Case: Lombe v Wagga Leagues Club Ltd [2006] NSWSC 3 ; (2006) 56 ACSR 387
Outcome: followed
A contrary view was taken by Barrett J in Lombe v Wagga Leagues Club Ltd [2006] NSWSC 3 ; (2006) 56 ACSR 387. In that case, a clause of the deed provided that the deed fund was to be held on trust for the benefit of the administrators, deed administrators and for those creditors who became participating creditors. In other words, there was specific reference to the deed fund being held on trust. His Honour held, however, that no trust of the kind suggested by Austin J was created by the deed. Instead, the administrator was like a liquidator who was bound by statute to deal with the Club's assets in a particular way in accordance with the deed of company arrangement. In his reasons, Barrett J relied upon a decision of Davies J in Federal Commissioner of Taxation v All Suburbs Car Repairs Pty Ltd (1994) 14 ACSR 753. In that case, Davies J concluded that when an administrator was acting in accordance with the powers conferred by the deed and carrying out the duties arising under the deed, the administrator was acting in his capacity as agent for the company. After discussing that case, Barrett J said at 407: But that, in my opinion, is not what happened here. The segregation of part of the company's property (whether or not including property to be contributed by someone else) so that it becomes a fund to be applied by the deed administrator as the company's agent in accordance with the deed of company arrangement does not, of itself, give rise to a trust. And where, as in the present case, the segregation is made in a context referring to a "trust" administered by the deed administrator, there is again no trust unless it can clearly be seen that the company has divested itself of the legal and beneficial interests in its property. The fact that the fund is to be applied by reference to creditors' claims is not sufficient to give them such beneficial interests in the property concerned; nor is it sufficient to justify a conclusion that the deed administrators became the legal owners of the property so as to be capable of holding it on trust. 45 That decision was followed by Gyles J in Purchas v Estore Pty Ltd (in liq) [2006] FCA 1222 ; (2006) 154 FCR 246. His Honour said at [14] and [15]: Counsel for the plaintiffs has pointed out that there is an apparent division of opinion in the authorities upon the critical question. The decisions of Austin J in Dean-Willcocks v ACG Engineering Pty Ltd (in liq) [2003] NSWSC 353 ; (2003) 45 ACSR 290 and Campbell J in Sports Mondial favour the conclusion that the fund is held on trust for the deed creditors. After those decisions, Finkelstein J, in Commonwealth v Rocklea Spinning Mills Pty Ltd [2005] FCA 902 ; (2005) 145 FCR 220 , drew attention to the possibility of an inconsistency between them and the earlier decision of Davies J in Commissioner of Taxation (Cth) v All Suburbs Car Repairs Pty Ltd (1994) 29 ATR 329. Davies J held that payments to the administrator were payments to him in his capacity as the agent of the company and consequently the sums received were the property of that company. Barrett J needed to consider the differences in the reasoning in those authorities in Lombe v Wagga Leagues Club Ltd [2006] NSWSC 3 ; (2006) 56 ACSR 387 at [53] - [77] . In circumstances which I cannot distinguish in substance from the present facts, Barrett J in a careful and reasoned decision applied the reasoning of Davies J. It is appropriate to follow the decision of Barrett J unless I am satisfied that it is clearly wrong. Consistency of decision in relation to the Act is desirable. As I am not satisfied that the decision of Barrett J is clearly wrong, I propose to follow it and give directions accordingly.