Nolan v Collie & Merlaw Nominees Pty Ltd (in liq)

(2003) 7 VR 287; [2003] VSCA 39

Victorian Court of Appeal

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Interrogate

Catchwords

1. Trusts
2. › Trading trust
3. › Trustee's right of indemnity
4. › Same corporation trustee of multiple trusts
5. › Whether trustee entitled to indemnification from assets of express trust for liability arising from breach of constructive trust
6. › Whether right of indemnity confined to trust in respect of which breach occurred
1. Trusts
2. › Constructive trust
3. › Vendor and purchaser
4. › Nature of constructive trust arising from contract of sale
5. › Whether vendor-trustee entitled to indemnification from constructive trust assets
6. › Whether incidents of express trust apply to vendor-purchaser constructive trust
1. Trusts
2. › Trustee's right of indemnity
3. › Test for 'properly incurred' expenses and liabilities
4. › Whether test is 'not improperly incurred'
5. › Whether inadvertent error of judgment sufficient to deny indemnification
6. › Gatsios Holdings Pty Ltd v Mick Kritharas Holdings Pty Ltd considered
1. Trusts
2. › Subrogation
3. › Creditor's right to be subrogated to trustee's right of indemnity
4. › Effect of liquidation of trustee company
5. › Octavo Investments Pty Ltd v Knight considered

Quick Take

Where a corporation is trustee of both an express trust and a constructive 'purchase trust' arising from a sale of trust property, the right of indemnification for liabilities (including for breach of the constructive trust) lies against the assets of the express trust, not the constructive trust. The test for whether a liability has been 'properly incurred' is the negative formulation: whether it has been shown to have been 'not improperly incurred', with the content of that test varying according to the nature of the duty breached. A mere inadvertent error of judgment in executing a mortgage does not constitute impropriety sufficient to deny indemnification. The broad approach to trustee indemnification in Gatsios Holdings should be confined to tort liabilities.