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DISCLOSURE STATEMENT
No potential conflict of interest was reported by the author(s).
Notes
1 See generally N D’Angelo, Transacting with Trusts and Trustees (LexisNexis Butterworths Australia, 2020) (‘D’Angelo’), 413; N D’Angelo, ‘The trust as a surrogate company: the challenge of insolvency’ (2014) 8 Journal of Equity 299. In summary, D’Angelo asserts that a trust may be regarded as insolvent if the trustee is unable to pay all trust debts as and when they become due and payable out of trust assets and (where it is obliged to do so) its own assets.
2 Cave v Cave (1880) 15 Ch D 639; Phillips v Phillips (1861) 4 De FG & J 208; 45 ER 1164 (‘Phillips’); Rice v Rice (1853) 2 Drewry 73; 61 ER 646; Brace v Duchess of Marlborough (1728) 2 P Wms 491; 24 ER 829 (‘Brace’).
3 See Richardson v Aileen [2007] VSC 104 (‘Richardson’); Francis (Trustee) in the matter of Fotios (Bankrupt) v Helios Corporation (No 3) [2023] FCA 251 (‘Fotios’) [11] (Colvin J).
4 Equity Trust (Jersey) Ltd v Halabi [2022] UKPC 36 (‘Halabi’).
5 Halabi (n 4) [171] (Lord Richards and Sir Nicholas Patten).
6 Halabi (n 4) [250] (Lord Briggs).
7 In re the Exhall Coal Company (1866) 35 Beav 449, 453; 55 ER 970, 971 (‘Exhall Coal’).
8 See for example Lane v Deputy Commissioner of Taxation [2017] FCA 953, (2017) 253 FCR 46 [34] (‘Lane’) (Derrington J); Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; 268 CLR 524 (‘Amerind’) [139]-[140] (Gordon J)
9 See Lawrence Berger, ‘An Analysis of the Doctrine That “First in Time Is First in Right” (1985) 64 Nebraska Law Review 349 (‘Berger’).
10 Halabi (n 4) [246].
11 See D’Angelo (n 1).
12 Ibid.
13 Parliamentary Joint Committee on Corporations and Financial Services Report, Corporate insolvency in Australia, 12 July 2023, Commonwealth of Australia, (‘PJC Report’) chapter 14. <https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/CorporateInsolvency/Report>.
14 S Worthington, ‘Equitable Liens in Commercial Transactions’ (1994) 53 Cambridge Law Journal 263, 265.
15 Amerind (n 6) [140] (Gordon J).
16 Worrall v Harford (1802) 8 Ves 4, 8, (Lord Eldon LC); Exhall Coal (n 8) 453 (Lord Romilly MR).
17 Halabi (n 4).
18 Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550, (‘Lemery’) 553 (Brereton J).
19 Yeoman Credit Ltd v Latter [1961] 2 All ER 294, 296 (Harman LJ); see further Nuncio D’Angelo, ‘The Indemnity: It’s all in the drafting’ (2007) Australian Business Law Review 93, 94.
20 See for example Harburg India Rubber Comb Co v Martin [1902] 1 KB 778, 784 (Vaughan Williams LJ).
21 Exhall Coal (n 7).
22 Ibid, 971–72 (emphasis added).
23 Break Fast Investments v Sclavenitis [2022] VSC 288 (‘Break Fast’) (Riordan J); Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (192) 8 WAR 42, 46 (Owen J).
24 Octavo Investment Pty Ltd v Knight (1979) 144 CLR 360; [1979] HCA 61 [13] (‘Octavo’).
25 See Savage v The Union Bank of Australia Limited (1906) 3 CLR 1170, 1196 per O’Connor J; Octavo, n 27, 369; Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation (2009) 239 CLR 346 [43] (‘Bruton’).
26 There are many older English authorities which confirm the trustee’s lien including Exhall Coal, n 9; Re Pumfrey (1882) 22 Ch D 255, 262; Stott v Milne (1884) 25 Ch D 710, 715; St Thomas’s Hospital (Governors) v Richardson [1910] 1 KB 271, 276. For Australian cases see Kemtron Industries Pty Ltd v Commissioner of Stamp Duties [1984] 1 Qd R 576, 585; Trim Perfect Australia v Albrook Constructions [2006] NSWSC 153, [20] (‘Trim Perfect’); Caterpillar Financial Services Australia v Owens Nominees Pty Ltd [2001] FCA 677 [7]; Lemery (n 18) [16]; Bruton (n 25) [43].
27 In fact, the terms are frequently used interchangeably.
28 Halabi (n 4) [249]-[250] (Lord Briggs)
29 See for example Hewett v Court (1983) 149 CLR 639, 663 (‘Hewett’) (Deane J).
30 Ibid, 664.
31 Ibid.
32 Worthington (n 14) 263.
33 See E Sykes and S Walker, The Law of Securities (Lawbook Company, 5th ed, 1993), 198 (‘Sykes & Walker’).
34 JC Campbell, ‘Some historical and policy aspects of the law of equitable liens’ (2009) 83 Australian Law Journal 97, 120.
35 See, for eg, Whitbread & Co Ltd v Watt [1902] 1 Ch 835, 840 (Stirling J) in the context of vendor’s and purchaser’s liens.
36 Ibid, 838 (Vaughan Williams LJ); See further Campbell (n 34).
37 Sexton v Kessler (1912) 225 US 90, 98–99.
38 See for example Apostolou v VA Corp Aust Pty Ltd [2011] FCAFC 103 [45] and Jones v Matrix Partners Ltd, in the matter of Killarnee Civil and Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40 [44] (‘Jones’)(Allsop CJ).
39 See Trim Perfect (n 26), and the authorities cited at [20(5)]: Tennant v Trenchard (1869) LR 4 Eq 537; Seton’s Judgments and Orders, 7th ed, 1912, vol 3 pp 2220 to 2225; see also Ashburner’s Principles of Equity, 2nd ed (1983) p 248; Sykes & Walker (n 33) 198; E L G Tyler, P W Young and C W Croft, Fisher and Lightwood’s Law of Mortgages (LexisNexis, 2nd Australian ed,1995) 44; ANZ Banking Group Limited v Intagro Projects Pty Limited [2004] NSWSC 1054 [14].
40 [1895] AC 457, 466 cited in D Ong, Ong on Subrogation (Federation Press, 2014) 16.
41 See also Agusta Pty Ltd v Provident Capital Ltd [20120 NSWCA 26, 2012) 16 BPR 30 [41] (‘Agusta’) (Barrett JA).
42 See Newcastle Airport Pty Ltd v Chief Commissioner of State Revenue (2014) 99 ATR 748 [78] (White J).
43 Nor is it an encumbrance over the beneficiaries’ interest in the trust assets: Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226.
44 Worthington (n 14) 264.
45 Ibid, 263.
46 See Diccon Loxton, ‘In with the Old, Out with the New? The Rights of a Replaced Trustee Against its Successor, and the Characterisation of Trustees' Proprietary Rights of Indemnity’ (2017) 45 Australian Business Law Review 287, 315.
47 citing Exhall Coal (n 7).
48 Halabi (n 4) [171] (Lord Richards and Sir Nicholas Patten).
49 Halabi (n 4) [207] and [240].
50 Bruton (n 25) [47].
51 Amerind (n 6) [85] Bell, Gageler and Nettle JJ (with whom Gordon J agreed) accepted that the ‘trustee’s right of indemnity confers a beneficial interest in trust assets’.
52 Ibid, [139]-[140] (Gordon J).
53 [1901] AC 118.
54 Ibid, 124 (Lord Lindley).
55 WJ Gough, Company Charges, (London, Butterworths, 1978) 224; Worthington (n 14).
56 Ibid, 264–65.
57 Ibid, 265. See further Campbell (n 34) 101.
58 Trim Perfect (n 26).
59 Fischer v Nemeske Pty Ltd (2016) 257 CLR 615 [186] (Gordon J).
60 (1841) 4 Beav 115; 49 ER 282.
61 Phillips (n 2) 217.
62 Brace (n 2).
63 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLE 265, 276 (‘Latec’) (Kitto J).
64 Ibid, 276 (Kitto J) citing Rice (n 2) 78.
65 Berger (n 9) 388.
66 Between fruits of litigation liens’ priority was given to the solicitor who brought in the assets: In Re Wadsworth; Rhodes v Sugden (1886) 34 Ch D 155. cf Atkinson v Pengelly [1995] 3 NZLR 104 where held to rank pari passu.
67 Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 3 All ER 747, 999–100 (Millet LJ).
68 (1828) 3 Russ 1; 38 ER 475.
69 In Ward v Duncombe (1893) AC 369 Lord MacNaghten observed that ‘the rule in Dearle v Hall has on the whole produced at least as much injustice as it has prevented.’
70 JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies, 5th edn (LexisNexis, 2014) 108, [4-015].
71 [2001] AC 102.
72 Ibid, 109.
73 Young, Croft, Smith, On Equity (Lawbook Co Ltd, 2009), 591.
74 In Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321, 328, (‘Canny Gabriel’) the High Court of Australia described the interest of a partner in partnership assets as a sui generis interest and applied the first in time rule to it.
75 Halabi (n 4) [246].
76 Hewett (n 29).
77 General Finance Agency & Guarantee Co. of Australia Ltd. (In Liquidation) v Perpetual Executors & Trustees Association of Australia Ltd (1902) 27 VLR 739
78 Youssef v Victoria University of Technology [2005] VSC 223 (Whelan J)
79 Canny Gabriel (n 77).
80 Halabi (n 4) [238] (Lord Briggs).
81 For example, Re Dalewon Pty Ltd (in liq) (2010) 79 ACSR 530 [8]; Re Winter Holdings (WA) Pty Ltd [2015] WASC 162 [40], Caterpillar Financial Services Australia v Owens Nominees Pty Ltd [2001] FCA 677 [22]; Collie v Merlaw Nominees Pty Ltd (in liq) [2001] VSC 39 [54]-[55]; Lemery (n 18) [21]; Agusta (n 41) [44].
82 Synergy Concepts Pty Ltd v Rylegrove Pty Ltd (in liquidation) (1997) 8 BPR 15,555 (Santow J)
83 Tolhurst Druce & Emmerson v Maryvell Investments Pty Ltd (in liq) [213] (Dodds-Streeton J), cited with apparent approval in Pitard Consortium Pty Ltd v Les Denny Pty Ltd (2019) 58 VR 524 [24] (McDonald J).
84 [2007] VSC 104.
85 in accordance with the equitable principle in Re Universal Distributing Company Ltd (in liq (1933) 48 CLR 171.
86 Ibid, [51], citing for example, Moffett v Dillon [1999] 2 VR 480.
87 Fotio (n 3) [9] and [61] that the orders made were ‘on the basis of the principle that the former trustee’s rights have priority over a new trustee in the absence of some vitiating factor’, citing Richardson v Aileen.
88 cited with apparent approval by the New South Wales Court of Appeal in Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99 [279] (per Ward JA, with whom McColl and Gleeson JJA agreed).
89 Fotios (n 3) [11] (Colvin J).
90 [2019] NZHC 2536.
91 Ibid, [61] cited with approval in Temple 88 Limited (in liq) v Hassine [2021] NZHC 2351 [19]-[21].
92 Halabi (n 4) [52]-[58].
93 Representation of Rawlinson and Hunter Trustees SA re Z Trusts [2019] JCA 106 (Sir William Bailhache, Bailliff, Martin JA and Logan Martin JA).
94 ITG Limited v Glenalla Properties Limited [2020] GCA 43.
95 Lord Richards and Sir Nicholas Patten delivered a joint judgment, (the Joint Opinion), with which Lord Stephens agreed.
96 ITG (n 96) [177].
97 Ibid.
98 Lord Briggs delivered a separate judgment on the Priority Question with which Lord Reed and Lady Rose agreed, and Lady Arden agreed in the result whilst delivering brief additional reasons.
99 Halabi (n 4) [239].
100 Ibid, [246].
101 Ibid.
102 Ibid, [258].
103 Halabi (n 4) [259] (Lord Briggs).
104 Ibid, [254].
105 Ibid, [206] (Joint Opinion); [267] (Lord Briggs).
106 Caron and Seidlitz v Jahani and McInerney in their capacity as liquidators of Courtenay House Pty Ltd (in liq) & Courtenay House Capital Trading Group Pty Ltd (in liq) (No 2) [2020] NSWCA 117 [122]-[123] (Bell P).
107 Ibid, [256]-[257].
108 Ibid, [257].
109 Ibid, [277].
110 HAJ Ford and IJ Hardingham, ‘Trading Trusts: Rights and Liabilities of Beneficiaries’ in PD Finn (ed) Equity and Commercial Relationships (Law Book Co, 1987) 84.
111 D’Angelo (n 1).
112 Halabi (n 4) [271].
113 Ibid, [276].
114 See Nuncio D’Angelo, ‘Shares and Units: The Parity Myth and the Truth about Limited Liability’ (2011) 29 C&SLJ 477 at 499-450 and generally, D’Angelo (n 1) ch 5.
115 See RWG Management Ltd v Commissioner for Corporate Affairs [1985] VR 385 (SC) 397–98 (Brooking J); Australian Securities and Investments Commission v Letten (No 17) (2011) 286 ALR 346 [19]–[20] (Gordon J).
116 Halabi (n 4).
117 [2023] NSWCA 214 (Leeming JA and Kirk JJA; Bell CJ dissenting).
118 It was held that the successor trustee owes no fiduciary duty to the former trustee: (n 121) [115]-[141] (Leeming JA); [228]-[237] (Kirk JA); [3]-[33] (Bell CJ contra).
119 (n 13).
120 Amerind (n 6) [95] to [97] per Bell, Gageler and Nettle JJ and at [153] to [172] per Gordon J.
121 Jones (n 38) [108] (Allsop CJ).
122 Amerind (n 6) [167] to [172] per Gordon J.
123 See H Ford, WA Lee, M Bryan, J Glover and I Fullerton, Ford and Lee: The Law of Trusts (Lawbook Co, 2012) [14.290] doubting that it is assignable (other than to a trustee in bankruptcy or representative of a deceased trustee); cf Break Fast (n 23) [78]-[79] ((Riordan J).
125 Ibid.
126 Halabi (n 4) [171] per Lord Richards and Sir Nicholas Patten.
127 See for example Lane (n 6)[34] (Derrington J); Amerind (n 6) [139]-[140] (Gordon J).
128 The Hon TF Bathurst ‘The Historical Development of Insolvency Law’ (Speech delivered at the Francis Forbes Society for Australian Legal History, 3 September 2014), [97].