The recent Australian Federal Court case of Neeat Holdings (in liq)  FCA 61 considered the issue of whether the liquidator of a trustee company should be permitted to sell trust assets notwithstanding the appointment of a new trustee in substitution for the insolvent trustee company.
The subject trustee company was the trustee of three trusts and under each trust deed, the trustee would automatically be removed as trustee if it became insolvent. The settlor of each of the trusts had the power to appoint a new trustee to each of the trusts and had done so after the trustee company was wound up. The liquidator of the trustee company sought the Court’s approval to sell the assets of each of the trusts and deal with the surplus proceeds from the sale of such assets to distribute them to creditors of the trustee company.
The Court held that if liquidation causes a trustee company to be removed, it remains entitled to hold trust assets as against the beneficiaries, and as against the new trustee, in order to exercise the trustee company's right of indemnity out of the trust assets. The Court therefore granted the orders sought, directing that the liquidator be permitted to sell the assets of the relevant trusts and deal with the proceeds of the sale of trust property for the purposes of satisfying liabilities of the trustee company (including the liquidators' costs).
This case demonstrates that creditors' claims against a corporate trustee, and liquidators' costs of winding up a corporate trustee, may be paid out of trust assets even in circumstances where the trust company has been removed as trustee and a new trustee appointed. While there is no New Zealand case that has considered this issue, we believe it is likely that the same approach would be taken in New Zealand.