Stewart v Atco Controls Pty Ltd (in liq)

The High Court of Australia considered an appeal by a liquidator, Stewart, against Atco Controls Pty Ltd (in liq). The dispute concerned whether the liquidator was entitled to an equitable lien over an asset realised through litigation, in priority to Atco, a secured creditor. The litigation involved an unsuccessful challenge to Atco's interest as a secured creditor, but the asset was ultimately recovered as a result of the liquidator's actions in the winding up.

The central legal issue before the High Court was whether the principle established in *Universal Distributing Co Pty Ltd v Federal Commissioner of Taxation* (1933) 48 CLR 465 applied to grant the liquidator an equitable lien over the realised asset for his costs, expenses, and remuneration, in priority to the secured creditor. The Court of Appeal had held that the principle did not apply, distinguishing the case on the basis that the litigation challenged the secured creditor's interest and was not pursued for the benefit of that creditor.

The High Court allowed the appeal, reasoning that the principle in *Universal Distributing* was indeed applicable. The Court found that the liquidator had acted properly and in the course of his statutory duties in pursuing the litigation, which resulted in the realisation of an asset for the winding up. The fact that the litigation involved an attack on a secured creditor's interest did not, in itself, preclude the application of the equitable lien principle, as the ultimate recovery of the asset for the benefit of the winding up was paramount. The Court emphasised that the expenses were properly incurred in the realisation of the asset.

Consequently, the High Court set aside the order of the Court of Appeal and ordered that the appeal to that Court be dismissed with costs. This outcome affirmed the liquidator's entitlement to an equitable lien over the realised asset for his costs, expenses, and remuneration, in priority to Atco's secured claim.