants. An application for judicial advice, whether under s 63 or under the general jurisdiction of equity, is in nature essentially a request for private advice: see eg Harrison v Mills [1976] 1 NSWLR 42, at 45 per Needham J; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, at 440 per Sheller JA. This exceptional jurisdiction, which is derived from the practice of the Court of Chancery under the general law in giving directions to those entrusted with the administration of property under the control of the Court, may now be regarded as affording special assistance to those, such as trustees, liquidators, bankruptcy trustees and Receivers, who have no direct pecuniary interest in a fund but have assumed the onerous obligation of administering it for the benefit of others: see eg Re G.B. Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674, at 677; Gardner v London Chatham & Dover Railway Co (No 1) (1867) LR 2 Ch App 201, at 211.

  1. The proper purpose for seeking judicial advice includes relief aimed at resolving legitimate doubts held by the trustee as to the proper course of action and protecting the trust and those entitled to it ( Macedonian Orthodox Community Church v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66.) In the present case, the plaintiffs as trustees of the Creditors' Trust seek assistance in the interpretation of the remuneration provisions of the Trust Deed (noting that issues of construction of a trust deed are a common basis for advice being sought ( Leonard Thomas Hinde [2007] NSWSC 640 per Rein AJ at [30]) and seek the protection that would then follow if they act on that advice (as identified by Austin J in Arakella Pty Ltd at [2]).

  1. As to the relevant principles when interpreting a trust deed, reliance is placed on what was said by Upjohn LJ in Re Gulbenkian's Settlements [1970] AC 508 at [522]; [1968] 3 All ER 785:

There is no doubt that the first task is to try to ascertain the settlor's intention, so to speak, without regard to the consequences, and then, having construed the document, apply the test. The court, whose task it is to discover that intention, starts by applying the usual canons of construction; words must be given their usual meaning, the clause should be read literally and in accordance with the ordinary rules of grammar. But very frequently, whether it be in wills, settlements or commercial agreements, the application of such fundamental canons leads nowhere, the draftsman has used words wrongly, his sentences border on the illiterate and his grammar may be appalling. It is then the duty of the court by the exercise of its judicial knowledge and experience in the relevant matter, innate common sense and desire to make sense of the settlor's or parties' expressed intentions, however obscure and ambiguous the language that may have been used, to give a reasonable meaning to that language if it can do so without doing complete violence to it. The fact that the court has to see whether the clause is "certain" for a particular purpose does not disentitle the court from doing otherwise than, in the first place, try to make sense of it.

  1. Reference was also made to the approval by Waddell CJ in Eq in Lock v Westpac Banking Corp (1991) 25 NSWLR 593 at [602] (in the context of the interpretation of a trading trust deed) of the dicta of Warner J (in the context of a pension scheme deed) in Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 at [1610]; [1991] 2 All ER 513 at [537]:

... the court's approach to the construction of documents relating to a pension scheme should be practical and purposive, rather than detached and literal ... although there are no special rules governing the construction of pension scheme documents, the background facts or surrounding circumstances in the light of which those documents have to be construed - their 'matrix of fact' (to use the modern phrase coined by Lord Wilberforce) include four special factors. The first factor is that, as the Court of Appeal pointed out in two unreported cases... namely Kerr v British Leyland (Staff) Trustees Ltd (unreported) 26 March 1986; Court of Appeal (Civil Division) [1986] Transcript No 286 of 1986 and Mihlenstedt v Barclays Bank International Ltd , The Times, 18 August 1989, Court of Appeal (Civil Division) Transcript No 817 of 1989, [[1989] IRLR 522], the beneficiaries under a pension scheme such as this are not volunteers. Their rights have contractual and commercial origins. They are derived from the contracts of employment of the members. The benefits provided under the scheme have been earned by the service of the members under those contracts and, where the scheme is contributory, pro tanto by their contributions."

  1. When construing documents such as the Trust Deed, it has been said that a construction that would undermine the effectiveness of the document for its obvious purpose should be eschewed ( Leonard Thomas Hinde per Rein AJ at [48]).

  1. It is submitted by Mr Addison that creditors were informed of the risks associated with the use of a creditors' trust in the Supplementary Administrators' Report to Creditors dated 16 June 2010 (as required by Regulatory Guide 82 issued by the Australian Securities & Investments Commission). Beneficiaries whose rights may be prejudiced by an opinion, advice or direction affecting the conveyance or distribution of trust property are to be notified of the Court's orders under ss 63(8) and 63(9) of the Trustee Act . I understand that the trustees propose to notify creditors of the outcome of this application.

Issue

  1. The issue on which advice is sought is whether the provisions of the Trust Deed regarding remuneration, as properly construed, allow payment from the trust fund of monies for the trustees' remuneration, costs and expenses of administering the Trust beyond the amount approved by the creditors on 28 June 2010 and the additional amount approved by the Committee of Creditors on 13 August 2010. The termination of the Deed of Company Arrangement on 15 November 2010 strictly removed the power of the Committee of Inspection or the Court under s 449E of the Corporations Act to approve the remuneration of the deed administrators.

  1. There is no doubt that the Trust Deed contemplated the remuneration and reimbursement to the trustees' of fees and expenses referable not simply to their work as trustees in relation to the Trust, but also to their work in their former capacity as deed administrators under the Deed of Company Arrangement. Where room for doubt arises is from the references in clause 18 of the Trust Deed to such remuneration or reimbursement being subject to clause 13 of the Deed of Company Arrangement (which provides for the basis on which such remuneration is to be calculated "subject to the approval of the Creditors" or a Court pursuant to s 449E of the Act) and the provision in clause 18.2 that entitles the trustees to draw their remuneration "to the limits approved by the Creditors" at the 28 June 2010 meeting.

  1. Mr Addison submits that clause 18 of the Trust Deed and clause 13.1 of the Deed of Company Arrangement must be read together with clause 15.2(b) of the Trust Deed which provides that the "Trust shall not terminate under clause 15.2(a) unless the Trustees have received payment for all remuneration and costs to which they are entitled pursuant to clause 18 of this Trust Deed". This, it is submitted, demonstrates that the Trust Deed always intended full and complete remuneration of the trustees. It is further submitted that clause 18.1 (in referring to remuneration for "any work" in connection with the Trust and reimbursement of "all costs, fees and expenses") indicates an intention that the trustees, acting as such (and, I might add, formerly acting as deed administrators) be fully remunerated for performing their professional work.

  1. It is submitted that the fact that the Trust Deed does not expressly provide for a mechanism by which remuneration may be approved in the current circumstances is not in itself an indicator that no further remuneration may be sought or granted. Mr Addison notes that events for which provision was made under the Deed of Company Arrangement generated work which led to approval of further remuneration on 13 August 2010. It is submitted that this approval effectively made redundant the limits expressed in clause 18.2 (namely, that the drawing of remuneration and costs from the Trust Fund be limited to those amounts "approved by the Creditors of Jackgreen by resolution at the section 439A meeting held on 28 June 2010").

  1. It is further submitted that, when construing the parties' presumed intention, it cannot be the case that the only mechanism for approving remuneration would be by the Committee of Creditors, when it must have been known that that committee would dissolve upon termination of the Deed of Company Arrangement and when all parties were aware that the trustees would continue to perform their duties thereafter.

  1. Emphasis is placed on clause 15.2 of the Trust Deed (which prevents the termination of the Trust before, and makes the final distribution to beneficiaries subject to, payment of all remuneration and costs), which in its terms is not qualified (other than by reference to entitlement under clause 18). It is this provision which it is submitted represents the true intention of the parties on executing the Deed.

  1. Mr Addison notes that the trustees are professional persons who are entitled to expect remuneration for their services and that the parties to the Deed of Company Arrangement and Trust Deed must have expected that the trustees would be remunerated for unanticipated work arising from the operation of and transactions contemplated by those documents.

Section 81 of the Trustee Act and the Court's inherent jurisdiction

  1. In the alternative, the plaintiffs seek an order pursuant to s 81 of the Trustee Act and/or the Court's inherent jurisdiction, authorising payment of the remuneration to the trustees.

  1. There is no doubt that the Court has jurisdiction to authorise the payment of remuneration of trustees (see Re Duke of Norfolk's Settlement Trusts [1982] Ch 61; [1981] 3 All ER 220; Ford & Lee, The Law of Trusts at [612]).

  1. Mr Addison notes that Palmer J in Cuesuper Pty Ltd [2009] NSWSC 981 (at [15] to [17]) cited with approval Williams J in Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd [1999] 2 Qd R 524, who had held that payment of remuneration to trustees could be authorised either under the Queensland equivalent of s 81 of the Trustee Act or in the exercise of the inherent jurisdiction of a court of equity to authorise payment of remuneration to a trustee when the Court considers it necessary for the proper administration of the trust.

  1. The Court's inherent jurisdiction to allow remuneration of a trustee extends to the approval of remuneration for future work done, as well as past work done in administering the trust ( Nissen v Grunden (1912) 14 CLR 297 at [307] - [308]; In re Keeler's Settlement Trusts [1981] Ch 156 at [161] -[162]; Re White; Tweedie v Attorney-General (2003) 7 VR 219 at [233]) and to authorise payment of remuneration at a higher rate than that originally allowed by the trust instrument ( Duke of Norfolk's Settlement Trusts ; Parbery and Others (in their capacity as joint and several administrators of Trio Capital Ltd (admins apptd) and Others) v ACT Superannuation Management Pty Ltd and Others [2010] NSWSC 941).

  1. Mr Addison notes that the inherent jurisdiction can be exercised by the Court in circumstances where the duties are extensive and the trustee can perform them only by seriously sacrificing his own interests ( Marshall v Holloway (1820) 2 Swans 432 at [452] - [453], 36 ER 681 at [689]; Re Cox's Will (1890) 11 LR (NSW) Eq 124) and where the trustees are not prepared to act without being remunerated and no alternative trustees can be found ( In re Freeman's Settlement Trusts (1887) 37 Ch D 148; Re application of Sutherland (2004) 50 ACSR 297).

  1. In Parbery, Palmer J (at [20]) summarised the circumstances when an application could be made to the Court's inherent jurisdiction:

the administrator or liquidator of a corporate trustee does not have an immediately enforceable right of recoupment for fees and expenses out of the trust funds. Rather, where the terms of the trust instrument, or the trustee's fees recoverable out of trust assets under the trust instrument, are inadequate to provide sufficiently for the costs and expenses of the administrator or liquidator, the administrator or liquidator may appeal to the Equity Court's inherent jurisdiction in the administration of trusts to seek allowance for remuneration and expenses out of the trust assets, where it appears clear that the remuneration and expenses are for work done for the benefit of the trust. Whether the administrator or liquidator is granted such an allowance out of trust assets is a matter in the court's discretion, having regard to all the circumstances of the case: see for example Re Berkeley Applegate at Ch 50H; All ER 83.

  1. Section 81 of the Trustee Act gives the Court power to order expenditure where it would be considered to be expedient in the management or administration of any property vested in trustees and such power does not exist in trust instruments. The payment of remuneration to trustees has been considered to be "expenditure" for the purposes of the section ( Cuesuper per Palmer J at [19]).

  1. The formation of opinion as to what is expedient has been held to be "a criterion of the widest flexible kind ... I do not think that the powers given by s 81 were intended to be restricted by any implications" ( Riddle v Riddle (1952) 85 CLR 202 at [214] per Dixon J cited with approval by Austin J in Arakella Pty Ltd ).

Advice

  1. As to the construction of the Trust Deed, I accept that this is a proper application for judicial advice. I also accept that clause 15.2 indicates in broad terms an intention that the trustees receive remuneration for all the work performed in connection with the trust (and, by reference to clause 18, previously in respect of the Deed of Company Arrangement).

  1. However, the qualification is that they be remunerated in accordance with their entitlement to remuneration pursuant to clause 18 and clause 18 subjects the entitlement of the trustees both to remuneration and reimbursement to the operation of clause 13. Further, clause 18.2 limits the entitlement of the trustees to draw their remuneration and costs from the trust fund to the limits approved.

  1. As to the first qualification (the reference to clause 13) the words "subject to the approval of" in clause 13 in their ordinary sense would mean that the remuneration is to be calculated at the specified rates only if so approved by the creditors (or the court). I am inclined to the view that clause 13 specifies only the method of approval of the basis for calculation of the remuneration, such that once approved at the second meeting of creditors (in the context of quantum of the fees then approved), there is a reasonable basis for concluding that this operates going forward as approval of such as the continuing basis for calculation of fees for any further work (such that approval of the basis for calculation of the additional unanticipated work is not necessary if the work is charged at the earlier approved rates or on the earlier approved time basis). However, that does not address the second qualification - which is that under clause 18.2 the trustees are "entitled to draw" their remuneration "to the limit approved by the creditors" (only).

  1. I accept that this would not preclude creditors from approving additional remuneration (as happened when the first amount of additional remuneration was approved) and that this should not be read as precluding additional remuneration of the kind now sought. However, what it does appear to mean is that there is no entitlement under clause 18 to draw remuneration and costs in excess of the approved amount in the absence of further creditor approval or court order.

  1. I was inclined to think that clause 18.2 might be able to be read as merely a mechanical provision dealing with the time at which funds or amount for which funds could be drawn down during the course of the Trust (rather than the entitlement to remuneration as such). However, on reflection I do not think that pays sufficient regard to the limitation imposed by reference to the 28 June 2010 creditors' approval.

  1. While the parties' intention certainly appears to have been that the trustees would be remunerated in full for the work performed by them, it is also clear that this was to be subject to approval by the creditors (and that the trustees were only to be entitled to draw funds from the trust to meet that entitlement up to approved limits). I accept that this is unworkable once the committee of creditors has been dissolved on termination of the Deed of Company Arrangement, and that one must strive to give reasonable meaning in a commercial context to the remuneration clause. However, it seems to me that to construe the clause to produce the outcome for which the trustees contend would be impermissibly to rewrite the clause.

  1. I have, however, no doubt that the appropriate result (and that which must have been intended by creditors) is for the trustees to be properly remunerated for their efforts on behalf of the creditors.

  1. I consider that this is expedient in the management and administration of the Trust, where it is not practicable for remuneration to be awarded under the mechanism contemplated by the Trust Deed. Further, I accept that the Court's inherent power to allow remuneration to a person administering a trust fund (as well as the wider equitable principle that allowance be made for costs incurred and skill and labour expended in connection with the administration of trust property) justifies the payment of remuneration and expenses for work done by the trustees in this case.

  1. The trustees submit that they have been put in their current position as a result of the delay in the operation of the Deed of Company Arrangement and the need for additional work (occasioned by the unforeseen need to reach agreement as to the release required by the Receivers) coupled with the lack of a specific mechanism in the Trust Deed for approval of further remuneration over and above that approved by creditors during the earlier administration and Deed periods.

  1. It is submitted (and I agree) that the trustees should not be put in the position of having to collect, and then distribute, more than $1,000,000 to the beneficiaries of the trust without being paid for their services.

  1. It is further noted that as the Trust fund will be distributed on a pro rata basis to the beneficiaries, the effect of these proposed orders has an equal effect upon the beneficiaries.

  1. As to whether any formal regime of notice should be required or a regime comparable to that required for approval of liquidators' remuneration, it is submitted that if the proposed orders were made pursuant to s 63 of the Trustee Act , then no notice to the beneficiaries would be required and that to require a complicated regime of notice would defeat the purpose of saving time and costs to the Trust (which would otherwise ultimately reduce the distribution to the beneficiaries). I agree, particularly in circumstances where, as a practical matter, creditors will be informed at the time of distribution, if not before, of the outcome of the trustees' application.

Costs

  1. As to costs, the trustees seek an order that the costs of these proceedings be paid out of the Trust fund on an indemnity basis. Clause 18.3(c) of the Trust Deed permits the trustees to be indemnified for all "all actions, suits, proceedings, accounts, claims and demands arising out of the Trust or the DOCA which may be commenced, incurred by, or made on the Trustees in their former capacities as administrators or deed administrators of the DOCA, or in connection with the Trust or their role as Trustees, by any person, and against all costs, charges and expenses incurred by the Trustees in respect of these".

  1. Section 93 of the Trustee Act provides:

(2) The Court may order the costs, charges and expenses of and incident to any application or any order under this Act to be paid or to be raised by sale or mortgage out of the property in respect whereof the same is made or out of the income thereof, or to be borne and paid in such manner and by such persons as to the Court may seem just.
(3) In any proceedings with respect to the management or administration of any property subject to a trust or forming part of the estate of a testator or intestate, or with respect to the interpretation of the trust instrument, the Court may, if it thinks fit, order any costs to be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings.
(4) This section shall extend to any direction opinion or advice, any payment into or out of court, and any conveyance or transfer in pursuance of an order.

  1. It is noted by Mr Addison that an order of that kind is said to be usual (citing J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia , (7th edn) at [2136]).

  1. I consider it appropriate that the costs of the application be borne out of the Trust Fund.

Orders

  1. I make the following orders:

1. Pursuant to s 81 of the Trustee Act 1925 (NSW), or otherwise in the inherent jurisdiction of the Court, I order that the plaintiffs be entitled to payment out of the Trust Fund of the further sum of $50,000 plus GST for their remuneration, costs and expenses of administering the Jackgreen (International) Pty Ltd Creditors' Trust until the Trust is terminated in accordance with its terms.

2. I order pursuant to s 93 of the Trustee Act 1925 (NSW) that the plaintiffs' costs, charges and expenses of and incidental to this application be paid on an indemnity basis out of the Trust property in the possession of the plaintiffs.

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Amendments

19 July 2011 - The word "reliance" has been replaced by the word "release"


Amended paragraphs: 55

Decision last updated: 18 July 2011

Key Legal Topics

Areas of Law

  • Trusts & Equity

Legal Concepts

  • Fiduciary Duty

  • Trustee Remuneration

  • Court's Inherent Jurisdiction

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