New South Wales Supreme Court CITATION : Glazier Holdings Pty Ltd (in liquidation) v Australian Men's Health Pty Ltd (in liquidation) & 4 Ors [2006] NSWSC 1240 HEARING DATE(S) : 25/09/06 JUDGMENT DATE : 8 December 2006 JURISDICTION : Equity Division Corporations List JUDGMENT OF : White J DECISION : Application adjourned. CATCHWORDS : CORPORATIONS – Winding up – Liquidators – Remuneration – Expenses out of trust assets – First defendant was formerly trustee of unit trust but was removed on application of beneficiary – New trustee appointed – New trustee ceased to operate business of trust and was appointed receiver to assets of trust – After an account, new trustee terminated trust and paid funds held by him into court – Application by first defendant and liquidator of first defendant for orders directing distribution of moneys paid into court – Whether liquidator of first defendant entitled to funds in court on basis of first defendant's right of indemnity in trust deed – Whether liquidator of first defendant entitled to funds in court on basis of right to indemnity from trust assets – Held that liquidator of first defendant entitled to balance of fund to extent able to demonstrate remuneration and expenses relate to administration of trust. LEGISLATION CITED : Trustee Act 1925 (NSW) Corporations Act 2001 (Cth) Glazier v Australian Mens Health [2000] NSWSC 253 Glazier v Australian Mens Health (No. 2) [2001] NSWSC 6 Meehan & Ors v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146 Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 Dimos v Dikeakos Nominees Pty Ltd (1996) 68 FCR 39 Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 Collie v Merlaw Nominees Pty Ltd (2001) 37 ACSR 361 CASES CITED : Nolan v Collie (2003) 7 VR 287 Re Suco Gold Pty Ltd (In Liq) (1983) 33 SASR 99 French Caledonia Travel Service Pty Ltd (In Liq) (2003) 59 NSWLR 361 Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158 Berkeley Applegate (Investment Consultants) Ltd (in liq); Harris v Conway [1989] 1 Ch 32 Re Eastern Capital Futures Ltd (in liq) [1989] BCLC371 Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) (1999) 30 ACSR 377;17 ACLC 500 Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361 Glazier Holdings Pty Ltd (in liquidation) PARTIES : v Australian Men's Health Pty Ltd (in liquidation) & 4 Ors FILE NUMBER(S) : SC 4905/97 COUNSEL : Applicant/1st Defendant: A Fernon SOLICITORS : Applicant/1st Defendant: Toomey Pegg Drevikovsky IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WHITE J Friday, 8 December 2006 4905/97 Glazier Holdings Pty Ltd (in liquidation) v Australian Men's Health Pty Ltd (in liquidation) & 4 Ors JUDGMENT 1 HIS HONOUR: This is an application for orders directing the distribution of moneys paid into court by Mr Martin Madden, the trustee and receiver of the Australian Men's Health Unit Trust. The applicants are the first defendant, Australian Men's Health Pty Ltd (in liquidation) ("the company"), and its liquidator, Mr Nicholas Malanos. 2 The company was formerly the trustee of the Australian Men's Health Unit Trust. The beneficiaries of the trust are Glazier Holdings Pty Ltd (in liquidation) ("Glazier") and Treykell Pty Ltd ("Treykell"). 3 The company carried on no business except as trustee of the trust. In that capacity, it contracted with doctors who provided medical services. The doctors paid a fee to the company for the services it provided to them. It operated more than 25 clinics throughout Australia. It advertised through the print media. It used the services of service companies associated with the beneficiaries of the trust. The service companies provided it with administrative services, booking services and equipment. 4 Proceedings were commenced in 1997 by Glazier for the removal of the company, and for the appointment of Mr Madden, as trustee of the trust. After three days of hearing, by consent, Young J removed the company as trustee and substituted Mr Madden as trustee. 5 His Honour made orders vesting the assets of the trust in Mr Madden, upon the terms of the trust deed. His Honour ordered that an account be taken of the dealings and transactions of the company as trustee. 6 Upon the making of these orders, the company ceased carrying on business. A week after the orders were made, Mr Madden sought advice under s 63 of the Trustee Act 1925 (NSW) to the effect that he would be justified in ceasing to operate the business of the trust. He also sought an order that he be appointed as receiver to the assets of the trust. This application was made because Mr Madden was of the view that the trust's assets were insufficient to meet its liabilities and the services of the service companies were no longer available. The company claimed that it was entitled to a lien in respect of moneys which it had paid, or debts which it was due to pay, in respect of which it was entitled to be indemnified out of the trust assets. On 25 March 1998, Cohen J appointed Mr Madden as receiver so that he could continue his investigations, realise the assets, and pay the proceeds into court. Cohen J also gave directions that Mr Madden would be justified in not continuing to trade. The orders of 25 March 1998 provided that the remuneration of the receiver, together with any costs, expenses and liabilities incurred by him, were payable out of assets of the trust in priority to any lien or right of indemnity of the company from those assets. 7 On 14 May 1998, Mr Madden sold the stock in trade of the trust business and other assets for $400,000. It appears from a judgment of Austin J of 14 December 1998 that as at 19 November 1998, Mr Madden held cash on deposit of $370,715 after deducting his own fees and expenses, but without making any payment to, or allowance in favour of, the company. 8 On 15 June 1998, the directors of the company appointed Mr John Starr as administrator. 9 On 10 September 1998, a creditors' meeting of the company resolved that the company enter into a deed of company arrangement. It was also resolved that "the remuneration of the administrator of the company up to the date of the execution of the deed be fixed in respect of the administrator and his employees at the hourly rates applicable and in accordance with the scale of fees recommended by the Insolvency Practitioners Association of Australia and subject to a cap of $30,000." 10 The administrator's report to creditors stated that the company's only asset was its right of indemnity against the assets of the trust. The report as to affairs disclosed that the company had liabilities of $1,254,311 comprising $60,603 owed to the service companies, $590,253 in respect of loans obtained from shareholders and unit holders, and $603,455 owed to trade creditors. Most, if not all, of these liabilities would have been incurred whilst the company was carrying on business as trustee. 11 On 30 September 1998, the company entered into a deed of company arrangement with the administrator. The deed of company arrangement and associated agreements provided for the company to assign to the administrator, in his capacity as administrator of the deed of company arrangement, all rights the company had to be indemnified out of the assets of the trust. 12 In October 1998, Glazier commenced proceedings to have the deed of company arrangement set aside. 13 On 20 November 1998, Mr Madden provided a report to the Court summarising the results of his investigations of the dealings and transactions of the company as trustee of the trust. 14 On 17 December 1998, Austin J rejected an application by the company to have access to the fund of $370,715 held by Mr Madden. His Honour noted that the appropriate applicant should have been Mr Starr as administrator, rather than the company, but his Honour's judgment did not turn on that point. His Honour observed that the basis for the application was the claimed right of the company to be indemnified out of the funds of the trust in respect of expenditure made or liabilities incurred by it whilst it was trustee. His Honour found that there were three obstacles to such an asserted entitlement. The first was that the financial information did not identify particular expenditure or liabilities such that it could be concluded that they were properly incurred by the company in the administration of the trust. Secondly, his Honour was concerned as to whether related party transactions identified in the receiver's report may have been unauthorised, or in breach of trust, so as to preclude the exercise of the right of indemnity. Thirdly, it was premature to deal with an application for payment of the moneys held by Mr Madden into court without first dealing with Mr Madden's motion for judicial advice as to whether further steps should be taken by him as trustee or receiver. 15 On 2 March 1999, the creditors of the company unanimously resolved that they would not fund the administration of the company and that the deed of company arrangement should be terminated. As a result, Mr Starr became liquidator of the company. The proceedings commenced by Glazier to set aside the deed of company arrangement became redundant. 16 In his report to creditors of 24 February 1999, Mr Starr stated that following execution of the deed of company arrangement, he had undertaken investigations in respect to issues raised by Mr Madden in his report of 20 November 1998. On 19 January 1999, Mr Starr wrote a detailed letter to Mr Madden in relation to his report querying many of the statements in it and asking for further information. It appears that the work done by Mr Starr in this period included some substantial work in an attempted investigation of the affairs of the company as trustee and of matters affecting its right of indemnity. Other work done during the period included resisting proceedings commenced by Glazier for orders setting aside the deed of company arrangement and making an application to Austin J for access to the funds held by Mr Madden. Mr Starr also received queries from certain creditors as to the admissibility of their claims. He reported that he did not intend to settle a list of admitted creditors until there were sufficient funds available for any distribution. 17 On 15 June 1999, Mr Starr gave notice to creditors of the company of a meeting of creditors to be held on 30 June 1999 to approve of his remuneration as administrator from the date of execution to the date of termination of the deed of company arrangement and of his remuneration as liquidator from the date of liquidation until the date the liquidation was completed or he resigned, whichever occurred first. On 30 June 1999, the meeting of creditors resolved that: " Resolution 1: It was resolved that the remuneration for the Deed Administrator for the period 30 September 1998 to 2 March 1999 be approved. The remuneration is to be fixed in respect of the Deed Administrator and his employees at the hourly rates applicable and in accordance with the scale of fees recommended by the Insolvency Practitioners' Association of Australia and that the Deed Administrator shall be authorised to draw such remuneration from time to time from monies held by him as Deed Administrator and that the fees be subject to a cap of $100,000. Resolution 2: It was resolved that the remuneration for the Liquidator for the period 2nd March 1999 to 30 June 1999 be approved. The remuneration is to be fixed in respect of the Liquidator and his employees at the hourly rates applicable and in accordance with the scale of fees recommended by the Insolvency Practitioners' Association of Australia and that the Liquidator shall be authorised to draw such remuneration from time to time from monies held by him as Liquidator and that the fees shall be subject to a cap of $25,000. Resolution 3: It was declared that the remuneration for the Liquidator for the period 30 June 1999 to completion be approved. The remuneration is to be fixed in respect of the Liquidator and his employees at the hourly rates applicable and in accordance with the scale of fees recommended by the Insolvency Practitioners' Association of Australia and that the Liquidator shall be authorised to draw such remuneration from time to time from monies held by him as Liquidator and that the fees be subject to a cap of $100,000. " 18 Five creditors attended. They were the service companies associated with the former directors. The resolutions were carried unanimously. 19 On 3 April 2000, Austin J gave judgment upon Mr Madden's application for judicial advice as to whether he would be entitled to take no further steps as trustee and receiver of the trust, other than in relation to any liabilities of the trust, until further order of the Court. Glazier contended that Mr Madden ought to commence proceedings against two of the directors, Messrs Meehan and Murphy, or companies associated with them. Austin J did not agree. On 18 March 1998, Young J had ordered that an account be taken "of the dealings and transactions of [the company] as trustee and that the defendants be ordered to pay to the new trustee the amount found to be due on the taking of such accounts together with interest." The "defendants" were the company, three of the directors, Messrs Meehan, Murphy and Brain, and Treykell Pty Ltd. Austin J concluded that he should not advise Mr Madden to institute any proceedings or to seek to examine any of the defendants. However, Mr Madden's report expressed concern that breaches of trust and duty may have occurred. Austin J gave directions for the taking of the account which Young J had ordered. Austin J directed that Mr Madden was justified in taking no further steps as trustee and receiver of the trust, other than in relation to any liabilities of the trust, until further order of the Court. Austin J dismissed Glazier's proceedings to set aside the deed of company arrangement with no order as to costs (Glazier v Australian Men's Health [2000] NSWSC 253). 20 On 22 January 2001, Austin J delivered judgment in respect of Glazier's application for the taking of accounts by the directors of the company. His Honour ordered that accounts be taken on a wilful default basis (Glazier v Australian Men's Health (No. 2) [2001] NSWSC 6). 21 On 7 March 2002, the Court of Appeal allowed an appeal from this order and remitted the proceedings to the Equity Division for the taking of accounts in common form, rather than on the basis of wilful default (Meehan & Ors v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146). 22 On 22 May 2002, a further meeting of creditors of the company was held. It was unanimously resolved that upon the retirement of Mr Starr as liquidator, Mr Malanos would be appointed to act as liquidator in his stead, effective on and from 22 May 2002. 23 The account ordered by Young J was taken before Registrar Berecry. Mr Murphy, a director of the company, filed verified accounts. Orders were made for him and for Mr Meehan to be examined viva voce on the accounts and for the accounts to be vouched. The vouching process was completed in March 2004. Mr Murphy was examined viva voce on 9 August 2004 before the Registrar. Glazier, who had sought the account, did not seek to surcharge or falsify the accounts. 24 Mr Malanos made demand upon Mr Madden for the moneys held by Mr Madden to be paid to him. On 18 November 2005, Mr Madden sought judicial advice as to whether he was: " (a) Justified in forming the opinion that it is in the interests of the unit holders of the Trust to terminate the Trust; (b) entitled to terminate the Trust and pay the balance of the funds held by him as Trustee and Receiver of the Trust into Court in fulfilment of his obligations as Trustee upon termination of the Trust; (c) entitled to be removed as court appointed receiver of the Trust; and (d) justified in taking no further steps as Trustee of the Trust. " 25 On 3 February 2006, the Court made orders by consent answering those questions in the affirmative. It ordered that Mr Madden "terminate the trust and pay the funds held by him as Trustee and Receiver of the Trust, after deduction of his remuneration and costs as Trustee and Receiver, into Court in fulfilment of his obligations as Trustee on termination of the Trust." Pursuant to this order, Mr Madden has paid the sum of $171,765.83 into court. The Court also ordered that Mr Madden be removed as receiver of the trust and that he take no further steps as trustee after paying funds into court in accordance with those orders. 26 The reference to the trust being "terminated" is to provisions of the trust deed dealing with the so-called termination of the trust. Clause 11.2 of the trust deed provides that: " If (a) the Trustee ceases to carry on business; (b) the Trustee considers it would be in the interests of the Holders to terminate the Trust, or (c) …, then the Trustee may if it considers it to be in the interest of the Holders to do so terminate the Trust. 'Holders' means persons who hold units in the Trust. " 27 Clause 11.3 provides: " On termination of the Trust … the Trustee must as soon as practicable sell, call in and convert into money the Fund and divide the proceeds of sale, after deducting all debts and liabilities of the Trust and all proper costs, charges and expenses, among the Holders in proportion to the number of Units held by them. " 28 As Cohen J said in his judgment of 25 March 1998, the termination provisions anticipate that there would be assets available to the unit holders after providing for the costs and expenses of getting in the assets, and after paying the debts incurred by the trustee in execution of the trust. The clause does not deal with the position where the trust assets are insufficient to meet the trustee's liabilities. Notwithstanding the language of clause 11 of the trust deed and the orders made on 3 February 2006, the trust is not terminated until all of the trust assets have been dealt with either by being applied pursuant to the right of indemnity of the existing or former trustee, or by being paid to creditors of a trustee pursuant to the creditors' rights to be subrogated to a trustee's right of indemnity, or by being distributed to the beneficiaries. 29 On 27 July 2006, Mr Starr assigned to Mr Malanos Mr Starr's rights to be paid fees and disbursements. He assigned to Mr Malanos such rights and interests he might have in the moneys paid into court. 30 Claims to the money paid into court have been made by Mr Malanos, by the liquidator of Glazier, and by Treykell. The principal unrelated unsecured creditor of the company is a company called Initiative Media Australia Pty Ltd. It is owed $404,272.42. It claimed to be subrogated to the rights of the company to be indemnified out of the trust assets. It claimed that the liquidator was only entitled to be paid reasonable costs and expenses of recovering trust assets. However, it did not appear on the present application. On 7 September 2006, its solicitor advised that it would not be contesting the liquidator's application. 31 The liquidator concluded that given the size of the payment into court, and the claims made on that amount by unit holders and a third party creditor, the costs of litigating his claim, and the uncertainty of litigation, the best course was to reach a commercial settlement with the unit holders. Mr Malanos claims that the fees and disbursements he is entitled to recover for the work done by him or Mr Starr up to 30 June 2006 total $259,253.34. The only funds available to pay this amount are the funds in court. He has reached an agreement with the liquidator of Glazier, and with Treykell that, subject to the Court's approval, the moneys in court be paid to him or to the company, and that they then be disbursed in the following order: (a) first, in payment of his legal costs and disbursements incurred on or after 27 June 2006 in making the application to the Court and finalising the matter, together with the costs incurred by Treykell in preparing affidavit evidence in support of the application and any appearances in support of the application; (b) secondly, by paying $15,000 to the liquidator of Glazier; and (c) thirdly, dividing the balance equally between him and Treykell. 32 If the orders sought are made, the creditors of the company will receive nothing. 33 Notice of the liquidator's application has been served on all unsecured creditors of the company. Creditors were also advised to obtain their own legal advice in relation to the liquidator's claim. The liquidator's advice was summarised for the benefit of creditors. Creditors were also provided with copies of the correspondence from the solicitors for Initiative Media Australia, which challenged the liquidator's claim. No creditor has opposed the liquidator's application. On the other hand, the application is not made with the creditors' consent. 34 The liquidator submits that he is entitled to the funds in court on two bases. The first is the company's right of indemnity pursuant to clause 10.1 of the trust deed. The second is pursuant to his rights, or Mr Starr's rights, to which the liquidator has succeeded, as administrator, deed administrator and liquidator, to be indemnified from the trust assets. 35 Clause 10.1 of the trust deed provides: " 10.1 The Trustee is entitled to be indemnified out of the Fund against and in respect of all liabilities (including any actions, costs, claims or other things made against it): (a) which it incurs relating to the exercise of any power, duty or discretion vested in the Trustee by virtue of this deed, (b) acting in or about the investment and administration of the Fund, (c) incurred in the conduct and management of any business forming part of the Fund, (d) arising from the acquisition of any investment under this Deed or any contract entered into by the Trustee under this Deed, and (e) in relation to any matter or thing in connection with the Trust. The Trustee is entitled to enter an arrangement with a third party on the basis that any liability of the Trustee under the arrangement is enforceable only against the Fund, in which event the Person contracting with the Trustee is entitled to look only to the Fund for the payment of a claim that may otherwise be payable by the Trustee. " 36 The right of a liquidator to recover his remuneration out of trust assets of which the company in liquidation is the trustee has been considered on numerous occasions. In the present case, the company is not now a trustee. The trust assets are not vested in it. The costs of administration and liquidation were not incurred when the company held office as trustee. 37 A trustee, by virtue of his office as trustee, has a right to be indemnified out of the trust fund for liabilities properly incurred in the administration of the trust. The trustee is entitled to be recouped out of the trust fund for liabilities which he has discharged. If the trustee has incurred liabilities in the course of acting as trustee but not discharged them, he is entitled to apply the trust property in discharging the liabilities, and thus is entitled to exoneration (Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 245-246). Where a trustee incurs debts in the execution of the trust, the creditors are entitled to be subrogated to the trustee's right of indemnity against the trust assets. 38 The trustee's right to be indemnified, by exoneration or recoupment, out of the trust assets for liabilities properly incurred in execution of the trust is not lost if the trustee is removed (Dimos v Dikeakos Nominees Pty Ltd (1996) 68 FCR 39 at 43-44; Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 653; Collie v Merlaw Nominees Pty Ltd (in liq) (2001) 37 ACSR 361 at [54], and on appeal Nolan v Collie (2003) 7 VR 287). 39 The only business carried on by the company was as trustee of the trust. The company is entitled to the funds in court in priority to the claims of beneficiaries. The beneficiaries would only be entitled to the funds if the company's right to be exonerated for the debts incurred by it had been satisfied. 40 However, it does not follow that the liquidator is entitled to the funds in court. The right of indemnity, which may be described as a right of lien or charge in the sense explained by the High Court in Chief Commissioner of Stamp Duties (NSW) v Buckle at 245, is property of the company, not of the liquidator. To the extent Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99 suggests otherwise, it is wrong (Re Sutherland; French Caledonia Travel Service Pty Ltd (In Liq) (2003) 59 NSWLR 361 at [201]). It is not suggested that the company is entitled to recoup itself from the trust funds in respect of liabilities which it discharged but for which it did not receive payment from the trust assets. If it had such a right of recoupment, then, to that extent, it would be entitled to the moneys paid into court, and the moneys which it recouped would form part of its general assets available to the liquidator for payment of his fees and expenses. However, it is not a right of recoupment which is asserted. Subject to its express right of indemnity under clause 10.1 of the trust deed, the company's only right to the funds in court is the right to be exonerated for liabilities properly incurred in the administration of the trust. The company's creditors are entitled to be subrogated to its right of exoneration. 41 Clause 10.1 of the trust deed entitles the company to an indemnity in respect of, inter alia, all liabilities incurred in relation to any matter or thing in connection with the trust. In its context, the clause provides for an indemnity in respect of such liabilities incurred by the company in its capacity as trustee or in connection with the administration of the trust. 42 The company incurred a liability for the administrator's and liquidator's fees. In Re Suco Gold Pty Ltd (in liq), King CJ, with whom Matheson J agreed, said (at 110): "It is part of the duty of the trustee company to incur debts for the purposes of the trust businesses and, of course, to pay those debts. Upon winding up, those debts can only be paid in accordance with the provisions of the Companies Act . This requires necessarily that there be a liquidator and that he incur costs and expenses and be paid remuneration. Section 292 provides that there be paid the costs and expenses of winding up, the taxed costs of the petitioner and the remuneration of the liquidator 'in priority to other unsecured debts' …. The expression ' other unsecured debts' appears to imply that the costs and expenses of winding up, the petitioner's costs and the liquidator's remuneration are regarded by the statute as debts of the company. As the company's obligation as trustee to pay the debts incurred in carrying out the trust cannot be performed unless the liquidation proceeds, it seems to me to be reasonable to regard the expenses mentioned above as debts of the company incurred in discharging the duties imposed by the trust and as covered by the trustee's right of indemnity. " 43 This was said in the context of a company whose only business was that of a trustee of two unit trusts and which held office as trustee when it went into liquidation. Other authorities make it clear that the liquidator is only entitled to recover remuneration from trust assets where the work done was in administration of the trust (Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158; In re Berkeley Applegate (Investment Consultants) Ltd (in liq); Harris v Conway [1989] 1 Ch 32 at 50-51; Re Eastern Capital Futures Ltd (in liq) [1989] BCLC371 at 375; Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 686-687; 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 385; 17 ACLC 500 at 509; Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) at [213], [217]). 44 It follows that the only claim which the liquidator has for which the company is liable, and against which the company is entitled to be exonerated from the funds in court, is for remuneration and expenses in connection with the administration of the trust. 45 The liquidator also relied upon ss 443D and 443F of the Corporations Act 2001 (Cth), and upon clause 6.2 of the deed of company arrangement. Clause 6.2 of the deed of company arrangement provided that the administrator was entitled to remuneration at a certain scale. That clause does not give the liquidator an entitlement to the trust moneys in court. Section 443D provides that the administrator of a company under administration is entitled to be indemnified out of the company's property for, inter alia, his or her remuneration as fixed under s 449E. To secure that right of indemnity, the administrator has a lien on the company's property (s 443F). 46 However, the question is: what is the company's property? The fund in court is not the company's property, except to the extent to which the company has a lien over it to secure the right of indemnity which the company has in relation to liabilities incurred in the administration of the trust. The company's right of indemnity extends to providing for its liability to pay remuneration to the liquidator and administrator, but only to the extent that work was done in connection with the administration of the trust. Otherwise, it extends to exonerate the company, so far as funds allow, against its liability to trust creditors. The creditors are subrogated to that right of indemnity. The liquidator, as a creditor, has priority in accordance with the provisions of the Corporations Act. 47 In 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd, Finkelstein J said (at 385): "…provided a liquidator is acting reasonably he is entitled to be indemnified out of trust assets for his costs and expenses in carrying out the following activities: identifying or attempting to identify trust assets; recovering or attempting to recover trust assets; realising or attempting to realise trust assets; protecting or attempting to protect trust assets; distributing trust assets to the persons beneficially entitled to them." 48 As the company was not the trustee of the trust when any of the work of the administrator and liquidator was done, I cannot assume that any of the work done by the administrator or liquidator fell within this description. 49 Work done in identifying the company's creditors and the amount of their debts would qualify as work done in administering the trusts. It also appears from the liquidator's reports that Mr Starr consented to remaining liquidator at the request of the Court in connection with the proceedings brought by Glazier. Those proceedings were brought for the purpose of attempting to identify and recover causes of action which, if realised, would have been available for the benefit of creditors and beneficiaries. Remuneration and expenses incurred by Mr Starr, or by the liquidator, in connection with the proceedings could therefore also be covered by the company's right of indemnity for the benefit of the liquidator. There may be other work which was done which would also qualify. However, no evidence or submissions were directed to establishing how much of the amount claimed by the liquidator falls into this category. 50 The liquidator has compromised his claim with the beneficiaries. To the extent the liquidator is entitled to recover from the assets of the company, it is a matter for him whether or not he has compromised his claim. However, no such compromise can operate to the prejudice of the creditors, who will be entitled to any balance of the funds in court in priority to the beneficiaries. 51 I can see no basis for the beneficiaries being entitled to any of the moneys held in court. In his report to creditors of 24 August 2006, the liquidator advised that: " Treykell advised me that it may also claim on the funds in respect of costs incurred in the proceedings on behalf of the defendants, particularly relating to the production of an accounting as ordered by the Court, and that there may be other claims, by entities also associated with Mr Meehan, for unpaid administrative services and rent incurred during the period from the date of the appointment of Mr Madden as trustee to the date of sale of the business. " 52 No submissions were made on behalf of Treykell in relation to the present application. No order for costs has been made in its favour in relation to the accounting ordered by Young J. If any entities associated with Treykell had any claims on Mr Madden, they should have been made before orders were made on Mr Madden's notice of motion of 18 November 2005. In any event, the possibility of claims of third parties against Mr Madden, in respect of which Mr Madden would be entitled to an indemnity from the trust fund, is not a reason for allowing the liquidator any greater amount than he is otherwise entitled to. 53 I accept that the present application is a necessary one for determining who is entitled to the moneys paid into court. The application is properly brought and all of the matters raised in the affidavits in support of the liquidator's affidavit are properly raised. The liquidator will be entitled to the costs of the present application as a first claim on the fund. The liquidator will be entitled to the balance of the fund to the extent to which he can demonstrate that his remuneration and expenses related to the administration of the trust in the way indicated above. To that extent, the liquidator will be entitled to remuneration at the rates claimed, and to the reimbursement of expenses. The present material does not enable me to decide how much the liquidator is entitled to on these principles. The balance of the fund, if any, after allowing for these charges and remuneration, will be payable to the trust creditors pari passu pursuant to their right to be subrogated to the company's right of exoneration. As the liquidator or Mr Starr has carried out the investigation as to the identity of those creditors and the amount of their debts, it would be appropriate that the liquidator be authorised to effect any such distribution. He will be entitled to his proper remuneration and expenses in doing so. 54 Accordingly, I will adjourn this application so that the liquidator can provide evidence of what work is properly chargeable against trust assets, and the remuneration and expenses claimed in respect of that work, having regard to the matters set out above. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.