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ARTICLE · 15 JUNE 2022

No salvage lien to rescue administrators

Corrs Chambers Westgarth
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Recent case dismisses claim for equitable lien made by administrators & liquidators for trading costs & remuneration.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Cameron Cheetham
Cameron Cheetham
Mark Wilks
Mark Wilks
Craig Ensor
Craig Ensor
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The NSW Supreme Court considered the application of the 'Universal principle' in Volkswagen Financial Services Australia Pty Ltd v Atlas CTL Pty Ltd (Receivers and Managers Appointed) (In Liquidation) [2022] NSWSC 573, dismissing a claim for an equitable lien made by administrators and liquidators for trading costs and remuneration.

Key takeaways

  • Administrators need to ensure that they appropriately consider the risks and/or secure funding arrangements before deciding to continue trading.

  • The 'Universal principle' does not create an equitable lien over assets or funds that do not bear a sufficient nexus to the administrators' activities.

  • Where administrators do work in preserving or realising secured assets, it is worth keeping a clear record of the costs by reference to the specific property and security.

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