Drinkwater & Ors v Gedrot Holdaway Pty Ltd & Ors [2003] NSWSC 255

New South Wales Supreme Court

CITATION : Drinkwater & Ors v Gedrot Holdaway Pty Ltd & Ors [2003] NSWSC 255 revised - 03/04/2003 HEARING DATE(S) : 2/4/03 JUDGMENT DATE : 2 April 2003

JUDGMENT OF : Gzell J DECISION : Application dismissed

CATCHWORDS : CORPORATIONS - Winding Up - Liquidation of corporate trustee - Whether mareva order should be varied to allow liquidator access to trust property - Whether a liquidator is entitled to indemnity from trust assets LEGISLATION CITED : Trustee Act 1925 Re G B Nathan & Co Pty Ltd (in liquidation) (1991) 24 NSWLR 674 CASES CITED : Re Suco Gold Pty Ltd (in liquidation) (1983) 33 SASR 99 Sjoquist v Rock Eisteddford Productions Pty Ltd (1996) 19 ACSR 339 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liquidation) (1999) 30 ACSR 377 PARTIES : Peter Westgarth Drinkwater and John Francis Drinkwater - Plaintiffs Excelsior Parade Properties Pty Limited (in liquidation) - Fifth Defendant FILE NUMBER(S) : SC 4053/01 COUNSEL : M Ashhurst - For the Plaintiff C R Newlinds - For the Defendants SOLICITORS : Hewitts Commercial Lawyers - Plaintiffs Kemp Strang - 5th Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

GZELL J

TUESDAY 2 APRIL 2003

4053/01 PETER WESTGARTH DRINKWATER & Anor v GEDROT PTY LTD & Ors JUDGMENT 1 On 16 October 2001, Bryson J made a mareva order restraining the defendants, amongst other things, from disposing of assets within or outside the jurisdiction until the final disposition of the proceedings. The liquidator of the fifth defendant, Excelsior Parade Properties Pty Ltd (in liquidation), seeks a variation of that order to allow him to deal with funds held in an account in the company's name with Newcastle Permanent Building Society Ltd ("NPBS") in accordance with the trust or trusts on which the funds are held. 2 The material facts are set out in the judgment of Bryson J. In summary, Gedrot Pty Ltd as trustee of the Geoffrey Kyrwood Family Trust and Gavros Pty Ltd as trustee of the Terrence Kyrwood Family Trust held equally all the units in the Kyrwood Unit Trust of which Geoffrey Kyrwood and Terrence Kyrwood were the trustees. In previous proceedings, the court ordered Gedrot and Gavros to purchase the shares held by Peter Westgarth Drinkwater and John Francis Drinkwater in Caddyrack Inc. Those shares were not purchased and Caddyrack was liquidated and deregistered. Gedrot and Gavros were replaced as trustees of the Family Trusts by Bolton Point Investments Pty Ltd and Brighton Avenue Investments Pty Ltd respectively and they took transfers of the units in the Unit Trust. The parents of Geoffrey Kyrwood and Terrence Kyrwood transferred land at Excelsior Parade, Toronto, to them. They had already declared that the land would be held in trust for the Unit Trust and the two Family Trusts. The fifth defendant was purportedly appointed as the trustee of the Unit Trust. Geoffrey Kyrwood and Terrence Kyrwood transferred the land to the fifth defendant alone as trustee of the Unit Trust. The land was mortgaged and ultimately sold and $131,784.52, portion of the purchase price, was deposited to an account in the name of the fifth defendant with NPBS. The fifth defendant was subsequently wound up. 3 The purpose of the application is to enable the liquidator to recoup his costs and expenses from the account with NPBS. I was informed by counsel that the fifth defendant held no other property than the land and its proceeds of sale. 4 In Re G B Nathan & Co Pty Ltd (in liquidation) (1991) 24 NSWLR 674, where a liquidator held investments on trust, McLelland J considered the question whether he was entitled to recoup his expenses and charges from the trust property. In Re Suco Gold Pty Ltd (in liquidation) (1983) 33 SASR 99 the Full Court of South Australia considered the position of the liquidator of a trustee of a trading trust and held that the liquidator's expenses were incurred in discharging the duties imposed by the trust and, as such, were covered by the trustee's right of indemnity against the trust assets. McLelland J pointed out, at 686, that the case before him did not, to any significant extent, involve the company in carrying on business as a trustee or incurring debts in that capacity. At 688-689 his Honour said: "Where, as appears to be the position in the present case, the company holds assets on what are virtually bare trusts for other persons, there seems to be no sufficient reason why the liquidator should not simply cause the company to comply with any demand by the beneficial owners to transfer the assets to them, thus giving effect to, and terminating, the trusts. In such a case, the work of the liquidator in causing those assets to be transferred to those entitled to them wears the double aspect of work properly carried out for the purposes of the winding up, as well as work carried out in the "administration" of the trusts."