+ Creditors Trust Deeds

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Creditors Trust Deeds

Where there is a rapid transition from a deed of company arrangement to a creditors trust deed, the protection provided by the Corporations Act 2001 (Cth) is lost. There is no jurisdiction of the Court to interfere with a creditors' trust deed under s445D of the Corporations Act where the creditors have resolved to adopt a creditors trust deed and terminate the deed of company arrangement as the fund is vested in the trustees of the creditor's trust - see Parkview Constructions Pty Ltd-v-Tayeh [2009] NSWSC 186.

It is true that a Court does have limited inherent jurisdiction to interfere with the trust deed in its general or equitable jurisdiction and can set aside a trust (i) for lack of the three certainties; or (ii) if it is offensive to public policy - for example, Re Great Berlin Steamboat Co (1884) 26 Ch D 615. A Court can also invoke its limited statutory jurisdiction to vary the terms of the trust - for example, under s31 of the Trustee Act 1925 (NSW).

But the fact is that none of these sources really offers a total solution to creditors where the creditors trust deed is oppressive, unfair or discriminatory and they want to set it aside.

It is accordingly suggested that administrators delay the implementation of the creditors trust in order to allow time for dissenting creditors to apply to the Court to set aside the DOCA. An alternative way forward would be for the deed administrator to explain to the creditors the consequences of the immediate implementation of the creditors trust deed before taking a vote on the DOCA.

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