Senior Associate, Sarah Drinkwater, Associate, Tim Logan and Paralegal, Erin Donald discuss the recent case of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 [2014] NSWSC 1004.

The facts

The applicants were the Liquidators of AAA Financial Intelligence Ltd (in liquidation) (the Company).

Funds recovered by the Liquidators during the course of the liquidation of the Company were held on trust for two classes of creditors – Advisers and Stockbrokers. The assets recovered were treated as trust assets, and the Advisors and Stockbrokers were treated as creditors of the trust, rather than unsecured creditors of the Company. The Liquidators had previously sought advice regarding those aspects, and there appears to have been no issue taken by the Court with respect to this classification.

The Liquidators held approximately $120,000.00 in trust assets. Liquidators identified total claims by Advisers of $623,572.00 and by Stockbrokers in the amount of $8,108.00.

Orders sought by Liquidators

The Liquidators applied for directions pursuant to section 511 of the Corporations Act 2001 (Cth) and s 63 of the Trustee Act (NSW) in relation to applying the Trust Assets in the following order and priority:

  • costs and expenses of the Liquidators associated with the proceedings seeking directions
  • remuneration and expenses of the Liquidators, as approved by the Court
  • further remuneration and expenses of the Liquidators, as approved by the Court
  • pari passu distribution for admitted claims of Advisers and Stockbrokers
  • to the Liquidators as an asset of the Company (although the Liquidators did not anticipate any funds to fall under this category).

Reasons for the Decision by Justice Brereton

The main issues considered by His Honour Justice Brereton were:

  • Whether the liquidators were permitted to recover their remuneration and expenses from trust assets.

If a Company acts solely as a Trustee, the liquidators are entitled to be paid their costs and expenses from the Trust Assets. However, as the Company did not solely act as a trustee, “prima facie, costs and expenses of the winding up should be borne by its non-trust assets.”

As the Company appeared to not have any other assets other than the Trust Assets, it was held that the liquidators were entitled to their “reasonable and proper costs and expenses from the trust assets, but only in respect of such work as is referable to the administration of the trust assets”.

  • Whether the residue of the trust assets should be on a parri passu basis.

His Honour drew an analogy to Re Sutherland; French Caledonia Travel Service Pty Ltd, wherein a Travel Agent had received funds from customers on account of travel expenses they were yet to incur. The travel agent subsequently went into liquidation and it was held that the distribution of trust account funds were to be distributed to the customers in accordance with the proportion of their claim, as assed by the liquidator. His Honour held in this case that the “liquidators would be justified in distributing the remaining balance pari passu amongst the Advisers and Stockbrokers according to their claims as assessed by the liquidators.”

  • The amount of the remuneration and expenses claimed by the liquidators.

The liquidators have the onus to prove that the costs and expenses of the liquidator are reasonable. The court has wide discretion in determining the remuneration of liquidators, subject to the considerations in section 473(10) of the Corporations Act 2001 (Cth). The remuneration is a subjective question which must be proper and reasonable with respect to the winding up of the company.

His Honour was conscious of the costs to be incurred by further litigation to determine the remuneration of the liquidators, thus held that the Court would fix the costs of remuneration, subject to the liquidators providing further evidence of their remuneration and the Advisers and Stockbrokers having a say in the orders sought.

  • Whether the directions and advice sought by the Liquidators should be given without notice to the Advisors and Stockbrokers – those affected

Ultimately, the Court considered that it was appropriate for the Advisors and Stockbrokers to be made aware of the Application, and be given the opportunity to be heard.  The matter was adjourned to 1 September 2014 to allow that to occur. The liquidators gave notice of the adjournment to the advisors and stockbrokers using various methods of communication. Only one Advisor responded who “sought confirmation that based on current estimates it appeared unlikely that there would be any return to Advisers, and indicated that he did not intend to appear, oppose or seek to be hear in respect of the application.”


This case enforces the fact that the Court has a discretion when dealing with the costs and expenses claimed by a liquidator, and that a strong regard is had to the reasonableness of the costs incurred in light of the benefit received by the creditors.

We note that while this matter was adjourned to 1 September 2014. On 17 September 2014 the second judgment was handed down, In the Matter of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 (No 2) [2014] NSWSC 1270. The second decision goes into further detail regarding how the remuneration and expenses of liquidators are to be assessed. To that end, His Honour deemed it appropriate for the liquidators’ remuneration to be calculated at 20% of the assets realised.  His Honour made preliminary orders, affirming the orders made in the first decision, subject to any submissions that may be made after consideration of the preliminary orders.