A matter of trust: High Court rules on distribution of assets of an insolvent corporate trustee

Articles Written by Pravin Aathreya (Partner), Sara Gaertner (Senior Associate)

In its much anticipated decision, the High Court has unanimously dismissed the Amerind appeal.[1] This decision finally resolves recent uncertainty as to the proper application of trust assets in the liquidation of an insolvent corporate trustee. 

In short, the High Court’s decision confirms that in the winding up of a corporate trustee:

  • the “property of the company” for the purpose of s 433 of the Corporations Act 2001 (Cth) (Act) includes the trust assets to which the company is entitled (in exercise of its right of indemnity, including through its power of exoneration[2]) to apply in satisfaction of the claims of creditors; and
  • proceeds of the right of exoneration may be applied only in satisfaction of trust liabilities to which the right relates (that is, the proceeds are not available to creditors generally), and those proceeds must be paid in accordance with the statutory priority rules in a winding up.


At first instance, the Court that Amerind’s right of indemnity from trust assets did not constitute “property of the company” and therefore the priority regime in sections 433(3), 556 and 561 of the Act did not apply to proceeds from those assets.[3]  The Victorian Court of Appeal overturned the primary decision.[4] See our previous articles here and here regarding those decisions.

The two grounds of appeal before the High Court focused on whether:

  1. the insolvent corporate trustee’s right of indemnity out of trust assets (specifically, the trustee’s right of exoneration) was “property of the company” available for distribution to the company’s creditors pursuant to section 433 of the Act; and
  2. the trustee’s right of indemnity was “property comprised in or subject to a circulating security interest” within the meaning of s 433(2) of the Act.


Although unanimous in their decision, three sets of reasons were delivered by the High Court.

The following key points emerge from the reasons of Bell, Gageler and Nettle JJ (with which Gordon J agreed):

  1. Amerind's right of indemnity was not "property [of the company] comprised in or subject to a circulating security interest." This was because it was not a “circulating asset” within the meaning of s 340 of the PPSA, and therefore any security over the right of indemnity was not a “circulating security interest” as defined in s 51C of the Act.
  2. Rather, the inventory itself was the relevant property “comprised in or subject to a circulating security interest” created by Amerind in favour of the Bank.  The inventory was therefore a circulating asset the subject of a circulating security interest, and therefore attracted the operation of s 433 of the Act.[5]  Accordingly, the receivers’ sale of the inventory generated proceeds which the receivers were entitled to apply in satisfaction of the claims of trust creditors and in accordance with the statutory priority regime.[6]
  3. Their Honours favoured the approach in Re Suco Gold[7] (and rejected Re Enhill[8]), confirming that the proceeds from an exercise of a corporate trustee’s right of exoneration in respect of trust liabilities may be applied only in satisfaction of the trust liabilities to which that right relates.[9] Relevantly, the Court also endorsed the principle that where priority debts are incurred by a trustee, the statutory priority rules should govern the application of the trustee’s right of exoneration to distribute proceeds of that right among trust creditors.[10]

Gordon J agreed with the reasons of Bell, Gageler and Nettle JJ, but also addressed a number of additional issues of broader relevance, including:

  1. Confirmation that circulating assets which are the subject of the right of exoneration can only be applied to satisfy trust debts, and are not available for distribution to creditors generally. That does not preclude the application of the statutory priority regime.[11]
  2. In the case of an insolvent corporate trustee of multiple trusts, receivers or liquidators should be viewed as holding multiple funds, each directed to different groups of trust creditors.[12]
  3. In relation to administration costs, the relevant authority (e.g. liquidator or receiver) can be treated as a trust creditor, and their expenses regarded as debts of the corporate trustee which would have priority under s 556(1)(a) of the Act as expenses incurred in preserving, realising or getting in property of the company.[13]
  4. There is no inconsistency between the corporate insolvency priority regime and s 116(2)(a) of the Bankruptcy Act 1966 (Cth), which provides that property held by a bankrupt in trust for another person is not property divisible amongst the creditors of the bankrupt. The right of exoneration and the proprietary interest generated in the fund meant that the trust property ceased to be aptly described as property “held on trust” but instead was the trustee’s property subject to limitations as to use.[14]

Kiefel CJ, Keane and Edelman JJ also dismissed the appeal based on application of fundamental principles of trust law concerning the benefit in insolvency of rights held on trust, and the nature of the trustee’s right of indemnity, in particular its power of exoneration.

Their Honours indicated that their decision was fortified by avoiding a perverse outcome whereby the Act operated to deny employees priority solely because the company which employed them was trading as a trustee, and that s 433 was enacted at a time when Re Suco Gold had been accepted for many years.[15]


The High Court’s decision provides welcome certainty to receivers and liquidators dealing with the trust assets of insolvent corporate trustees.  It also safeguards the historical position of employees enjoying priority in relation to circulating assets, irrespective of whether they are employees of a company or of a corporate trustee. In this way, the High Court’s decision goes a long way towards achieving functional equivalence at law of trading trusts and ordinary corporations.

However, the High Court itself recognised that practical difficulties may arise and additional expenses may be incurred in circumstances where a corporate trustee carried on its own non-trust business, or acted as trustee of multiple trusts. Some practical methods of dealing with these circumstances are suggested, such as apportioning winding up expenses across each trust based on the relevance of the work to each trust. However, it is likely in these more complicated scenarios that receivers and liquidators will need to apply to the Court for directions, given that what will be an appropriate allocation between multiple trusts will vary from case to case.



[1] Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth of Australia & Ors [2019] HCA 20 (“Amerind”).

[2] Being the power to use trust funds to discharge debts that were properly incurred by the trustee in the course of trust business.

[3] Re Amerind (Receivers and Managers Appointed) (In Liquidation) [2017] VSC 127; (2017) 320 FLR 118.

[4] Re Amerind Pty Ltd; The Commonwealth v Byrnes & Hewitt (2018) 54 VR 230.

[5] Amerind [2019] HCA 20 at [86].

[6] Amerind [2019] HCA 20 at [90], [92] and [93].

[7] In re Suco Gold Pty Ltd (In Liquidation) (1983) 33 SASR 99 (Re Suco Gold).

[8] Re Enhill Pty Ltd [1983] 1 VR 561.

[9] Amerind [2019] HCA 20 at [92].

[10] Amerind [2019] HCA 20 at [95] and [96].

[11] Amerind [2019] HCA 20 at [156].

[12] Amerind [2019] HCA 20 at [160].

[13] Amerind [2019] HCA 20 at [169]-[171].

[14] Amerind [2019] HCA 20 at [173].

[15] Amerind [2019] HCA 20 at [58].

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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