The recent decision of Markovic J in Robert Kite and Mark Hutchins in their capacity as liquidators of Mooney’s Contractors Pty Ltd (in liq) & Anor v Lance Mooney & Anor  FCA 653 in the Federal Court of Australia provides practitioners with further clarification of the requirements when insolvency practitioners are appointed to companies which operate as corporate trustees.
The recent decision of Markovic J in Robert Kite and Mark Hutchins in their capacity as liquidators of Mooney’s Contractors Pty Ltd (in liq) & Anor v Lance Mooney & Anor  FCA 653 in the Federal Court of Australia provides practitioners with further clarification of the requirements when insolvency practitioners are appointed to companies which operate as corporate trustees. However, while the decision follows the reasoning of Brereton J in Re Independent Contractor Services (Aust) Pty Limited (in li) (No 2)  NSWSC 106 in confirming that liquidators of trustee companies may not deal with trust assets in their capacity as liquidator, and the distribution of trust assets is not subject to the priorities in section 556 the Corporations Act 2001 (Cth), the decision maintains the Federal Court’s practical approach to the consideration of insolvency practitioners’ remuneration.
The decision of Markovic J arose from an application by the liquidators of Mooney’s Contractors Pty Ltd (in liq) (the Company) for judicial advice in respect of the following practical considerations in the winding up of the Company, in circumstances where the Company had been the trustee of the Mooney Family Trust (the Trust):
The liquidators had previously sought interlocutory orders appointing them as receivers and managers of the assets of the trust. These orders were made by Yates J in the Federal Court of Australia on 29 July 2016 in a brief but circumspect judgment which is dealt with in further detail below.
On 13 June 2017 the Federal Court of Australia handed down judgment in an application for judicial advice in Robert Kite and Mark Hutchings in their capacity as liquidators of Mooney’s Contractors Pty Ltd (in liq) & Anor v Lance Mooney & Anor  FCA 653. McCabes were the solicitors on the Record for the plaintiffs in this matter.
Prior to 27 April 2015 Mooney’s Contractors Pty Ltd (the Company) had been the trustee of the Mooney Family Trust (the Trust), a trading trust which, amongst other things, supplied equipment and workers for infrastructure projects in Queensland. The Company operated solely as trustee of the Trust.
On 27 April 2015 the plaintiffs were appointed as voluntary administrators of the Company. On appointment, the Company ceased to be trustee of the Trust by operation of the trust deed, however no replacement trustee was appointed. Consequently, the Company held the assets of the Trust as bare trustee.
On 7 June 2015 the Company entered into a deed of company arrangement, with the plaintiffs as deed administrators. The Company defaulted and the deed was terminated.
On 7 July 2016 the Company was placed into liquidation and the plaintiffs were appointed as joint and several liquidators.
As bare trustee, the Company had an equitable lien over the assets of the Trust. However, the issues that arose were:
When acting as administrators and deed administrators of the Company, the plaintiffs had proceeded on the basis of the principles outlined in Kitay, in the matter of South West Kitchens (WA) Pty Ltd  FCA 670 which provided that a liquidator’s power of sale under section 477(2) of the Corporations Act 2001 (Cth) extended to the property of a trust of which the company had been trustee but had been disqualified from by reason of the liquidation.
The plaintiffs subsequently became aware of the decision of Brereton J in Stansfield DIY Wealth Pty Limited  NSWSC 1484 in which his Honour found that a trustee’s equitable lien over trust assets does not give rise to a beneficial interest in the trust assets, such that the assets of the trust cannot be considered to be “property of the company” for the purposes of section 477(2) which provides the power of sale.
Consequently the plaintiffs sought an order that they be appointed as receivers and managers of the assets of the Trust to avoid any doubt over their ability to deal with the assets of the Trust. In making the order, rather than opining as to the correctness (or otherwise) of Brereton J’s decision in Re Stansfield, Yates J merely observed that:
“Because of that doubt, the plaintiffs have adopted the course that has been taken in a number of other cases, namely to seek appointment as receivers and managers of the trust property so that, in that capacity, they can exercise powers over the property: see, for example, Bastion v Gideon Investment Pty Ltd (in liq) (2000) 35 ACSR 466;  NSWSC 939; Stansfield; Hundy (Liquidator); In the Matter of Enviro Friendly Products Pty Ltd (In Liq)  FCA 852; SMP Consolidated Pty Limited (in liquidation) v Posmot Pty Limited  FCA 1382; QBE Insurance (Australia) Limited v WA Metal Recycling Pty Ltd, in the matter of WA Metal Recycling Pty Ltd (in Liq)  FCA 238.”
In a further application, the plaintiffs (as liquidators of the Company and receivers of the assets of the Trust) sought judicial advice on the following matters:
Until the decision of Brereton J in the NSW Supreme Court in Re Independent Contractor Services  NSWSC 106 on 23 February 2016, the longstanding precedent in relation to how trust assets should be distributed on a winding up of a corporate trustee was that of Re Suco Gold (1983) 7 ACLR 873, which provided that the proceeds of the trust should be distributed in accordance with the priorities provided for in the Corporations legislation (section 556 of the Corporations Act 2001 (Cth)).
However, in Independent Contractor Services, consistent with his existing fixation on the idea that a trustee’s equitable lien over trust assets does not give rise to a beneficial interest in the trust assets, such that the assets of the trust cannot be considered to be “property of the company” in liquidation (see: Stansfield DIY Wealth Pty Limited  NSWSC 1484), Brereton J held that since section 556 of the Corporations Act only applies to “property of the Company”, the liquidators of the corporate trustee should distribute any proceeds from the realisation of trust assets amongst creditors in accordance with trust principles, rather than the priorities in section 556(1) of the Corporations Act.
Given that section 556(1) prioritises such items as the remuneration of insolvency practitioners and employee entitlements, the practical impact if this section does not apply in a winding up scenario can be significant.
In Mooney’s the plaintiff’s asked the Federal Court to follow Re Suco Gold and submitted that the trustee’s lien provides the insolvent Company as bare trustee with a beneficial interest in the property of the Trust to make the relevant property the property of the Company.
After much detailed consideration of the relevant authorities (including Re Suco Gold , Re Enhill, Independent Contractors Services and the recent decision of Robson J in the Supreme Court of Victoria in Re Amerind Pty Ltd (receivers and managers appointed) (in liq)  VSC 127), ultimately the Court held that the trustees indemnity and lien were not property of the company and accordingly the statutory priority regime in 556(1) would not apply.
This decision affirms and expands upon the growing list of authorities which have also held that the employees of corporate trustees will rank equally with other creditors and will not be afforded the benefit of the statutory priority contained in s556(1). These decisions (in particular Re Amerind) are also relevant in the context of matters where the Commonwealth has paid out employee entitlements under the Fair Entitlements Guarantee Scheme and seeks to recover payments made under that scheme from the company in liquidation as a priority creditor.
It is yet to be seen whether the Commonwealth will appeal the decision in Re Amerind but it appears that the status quo against the application of 556(1) employee priorities to trust property has been set and any potential appeal on the matter will not be assisted by the decision in in this case.
On the issue of whether the liquidators would be justified in paying remuneration out of trust assets, the plaintiffs relied on the decision of Riordan J in In the matter of Freelance Global Limited; Freelance Global Limited (in liquidation) v Barbara-Ann Bensted  VSC 181 at  in which his Honour held that the discretion to allow expenses and remuneration from trust assets would usually be exercised if the work had been done in the interests of the beneficiaries and there is no practical alternative to allowing the remuneration.
The Court found that the “salvage principle” as first propounded in the matter of Re Universal Distributing Company Limited (in liq) 1933 48 CLR 171 and later considered and applied in Freelance Global v Bensted  VSC 181 should apply such that that practitioners who undertake work for the purpose of realising, caring for or preserving property of a trust to create a fund or pool of assets should be entitled to a lien or charge against the fund or pool of assets for the expense and remuneration incurred in such work.
The Court in Mooney’s agreed with the position put by his Honour Justice Riordan in Freelance that the application of the Salvage principle entitled a “liquidator acting reasonably …[for that purpose] to be indemnified out of trust assets for its costs and expenses.”
In Mooney’s the Court noted that there was a contest between Messrs Kite and Hutchins variously in their capacities as administrators, liquidators and receivers, and the general body of creditors, in that in applying the salvage principle the general body of creditors would rank pari passu for the balance after the practitioner had deducted their remuneration and expenses from the fund.
In deciding to apply the salvage principle to the matter the Court noted that:
In all of the circumstances the Court held that Kite and Hutchins were entitled to a lien over the trust assets and in relying on that lien were entitled to deduct their remuneration and expenses ( in their capacities as administrators, deed administrators, liquidators and receivers) from the Trust before paying the general body of creditors .
In some ways the decision in Mooney’s is consistent with the trend which has seen the Federal Court adopt a practical attitude to the commercial realities for insolvency practitioners appointed to insolvent trusts.
However the Court’s decision not to apply s556(1) priorities to employee entitlements shows a reluctance to give precedence to the Commonwealth legislative insolvency regime and is more in line with the approach taken by the Victorian and NSW Supreme Courts which have applied a strict conceptual precedence to the general law of trusts.
Going forward, the recent line of authorities is likely to have significant and overall negative impact on both the employees of insolvent corporate trustees and the Commonwealth which often steps in to cover entitlements under the Fair Entitlements Guarantee Scheme.
With an appeal by the Commonwealth likely in Re Amerind it will be interesting to see whether the Victorian Court of Appeal departs from the recent caselaw or whether legislative reform will be required in the future to import statutory priorities in insolvency into the general law when dealing with insolvent trusts.
In light of the decision of the Court of Appeal inSanderson as liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr  NSWCA 38 (previously discussed here ) it would seem that the discrepancies in the approaches taken by the Federal Court of Australai and The Supreme Court of New South Wales are not as distinct.
However, it will be interesting to see whether the Federal Court requires the same exceptional level of detail that was required by the Supreme Court of NSW in Sakr Nominees Pty Limited  NSWSC 668 (29 May 2017) and earlier in Re Banksia Securities Ltd (in liq) (recs and mgrs. apptd)  NSWSC 540 when the practitioners involved in this matter approach the Court for approval of their fees.
Andrew Lacey heads McCabes’ Insolvency Group which offers expertise and experience in corporate and personal insolvency. We deliver commercially relevant advice to businesses of all sizes, insolvency practitioners and individuals.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.
In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph , Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph , Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph : "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.
The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane  NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.