Plaintiff v First Defendant

1 By writ filed 31 March 2021, the plaintiff ('BFI') claims the following relief:

1. A declaration as to the amount of the debt owed to BFI pursuant to the Trustee's Right of Indemnity at the date of judgment.
2. An order that BFI be appointed as receiver of the Debt [owed by the first defendant], with the power to enforce the Debt in this proceeding.

1. An order that Olga [the first defendant] pay to BFI, as receiver of the Debt, the amount of the Debt, together with interest pursuant to statute from the date of issue of the writ, in satisfaction of the amount determined by paragraph A.

1. Costs.
2. Such other relief as the Court considers fit.

2 At the centre of the dispute is the uncontested entitlement of a guarantor to recover the amount of a debt that it paid under a guarantee, from the principal debtor.

3 BFI's entitlement to make this claim is disputed as a consequence of issues arising from the following agreed facts:

(a) By deed dated 10 May 2006, C & O Voukidis Pty Ltd ('COV') in its capacity as trustee of the Voukidis Family No. 2 Trust ('the Trust') guaranteed the liability of the first defendant ('Olga') and her spouse Christos Voukidis ('Christos') to the National Australia Bank Limited ('the NAB'), limited to $2,450,000, in respect of debts owed to the NAB by Olga and Christos ('the COV Guarantee').[1]

(b) On 27 May 2014, COV was ordered to be wound up and ipso facto was removed as trustee of the Trust.

(c) On 13 April 2015, COV discharged its liability to the NAB under the COV Guarantee.

(d) By deed dated 18 September 2019, COV, by its liquidator, purported to assign to BFI, its rights with respect to the debt owed to it by Olga and Christos, described further in paragraph 20 below.

4 The relevant facts with respect to this dispute were agreed by the parties as follows.

5 On 14 January 1993, Olga and Christos were registered as the proprietors of Lot A/959723, being 5 Wyatt Avenue, Burwood NSW ('Wyatt Avenue').

6 By trust deed dated 15 November 2001 ('the Trust Deed'), COV was appointed the trustee of the Trust. The Trust is a discretionary trust, and the potential objects of the Trust include Olga and Christos, together with their relatives. With respect to COV:

(a) Olga was, between 13 May 1994 and 20 June 2013, one of two directors of COV;

(b) Christos was, between 13 May 1994 and 4 May 2016, the other of the two directors of COV; and

(c) on 27 May 2014, a liquidator was appointed to COV and pursuant to the terms of the Trust Deed, ipso facto, COV was removed as the trustee of the Trust.

7 The second defendant ('Voukidis Management') was appointed as the replacement trustee of the Trust on 28 May 2014.

8 In April 2003, pursuant to orders made in the Local Court of New South Wales, Christos and Olga transferred Wyatt Avenue to COV in its capacity as trustee of the Trust subject to registered mortgage no. 9536878J in favour of the NAB dated 2 January 2003.

9 As set out in paragraph 3(a) above, COV executed the COV Guarantee on 10 May 2006.

10 By agreement made between the NAB, Christos and Olga in or about December 2007 ('the Portfolio Agreement'), the NAB agreed to lend to Christos and Olga an amount of up to $2,450,000, the repayment of which was to be secured by two properties owned by Olga. The Portfolio Agreement included the NAB Portfolio Facility Agreement Terms and Conditions and the NAB Portfolio Facility Agreement Details.

11 It was a term of the Portfolio Agreement that the COV Guarantee would apply to any amounts advanced by the NAB to Christos and Olga under the Portfolio Agreement.

12 By agreement dated 29 October 2010 between the NAB, Christos and Olga, the parties agreed to vary the terms of the Portfolio Agreement, by:

(a) reducing the amount which the NAB agreed to lend to Christos and Olga to $1,840,000; and

(b) releasing the initial securities given to the NAB in support of the loan to Christos and Olga and replacing them with a new security over a different property.

The COV Guarantee continued to apply to the monies lent under the Portfolio Agreement, up to a limit of $1,840,000.

13 On 28 February 2015, the NAB sold Wyatt Avenue as mortgagee for $1.8 million; and on 13 April 2015, pursuant to the terms of the COV Guarantee, it appropriated the proceeds of sale in the amount of not less than $1,517,816.22 in reduction of amounts owing by Christos and Olga pursuant to the Portfolio Agreement as varied.

14 On 4 March 2005, Perpetual Trustee Company Ltd ('Perpetual') and Onetofour Holdings Pty Ltd entered into an agreement under which Perpetual agreed to lend money to Onetofour.

15 By deed of guarantee dated 4 March 2005 ('the Perpetual Guarantee'), COV and Christos, among others, agreed to guarantee the repayment of the Perpetual Debt.

16 In January 2013, Perpetual issued proceeding number 2013/00083664 in the Supreme Court of New South Wales against, among others, COV and Christos, with respect to their liability under the Perpetual Guarantee ('the Perpetual Debt').

17 By letter of demand dated 15 August 2013 to COV, Perpetual demanded payment of the Perpetual Debt in the sum of $1,732,574.

18 By deed dated June 2016 between Perpetual and WeChat Pty Ltd ('WeChat'), Perpetual assigned the Perpetual Debt, among other things, to WeChat.

19 By deed dated 26 August 2016 between WeChat and BFI, WeChat then assigned the Perpetual Debt, among other things, to BFI.

20 By deed of assignment between COV and BFI dated 18 September 2019 ('the COV-BFI Assignment Deed'), in consideration of the payment of $5,500 by BFI, COV purported to assign to BFI certain rights, including:

(a) its common law right of indemnity as guarantor against Christos or Olga arising from COV's payment to the NAB under the COV Guarantee ('the Surety Indemnity Debt'); and

(b) its equitable rights of indemnity (relevantly expressly its right of exoneration and supporting lien or charge) from all liabilities incurred in acting as trustee of the Trust and the supporting charge over the assets of the Trust.

21 The recitals to the COV-BFI Assignment Deed are as follows:

1. On 27 May 2014 the Federal Court of Australia made an order that COV be wound up and Gary Stephen Fettes was appointed Liquidator of COV (the Liquidator).

B. Since 27 May 2014, the Liquidator has investigated the affairs of COV.

1. At the time of the Liquidator's appointment, COV was the trustee of, inter alia, the Voukidis Family No 2 Trust and the Voukidis Family Trust. Each of those trusts were discretionary trusts.

1. COV did not hold any assets in its own right, but only acted as trustee of the Trusts.
2. COV was the registered proprietor of the Wyatt Avenue property (in its capacity as trustee of the VF Trust No 2) which it mortgaged to NAB.
3. COV guaranteed the obligations of Mr Christos Voukidis and Mrs Olga Voukidis for advances made to them by NAB under the NAB Portfolio facility.
4. The Liquidator has agreed to assign certain choses in action against Mr Christos Voukidis and Mrs Olga Voukidis to Break Fast upon the following terms and conditions.

22 The terms of the COV-BFI Assignment Deed include the following:

2.1 Upon payment of the Consideration by Break Fast to COV in accordance with Clause 4, COV hereby assigns all its right title and interest in the following Choses in Action to the Assignee, effective upon the execution of this Deed and subject to the terms of this Deed:

2.1.1 All the rights of COV against Christos Voukidis, or Olga Voukidis (or both of them) arising from the giving by COV of the Wyatt Avenue Guarantee and the COV-NAB Mortgage, including rights of Indemnity of COV against Christos Voukidis and / or Olga Voukidis as principal borrowers (or principal debtors) pursuant to the NAB Portfolio facility and all rights to be subrogated to NAB's rights under any other security it holds or held to secure the repayment of the debts owed under the NAB Portfolio facility.

2.1.2 All rights of COV against the trust property of the Voukidis Family No 2 Trust and Voukidis Family Trust including:

• all rights of recoupment out of the assets of Voukidis Family No 2 Trust and Voukidis Family Trust; and
• all rights of exoneration from all liabilities incurred in acting or trustee of the Voukidis Family No 2 Trust and the Voukidis Family Trust; and
• any equitable lien or charge over the assets of the Voukidis Family No 2 Trust and the Voukidis Family Trust in order to enforce its right of recoupment and/or right of exoneration.

23 At no time prior to commencement of this proceeding did COV or BFI provide written notice to Olga of the assignment purportedly effected by the COV-BFI Assignment Deed.

25 On 22 April 2021, BFI was appointed as interim receiver of all causes of action against Olga which are the subject of this proceeding. These include any claims of COV against Olga arising from the giving by COV of the COV Guarantee, including rights of indemnity of COV against Christos and Olga as principal debtors under the Portfolio Agreement.

26 As a result of these facts, the first defendant contended that the proceeding was a nullity because BFI had no proprietary interest in the Surety Indemnity Debt prior to the filing of the proceeding.

27 The questions that I am required to determine to resolve this dispute are as follows:

On a proper construction, did clause 2.1.1 of the COV-BFI Assignment Deed purport to assign:

(i) both the legal and beneficial interests in the right of indemnity of COV in relation to the Surety Indemnity Debt; or

(ii) only COV's legal title in the Surety Indemnity Debt subject to the interests under the Trust?

(b) Question 2

If clause 2.1.1 did purport to assign both the legal and beneficial interests, and COV as a bare trustee had no power to sell the Surety Indemnity Debt, was the effect of clause 2.1.1 of the COV-BFI Assignment Deed:

(i) to assign all the legal and beneficial interests in the Surety Indemnity Debt;

(ii) to assign COV's legal title in the Surety Indemnity Debt subject to the interests under the Trust; or

(iii) a nullity?

More particularly, does the lack of power to sell trust property render the purported assignment a nullity; or cause the assignee to take subject to the known equitable interests?

If the purported assignment was otherwise a nullity, was the liquidator nonetheless empowered to assign both the legal interest and the beneficial interest in the Surety Indemnity Debt pursuant to s 477 of the Corporations Act 2001 (Cth) ('the Act')?

(i) effect an assignment of COV's right of exoneration with respect to its liability for the Perpetual Debt? and

(ii) give BFI standing, as assignee of the right of exoneration, to file this proceeding to enforce the Surety Indemnity Debt?

(e) Question 5

Question 1 - On a proper construction, did clause 2.1.1 of the COV-BFI Assignment Deed purport to assign both the legal and beneficial interests in the right of indemnity of COV in relation to the Surety Indemnity Debt or only COV's legal title in the Surety Indemnity Debt subject to the interests under the Trust?

28 The relevance of this question is that, as set out in paragraph 38 below, the first defendant argued that, if COV purported to assign both the legal and beneficial interests in the Surety Indemnity Debt to BFI, such an assignment is beyond power and the COV-BFI Assignment Deed is therefore a nullity.

29 The plaintiff submitted that, on a proper construction, the COV-BFI Assignment Deed should be interpreted as COV assigning to BFI whatever rights COV had, and was able to assign, for the following reasons:

(a) The recitals acknowledge that Wyatt Avenue (the sale of which gave rise to the Surety Indemnity Debt as an asset of COV) was an asset of the Trust.

(b) Under clause 2.1.1, COV assigned 'all its right title and interest' in 'all the rights of COV against ... Olga', including the rights arising under the guarantor's right of indemnity (also known as, the Surety Indemnity Debt). Twice, it is stated that COV assigns:

(i) 'all';

(ii) 'COV's'; and

(iii) 'rights'.

30 This construction makes commercial sense and is consistent with the purpose of the COV-BFI Assignment Deed being to enable BFI to pursue claims against Olga directly, without the involvement of COV or its liquidator (as far as possible).

31 This is also consistent with the evidence of the director of BFI, Mr Taylor.

32 The first defendant submitted that, on its proper construction, the COV-BFI Assignment Deed purported to assign all the legal and beneficial interests in the Surety Indemnity Debt, for the following reasons:

(a) The evidence of Mr Taylor as to the plaintiff's subjective intention in entering into the COV-BFI Assignment Deed was inadmissible.

(b) The object and purpose of the transaction was plainly to assign all rights of COV in the property identified, whether it was then appreciated this was efficacious or not. It is not evident that the sale related to some part of the rights.

(c) There was no authority for the proposition that the principles of construction and commercial contracts can be applied to rescue a defective transaction of the whole divided into parts for the purpose of benefitting a plaintiff's case.

33 To determine the meaning of the terms of a commercial contract, the Court will ask the question, what would a reasonable businessperson have understood those terms to mean?[2] For the purpose of answering that question, the reasonable businessperson is placed in the position of the parties,[3] and the Court applies the following principles:

(a) The terms are construed objectively and the subjective intentions of the parties are irrelevant.[4]

(b) The objective approach requires reference to not only the text and the ordinary meaning but also:

(i) the context, being the entire text of the contract including matters referred to in the text of the contract; and

(ii) the commercial purpose of the contract.

These matters will ordinarily be identified by reference to the contract alone.[5]

(c) If, after completion of this process, the language used in the contract 'is ambiguous or susceptible of more than one meaning',[6] then evidence of surrounding extraneous circumstances is admissible to assist in the interpretation of the contract.[7]

(d) Surrounding circumstances are 'events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating'.[8]

34 In my opinion, as explained in paragraph 36 below, the difference between the competing constructions in question 1 is more apparent than real.

35 A reasonable businessperson placed in the position of the parties would have understood clause 2.1.1 to mean, relevantly, that COV was assigning to BFI 'all its right title and interest' in the Surety Indemnity Debt. All of COV's 'right title and interest' plainly included the legal interest which it undoubtedly held. That legal interest would be transferred subject to the interests of the beneficiaries. I make this finding for the following reasons:

(a) The text of the COV-BFI Assignment Deed expressly refers to the assignment of 'all [COV's] right title and interest'. The ordinary meaning of the text is unambiguous. The terms of the clause are to be contrasted with the terms of the mortgage in Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd.[9] In that case, the Full Court of the Supreme Court of Western Australia considered the construction of a clause in which a trustee charged all his interest in freehold or leasehold property. Crucially, the clause included the words 'as beneficial owner'.[10] The Court upheld the trial judge's construction of the clause as being 'confined to charging property of which a trustee covenantor is the beneficial owner and not property which the covenantor holds purely as a trustee',[11] thereby excluding trust property.[12]

(b) Here, the fact that the parties, in the recitals, acknowledge that COV holds Wyatt Avenue on trust is consistent with the fact that the parties intended that COV was assigning at least the legal title to BFI, but it was recognised that BFI would take the legal title with the beneficiaries' interest 'engrafted onto it as a restriction on the manner in which the trustee may deal with trust assets'.[13]

(c) That intention was consistent with the commercial purpose, apparent from the context, being to allow BFI to collect the Surety Indemnity Debt from Christos or Olga for the purpose of raising a fund from which the right of exoneration could be exercised. In particular, it is apparent from the fact that the parties knew that:

(i) as a result of being assigned the Perpetual Debt, BFI was the sole creditor of the Trust; and

(ii) the exercise of the right of exoneration would result in the repayment of BFI, as assignee of the Perpetual Debt, from the recovered proceeds of the Surety Indemnity Debt.

36 As stated above, the difference between the competing constructions in question 1 is more apparent than real. A legal owner who transfers its interest in a trust asset does not transfer part of the asset. The equitable interest is not 'cut out' of the legal interest.[14] Accordingly, as discussed in the answer to question 2 below, unless the sale is to a bona fide purchaser for value without notice, the transfer will be of the whole of the asset but with the equitable interest engrafted on it.[15]

Question 2 - If clause 2.1.1 did purport to assign both the legal and beneficial interests, and COV as a bare trustee had no power to sell the Surety Indemnity Debt, what was the effect of clause 2.1.1 of the COV-BFI Assignment Deed?

37 The plaintiff submitted that the assignment under clause 2.1.1 was not a nullity, and was effective to assign at least the legal title to the Surety Indemnity Debt, for the following reasons:

(a) it was not necessary to outline the varying bundle of property rights in clause 2.1.1 because the effect of the clause is that COV assigned so much of those rights as were capable of assignment, being:

(i) the legal title to the Surety Indemnity Debt (as a common law chose in action); and

(ii) COV's right of exoneration and any equitable lien or charge supporting the right; but

(iii) not the beneficial interest in the Surety Indemnity Debt being an asset of the Trust.

(b) The fact that COV had no power of sale, without court assistance, to sell the assets of the Trust is no barrier to the trustee assigning its charge. The assignee of the charge, in approaching a court for assistance in enforcing the trustee's charge, would be required to recognise the equities, which attach to the property (being the obligation to only apply proceeds recovered from realisation of trust property in satisfaction of trust debts and otherwise account for any surplus to the new trustee).

38 The first defendant submitted that, by purporting to assign all of the legal and beneficial interests in the Surety Indemnity Debt to BFI, the effect was that the assignment was a nullity, for the following reasons:

(a) As a bare trustee, COV had no power to sell the Surety Indemnity Debt without the assistance of the Court.

(b) Section 477(2)(c) of the Act does not empower the liquidator to sell or dispose of property, because:

(i) a liquidator has no power to sell property which the company itself is not able to assign or which is property inherently incapable of being assigned;

(ii) the powers of a bare trustee do not extend to a power of sale to realise its right of indemnity and so a liquidator must obtain a court order permitting such a sale; and

(iii) the legal interest could not be validly transferred subject to trust obligations because obligations cannot be sold.

(c) Accordingly, BFI purchased no interest in the Surety Indemnity Debt capable of founding the proceedings against Olga.

(d) The defect in a title cannot be retrospectively remedied because no order can be made nunc pro tunc to remedy the purported sale.

(e) The view that the law of property necessarily requires and divides into distinct legal and beneficial ownership is incorrect.

(f) The liquidator could not cause COV to transfer, using s 477 of the Act or otherwise, any interest in the assets of the Trust, including the Surety Indemnity Debt and the assignment was therefore a nullity.

39 In my opinion, the answer to this question arises from consideration of established principles of property and equity, which I rehearse as follows.

40 The legal owner of a property is the person who is vested with the rights recognised at common law to enjoy the property to the exclusion of others.[16] The incidence of ownership has been defined as follows:

Rights of ownership include the right to exclude others, to destroy or alter the property, to alienate the property, to maintain it, and to recover possession of it. Rights of ownership are divisible, in that property may be bailed, pledged, hired, mortgaged, or partially transferred to another. As a consequence, an owner may not always have a right to possess and may be restricted in exercising rights such as to alter or destroy the property.[17]

41 Property does not refer to a thing but rather to the legal relationship arising from enforceable rights that relate to that thing. As the plurality observed in Yanner v Eaton:

The word 'property' is often used to refer to something that belongs to another. But ... 'property' does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of 'property' may be elusive. Usually it is treated as a 'bundle of rights'.[18]

42 This 'bundle of rights' can be split. Relevantly, the person who holds the rights recognised at common law (the legal owner) may be subject to the rights of others recognised in equity (including the equitable or beneficial owner).

43 A classic example of such a bundle of rights arises from property that is subject to a trust. The legal owner 'has all the powers incidental to ownership subject only to the power of the beneficiaries to compel the trustee to exercise the trustee's powers in accordance with the terms of trust.'[19] The beneficiaries' interest is not 'cut out of the trustee's legal estate but rather ... engrafted onto it as a restriction on the manner in which the trustee may deal with trust assets'.[20]

44 Generally, a trustee is personally liable for the debts or liabilities incurred in the execution of its duties and powers of the affairs of the trust.[21] This liability arises in accordance with ordinary principles of law and creditors have no direct right to the assets of the trust. However, creditors may apply to a court of equity to be subrogated to the trustee's right of indemnity against trust assets, as explained below.[22]

45 The trustee has an equitable right of indemnity, which consists of two separate rights, being:

(a) a right of reimbursement or recoupment, if the trustee has applied its own property in discharge of the liability; and

(b) a right of exoneration to apply trust assets for the purpose of discharging the liability.[23]

46 A simple example of the exercise of a right of reimbursement arises when a solicitor, who has paid a client's debt from its personal account, transfers the amount so paid from its trust account to its personal account. A simple example of the exercise of a right of exoneration occurs when a solicitor, who has incurred a debt on behalf of its client, pays the debt to the creditor directly from its trust account.

47 There is an important distinction between the right of reimbursement and the right of exoneration. On the one hand, the right of reimbursement is a personal asset of the trustee because it has applied its own funds to discharge the trust liability.[24] On the other hand, in exercising the right of exoneration, the trustee remains under a fiduciary duty to apply the trust funds in discharge of the liability.[25]

48 Apart from a right of sale under the terms of a trust, at general law the trustee may exercise its right of indemnity without the assistance of a court of equity where it is not necessary to sell trust assets.[26]

49 The right of indemnity is supported or secured by a proprietary interest,[27] (commonly described as an equitable lien over the trust assets),[28] which does not depend upon possession,[29] and empowers a trustee (including a former trustee):

(a) to retain possession of the assets it holds as security for the indemnity;[30] and

(b) to apply to a court of equity for assistance in exercising its right of indemnity by a judicial sale or the appointment of a receiver over the trust assets.[31]

However, the right of indemnity itself does not confer any power of sale of trust assets to raise a fund because it does not grant title to the trust assets.[32]

50 The right of indemnity is a beneficial interest in the trust assets and has priority over the interests of the beneficiaries of the trust.[33] On the trustee's application, a court of equity will assist the trustee to realise trust assets to satisfy the right of indemnity;[34] and, on a creditor's application, may order that a creditor be subrogated to this right permitting it indirect access to trust assets.[35]

51 A former trustee holds any trust assets as a bare trustee. A bare trustee:

(a) has no active duties to perform other than to get in the trust assets, to protect it and vindicate rights attached to it, which may include bringing proceedings;[36]

(b) has no power to sell trust assets, without court order;[37]

(c) retains its right of indemnity with respect to liabilities properly incurred in the conduct of the affairs of the trust;[38]

(d) may exercise its right of indemnity from trust assets from funds held by it without seeking the assistance of the courts, if it is not necessary to sell trust assets;[39] and

(e) may apply to court for a judicial sale of trust assets or appointment of a receiver, if a sale is necessary for the exercise of the right of indemnity, whether it be reimbursement or exoneration.[40]

52 A sale of a trust asset by a bare trustee, whether deliberate or inadvertent, is a breach of trust because 'a breach of trust consists in nothing more nor less than an act by the trustee in contravention of the duties imposed upon him by the trust, or an act done in excess of his powers'.[41]

53 A former corporate trustee can be equated to that of a bare trustee.[42] Accordingly, a sale by an administrator or liquidator of a former corporate trustee of assets, which the former trustee held as a bare trustee, is a breach of trust.[43]

54 The effect of a sale by a bare trustee in breach of trust may result in the following:

(a) If the sale has not been completed, equity may intervene to restrain the completion of the sale.[44]

(b) If the sale is complete and the purchaser is a bona fide purchaser for value without notice, the sale is effective to transfer the legal and beneficial title,[45] even if 'the trustee has acted in breach of an express restriction of the usual power of sale'.[46]

(c) If the purchaser has notice, it takes it as a constructive trustee, subject to the equitable interest and 'is liable in equity to the same extent and in the same manner as the person from whom he made the purchase; his conscience is equally bound with that of his vendor, and he acquires only what his vendor can honestly transfer'.[47] A declaration of a constructive trust may frequently be accompanied by an order for re-conveyance of the trust assets.[48] As a constructive trustee, the purchaser is liable not merely to a proprietary remedy but also to an order to pay equitable compensation to the beneficiary for any loss.[49]

(d) The sale to the purchaser with notice of the breach of trust may be set aside by a court of equity.[50] However, the sale is only voidable, not void or a nullity.[51]

(e) The sale may be subsequently rendered valid by a court order made nunc pro tunc authorising the trustee to sell the trust assets.[52]

55 In summary, a sale by a bare trustee in breach of trust is effective to convey the legal title even if the purchaser has notice; but the purchaser will be subject to a court of equity granting remedies including those referred to in the previous paragraph.

56 The position of a bare trustee is to be contrasted with a purported sale by a non-owner of property that, in accordance with the principle of nemo dat quod non habet, usually effects no transfer of property rights to the would-be purchaser_._[53]

57 The first defendant's submission that the sale by a bare trustee is a nullity is contrary to the above analysis and was made without reference to any authority. It is also inconsistent with the authorities that have considered the effect of sales of trust assets by liquidators of trustee companies, after their removal from office. In each of the cited cases,[54] the liquidators of former trustees, who sold assets without power, were excused from their breach of duty under s 1318 of the Act. It was not suggested, in any of the authorities, that the sales made without power were void.

58 Accordingly, the assignment of the Surety Indemnity Debt by the liquidator of COV was effective to transfer the legal title. Of course, in accordance with the principles discussed in paragraph 54(c) above, as BFI was well aware that the Surety Indemnity Debt was a trust asset, it took its legal interest subject to a constructive trust. However, as the now legal owner, BFI has standing to file this proceeding. It may even be that BFI, as a constructive trustee, had an equitable duty to preserve the asset, which meant that to file this proceeding before the expiration of the limitation period was not a breach of trust.[55] However, that is not a matter I need to determine.

Question 3 - If the purported assignment was otherwise a nullity, was the liquidator nonetheless empowered to assign both the legal interest and the beneficial interest in the Surety Indemnity Debt pursuant to s 477 of the Act

59 The plaintiff submitted that, under s 477(2)(c) of the Act, the liquidator was empowered to assign both the legal interest and the beneficial interest in the Surety Indemnity Debt, for the following reasons:

(a) The section states a liquidator may 'sell or otherwise dispose of, in any manner, all or any part of the property of the company'.

(b) The Surety Indemnity Debt is a thing in action; and s 9 of the Act provides that the property of the company is 'any legal or equitable estate or interest ... in real or personal property of any description and includes a thing in action'.

(c) Although there is support for the proposition that the power of sale under s 477(2)(c) does not extend to a power to sell assets which are held on trust without the assistance of the court, the effect of the observations by Bell, Gageler and Nettle JJ at paragraph 82 in Carter Holt is that a liquidator does have power to sell trust assets.

60 The first defendant submitted that the power of sale under s 477(2)(c) did not expand the power of the liquidator to assign property beyond that which the company had as a bare trustee. Accordingly, if the assignment of the Surety Indemnity Debt by COV as a bare trustee was a nullity, its assignment by COV's liquidator would similarly be a nullity.

61 As I have found in paragraphs 57-58 above that the purported assignment was not a nullity, it is not necessary for me to answer this question. However, as the issue was fully argued before me, I make the following observations.

62 Under the heading: 'Powers of liquidator', s 477(2)(c) of the Act relevantly provides:

Subject to this section, a liquidator of a company may:

...

(c) sell or otherwise dispose of, in any manner, all or any part of the property of the company; and

...

(m) do all such other things as are necessary for winding up the affairs of the company and distributing its property.

63 In s 9 of the Act, 'Property' is defined to mean to mean 'any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description ...'.

64 Prior to the decision of the High Court in Carter Holt, the weight of authority was that s 477(2)(c) of the Act did not give liquidators of former trustees any greater powers than those of the corporation over which they were appointed, being the powers of a bare trustee limited to protecting trust assets.[56] In Jones, Allsop CJ, after a detailed review of the authorities, rejected the submission that the right of indemnity and its supporting charge were 'somewhat more than a mere hypothecation or lien [which] meant that the liquidator of a company was empowered by s 477(2)(c) when read with s 447(2)(m) to sell the interest and thus the underlying property'.[57] He concluded that s 477(2) of the Act was 'not apt to empower the liquidator [of a former trustee] to sell the underlying [trust] assets'.[58]

65 After the decision in Carter Holt, Moshinsky J, in Re Cremin, Brimson Pty Ltd (In Liq), held that 'to the extent that the subject of a sale [by the liquidator of an insolvent (former) corporate trustee] is the whole of a trust asset, rather than merely the company's lien or charge in respect of that asset, it is not authorised by the power of sale in s 477(2)(c)'.[59] His Honour described the state of the law as settled and explained:

The rationale for this position is that, on a proper understanding, the trust assets are not the 'property of the company', but are instead trust property in which the corporate trustee has a proprietary interest by way of lien or charge to secure its right of exoneration.[60]

66 This statement has since been widely adopted without disagreement.[61]

67 The plaintiff submitted that I should not follow this line of authorities because it was inconsistent with the decision in Carter Holt, and in particular the following statement of Bell, Gageler and Nettle JJ:

As has been understood at least since Maitland's explication of the trust, a trustee as legal owner of the trust assets has all the powers incidental to ownership subject only to the power of the beneficiaries to compel the trustee to exercise the trustee's powers in accordance with the terms of trust. Inasmuch as a court of equity will aid the beneficiaries in the enforcement of the terms of trust, the beneficiaries are described, especially in revenue contexts, as having a beneficial interest in, or occasionally even beneficial ownership of, the trust assets. The beneficiaries' interest is not, however, to be conceived of as cut out of the trustee's legal estate but rather as engrafted onto it as a restriction on the manner in which the trustee may deal with trust assets.[62]

68 Of course, I would be bound to follow Jones and the other authorities referred to above, unless I considered them inconsistent with the High Court's decision in Carter Holt, or plainly wrong.[63]

69 I do not consider that the observations of Bell, Gageler and Nettle JJ in Carter Holt, quoted in paragraph 67 above, are in any way inconsistent with the proposition that s 477(2)(c) of the Act gives liquidators of former trustees no greater powers of sale than those of the corporation over which they have been appointed. The issue before the Court in Carter Holt was not related to the effect of s 477 of the Act. Rather, it concerned the interrelationship of a corporation's trustee obligations and the priority regime for payment of creditors under ss 433 and 556 of the Act.

70 Bell, Gageler and Nettle JJ made it clear that the liquidator of a trustee company acquired no better interest in the trust assets than that held by the company, stating:

The liquidator of a company assumes control of the company's assets subject to equities, and, accordingly, must deal with assets held by the company as trustee in accordance with the terms of trust. But to the extent that the company has a beneficial interest in the trust assets, as it has by reason of the company's right of indemnity in respect of properly incurred trust obligations, the trust assets are property of the company available for the payment of creditors_.[64]_

71 Gordon J held that there was nothing in the Act supporting a statutory intention for s 433 to alter the relationship between a trustee and its beneficiaries.[65] In my opinion, neither is there anything in the text of s 477 or otherwise in the Act supporting a statutory intention to authorise, contrary to the terms of the trust, a sale of trust assets by a former corporate trustee. Indeed, there is a presumption in the interpretation of statutes against an intention to interfere with vested property rights,[66] and such legislation is 'not to be construed as interfering with vested interests unless that intention is manifest'.[67]

72 With respect, I consider the authorities referred to in paragraph 64 above to be correct in holding that s 477(2)(c) of the Act does not authorise the sale of trust assets by a former corporate trustee contrary to the corporation's obligations as a trustee. Accordingly, any unauthorised sale is subject to the remedies referred to in paragraph 54 above.

Question 4 - Did clause 2.1.2 of the COV-BFI Assignment Deed effect an assignment of COV's right of exoneration and give BFI standing to file this proceeding?

73 The plaintiff submitted that clause 2.1.2 of the COV-BFI Assignment Deed effectively assigned COV's right of exoneration, for the following reasons:

(a) Although the clause refers to two trusts, BFI only seeks to enforce the rights of COV with respect to the Trust and the Court has power to limit the transfer of the assignment.

(b) COV's right of exoneration from the Surety Indemnity Debt and the supporting charge are equitable interests of COV in the property which remains despite the appointment of a new trustee.

(c) The fact that a former trustee of the Trust usually has no power of sale of trust assets is no barrier to the ability of the trustee to assign its charge, although the assignee will still be required to approach a court for assistance in enforcing the charge and to recognise the equities which attach to the property recovered by the exercise of the right of exoneration.

(d) Equity will recognise an assignment of an equitable interest and the holder of equitable rights has standing to commence a proceeding. Any requirement to join the assignor was procedural only and did not render the proceeding a nullity.

74 The first defendant submitted that clause 2.1.2 of the COV-BFI Assignment Deed did not effectively assign the right of exoneration, for the following reasons:

(a) The trustee's right of exoneration cannot as a matter of principle be assigned at large because to do so could prejudice an unpaid trust creditor's right to be subrogated to the trustee's right.

(b) The case of Custom Credit should be distinguished because Owen J was there dealing with a clause that had the effect of charging the right of exoneration only 'by way of security for the payment of the moneys hereby secured'.[68] It therefore did not purport to extend to the right of exoneration with respect to debts owed to other creditors. Further, Owen J observed that '[a]n example where an assignment will not be countenanced because it offends basic equitable principles is an attempt to assign the benefit of a contract the performance of which involves personal skill or confidence'.[69] The benefit of the right of exoneration comes with strict fiduciary obligations giving rise to an even starker scenario than one merely involving personal skill or confidence.

(c) The fact that the purported assignment is at large, not referable to the relevant liability and referable to two trusts, means that it is incapable of being read down in any beneficent fashion.

(d) Even if the trustee's charge was assigned to BFI, the assignment of only the trustee's charge would not entitle BFI to bring the proceedings in respect of the Surety Indemnity Debt, because an equitable lien or charge does not grant title to the property that is subject to it; is a mere hypothecation and can only be enforced by the processes of equity. The fact that the holder of an equitable charge, and the right of exoneration in particular, does not have title and cannot effect a sale, without first approaching the court, has the effect that it does not give the holder a basis to file a proceeding.

75 In Custom Credit, the Full Court of the Supreme Court of Western Australia considered whether a trustee's right of exoneration was validly assigned by way of a sub-charge by a covenant in a mortgage. The relevant clause of the mortgage provided:

11.3 [T]he [trustee] as beneficial owner while any moneys remain outstanding hereunder charges all the interest which the [trustee] may have or hereafter acquire in any freehold or leasehold property by way of security for the payment of the moneys hereby secured.[70]

76 As referred to in paragraph 35(a) above, the Court found that, properly construed, the charging clause excluded trust property and was relevantly confined to the trustee's right of exoneration.[71] Owen J concluded that the trustee's right of exoneration was a species of property capable of assignment,[72] for the following reasons:

(a) The right of indemnity is a chose in action.[73] The interest which arises by virtue of the supporting charge is proprietary in nature and is beneficially owned by the trustee.[74]

(b) Equity has permitted the assignment of a chose in action unless such assignment would be contrary to public policy or offensive to equitable principles.[75]

(c) There was no public policy issue that would impact on a solvent trustee's right to assign its right of indemnity for value.[76]

(d) Although the assignment of the right of exoneration relating to the liability to the covenantee was only part of the trustee's right of indemnity, equity had no objection to an assignment of part of a chose in action.[77]

(e) The assignment was not an attempt to delegate the trustee's duties; but rather conferred a priority over the same right.[78] The effect of the charging clause was to set aside the right of exoneration to the extent necessary to satisfy the liability to the covenantee.[79]

(f) The right of indemnity gives the trustee the right to access the trust assets to relieve it of its liability incurred on behalf of the trust. There is 'no logical difficulty in extending that principle beyond an immediate and absolute assignment (by way of an application of trust assets directly to a creditor in payment of a debt) to an assignment by way of charge to secure eventual performance of an obligation'.[80]

(g) The assignment of the charge did not disadvantage the beneficiaries of the trust because the trustee's right of indemnity had priority over the interests of the beneficiaries.[81] The fact that there may be a contest between creditors was a different question that would arise if the proceeds from the right of indemnity were insufficient to satisfy all of the trust creditors.[82]

(h) The covenant was not an impermissible fetter of the trustee's exercise of his discretion because, as Owen J observed:

There is an enormous difference between, on the one hand, a resolution, contract or undertaking by which a trustee binds itself to act in a particular way regardless of the interests of the beneficiaries and, on the other hand a commercial transaction from which the trust obtains an advantage and which brings with it a restriction on the way in which powers are exercised. The former would be a fetter on discretion. The latter may be, depending on the extent of the restriction. It is a question of fact.[83]

(a) whether the right of exoneration is assignable; and

(b) whether the assignee of a right of exoneration has standing to file a proceeding to enforce a chose in action held on trust.

Did clause 2.1.2 of the COV-BFI Assignment Deed effect an assignment of COV's right of exoneration with respect to its liability for the Perpetual Debt?

78 In this case, the assignment of the right of exoneration was absolute and not by way of charge. However, in my opinion, the assignment would nonetheless be valid in equity, for the following reasons:

(a) Equity is concerned with substance rather than form.[84] The effect of the assignment by way of charge in Custom Credit was presumably to give the assignee/creditor the right to apply to a court of equity to require the trustee to apply trust funds in discharge of the assignee/creditor's debt. It is difficult to envisage that:

(i) the practical effect of the assignment in this case would be other than to give the assignee/creditor, standing in the shoes of the former trustee, the same right; or

(ii) given the attendant fiduciary obligations, anyone except a creditor would seek to be assigned a right of exoneration.

(b) As discussed in paragraph 47 above, the right of exoneration and its supporting charge confer the right to apply trust funds in its possession in discharge of a trust liability. Accordingly, if the former trustee held trust funds in a bank account, the assignment may permit the assignee to apply such funds to discharge a trust debt.

(c) However, the right of exoneration and its supporting charge do not confer a power to sell or otherwise deal with trust assets. Accordingly, apart from possibly achieving priority over competing creditors on insolvency, it is not apparent whether the assignment of the charge gives a better right to the assignee than a creditor's right to a claim of subrogation to the trustee's right of indemnity.

(d) As Owen J observed, as the right of indemnity has priority over the beneficiaries, the assignment results in no disadvantage to the beneficiaries.[85] The issue of whether it gives to the assignee a right to the trust assets in priority to other creditors may give rise to an issue of preference. However, the issue does not arise in this case because the uncontradicted evidence is that the assignee, BFI, is the sole creditor of the Trust.

(e) I also reject the first defendant's submission that the assignment was invalid because it would prevent other creditors from exercising their rights of subrogation to the right of indemnity, for the following reasons:

(i) There is no reason why the assignee would not still be subject to equity's power to order other creditors to be subrogated to the assigned right of exoneration.

(ii) The assignment may confer the assignee with priority over other creditors in the event of insolvency; but the assignee would still be subject to an order that it account to other creditors for any excess.

(iii) In this case, there are no other creditors. Therefore, there is no basis for a court of equity to be concerned about the effect of the assignment on other creditors.

(f) I accept the plaintiff's submission that the doubts about the assignability of the right of exoneration expressed by the learned authors Ford and Lee in 'The Law of Trusts',[86] should not be accepted following Carter Holt, where the High Court found that the right of exoneration was not a mere power but was a proprietary interest of the trustee that generated a proprietary beneficial interest in the trust assets.[87]

(g) The first defendant cited no authority in support of the submission that the assignment would be invalidated by the fact that it was expressed to relate to two trusts and was not limited to the BFI Debt.

79 Accordingly, I consider that the effect of clause 2.1.2 of the COV-BFI Assignment Deed was that COV assigned to BFI its right of exoneration and its supporting charge with respect to its liability for the Perpetual Debt.

Did clause 2.1.2 of the COV-BFI Assignment Deed give BFI standing, as assignee of the right of exoneration, to file this proceeding to enforce the Surety Indemnity Debt?

80 In my opinion, the assignment of the right of exoneration and its supporting charge did not give BFI standing to file this proceeding, for the following reasons:

(a) As noted above, the equitable charge supporting the right of exoneration is a mere hypothecation and does not grant title to, nor the power to sell the property to which it relates.[88] Accordingly, the assignment of the right of exoneration and its supporting equitable charge did not transfer the legal ownership of the Surety Indemnity Debt, nor did it give BFI an enforceable right for the debt to be assigned to it. But for the assignment of the title to the Surety Indemnity Debt under clause 2.1.1 of the COV-BFI Assignment Deed, the title to the Surety Indemnity Debt would have remained with COV.

(b) The plaintiff's propositions that:

(i) an assignee of a debt has standing to commence a proceeding with respect to a debt assigned to it; and

(ii) the failure to join the assignor does not render it a nullity,

may be accepted.[89] However, clause 2.1.2 of the COV-BFI Assignment Deed did not purport to assign the Surety Indemnity Debt. It relevantly assigned COV's right of exoneration and its supporting charge, which as described above, only entitled COV as the former trustee:

(iii) to apply trust funds held by it in discharge of liabilities incurred by it as trustee; and/or

(iv) to apply to the Court for assistance by way of an order for a judicial sale or the appointment of a receiver.

(c) As noted in sub-paragraph (a) above, the right of exoneration and its supporting charge confers no power of sale of assets and, whatever other rights COV may have had as the former trustee, the bare right of exoneration did not entitle COV (or the assignee of the bare right) to commence a proceeding to recover a debt owed to the trust for the purpose of establishing a fund, on which the right of exoneration could operate.

81 Accordingly, if BFI's only claim for standing to file this proceeding was as assignee of COV's right of exoneration under clause 2.1.2 of the COV-BFI Assignment Deed, the proceeding would be a nullity. However, as I have found that clause 2.1.1 was effective to assign the Surety Indemnity Debt to BFI, the proceeding is valid.

Question 5 - What is the amount of the Surety Indemnity Debt?

82 The plaintiff submitted that the amount of the proceeds of the sale of Wyatt Avenue which were applied in reduction of the debtor's indebtedness pursuant to the guarantee was $1,771,507.20, for the following reasons:

(a) Wyatt Avenue was sold for $1.8 million on 28 February 2015 with the settlement due on 6 April 2015.

(b) The first defendant conceded, on the basis of the NAB's accounts, that the sum of $1,517,816.22 was applied in reduction of the COV's indebtedness under the COV Guarantee.

(c) The accounts lodged with ASIC by Ferrier Hodgson on behalf of the NAB disclose that the NAB was appointed as controller over COV on 13 November 2013 under the mortgage 9536878J dated 2 January 2003, being the mortgage over Wyatt Avenue. The accounts disclose that the sum of $1,771,507.20 was received from the NAB as settlement funds and applied as to:

(i) the loan reduction of $1,517,816.22; and

(ii) legal, accounting and mortgage services in respect of the balance.

(d) The Portfolio Agreement states: 'Enforcement expenses may become payable under this agreement or any security referred to above in the event of a breach'.

(e) By email of 4 May 2015 to the solicitor for the liquidator of COV, the solicitors for the NAB stated that 'the sale of the Wyatt Avenue property has settled and the sale proceeds applied against COV's guaranteed indebtedness of Mr and Mrs Voukidis' NAB portfolio account'.

83 The first defendant conceded that the sum of $1,517,816.22 was applied from the proceeds of the sale of Wyatt Avenue under the COV Guarantee. However, it was submitted that there was inadequate evidence for the Court to conclude that the additional amounts relating to legal and associated costs were paid under the terms of the COV Guarantee.

84 I am satisfied, on the balance of probabilities, that the evidence established that the sum of $1,771,507.20 was applied from the proceeds of the sale of Wyatt Avenue under the COV Guarantee. In particular, the evidence establishes that:

(a) the NAB was entitled under the COV Guarantee to recover enforcement expenses;

(b) the NAB received the sum of $1,771,507.20 as sale proceeds from the sale of Wyatt Avenue; and

(c) the sale proceeds were applied against COV's guaranteed indebtedness of Olga and Christos' NAB portfolio account.

85 I will hear from the parties as to the appropriate orders to be made consequent on these reasons.

[1] With no disrespect intended, I refer to members of the Voukidis family by their first names.

[2] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne, Crennan, and Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, 116 [47] (French CJ, Nettle and Gordon JJ) ('Mount Bruce').

[3] Ecosse Property Holdings Pty td v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544, 551 [16] (Kiefel, Bell and Gordon JJ).

[5] Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95 [45]-[47] (Santamaria, Ferguson and McLeish JJA); Mount Bruce [2015] HCA 37; (2015) 256 CLR 104, 116 [46]-[48] (French CJ, Nettle and Gordon JJ); 132 [109] (Kiefel and Keane JJ).

[6] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 352 (Mason J).

[7] Known as the 'true rule', the proposition that ambiguity is a precondition to consideration of surrounding circumstances is controversial. My reasons for adopting this view are set out in Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2020] VSC 126, [89]-[109].

[8] Mount Bruce [2015] HCA 37; (2015) 256 CLR 104, 117 [50] (French CJ, Nettle and Gordon JJ).

[9] (1992) 8 WAR 42 (Malcolm CJ, Walsh and Owen JJ) ('Custom Credit').

[12] Ibid 51-2 (Owen J, with whom Malcolm CJ and Walsh J agreed).

[13] Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; (2019) 268 CLR 524, 561 [82] (Bell, Gageler and Nettle JJ) (citations omitted) ('Carter Holt').

[16] For example, the rights of an owner under the law of trespass.

[17] LexisNexis Australia, Encyclopaedic Australian Legal Dictionary (online at 10 May 2022) OW, definition of 'Owner'.

[18] [1999] HCA 53; (1999) 201 CLR 351, 365-6 (Gleeson CJ, Gaudron, Kirby and Hayne JJ) (citations omitted).

[19] Carter Holt [2019] HCA 20; (2019) 268 CLR 524, 560-1 [82] (Bell, Gageler and Nettle JJ).

[21] Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319, 324 (Latham J) and 335 (Dixon J); Jones v Matrix Partners Pty Ltd [2018] FCAFC 40; (2018) 260 FCR 310, 320 [34] (Allsop CJ) ('Jones').

[22] Carter Holt [2019] HCA 20; (2019) 268 CLR 524, 578 [132] (Gordon J).

[23] Carter Holt [2019] HCA 20; (2019) 268 CLR 524, 560 [81], 561 [83] (Bell, Gageler and Nettle JJ); Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226, 245 (Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ).

[24] Jones [2018] FCAFC 40; (2018) 260 FCR 310, 323 [45] (Allsop CJ).

[26] Jones [2018] FCAFC 40; (2018) 260 FCR 310, 323 [44] (Allsop CJ); Apostolou v VA Corp Aust Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84, 92-93 [38]-[39] (Finkelstein J) ('Apostolou').

[27] Jones [2018] FCAFC 40; (2018) 260 FCR 310, 329 [69] (Allsop CJ); Hewett v Court (1983) 149 CLR 639, 663 (Deane J) ('Hewett').

[28] Although commonly called a lien but 'in truth a form of equitable charge': Hewett (1983) 149 CLR 639, 663 (Deane J). Also see Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1992) 192 CLR 226, 246-7 [50] (Brennan CJ, Toohey Gaudron, McHugh, and Gummow JJ).

[29] Hewett (1983) 149 CLR 639, 663 (Deane J).

[30] Custom Credit (1992) 8 WAR 42, 53 (Owen J with whom Malcolm CJ and Walsh J agreed).

[31] Jones [2018] FCAFC 40; (2018) 260 FCR 310, 323 [44] (Allsop CJ).

[32] Hewett (1983) 149 CLR 639, 663 (Deane J); Apostolou [2010] FCA 64; (2010) 77 ACSR 84, 92 [39] (Finkelstein J).

[33] Jones [2018] FCAFC 40; (2018) 260 FCR 310, 320 [35] (Allsop CJ).

[34] Carter Holt [2019] HCA 20; (2019) 268 CLR 524, 561 [83] (Bell, Gageler and Nettle JJ).

[35] Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319, 335-6 (Dixon J), quoted with approval in Commonwealth v Byrnes [2018] VSCA 41; (2018) 54 VR 230, 237 [26] (Ferguson CJ, Whelan, Kyrou, McLeish and Dodds-Streeton JJA).

[36] CGU Insurance Ltd v One.Tel Ltd (in liq) [2010] HCA 26; (2010) 242 CLR 174, 182-3 [36]-[37] _(_French CJ, Heydon, Crennan, Kiefel and Bell JJ) ('CGU'); Re Innovateq Pty Ltd [2018] VSC 124, [73] (Kennedy J). See also Jones [2018] FCAFC 40; (2018) 260 FCR 310, 320 [33] (Allsop CJ).

[37] Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677, [28] (Gordon J) ('Caterpillar'); Jones [2018] FCAFC 40; (2018) 260 FCR 310, 323 [44] (Allsop CJ), 343 [138] (Siopis J).

[38] Alphena Pty Ltd (in liq) v PS Securities Pty Ltd atf Joseph Family Trust [2013] NSWSC 447; (2013) 94 ACSR 160, 166-7 [42] (Kunc J), quoting Garra Water Investments Pty Ltd (in liq) v Ourback Yard Nursery Pty Ltd [2012] SASC 44, [37] (Gray J).

[39] Jones [2018] FCAFC 40; (2018) 260 FCR 310, 323 [44] (Allsop CJ); Re Brereton, MyHouse (Aust) Pty Ltd (Admin Apptd) [2020] FCA 610, [30] (Farrell J) ('Re Brereton'), citing Jennings v Mather [1901] UKLawRpKQB 176; [1902] 1 KB 1, 6 (Stirling LJ) and Apostolou [2010] FCA 64; (2010) 77 ACSR 84, 92-3 [38]-[39] (Finkelstein J).

[40] Re Brereton [2020] FCA 610, [30] (Farrell J).

[41] Re Spedding (Deceased) [1966] NZLR 447, 463-4 (Turner J); quoted with approval in Re Suncoast Restoration Pty Ltd (in liq) [2013] FCA 355; (2013) 211 FCR 203, 214 [34] (Reeves J) ('Suncoast').

[42] Jones [2018] FCAFC 40; (2018) 260 FCR 310, 320 [33] (Allsop CJ), citing Lewis v Nortex Pty Ltd (in liq) [2013] FCAFC 56; (2013) 211 FCR 483, 503-4 [77] (Jagot and Yates JJ) and CGU [2010] HCA 26; (2010) 242 CLR 174, 182-3 [36] (French CJ, Heydon, Crennan, Kiefel and Bell JJ); Federal Commissioner of Taxation v Bruton Holdings Pty Ltd (in liq) [2008] FCAFC 184; (2008) 173 FCR 472, 498 [79] (Ryan, Mansfield and Dowsett JJ).

[43] Amirbeaggi, Re Simpkiss Pty Ltd (in liq) [2018] FCA 2121, [52] (Markovic J) ('Amirbeaggi'), citing Suncoast [2013] FCA 355; (2013) 211 FCR 203, 213-14 [33]-[35] (Reeves J).

[44] Wheelwright v Walker [1883] UKLawRpCh 135; (1883) 23 Ch D 752 (Pearson J); Thomson Reuters, Ford and Lee: The Law of Trusts (online at 12 May 2022) [17.640].

[45] Pilcher v Rawlins [1872] UKLawRpCh 13; (1872) LR 7 Ch App 259, 268-9 (Sir W M James LJ), 273 (Sir G Mellish LJ); Moffett v Dillon [1999] VSCA 32; [1999] 2 VR 480, 489 [36] (Brooking JA with whom Buchanan JA agreed).

[46] Thomson Reuters, Ford and Lee: The Law of Trusts (online at 12 May 2022) [17.4710].

[47] John N Pomeroy and Spencer W Symons, A Treatise on Equity Jurisprudence (Bancroft-Whitney and Lawyers Cooperative, 5th ed, 1941) [591], quoted with approval in Moffett v Dillon [1999] VSCA 32; [1999] 2 VR 480, 490 [39] (Brooking JA with whom Buchanan JA agreed).

[48] Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101, 112 [4]-[5] (Gleeson CJ, McHugh, Gummow and Callinan JJ).

[49] Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) [1999] 1 VR 584, 637 [183] (Hansen J).

[50] Thomson Reuters, Ford and Lee: The Law of Trusts (online at 12 May 2022) [17.8010].

[51] Daly v Sydney Stock Exchange Ltd [1986] HCA 25; (1986) 160 CLR 371, 387-8 (Brennan J).

[52] Jones [2018] FCAFC 40; (2018) 260 FCR 310, 334 [91] (Allsop CJ), 345 [152] (Siopis J), 352 [198] (Farrell J).

[53] Banque Belge pour l'Etranger v Hambrouck [1921] 1 KB 321, 329 (Scrutton LJ).

[54] Caterpillar [2011] FCA 677, [42] (Gordon J); Suncoast [2013] FCA 355; (2013) 211 FCR 203, 215 [39] (Reeves J); Amirbeaggi [2018] FCA 2121, [54] (Markovic J).

[55] For a discussion about the duties of constructive trustees see Daniel Reynolds, 'What Are the Duties of Constructive Trustees?' [2018] UNSWLawJl 44; (2018) 41(4) UNSW Law Journal 1297.

[56] Federal Commissioner of Taxation v Bruton Holdings Pty Ltd (in liq) [2008] FCAFC 184; (2008) 173 FCR 472, 498 [79] (Ryan, Mansfield and Dowsett JJ); Re Stansfield DIY Wealth Pty Ltd (in liq) [2014] NSWSC 1484; (2014) 291 FLR 17, 25, [30] (Brereton J); Apostolou v VA Corporation of Aust Pty Ltd [2011] FCAFC 103, [45] (Perram, Nicholas and Yates JJ).

[57] [2018] FCAFC 40; (2018) 260 FCR 310, 333 [89] (Allsop CJ, Farrell J agreeing at 351 [196]).

[59] [2019] FCA 1023; (2019) 136 ACSR 649, 656 [49].

[61] Mohen (Liquidator), Re Willco Breads Pty td (in liq) [2019] FCA 1539, [21] (Banks-Smith J); Michell (Liquidator) v Delltta Holdings Pty Ltd (in liq) atf Brookhill Trust [2019] FCA 2133, [8] (Davies J); Hillig (Liquidator), Re SKC & Co Pty Ltd (in liq) [2020] FCA 454, [13] (Gleeson J); Re Waratah Group Pty ltd (in liq) [2020] VSC 523, [36] (Delany J); Naidenov, Sweet Life Farms Australia Pty Ltd (in liq) v Dahbella Pty Ltd [2020] FCA 1474, [15] (Markovic J); Re Total Truss Systems Pty Ltd (in liq) (2021) 152 ACSR 323, [66] (Gardiner AsJ); In the Matter of Urban Property Melbourne Pty Ltd [2021] VSC 847 [30] (M Osborne J).

[62] Carter Holt [2019] HCA 20; (2019) 268 CLR 524, 560-1 [82] (citations omitted).

[63] Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485, 492 (Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 151-2 [135] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

[64] Carter Holt [2019] HCA 20; (2019) 268 CLR 524, 568 [95] (citations omitted), see also 552 [55] (Kiefel CJ, Keane and Edelman JJ).

[66] R & R Fazzolari Pty Ltd v Parramatta City Council [2009] HCA 12; (2009) 237 CLR 603, 619-20 [43]-[44] (French CJ); Owners Corporation PS 501391P v Balcombe (2016) 51 VR 299, 339 [123(b)] (Riordan J).

[67] Clissold v Perry [1904] HCA 12; (1904) 1 CLR 363, 373 (Griffiths CJ, with whom Barton and O'Connor JJ agreed).

[68] Custom Credit (1992) 8 WAR 42, 46.

[70] Custom Credit (1992) 8 WAR 42, 46.

[84] For example Burke v LFLOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282, 318-19 [95] (Kirby J).

[85] Custom Credit (1992) 8 WAR 42, 58.

[86] Thomson Reuters, Ford and Lee: The Law of Trusts (online at 7 March) [14.290].

[87] Carter Holt [2019] HCA 20; (2019) 268 CLR 524, 561-2 [84], 568-9 [95]-[98] (Bell, Gageler and Nettle JJ), 581 [139] (Gordon J). See also Allsop CJ writing extra-curially in James Allsop, 'The Intersection of Companies and Trusts' [2020] MelbULawRw 18; (2020) 43(3) Melbourne University Law Review 1128, 1139, 1150-3.

[88] Prior v Simeon [2010] WASC 382, [21(d)] (Corboy J); Apostolou (as trustee of the Vasiliou Family Trust) v VA Corporation of Australia Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84, 92-93 [39] (Finkelstein J).

[89] Alma Hill Constructions Pty Ltd v Onal [2007] VSC 86; (2007) 16 VR 190, 204 [44]-[45] (Kaye J).