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Cite as: September 2013 87 (9) LIJ, p.65

Liquidator’s claim for equitable lien for remuneration, costs and expenses

Atco Controls Pty Ltd (in Liquidation) v Stewart & Anor [2013] VSCA 132, (unreported, 25 June 2013, S APCI 2011 0118, Warren CJ, Redlich JA and Cavanough AJA).

Proceedings had been brought by Mr Stewart as liquidator (the liquidator) of Newtronics Pty Ltd (Newtronics) against Atco Controls Pty Ltd (Atco) and its receivers. In the proceedings, the liquidator alleged that Atco was not entitled to money secured by a mortgage debenture given by Newtronic to Atco by reason of Atco’s alleged failure to comply with the terms of certain letters of support. The proceedings were funded by Seeley International Pty Ltd (Seeley). The claim by the liquidator against Atco failed. The claim against the receivers and managers was settled. The settlement money, unbeknown to Atco, was paid by the liquidator to Seeley.

Atco brought proceedings by way of appeal under s1321 of the Corporations Act 2001 (Cth), (Corporations Act) against the liquidator’s decision to pay the settlement money to Seeley.

The liquidator and Newtronics alleged that the liquidator (or Seeley) was entitled to retain the settlement money by way of equitable lien to secure Mr Stewart’s reasonable remuneration, costs and expenses in accordance with the principle in Re Universal Distributing Co Ltd (in Liquidation) (1933) 48 CLR 171 (Universal Distributing).

At first instance it was held that the liquidator was entitled to assert an equitable lien over the settlement money and that Seeley was subrogated to the lien.

Warren CJ held that the principle in Universal Distributing did not apply, noting that a secured creditor must “come in” to the winding up in order that the liquidator have priority over the secured creditor – in this case, Atco. The principle will apply only where the secured creditor shows some willingness to participate (at [43]). The fact that Atco had claimed the settlement money was not sufficient to establish that it had “come in” to the winding up (at [46]).

Warren CJ then considered whether the liquidator might be entitled to assert a lien on some broader basis. Clearly, if a lien is to be asserted, the liquidator’s expenses must be properly incurred, however, something more is required. It must be unconscientious for the rights of the secured creditor to prevail over those of the liquidator. She concluded that the liquidator was really acting in the interest of Seeley in bringing the proceedings and that in those circumstances, the rights of the secured creditor, Atco, should prevail on a proper consideration of the question of unconscionability. It was not unconscientious for Atco to assert its priority as secured creditor.

Moreover, the indemnity agreement between the liquidator and Seeley imposed no obligation on the liquidator to repay Seeley. The liquidator was not indebted to Seeley nor to the solicitors employed by Seeley. The fact that Seeley was entitled to be subrogated to the liquidator’s right of recoupment against money recovered, did not give rise to such an indebtedness. The indemnity agreement in any event was subject to s564 of the Corporations Act. Any obligation to account was made subject to that section.

It followed that the appeal should be allowed.

Redlich JA and Cavanough AJA both delivered judgments in which in essence they agreed with Warren CJ.

The appeal was allowed.

PROFESSOR GREG REINHARDT is executive director of the Australasian Institute of Judicial Administration and a member of the Faculty of Law at Monash University, ph 9600 1311, email The numbers in square brackets in the text refer to the paragraph numbers in the judgment. The full version of this judgment can be found at


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