D12.6 Trusts, Bankruptcy, Insolvency

Date Published

D12.6.1 Trusts

Section 117 of the Act provides that:

'Notice of a trust, whether express, implied or constructive, must not be received by the Registrar or entered in the Register.'

A trust relationship arises where a person has property or rights which they hold or are bound to exercise for or on behalf of another for the accomplishment of some particular purpose.

The requirement that a trust must not be received means no more than the Registrar is precluded from ‘receiving’ the trust in the same way as a court would ‘not receive’ inadmissible evidence.

That is, a notice of trust can be placed before the Registrar, but the Registrar can not act upon such a notice to alter the registered particulars. Nor is the Registrar obliged to consult or seek the approval of beneficiaries if a trustee who is registered, assigns or takes other actions in regard to those rights. The requirement that a notice of trust must not be registered does not exclude registration of a trustee if the trustee holds the legal interest in the patent rights. Section 117 merely prevents notification of the trust or details of the trust being recorded. That is, s 117 permits trustees who have good title to the legal interest in the rights to be registered, the Registrar being obliged to record the details of those prima facie so entitled without noting the trust relationship.

Thus, where a request is made to record a trustee in the Register, the trustee can be recorded so long as the usual requirement for supporting evidence has been met. The Register entry should make no reference to the person's status as trustee. Any provisions in a deed of assignment setting out obligations as between the trustee and the beneficiaries of that trust are not relevant and must not be recorded in the Register.

D12.6.2 Bankruptcy

In the case of a bankrupt, the rights which are the personal property of the bankrupt pass absolutely to their registered trustee or the Official Trustee (s 58 of the Bankruptcy Act 1966 (Cth)) - but such vesting of design rights are conditional upon the interest being registered in the Register of Designs. Where the Registrar receives a request to record a trustee in bankruptcy in the Register, the trustee is to be recorded provided there is relevant proof - such as a sequestration notice or other document or order declaring the current holder of design rights bankrupt. As there will be no deed of assignment, the entry should refer to the sequestration order or other document as giving rise to the trustee's entitlement.

Note: The assignment of a bankrupt’s property to his trustees in bankruptcy (or whoever is the representative of his creditors) under the law of a country which has jurisdiction over his person operates as an assignment of the movables of the bankrupt wherever locally situate, but only to the extent where the assignment is made in accordance with the laws of the situ of the movables (Radich v Bank of New Zealand (1993) 45 FCR 101).

The effect of bankruptcy on the ownership of a patent was discussed by the Administrative Appeals Tribunal in the matter of Reilly v Commissioner of Patents (1996) 36 IPR 314. The discussion at paragraphs 29 to 38 of that decision covers matters directly relevant to the Designs Act 2003 – and should be referred to when dealing with bankruptcy issues.

D12.6.3 Winding up of Companies

Companies can be wound up under a variety of circumstances, ranging from insolvency to a simple voluntary winding up.

When a company is insolvent, a liquidator will be involved with the winding up. In this situation, liabilities will exceed assets - so that after the sale of all assets to meet liabilities there is nothing remaining. The liquidator has full powers to deal with the assets of the company, including assigning of any design rights of the company. A Company may be voluntarily wound up. In this situation the assets will usually be greater than the liabilities, such that there will be a distribution of assets following the payment of all outstanding liabilities.

The distribution of assets is done as part of the process of winding up a company, which should occur before the company is deregistered. If a company has been deregistered before the assets have been distributed, then generally the company will need to be reconstituted so that the assets can be distributed in accordance with law. Assertions by 'former directors' of the company that the rights in a design belong to them following deregistration are inadequate; there needs to be a formal assignment from the company to themselves - and this cannot occur after the company has been deregistered. If an assignment is executed after deregistration, it will need to be re-done once reinstatement occurs (since entry on our Register does not establish validity of title). However, in some circumstances it is possible for ASIC to execute the assignment on the company's behalf.