Trust The Liquidators - Court Rules On Liquidators Power To Administer Trusts

In the recent case of Mansfield (Liquidator), in the matter of Xiang Rong (Australia) Construction Group Pty Ltd (Trustee) (in Liq) (Company) [2023] 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:

  1. The Company was incorporated on 14 May 2004, where Andrew Tsang was the sole shareholder, director and secretary.
  2. On 5 March 2019, the Federal Circuit Court of Australia made a sequestration order against Mr Tsang.
  3. Investigations carried out by the trustee in bankruptcy (Bankruptcy Trustee) revealed that the Company held 10,080,000 shares in Mindax Ltd and 14,862,763 shares in Diatreme Resources Ltd (together, Shares).
  4. The Company was consequently deregistered on 14 October 2020.
  5. On 28 July 2021, the Bankruptcy Trustee filed an originating process in the Supreme Court of Victoria seeking for the reinstatement and winding up of the Company, and the subsequent appointment of the Liquidators pursuant to s 472 of the Corporations Act 2001 (Cth) (Act).
  6. On 6 August 2021, orders were granted accordingly for the relief sought.
  7. The Liquidators carried out investigations and determined that the Company was the trustee of the Trust and that the Shares were listed as assets of the Company in its capacity as the trustee of the Trust.
  8. The total value of the Shares on 16 August 2021 was $885,134.60 and the total sale price of the Shares on 12 January 2022 was $666,584.92

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:

  1. The Company remained the trustee of the Trust notwithstanding the appointment of the Liquidators.
  2. There was no ipso facto clause that would cause the removal of  the Company as trustee of the Trust in the event of its liquidation.
  3. The Company remained the trustee of the Trust notwithstanding its deregistration and subsequent reinstatement.
  4. Under cl 17(m) of the Trust Deed, which stated that “the trustee of the Trust may from time to time, sell, vary and transpose the property of the Trust fund”, the Company retained the power to sell the Shares.
  5. The administration of the Trust, including selling the Shares, was an aspect of the “affairs of the company” for the purposes of s 477(2)(m) of the Act and, therefore, was within the power of the Liquidators.


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:

  1. The work undertaken by the Liquidators was necessarily done for the purpose of winding up the affairs of the Company.4
  2. The Liquidators acted responsibly and diligently by:
    • realising the Shares in a timely fashion;
    • attempting to secure the co-operation of Mr Tsang;
    • pursuing other enquiries to locate a copy of the Trust Deed; and
    • having regard to extensive information and investigations provided by the former liquidator and the Bankruptcy Trustee.


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

  • the necessary and proper connection between the work performed and the external administration: s 60-12(a) and s 60-12(b);
  • the proportionality between the complexity of the external administration and the costs incurred: s 60-12(c) to s 60-12(i); and
  • the reasonableness of the billing method of the administrator: s 60-12(j).

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:

  • the Company’s only asset was the Shares (held pursuant to the terms of the Trust);
  • the absence of co-operation from the Company’s directors magnified the complexity and difficulty of realising the Shares and progressing  the Company’s liquidation; and
  • the manner in which the work was undertaken was appropriate given the billing method and the use of team members with different levels of experience and charge-out rates (disclosed in the timesheets in evidence).


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.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.
Leith Ayres
Joseph Abberton
Lawrence Lee
Restructuring & Insolvency


[1] See Re Maureen Michael Management Pty Ltd [2005] NSWSC 1044, [28] (Young CJ); See also In the matter of Aberdeen All Farm Pty Ltd (in liquidation) [2020] NSWSC 770, [17] (Black J); In the matter of J & Lee Property Investment Group Pty Limited (in liquidation) [2019] NSWSC 927, [24] (Rees J); Owen, in the matter of RiverCity Motorway Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) (2014) 225 FCR 541, [60] (Greenwood J).

[2] 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) [1999] FCA 144, [35] (Finkelstein J) (Coromandel).

[3] Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158,161-162 (McLelland J);  Greater West Insurance at [18]-[23] (Young CJ in Eq); Propestate,[5]-[7], [21] (Bryson AJ); Re G B Nathan & Co Pty Limited (In Liq) (1991) 24 NSWLR 674, (McLelland CJ in obiter).

[4] See Rolcross Pty Ltd (in liquidation) [2012] NSWSC 846, [16] (Black J); 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) [1999] FCA 144, [35] (Finkelstein J).

[5] See Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr (2017) 93 NSWLR 459, [54] (Bathurst CJ).

[6] [2019] FCA 1771, [12] (Perram J).