Admiralty & Corporations
Wage entitlements & priorities
John Levingston
10 February 2007
…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.
Admiralty
• Maritime lien for wages
• Wage priority before secured creditors
• Broad definition of wages
– Developed by Admiralty Courts
– Expanding with social developments
Corporations law
 No lien
 Wages come after secured creditors
 Limited statutory definition of wages
The outcomes
Admiralty
 Wage entitlements fully paid
Corporations
 Wage entitlements might not be paid
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
Why?
Admiralty
 Royal letters patent, 12 April 1787
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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)
Why?
Corporations
 Domestic law
 Statutory regime
 Corporations Act 2001
 Part 5.8A Employee Entitlements, ss596AA – 596AI
Why?
Corporations
 Statutory jurisdiction
 Companies Act (UK)
 Companies Act 2001 (Cth)
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
Admiralty Act 1988
General maritime claim, s4 and lien, s15
• Master’s disbursements, s4(3)(r), s15(2)(d)
• Wages, s4(3)(t), s15(2)(c)
• Interest, s4(3)(w) (same priority as lien)
• Legal costs (same priority as lien)
Admiralty Act 1988
Priority
• Admiralty Marshal’s fees and expenses in the arrest and sale
• Maritime liens, s15
– Salvage, damage done by a ship, wages, master’s disbursements
– No fixed rules: Thomas, Maritime Liens
• Secured creditors
• Unsecured creditors
Enforcement
• Arrest of the res (ship or cargo), s15
• Arrest of a sister or surrogate ship, s19
• Court sale of the res (Admiralty Marshal)
Admiralty cases
• 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 cases
• Equity
Admiralty cases
• Wages – principles
• Wages earned
– Prior to voyage
– During voyage
– Leaving the ship
• Dismissal
• Desertion
– Voyage ends
– Wages – items
Admiralty cases
• Maritime lien
• Priority
– Claims before wages
– Claims after wages
Admiralty cases
• Master’s Disbursements
Corporations Act 2001
Object, s596AA(1)
The object of this Part is to protect the entitlements of a company's employees
from agreements and transactions that are entered into with the intention of
defeating the recovery of those entitlements.
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]
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
Corporations Act
Wages
 Payable under an industrial award or industrial
instrument
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
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)
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]:
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
Corporations Act
Priorities
 Secured creditors
 Unsecured creditors – debts and claims
 Employees (arising before the winding up)
 Chargee, floating charge
 Other proved claims
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]
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)
Questions?
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