On 19 June 2019, the High Court handed down its decision in Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20. This was an appeal from the decision of the Victorian Court of Appeal in Amerind[1] in which it was held that the priority regime under sections 433, 556 and 560 of the Corporations Act 2001 applied to distribution of proceeds from the realisation of trust assets (where the insolvent company carried on business solely as trustee of a trading trust), as it was held that the Company’s right of indemnity against the assets of the trust was “property of the company”. At first instance[2] the primary judge had earlier determined that the company’s right of indemnity was not “property of the company” with the effect that the statutory priorities for the payment of debts and claims in a winding up, including the priority afforded to employees, was not available and all unsecured creditors of the trust ranked equally.
The High Court confirmed that, in the winding up of a corporate trustee, the “property of the company” includes the trust assets the company would, in exercising its right of indemnity, be entitled to apply in satisfaction of the claims of trust creditors, with the result that the priority regime in the Corporations Act applies to give priority to employees of an insolvent company trading as the trustee of a trust, as it would for employees of a company trading in its own right.
The High Court’s decision will be of great interest to insolvency practitioners, as it puts to rest a question which has been the subject of differing lines of authority across various courts in Australia and has vexed practitioners, lawyers and judges for more than 30 years.
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This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.
[1] The Commonwealth v Byrnes & Hewitt as receivers and managers of Amerind Pty Ltd (receivers and managers appointed) (in liq) [2018] VSCA 41
[2] Re Amerind (receivers and managers appointed) (in liq) [2017] VSC 127
