Those creditors are nevertheless subrogated to the rights of the trustee in

Those creditors are nevertheless subrogated to the

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Those creditors are nevertheless subrogated to the rights of the trustee in relation to that property, and in the event of the t/ee becoming bankrupt, it is those rights which are to be realised in their favour. 29
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Chief C/r Stamp Duties v Buckle T/ee cannot be compelled to surrender trust property to beneficiaries until rights of recoupment/exoneration satisfied. ROI confers priority in administration of trust. To extent assets held by t/ee subject to ROI, they are not ‘trust assets’ or ‘trust property’ in sense held solely upon trust for beneficiaries. 30
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Implications of proprietary interest If total amount of t/ee’s liabilities equals/exceeds total value of trust assets, t/ee entitled to entire beneficial interest. ROI of bankrupt t/ee passes to t/ee in bankruptcy or liquidator. ROI does not cease upon termination of t/eeship. If sole t/ee dies, ROI passes to personal representative. If beneficial interest assigned to 3 rd party, taken subject to ROI, unless bona fide purchaser for value w/out notice. Successor t/ee with notice takes assets subject to right of indemnity. 31
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Insolvency Creditors of t/ee limited to assets secured by lien for properly incurred expenses. ROI of t/ee is proprietary – passes to t/ee in bankruptcy. Can ROI be used to pay t/ee’s general creditors or used only to discharge debts incurred by t/ee on behalf of trust? Re Enhill – SC Vic (FC) – t/ee’s liquidator could be paid fees out of ROI. Re Suco – if t/ee has discharged trust liability & seeking reimbursement – ROI available for general distribution. But if trust debts not discharged – ROI can only be used to discharge trust debts. 32
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Limitations on right to indemnity By statute. By terms of trust instrument? JA Pty Ltd v Jonco Holdings (2000) 33 ACSR 691 – right of indemnity against trust estate cannot be excluded because it is an incident of the office of t/ee & inseparable from it. 33
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ROI & Breach of Trust RWG Management [1985] VR 385 - t/ee loses right of indemnity (even for particular expense/liability that properly incurred) to extent trust has not been compensated for loss caused by breach. Re Staff Benefits [1979] 1 NSWLR 207 per Needham J “In my opinion, it is not every breach of trust which will debar the t/ee from indemnity – the breach must be shown to be related to the subject matter of the indemnity’. 34
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Indemnity against persons As well as ROI out of trust assets, t/ees may have personal right of indemnity against beneficiaries. Ordinarily, beneficiary not liable directly to creditor as principal. But beneficiaries can be personally liable to indemnify t/ee: in respect of liabilities properly incurred ; provided beneficiary sui juris & absolutely entitled.
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