In Re PrimeSpace Property Investment Limited (In Liquidation)  NSWSC 1450 the Supreme Court of New South Wales was asked to consider whether it could make directions in respect of the investigation of the affairs of a corporate trustee (whose only assets were held on trust). The company, as trustee, had guaranteed a loan from a third party and also granted that third party first option on several apartments. Subsequent to the liquidation of the corporate trustee, the third party sought to exercise its option on the apartments and brought proceedings against the corporate trustee.
The liquidators sought directions under s 511 of the Corporations Act 2001(Cth) to the effect that it could use trust resources (among other things) to conduct examinations and obtain a legal opinion regarding the transactions underlying the claim brought against the trustee company. The liquidators sought directions so they would be better placed to assess whether the claim should be defended.
The Court found that it could make directions, as whether or not to pursue the investigation with trust funds was an issue of propriety and reasonableness (as opposed to a mere commercial decision). In granting the orders sought, the Court found further that the transactions at issue raised questions that the liquidators could properly consider warranted further inquiry.
See Court decision here.