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

2. …it is reasonable that in whatever thing a person invests his services or his labour that very thing ought to pay him… Roscoe, Admiralty Practice, 3rd edn 1903, The Customs of the Sea.

3. Admiralty Maritime lien for wages Maritime lien for wages Wage priority before secured creditors Wage priority before secured creditors Broad definition of wages Broad definition of wages –Developed by Admiralty Courts –Expanding with social developments

4. Corporations law  No lien  Wages come after secured creditors  Limited statutory definition of wages

5. The outcomes Admiralty  Wage entitlements fully paid Corporations  Wage entitlements might not be paid

6. Why? Admiralty  Historical development  England since 1190  Helen of Acquitane brings the Laws of Oleron from France  Conflict between Admiralty & Common law  Private international law  Comity of nations  Beyond domestic policy and statute

7. Why? Admiralty  Royal letters patent, 12 April 1787  Jurisdiction of the Admiral and his Deputy, 13 Richard II Statutes 1 Ch 5  Jurisdiction of the Admiral, 15 Richard II Ch 3  Prerogativa Regis, 17 Edward II Ch 13  Admiral’s jurisdiction confirmed, 2 Henry IV Ch II  Admiralty Act 1690, 2 William & Mary Session 2 Ch 2  Admiralty Act 1844 (UK), 1861  Merchant Shipping Act 1894 (UK)  Colonial Courts of Admiralty Act 1890 (UK)  Admiralty Act 1988 (Cth)

8. Why? Corporations  Domestic law  Statutory regime  Corporations Act 2001  Part 5.8A Employee Entitlements, ss596AA – 596AI

9. Why? Corporations  Statutory jurisdiction  Companies Act (UK)  Companies Act 2001 (Cth)

10. Common features Capital (the ship, the company)  no return without employees  International activities  Ship carries cargo between ports  Companies in global markets  Equitable jurisdictions  Gathering in assets and paying claims  Admiralty Marshal  Company liquidator

11. Admiralty Act 1988 General 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)

12. Admiralty Act 1988 Priority Admiralty Marshal’s fees and expenses in the arrest and sale Admiralty Marshal’s fees and expenses in the arrest and sale Maritime liens, s15 Maritime liens, s15 –Salvage, damage done by a ship, wages, master’s disbursements –No fixed rules: Thomas, Maritime Liens Secured creditors Secured creditors Unsecured creditors Unsecured creditorsEnforcement Arrest of the res (ship or cargo), s15 Arrest of the res (ship or cargo), s15 Arrest of a sister or surrogate ship, s19 Arrest of a sister or surrogate ship, s19 Court sale of the res (Admiralty Marshal) Court sale of the res (Admiralty Marshal)

13. Admiralty cases Procedure Procedure –Master and crew lately employed upon the Ship Turakina –Master and crew can not be required to give security for costs Admiralty Rule 76 Admiralty Rule 76

14. Admiralty cases Equity Equity

15. Admiralty cases Wages – principles Wages – principles Wages earned Wages earned –Prior to voyage –During voyage –Leaving the ship Dismissal Dismissal Desertion Desertion –Voyage ends –Wages – items

16. Admiralty cases Maritime lien Maritime lien Priority Priority –Claims before wages –Claims after wages

17. Admiralty cases Master’s Disbursements Master’s Disbursements

18. Corporations Act 2001 Object, s596AA(1) The object of this Part is to protect the entitlements of a company's employees this Partentitlementscompanyemployeesthis Partentitlementscompanyemployees from agreements and transactions that are entered into with the intention of agreementstransactionsagreementstransactions defeating the recovery of those entitlements. entitlements

19. Corporations Act Special treatment? … 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 the 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 afforded to employees is that they are in a vulnerable position if their employer becomes insolvent: Australian Law Reform Commission, General Insolvency Inquiry, Report No 45 (1988) vol 1, 294. Commonwealth of Australia v Rocklea Spinning Mills Pty Ltd (Receivers and Managers Appointed), Finkelstein J at [22-23]

20. Corporations Act Entitlements, s596AA(2) and s9  Wages  Superannuation  Injury compensation  Leave or absence  Retrenchment, defined s556(2)  Not include payment in lieu of notice and full redundancy

21. Corporations Act Wages  Payable under an industrial award or industrial instrument

22. Corporations cases  Bonus  Unspecified but payable on quantum meruit basis, Walker & Sherman v Andrew [2002] NSWCA 214  In respect of services rendered to the company, Re Galaxy Media Pty Ltd (Rec/Mgrs apptd)(in liq) [2001] NSWSC 917, Santow J  Staff equity sharing scheme, Biotechnology Australia Pty Ltd v Pace (1988) NSWLR 130

23. Corporations Act Debts due to employees  Contract of employment, s558  Continues in receivership, s419, McEvoy v Incat Tasmania Pty Ltd [2003] FCA 810  Continues in voluntary winding up, ibid  Deemed employment  Employed by liquidator, s558(2)  Cost of the winding up, s558(3), (4)

24. Corporations Act  Superannuation  S556(2)  Same priority as wages  Superannuation contributions constitute an indirect form of employee entitlement but have been equated with wages, Ansett Ground Staff Superannuation Pty Ltd v Ansett Australia Ltd [2002] VSC 576 (20 December 2002); (2002) 174 FLR 1 per Warren J at [274] [275]:

25. Corporations Act  Retrenchment  Amount payable in respect of termination, payable before or after relevant date, s556(2)  Not include payment in lieu of notice and full redundancy  Hansen v Namoi Enterprises [2004] NSWSC 65

26. Corporations Act Priorities  Secured creditors  Unsecured creditors – debts and claims  Employees (arising before the winding up)  Chargee, floating charge  Other proved claims

27. Corporations Act inadequate  Intervention by Executive Government  General Employee Entitlements and Redundancy Scheme (Cth) GEERS  Described in Cth of Australia v Rocklea Spinning Mills Pty Ltd (Receivers and Managers Apptd) [2005] FCA 902, Finkelstein J at [4 -7], [16]

28. Corporations Act inadequate Other solutions  Consistency with Admiralty  lien for wages  priority before secured creditors  Sons of Gwalia Ltd (Administrator Apptd) (ACN 008 994 287) v Margaretic [2007] HCA 1  Trade Practices Act, s82 damages  s52 (misleading and deceptive conduct)  s53B (misleading conduct in relation to employment)  s75B (person knowingly involved)

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