Former trustee’s equitable proprietary interests in trust property
Where liquidator of former trustee appointed as receiver over the trust property
Quick Take
1A former trustee's right of indemnity is an equitable proprietary interest in trust assets that survives replacement by a successor trustee, and because it sounds in equity rather than contract or debt, it is not subject to limitation periods under s 14 of the Limitation Act 1969 (NSW) by operation of s 23 of that Act.
2Where a directors' loan from a family trust has no written agreement and the objective evidence demonstrates an ongoing continuing relationship of debtor and creditor with recurring debits and credits — akin to a running account or revolving credit facility — the loan is not immediately repayable under the 'normal rule' but is subject to an implied precondition that a demand for repayment be made before the obligation to repay arises.
3Where the quantum of a former trustee's right of indemnity exceeds the value of trust assets, those assets may no longer properly be characterised as 'trust property' and a liquidator appointed as receiver over the trust property can realise those assets in exercise of the equitable lien securing the right of indemnity.
