In the matter of MJM(WA) Enterprises Pty Ltd (in liq)

The matter before the Federal Court of Australia involved a winding up application by MJM(WA) Enterprises Pty Ltd, which was in liquidation. The central dispute was whether the liquidator could lawfully draw remuneration from the trust assets managed by the company, which was its sole activity. The dispute raised questions about the priority of trust creditors and the applicable statutory order in relation to trust assets.

The legal issues centred around the interpretation of relevant statutory provisions, specifically whether the statutory order of priority applied to the trust assets and creditors. The liquidator argued that the statutory priority did not extend to trust assets and that he was entitled to draw his remuneration from these assets. The opposing party contended that the statutory priority did apply and that the trust assets should be distributed according to the priority order, leaving the liquidator without entitlement to remuneration from these assets.

The court held that the statutory order of priority did indeed apply to the trust assets and creditors. The court reasoned that the trust assets were not to be considered as the property of the company but were held by it in a fiduciary capacity for the beneficiaries. Therefore, the liquidator’s claim to remuneration from these assets was not permissible under the statutory priority. The court ruled in favour of the opposing party, confirming that the trust assets were to be dealt with according to the statutory priority, leaving no entitlement for the liquidator to draw remuneration from these assets.

The final orders of the court directed that the liquidator should not draw remuneration from the trust assets and that the trust assets should be distributed in accordance with the statutory priority order. The court’s decision underscored the importance of distinguishing between the company’s property and assets held in a fiduciary capacity for beneficiaries in the context of external administration.