- The assets of Universal Distributing Co Ltd, a company in compulsory liquidation, were insufficient to satisfy the liability secured by its debentures which charged its whole under taking and its uncalled capital.
- The liquidator had incurred cost and expenses in realising the liquidated company’s assets.
- Was the liquidator entitled to recover costs and expenses related to the realisation of assets in priority to the interests of a secured creditor in the same assets?
- Dixon J of the High Court held that a liquidator is entitled to recover costs and expenses related to the realisation of assets in priority to the interest of a secured creditor in the same assets.
- A liquidator also has an equitable lien in respect of such costs and expenses over the assets recovered.
- The debenture holders were creditors who had a specific right to the property for the purpose of paying their debts.
- However, if those assets are realised in the winding up, a proceeding to which they are parties, the proceeds must bear the cost of the realisation just as if they had begun a suit for its realisation or had themselves realised it without suit.
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