The creditor of a custodian for an SMSF was able to enforce its rights against the asset – even though the asset was transferred to the SMSF just before the custodian was wound up.
The liquidator sought to enforce the custodian’s right of indemnity in respect of the transferred asset. Clearly the custodian had a right of indemnity (which related to unpaid strata levies). In this situation the custodian retains its right of indemnity (even though the asset has been transferred) and has an equitable charge over the asset to enforce its indemnity right. The indemnity right and equitable charge are prior equitable interests and take precedence over the title of the SMSF. However, the right of indemnity and equitable charge can only be enforced by judicial orders for sale or appointment of a receiver.
The lesson for SMSFs – transferring an asset held by a custodian/bare trustee to the SMSF will not defeat the rights of the creditors. The creditors can still enforce their rights to the transferred asset even while it is held by the SMSF. However, the creditors have no rights against the other assets of the SMSF.
Ref: [2016] NSWSC 1767
Michael Hallinan
Special Counsel Superannuation
Townsends Business & Corporate Lawyers
t: (02) 8296-6205
Twitter: @TownsendsLaw
e: michael@townsendslaw.com.au

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