INSOLVENCY Alert: Good news for liquidators: High Court upholds the Universal Distributing principle on priority of liquidators’ liens as against secured creditors

8 May 2014


On 7 May 2014, the High Court handed down its eagerly anticipated decision on the scope of the liquidator’s equitable lien in Stewart v Atco Controls Pty Ltd (In Liquidation) [2014] HCA 15.

The seminal case in this area is Re Universal Distributing Co Ltd (In Liq) (1933) 48 CLR 171, where Dixon J concluded that a secured creditor may not have the benefit of a fund created by a liquidator’s efforts in the winding up, without the liquidator’s costs and expenses of creating that fund being first met. To that end, equity would create a charge over the fund in priority to that of the secured creditor.

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