Conomy, In the matter of

The High Court of Australia considered an appeal concerning the interpretation of section 471.05 of the *Corporations Act 2001* (Cth) in the context of a liquidator's application for directions. The primary dispute involved whether a liquidator could be compelled to pay remuneration and expenses from the proceeds of a secured debt, notwithstanding the security holder's objection. The applicants were the liquidators of Conomy, and the respondent was the secured creditor, National Australia Bank Limited.

The central legal issue before the Court was whether the liquidator's right to be indemnified out of the company's assets for their remuneration and expenses, as provided by general law, was subordinate to the rights of a secured creditor under a registered charge. Specifically, the Court had to determine if section 471.05 of the *Corporations Act*, which deals with the effect of a charge on the property of a company, prevented the liquidator from accessing the proceeds of the secured asset to cover these costs.

The High Court held that the general law right of indemnity for a liquidator is not extinguished by the existence of a registered charge. The Court reasoned that the liquidator's role is to administer the company's affairs for the benefit of all creditors, and this necessarily involves incurring costs. To allow a secured creditor to claim the entire proceeds of their security without contributing to the costs of realisation would undermine the orderly winding up of the company. The Court affirmed that the liquidator's indemnity is a fundamental principle of insolvency law, enabling the efficient administration of insolvent companies.

The appeal was allowed, and the orders of the lower courts were set aside. The High Court directed that the liquidator's remuneration and expenses were to be paid out of the proceeds of the secured asset in priority to the claims of the secured creditor.