Case: Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439
Outcome: referred to
APM then submitted, in reliance upon the principles enunciated in Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439 at 443 per McPherson JA, that there would be no benefit to the creditors in the trustee company being wound up, and it was trite law that a creditor can claim to be subrogated to the right of indemnity of the trustee company and directly enforce the debt against the trust assets or even the beneficiaries personally. 35 The way in which these submissions were put seemed to relate both to the question of solvency and the discretion to be exercised by the Court as to whether to order a winding up, assuming I was not satisfied as to solvency. As a matter of procedure, APM moved the Court for its removal as trustee, the appointment of a receiver, and that a winding up not be ordered by the Court. 38 As to APM's reliance on Ron Kingham Real Estate 2 Qd R 439, in that case the question of whether the trustee had properly incurred liabilities was not a matter that was or could be in contention. The defendants could not, having authorised the action of the trustee, have complained of a breach of trust. 39 Putting aside the correctness of the decision in Ron Kingham Real Estate 2 Qd R 439 in allowing the trustee's creditor to sue trust beneficiaries directly to enforce the trustee's right of indemnity against the beneficiaries, I do not consider it appropriate where there is an issue or potential issue as to whether the right of indemnity is available in the circumstances of this case to conclude that the creditors should be left to pursue such claims individually. In any event, there is no evidence that there will be sufficient assets to pay the creditors after the secured creditors have been paid. I do not consider that APM's contentions relating to the right of indemnity demonstrate that APM is solvent, assuming that at law there is a right of indemnity in favour of APM, or that such right of indemnity is a factor in favour of exercising my discretion not to wind up the company. If a liquidator is appointed he will be well placed to consider and deal with the question of the right of indemnity, and pursue with priority claims over the beneficiaries. 40 I now turn to other discretionary matters raised by APM and the issue of APM continuing as a trustee and the appointment of a receiver. 41 As I have indicated above, it was contended that if I came to the conclusion that APM had not discharged the burden of proof to show it was solvent, I should not order the winding up of the company but should instead remove it as trustee and appoint a receiver over the trust assets. In support of this approach, evidence was led of a number of creditors who expressed a desire for such a course. It was argued that it would save time and costs if the appropriate person, already familiar with the company, was appointed (in this case Mr Andrew Leonard Dunner). It was further contended that with the number of actions threatened against the company a receiver would be in a better position to defend the company with the aid of the current director, that the principal director (Mr Edwards) who was responsible for the bad state of the books of accounts of the company is no longer involved with APM, and that the current director is taking steps to put the books of accounts in proper order and prepare proper financial statements. 42 In addition, it was argued that because of the operation clause 11 in the Memorandum of Agreement between APM and the developer, Rocco Antonio Calderone, dated 3 August 2005, in the event of the appointment of a liquidator, APM would not be able to rely upon its right of indemnity, as the developer would be released from its duties and obligations under the agreement, and the trust properties would vest in the hands of the beneficiaries. 43 I have come to the view that I should order the winding up of APM despite these contentions. In addition to the views I have expressed in coming to the view that APM has not discharged the burden of proof upon it and my views on the report of Mr Miller of 30 August 2007, I have concluded that APM should be wound up, and that the alternative course of action contended for by APM not be followed, for the following reasons: (i) Whilst some creditors do not want the appointment of a liquidator, this is not the universal view of the unsecured creditors, and in any event is not a decisive factor. (ii) Whilst the appointment of a receiver familiar with the company already may save some time and costs, this is not the important consideration when balanced against the important public interest of ensuring an insolvent company ceases trading even if only a presumed insolvent company. (iii) Clause 11 does not, in my view, release the developer from any past responsibilities or liabilities it may have had under the agreement all it seems to do is to release, upon the appointment of a liquidator, the developer from any further duties and obligations under the agreement from the date of the appointment. In any event, even if clause 11 does have the result as contended for by APM, including the vesting of trust property in the beneficiary, the other factors I have relied upon in these reasons would indicate that it is appropriate for the company to be wind up, the public interest being a paramount consideration where APM is unable to prove its solvency and the books of accounts are incomplete and are unsubstantiated. Upon vesting of the trust property in the beneficiaries, the company will still have a beneficial interest with priority over the beneficiaries if, as trustee, it has a right of indemnity as submitted. If the debts have been incurred in the administration of the trust, the liquidator can call upon the right of indemnity. (iv) I do not consider that there are now better prospects for the creditors as a whole (including the unsecured creditors) if the company, with or without a receiver, were allowed to continue to trade on.