Admiralty & Corporations Wage entitlements & priorities John Levingston 10 February 2007 10 February 2007

Admiralty & Admiralty & CorporationsCorporations

Wage entitlements & prioritiesWage entitlements & priorities

John LevingstonJohn Levingston 10 February 200710 February 2007

……it is reasonable that in whatever thing it is reasonable that in whatever thing a person invests his services or his a person invests his services or his labour that very thing ought to pay labour that very thing ought to pay him…him…

Roscoe, Roscoe, Admiralty PracticeAdmiralty Practice, 3rd edn 1903, The Customs of the , 3rd edn 1903, The Customs of the Sea.Sea.

AdmiraltyAdmiralty

• Maritime lien for wagesMaritime lien for wages

• Wage priority before secured Wage priority before secured creditorscreditors

• Broad definition of wagesBroad definition of wages– Developed by Admiralty CourtsDeveloped by Admiralty Courts– Expanding with social developmentsExpanding with social developments

Corporations lawCorporations law

No lienNo lien Wages come after secured creditorsWages come after secured creditors Limited statutory definition of wagesLimited statutory definition of wages

The outcomesThe outcomes

AdmiraltyAdmiralty

Wage entitlements fully paidWage entitlements fully paid

CorporationsCorporations

Wage entitlements might not be paidWage entitlements might not be paid

Why?Why?

AdmiraltyAdmiralty Historical developmentHistorical development

England since 1190 England since 1190 Helen of Acquitane brings the Laws of Oleron from Helen of Acquitane brings the Laws of Oleron from

FranceFrance Conflict between Admiralty & Common law Conflict between Admiralty & Common law

Private international law Private international law Comity of nationsComity of nations Beyond domestic policy and statuteBeyond domestic policy and statute

Why?Why?

AdmiraltyAdmiralty Royal letters patent, 12 April 1787Royal letters patent, 12 April 1787

Jurisdiction of the Admiral and his Deputy, 13 Richard II Statutes 1 Ch 5Jurisdiction of the Admiral and his Deputy, 13 Richard II Statutes 1 Ch 5 Jurisdiction of the Admiral, 15 Richard II Ch 3Jurisdiction of the Admiral, 15 Richard II Ch 3 Prerogativa Regis, 17 Edward II Ch 13Prerogativa Regis, 17 Edward II Ch 13 Admiral’s jurisdiction confirmed, 2 Henry IV Ch IIAdmiral’s jurisdiction confirmed, 2 Henry IV Ch II Admiralty Act 1690, 2 William & Mary Session 2 Ch 2Admiralty Act 1690, 2 William & Mary Session 2 Ch 2

Admiralty Act 1844 (UK), 1861Admiralty Act 1844 (UK), 1861 Merchant Shipping Act 1894 (UK)Merchant Shipping Act 1894 (UK) Colonial Courts of Admiralty Act 1890 (UK)Colonial Courts of Admiralty Act 1890 (UK) Admiralty Act 1988 (Cth)Admiralty Act 1988 (Cth)

Why?Why?


Domestic lawDomestic law Statutory regimeStatutory regime

Corporations Act 2001Corporations Act 2001 Part 5.8A Employee Entitlements, ss596AA – 596AIPart 5.8A Employee Entitlements, ss596AA – 596AI

Why?Why?


Statutory jurisdictionStatutory jurisdiction Companies Act (UK)Companies Act (UK) Companies Act 2001 (Cth)Companies Act 2001 (Cth)

Common featuresCommon features

Capital (the ship, the company)Capital (the ship, the company) no return without employeesno return without employees

International activitiesInternational activities Ship carries cargo between ports Ship carries cargo between ports Companies in global marketsCompanies in global markets

Equitable jurisdictionsEquitable jurisdictions Gathering in assets and paying claimsGathering in assets and paying claims

Admiralty MarshalAdmiralty Marshal Company liquidatorCompany liquidator

Admiralty Act 1988Admiralty Act 1988

General maritime claim, s4 and lien, s15General maritime claim, s4 and lien, s15

• Master’s disbursements, s4(3)(r), s15(2)(d)Master’s disbursements, s4(3)(r), s15(2)(d)

• Wages, s4(3)(t), s15(2)(c)Wages, s4(3)(t), s15(2)(c)

• Interest, s4(3)(w) (same priority as lien)Interest, s4(3)(w) (same priority as lien)

• Legal costs (same priority as lien)Legal costs (same priority as lien)

Admiralty Act 1988Admiralty Act 1988

PriorityPriority• Admiralty Marshal’s fees and expenses in the arrest and saleAdmiralty Marshal’s fees and expenses in the arrest and sale• Maritime liens, s15Maritime liens, s15

– Salvage, damage done by a ship, wages, master’s Salvage, damage done by a ship, wages, master’s disbursementsdisbursements

– No fixed rules: Thomas, Maritime LiensNo fixed rules: Thomas, Maritime Liens

• Secured creditorsSecured creditors• Unsecured creditorsUnsecured creditors

EnforcementEnforcement• Arrest of the res (ship or cargo), s15Arrest of the res (ship or cargo), s15• Arrest of a sister or surrogate ship, s19Arrest of a sister or surrogate ship, s19• Court sale of the res (Admiralty Marshal)Court sale of the res (Admiralty Marshal)

Admiralty casesAdmiralty cases

• ProcedureProcedure– Master and crew lately employed upon Master and crew lately employed upon

the Ship Turakinathe Ship Turakina– Master and crew can not be required to Master and crew can not be required to

give security for costsgive security for costs•Admiralty Rule 76Admiralty Rule 76


• EquityEquity


• Wages – principlesWages – principles

• Wages earnedWages earned– Prior to voyagePrior to voyage– During voyageDuring voyage– Leaving the shipLeaving the ship

• DismissalDismissal

• DesertionDesertion– Voyage endsVoyage ends– Wages – itemsWages – items


• Maritime lienMaritime lien

• PriorityPriority– Claims before wagesClaims before wages– Claims after wagesClaims after wages


• Master’s DisbursementsMaster’s Disbursements

Corporations Act 2001Corporations Act 2001

Object, s596AA(1)Object, s596AA(1)

The object of The object of this Partthis Part is to protect the entitlements of a company's employees is to protect the entitlements of a company's employees

from agreements and transactions that are entered into with the intention offrom agreements and transactions that are entered into with the intention of

defeating the recovery of those entitlements.defeating the recovery of those entitlements.

Corporations ActCorporations Act

Special treatment?Special treatment?

… … In the winding up of an insolvent company, where there is not enough In the winding up of an insolvent company, where there is not enough

money to go around certain debts are given priority over others. That is themoney to go around certain debts are given priority over others. That is the

function of s556, according to which priority is given to several classes of debt,function of s556, according to which priority is given to several classes of debt,

including debts due to employees. The rationale for the special treatment including debts due to employees. The rationale for the special treatment

afforded to employees is that they are in a vulnerable position if their employer afforded to employees is that they are in a vulnerable position if their employer

becomes insolvent: Australian Law Reform Commission, General Insolvency becomes insolvent: Australian Law Reform Commission, General Insolvency

Inquiry, Report No 45 (1988) vol 1, 294.Inquiry, Report No 45 (1988) vol 1, 294.

Commonwealth of Australia v Rocklea Spinning Mills Pty Ltd (Receivers andCommonwealth of Australia v Rocklea Spinning Mills Pty Ltd (Receivers and

Managers Appointed), Finkelstein J at [22-23]Managers Appointed), Finkelstein J at [22-23]


Entitlements, s596AA(2) and s9Entitlements, s596AA(2) and s9 WagesWages SuperannuationSuperannuation Injury compensationInjury compensation Leave or absenceLeave or absence Retrenchment, defined s556(2)Retrenchment, defined s556(2)

Not include payment in lieu of notice and full Not include payment in lieu of notice and full redundancyredundancy


WagesWages

Payable under an industrial award or industrial Payable under an industrial award or industrial instrumentinstrument

Corporations casesCorporations cases

BonusBonus Unspecified but payable on quantum meruit basis, Walker & Unspecified but payable on quantum meruit basis, Walker &

Sherman v Andrew [2002] NSWCA 214Sherman v Andrew [2002] NSWCA 214 In respect of services rendered to the company, Re Galaxy In respect of services rendered to the company, Re Galaxy

Media Pty Ltd (Rec/Mgrs apptd)(in liq) [2001] NSWSC 917, Media Pty Ltd (Rec/Mgrs apptd)(in liq) [2001] NSWSC 917, Santow JSantow J

Staff equity sharing scheme, Biotechnology Australia Pty Ltd v Staff equity sharing scheme, Biotechnology Australia Pty Ltd v Pace (1988) NSWLR 130 Pace (1988) NSWLR 130


Debts due to employeesDebts due to employees Contract of employment, s558Contract of employment, s558

Continues in receivership, s419, McEvoy v Incat Tasmania Pty Continues in receivership, s419, McEvoy v Incat Tasmania Pty Ltd [2003] FCA 810Ltd [2003] FCA 810

Continues in voluntary winding up, ibidContinues in voluntary winding up, ibid

Deemed employmentDeemed employment Employed by liquidator, s558(2)Employed by liquidator, s558(2)

Cost of the winding up, s558(3), (4)Cost of the winding up, s558(3), (4)


SuperannuationSuperannuation S556(2)S556(2) Same priority as wagesSame priority as wages

Superannuation contributions constitute an indirect Superannuation contributions constitute an indirect form of employee entitlement but have been form of employee entitlement but have been equated with wages, equated with wages, Ansett Ground Staff Ansett Ground Staff Superannuation Pty Ltd v Ansett Australia Ltd Superannuation Pty Ltd v Ansett Australia Ltd [2002] VSC 576 (20 December 2002); (2002) 174 [2002] VSC 576 (20 December 2002); (2002) 174 FLR 1 per Warren J at [274] [275]:FLR 1 per Warren J at [274] [275]:


RetrenchmentRetrenchment Amount payable in respect of termination, Amount payable in respect of termination,

payable before or after relevant date, s556(2)payable before or after relevant date, s556(2) Not include payment in lieu of notice and full Not include payment in lieu of notice and full

redundancyredundancy Hansen v Namoi Enterprises [2004] NSWSC Hansen v Namoi Enterprises [2004] NSWSC

6565


PrioritiesPriorities Secured creditorsSecured creditors Unsecured creditors – debts and claimsUnsecured creditors – debts and claims Employees (arising before the winding up)Employees (arising before the winding up) Chargee, floating chargeChargee, floating charge Other proved claimsOther proved claims

Corporations Act inadequateCorporations Act inadequate

Intervention by Executive GovernmentIntervention by Executive Government General Employee Entitlements and General Employee Entitlements and

Redundancy Scheme (Cth) GEERSRedundancy Scheme (Cth) GEERS Described in Cth of Australia v Rocklea Spinning Described in Cth of Australia v Rocklea Spinning

Mills Pty Ltd (Receivers and Managers Apptd) Mills Pty Ltd (Receivers and Managers Apptd) [2005] FCA 902, Finkelstein J at [4 -7], [16][2005] FCA 902, Finkelstein J at [4 -7], [16]

Corporations Act inadequateCorporations Act inadequate

Other solutionsOther solutions Consistency with AdmiraltyConsistency with Admiralty

lien for wageslien for wages prioritypriority before secured creditors before secured creditors

Sons of Gwalia Ltd (Administrator Apptd) (ACN 008 994 Sons of Gwalia Ltd (Administrator Apptd) (ACN 008 994 287) v Margaretic [2007] HCA 1287) v Margaretic [2007] HCA 1

Trade Practices Act, s82 damagesTrade Practices Act, s82 damages s52 (misleading and deceptive conduct)s52 (misleading and deceptive conduct) s53B (misleading conduct in relation to employment)s53B (misleading conduct in relation to employment) s75B (person knowingly involved)s75B (person knowingly involved)

Questions?Questions?

Visit <www.admiralty.net.au>Visit <www.admiralty.net.au>

Documents

Admiralty & Corporations Wage entitlements & priorities John Levingston 10 February 2007 10 February 2007