Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd

Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd concerned the validity of a deed by which a trustee of a trust was removed and the nature of the former trustee's right of indemnity following its removal. The dispute also involved the question of whether the deed of removal was a fraudulent conveyance, and the issue of the standing of a respondent to pursue recovery of secret commissions received by an appellant. The Full Court of the Federal Court of Australia was asked to determine these matters.

The legal issues included whether a trustee's right of indemnity is akin to a creditor's right for the purposes of s 86 of the Law of Property Act 1936 (SA) and whether the deed of removal was voidable as a fraudulent conveyance. The court also needed to determine whether the second respondent was entitled to pursue recovery of secret commissions received by the second appellant. The Full Court held that the right of indemnity of a trustee who has been removed can be considered a creditor's right for the purposes of s 86 of the LPA. The court found that the deed of removal was entered into with the intent to defraud creditors and was therefore voidable. Finally, the court found that the second respondent was entitled to pursue recovery of secret commissions under the deed of assignment from the principal to the second respondent.

The Full Court's reasoning was that the purpose of s 86 of the LPA is to protect creditors from fraudulent conveyances that would diminish their position. A trustee's right of indemnity, though not a traditional creditor's right, can be considered a creditor's right for the purposes of the statute when that right is diminished by a transaction with the requisite intent to defraud. The court found that the deed of removal was entered into with the intent to defraud creditors, as it delayed the former trustee's right to payment and removed its rights of self-help. The court also held that the second respondent was entitled to pursue recovery of secret commissions under the deed of assignment, as the principal had assigned all rights to pursue recovery of those commissions to the second respondent. The Full Court dismissed the appeal and ordered that certain sums be paid to the respondents and that the appellants pay the respondents' costs of the appeal.

The final orders of the court included the variation of Order 4 of the orders made on 4 January 2022 in SAD 312 of 2018, the dismissal of the appeal, the payment of the respondents' costs of the appeal, and the payment of moneys held by the court as security for the respondents' costs of the appeal to the respondents. The Full Court's decision was based on the statutory provisions, the purpose of those provisions, and the principles of equity and justice.