Excusing a liquidator for breaches, failures or omissions
On 31 July 2012, The Federal Court of Australia delivered a decision which dealt with an application by the liquidator of Starrit Pty Ltd, who took steps in relation to the winding up of the company, including sale of assets, prior to discovering that the company held all assets on trust for the Conquest Family Trust (the Trust). The liquidator sought a declaration that he had acted honestly and ought fairly be excused for any breaches, failures or omissions relating to the administration of Starrit Pty Ltd.
Collier J, in Fletcher, in the matter of Starrit Pty Ltd (in liq)  FCA 803 held that:
- Pursuant to s1318 of the Corporations Act 2001 (Cth) the liquidator acted honestly, and ought fairly be excused for any breaches, failures or omissions relating to the administration of the company; and
- Pursuant to s479(3) of the Act:
(a) The sales of assets held on trust for the Trust be deemed to be sales within the power of the company as trustee of the Trust;
(b) The proceeds of sale of the Trust assets and realisation of all other assets held on Trust be dealt with by the liquidator as assets in the winding up of the company and accounted for accordingly; and
(c) The distribution of monies held on trust for the Trust to priority unsecured creditors and secured creditors be deemed to be valid distributions by the liquidator in the winding up of the company.
This case confirms that a liquidator who acts honestly and reasonably in exercising their powers must be excused for any breaches of the Act which they commit.