In the recent case of Mansfield (Liquidator), in the matter of Xiang Rong (Australia) Construction Group Pty Ltd (Trustee) (in Liq) (Company)  FCA 1289, the Liquidators applied for a declaration from the Court that the Company, as trustee of Xiang Rong Management Trust (Trust), had the power to sell the Trust’s shares pursuant to a trust deed (Trust Deed), which, amongst other things, allowed the trustee to sell, vary and transpose the property of the Trust.
Additionally, the Liquidators also sought orders that they have recourse to the Trust assets for the payment of their remuneration and expenses, pursuant to s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) (IPS).
The facts of this case are stated simply, and are as follows:
On 30 June 2023, the Liquidators sought declaration from the Court that the Company, as Trustee of the Trust, had the power to sell the Shares pursuant to the Trust Deed in relation to the sale of the Shares, and that the Liquidators should be paid their remuneration and expenses out of the Trust fund.
His Honour found that the Liquidators had acted properly in realising the Shares, and specified his reasoning as follows:
His Honour outlined that the general position held by the Courts in regard to this issue was that the Court would generally exercise its discretion to allow for the liquidators’ remuneration and expenses to be paid out of the trust fund where they find themselves in charge of a trust fund, or administered a trust fund. However, his Honour did note that the Court’s exercise of this discretion is to be assessed on a case by case basis.1
Further, Halley J brought to attention Finkelstein J’s statement in Coromandel, where it was stated that “the liquidator will be required to estimate those of his costs that are attributable to the administration of trust property and only those costs will be charged against the trust assets”.2 Importantly, it was discussed that where there is a deficiency of non-trust assets to cover non-trust works, a number of cases had permitted recourse to trust assets for non-trust work where the work done by a liquidator was done for the purpose of “winding up the affairs of the company” and where the liquidators had acted responsibly and diligently.3
His Honour accepted that the Liquidators should have access to the assets of the Trust for the payment of their costs and expenses, primarily for the reasons that:
Lastly, his Honour went on to consider the amount that the Liquidators were entitled to in relation to their remuneration, costs and expenses.
Pursuant to s 60-5 of the IPS, an external administrator of a company is entitled to receive remuneration for necessary work properly performed in relation to the external administration of a company. The Court can make a remuneration determination under s 60-10(1)(c) of the IPS, but it must have regard to the factors identified in s 60-12 of the IPS.5
His Honour referred to the decision of Sallway, in the matter of Mossgreen Pty Ltd (in liq) (Remuneration of Liquidators), where Perram J conveniently summarised the relevant principles applicable to a remuneration determination which may be distilled into three categories:6
His Honour was satisfied that the work undertaken by the Liquidators was work that was reasonably necessary and bore a proper connection to the Company’s liquidation, and ordered that the total amount be paid from the Trust in priority to the creditors of the Trust for the following reasons:
This decision serves as a useful refresher as to the principles concerning whether liquidators have the power to administer trusts (of which specifically the company in liquidation is the trustee) for the purposes of the company’s liquidation and subsequent ability to disburse trust funds to pay the liquidators’ remuneration and expenses.
Further, although this particular case did not end up needing to deal with the issue of proportionately in relation to a liquidator's claim for remuneration and expenses, it is a reminder that liquidators should keep an eye out as proportionality of their claim for remuneration and costs, especially in circumstances where a contradictor to the liquidators claim is present.
If you have any queries about a liquidator’s power to administer trusts, or a liquidator’s claim for remuneration under the IPS, the experienced Lavan team is here to help.
 See Re Maureen Michael Management Pty Ltd  NSWSC 1044,  (Young CJ); See also In the matter of Aberdeen All Farm Pty Ltd (in liquidation)  NSWSC 770,  (Black J); In the matter of J & Lee Property Investment Group Pty Limited (in liquidation)  NSWSC 927,  (Rees J); Owen, in the matter of RiverCity Motorway Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) (2014) 225 FCR 541,  (Greenwood J).
 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq)  FCA 144,  (Finkelstein J) (Coromandel).
 Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd  1 NSWLR 158,161-162 (McLelland J); Greater West Insurance at - (Young CJ in Eq); Propestate,-,  (Bryson AJ); Re G B Nathan & Co Pty Limited (In Liq) (1991) 24 NSWLR 674, (McLelland CJ in obiter).
 See Rolcross Pty Ltd (in liquidation)  NSWSC 846,  (Black J); 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq)  FCA 144,  (Finkelstein J).
 See Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr (2017) 93 NSWLR 459,  (Bathurst CJ).
  FCA 1771,  (Perram J).