Can an external administrator be remunerated out of funds held in a project trust account (PTA)/Retention Trust Account (RTA) established under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act)? On Tuesday this week, the Queensland Supreme Court delivered a judgment on this point that is of considerable significance to insolvency practitioners who accept appointments to building companies in Queensland. In short, the Court determined that the options/pathway for external administrators to be remunerated out of funds held in a PTA/RTA are/is very limited. Specifically, the Court found: 1. on its proper construction, the BIF Act excludes a trustee from exercising any right of indemnity under equitable principles or the application of the Court’s inherent jurisdiction in equity to provide for remuneration of a trustee; 2. the reference to “trustee” in ss 51C and 51E of the BIF Act (which prohibits a trustee of a PTA/RTA from recovering costs incurred for administering the account) is not confined to the head building contractor and extends to the administrators and liquidators administering the trust; and 3. regardless, the liquidator or administrator would be a creditor of the trustee, and therefore precluded from claiming its remuneration, costs and expenses by s 51A(1) of the BIF Act (which says that funds in a PTA/RTA can’t be used to recover a debt owed to a creditor of the trustee). Separately and otherwise, the Court noted it may be open for an administrator or liquidator to seek remuneration out of funds held in a PTA/RTA on a Universal Distributing/Berkeley Applegate basis, or at least that the BIF Act did not extinguish or prohibit remuneration from being sought in that way. It also held it may be possible to appoint a receiver and manager to administer the PTA/RTA. A timely and important decision following on from the excellent coverage of this issue at the Queensland ARITA Young Professionals Committee panel discussion a few weeks ago, with Chris Cook, Scott Guthrie and Matthew Hudson. Matt has put up a post about this too, which you should read if this topic is of interest to you. There’s a copy of the judgment below, and a link in the comments.
Mark Robinson
2mo
Remains uncertain. Probably safest for an IP to make application to Court to be appointed as Receiver to the trust account. (An unfortunate and avoidable outcome).
Matthew Hudson
2mo
Not convinced Universal will be able to step in to save the day given s56B of the BIF Act. But either way, it goes to my point that why should all these added costs be incurred getting a decision or relief on something that should be automatic and easy.
Mark Hellwege
2mo
Just like the bare trustee issue, what's the point of having the extra step of applying to court to deal with the trust assets? Is it really necessary or would it be more appropriate to grant automatic powers to the Liquidator but with the ability of affected parties to apply to court if desired.
Nik Angelakis
2mo
Have not read the case yet, but the finding that a liquidator is a ‘creditor’ in respect of remuneration is plainly wrong … and I struggle to understand how a statutory right of indemnity (arising under Cth legislation) is extinguished but an equitable right of indemnity is not …
Special Counsel at Mills Oakley (Commercial Disputes & Insolvency)
2moRe PBS Building (Qld) Pty Ltd [2024] QSC 108: https://archive.sclqld.org.au/qjudgment/2024/QSC24-108.pdf