In the matter of Fellmane Pty Ltd (in liq)

The matter before the court involved Fellmane Pty Ltd, a company that had been placed into liquidation, and which was also the former trustee of a family trust. The liquidator of the company sought directions regarding the sale of trust property under the terms of a proposed deed of transfer and release. The proposed deed included the payment of an $850,000 cash sum, the release of the company from certain guarantees, and the discharge of a mortgage. The issue before the court was whether the receiver was justified in selling the trust property under these terms, and whether the proposed transaction would engage the company's right of indemnity against the principal debtor.

The court found that the proposed deed would not engage the company's right of indemnity against the principal debtor, as the payment was not made to the creditor or for the purpose of transferring property to the creditor. The court also found that the guarantor's right of subrogation was not dependent on the payment of the principal debt in full, and that the right of subrogation was not excluded by contract. The court held that the proposed deed was not a valid transaction, as it would not provide the company with any meaningful recourse against the principal debtor.

The court refused to give the directions sought by the liquidator, finding that the proposed transaction was not in the best interests of the company's creditors. The court emphasised the importance of ensuring that liquidators act in the best interests of creditors, and that any transaction entered into by a liquidator must be fair and reasonable. The court's decision highlights the need for careful consideration of the terms of any proposed transaction, particularly where the liquidator is also a party to the transaction.