The Australian Corporations Act 2001 provides that a company in liquidation that holds insurance for the benefit of third parties must pay the proceeds of the insurance policy to those third parties in priority to other creditors.  Insurance proceeds payable to third parties under this provision are subject to deductions of "any expenses of or incidental to getting in" those proceeds.  The liquidator of Brighton Hall Securities Pty Ltd sought directions from the court regarding the liquidator's entitlement to deduct his fees and expenses from the insurance proceeds.

The Australian Securities and Investment Commission appeared before the court to argue that "expenses" should be limited to disbursements.  The Court did not agree, and held that the wording "or incidental to" imported the liquidator's labour as a cost recoverable in priority to other claims to the insurance proceeds, and that in such situations, a liquidator is entitled to assert an equitable lien over the insurance proceeds.  The court thought it appropriate that a liquidator receive remuneration for conferring a benefit on a company's creditors, and further, that creditors seeking to obtain the benefit of the liquidation must accept the liquidator's proper costs in liquidating the company.

This ruling follows the principle that efficient administration of insolvent companies is key to serving the business community.

See Court decision here.