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ARTICLE · 19 APRIL 2023

Australia holds the line on priorities between successive trustees

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Considers FC's recent decision clarifying the current Australian position as to priorities between creditors of successive trustees.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Cameron Cheetham
Cameron Cheetham
Andrew Edington
Andrew Edington
Tom Fullerton
Tom Fullerton
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In this week's TGIF, we consider the Federal Court's recent decision in Fotios (Bankrupt) v Helios Corporation Pty Ltd (No 3) [2023] FCA 251, and earlier decisions in the same proceedings, clarifying the current Australian position as to priorities between creditors of successive trustees.

Key takeaways

  • The insolvency of personal and corporate trustees continues to raise difficult priority issues despite how commonplace trading trust and family trust structures are in Australia.

  • The current law in Australia is that a former trustee has priority to a subsequent trustee in a competition between trust creditors asserting subrogation to each trustee's rights of exoneration. It remains to be seen whether Australian appellate courts will adopt the pari passu approach taken recently in a majority Privy Council decision.

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