Russell & Anor v. AGC (Advances) Limited & Ors.

Judges:
Marks J

Court:
Supreme Court of Victoria

Judgment date: Judgment handed down 27 April 1987.

Marks J.

On 20 October 1983 the applicants were appointed under a debenture charge ("the charge") dated 10 May 1982 in favour of the first respondent ("AGC") as receivers and managers of Colcust Pty. Ltd. (formerly Collins Custom Electrics Pty. Ltd.) ("the company").

On the same day, NHP Electrical Engineering Co. Pty. Ltd. presented a petition for the winding up of the company and on its application the second respondent ("the liquidator") was appointed provisional liquidator.

On 2 November 1983 I made an order appointing the liquidator receiver and manager of the assets of the company situated in Queensland and on 23 November I empowered him to sell them.

On 15 December 1983 an order winding up the company was made and the liquidator appointed as such.

Section 365(2) of the Companies (Victoria) Code provides that the winding up shall be deemed to have commenced at the time of the filing of the application which (although it may have been by petition) was 20 October 1983.

At the time of the appointment of the applicants and the winding up application there were assets of the company in Queensland as well as Victoria but the charge was registered only in Victoria pursuant to the Companies Act 1961.

The Companies (Victoria) Code came into operation on 1 July 1982 as did also its counterpart in Queensland. The Companies (Queensland) (Application of Laws) Act No. 110 of 1981 also came into operation on 1 July 1982. Section 215A(1) of the Companies (Victoria) Code and the Companies (Queensland) Code provides that notwithstanding sec. 18 of the Companies (Application of Laws) Act 1981, Div. 7 of Pt IV of the Companies Act 1961 continues in force as if that section had not been enacted in relation to any charge created by a corporation before the commencement of the Companies (Application of Laws) Act 1981. Section 100 of the Companies Act of 1961 (Qld) provides that if a charge is not registered as required by that section within 30 days of its creation it shall "so far as any security on the company's property or undertaking is thereby conferred, be void against the liquidator and any creditor of the company". Section 110, as amended by the Companies (Amendment) Act 1979, provided that "A reference in this Division to a company shall be read as including a reference to a foreign company to which Division 3 of Part XI applies and to a recognised company which has a place of business or is carrying on business within the State, but nothing in this Division applies to a charge on property outside the State of a foreign company or a recognised company".

The company was a recognised company by virtue of the definition in sec. 5. It was not in contention before me that the company was carrying on a business in Queensland and fell within the ambit of sec. 100 of the Companies Act 1961 (Qld) and accordingly was required to register the charge if any of its assets were situated in that State.

It is common ground that the company was carrying on business in Queensland at the time the charge was given and that by virtue of its non-registration in Queensland the charge

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was void there against the liquidator and any creditor (
Luckins v. Highway Motel (Carnarvon) Pty. Ltd. & Anor (1975) 133 C.L.R. 164).

Although strictly speaking the charge was not void against the applicants in the sense that legally they could have, if possible, taken the Queensland assets under their control, they did not in fact and it is doubtful whether, if they had, they could have resisted a demand of the liquidator to hand them over to him.

The net fund held by the applicants from their receivership is of the order of $313,741.86 and that held by the liquidator $14,924.14.

When the applicants were appointed, the company owed AGC $1,179,416 of which approximately $650,000 and interest were secured by the charge.

On 19 March 1984 the deputy of the third respondent ("the Commissioner") for Victoria wrote to the applicants claiming $193,650.05 for unremitted instalments of group tax deductions pursuant to sec. 221P of the Income Tax Assessment Act 1936. The applicants disputed the claim to the extent only of $5,814.38 but this is of no moment. It is, however, of moment that the Commissioner claims priority pursuant to sec. 221P and I am asked to determine whether that section applies to the funds held by the applicants and the liquidator or one or other of them.

There are further questions concerning payment of claims by employees (including directors) of the company in accordance with sec. 331 of the Companies (Victoria) Code which involves other provisions of the Code in sec. 441 and 445. Since the winding up and appointments of the applicants and liquidator there have been amendments to these sections and I am asked to say whether they apply to the claims.

On 22 January 1987 Fullagar J. made representative orders, the effect of which is that the fourth respondent represents the employees (including himself but excluding directors) of the company and the fifth respondent represents the directors.

Initially I was asked to give directions by answering the questions in the summons. These questions, however, have by leave been substituted by the following:

It is convenient first to mention the book debts. In the charge they were expressed to be included in the "fixed and specific" charge but described as "its [the company's] present and future book debts from time to time".

It was not in contention that the book debts so described are to be regarded as subject to the floating not the fixed charge. The true categorisation of an asset depends on the proper

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construction of the instrument. It is clear enough that where a charge is expressed to be over present and future book debts from time to time of an ongoing business it is floating and not fixed. It is unnecessary, therefore, to dwell on the many authorities which confirm this view (
Government Stock & Other Securities Investment Co. v. Manila Railway Co. Ltd. (1897) A.C. 81; In
re Yorkshire Woolcombers Association Ltd. (1903) 2 Ch. 284 at p. 295; (1904) A.C. 355;
Hart & Ors v. Barnes (1983) 1 ACLC 690; (1983) 2 V.R. 517;
Waters & Anor v. Widdows & Anor (1984) 2 ACLC 714; (1984) V.R. 503; In
re Brightlife Ltd. (1987) 2 W.L.R. 197;
General Credits Ltd. v. Chemineer Nominees Pty. Ltd. (in liq.) & Ors (1986) 4 ACLC 570).

The charge in effect was over all the assets of the company. It was expressed to give a fixed charge over certain assets and:

"... also as a separate and distinct floating charge all the other undertaking property and assets of the company whatsoever and wheresoever both present and future not charged by way of the fixed and specific charge herein before contained..."

Once the book debts are understood to be part of the floating charge the fund attributable thereto can easily be identified, an exercise which, as will be seen, is necessary by virtue of sec. 331 of the Companies (Victoria) Code.

It is also to be observed that by virtue of the company's indebtedness, to which I have referred, any equity of redemption which might be said not to have passed to the applicants was worthless. There was indeed other substantial indebtedness, for example, to the Victorian Commissioner for payroll tax and unsecured creditors exceeding $1 million which I have not mentioned.

Questions 1 and 2 concern the priority of the claim of the Commissioner. The answers depend on the applicability of sec. 221P.

Subsection (1) provides:

"221P(1) Where an employer makes a deduction for the purposes of this Division, for the purposes of the corresponding provisions of a State income tax law or for the purposes of section 78 of the Income Tax (Arrangements with the States) Act 1978, or purporting to be for those purposes, from the salary or wages paid to an employee and refuses or fails to deal with the amount so deducted in the manner required by this Division, or to affix tax stamps of a face value equal to the amount of the deduction as required by this Division, as the case may be, he shall be liable, and where his property has become vested in, or where the control of his property has passed to, a trustee, the trustee shall be liable, to pay that amount to the Commissioner."

Subsection (2) provides that an amount payable to the Commissioner under the section has priority over all other debts (subject to an exception of no present relevancy) whether "preferential, secured or unsecured".

Subsection (3) gives priority to the costs, charges and expenses of a trustee in bankruptcy and a liquidator over the debt payable to the Commissioner (but apparently not to a receiver).

In sec. 6(1) of the Income Tax Assessment Act 1936 "trustee" is defined to include (among others) a liquidator and a receiver.

It was contended for the applicants that because they did not come to control the whole property of the company, sec. 221P does not apply, alternatively or for that reason they are not "trustees" within the section.

It was not suggested that any property of the company "vested" in the applicants or the liquidator as clearly there is nothing in the evidence or in law to provide a foundation for concluding that it did.

Mrs Moshinsky of counsel for the Commissioner submitted that the applicants in fact took control of all the property of the company because the charge authorised them to do so and although the charge was not registered in Queensland and void there against the liquidator and any other creditor it validly authorised the applicants to obtain control of the assets there.

Mr Hayne of Queen's Counsel for the applicants submitted that in no sense did control of the Queensland assets pass to them and indeed it could not, because the liquidator was by order appointed by the Court to take control and that order is deemed in law to have preceded the appointment as receivers.

Mrs Moshinsky also submitted that as sec. 16(b) of the Companies and Securities (Interpretation and Miscellaneous Provisions)

ATC 4396

Act 1980 provides that words in the singular include the plural "trustee" means "trustees" and here the liquidator and applicants were in each case a trustee or trustees so that the assets under their respective controls may be viewed as amalgamated ("the amalgamation point") under the control of a "trustee" within the meaning of sec. 221P.

Mrs Moshinsky contended further that the law is still unclear that sec. 221P only applies where the whole of the company's property passes into the control of a trustee and that here the section applied to the applicants because they did come to control substantially all the assets.

The proposition that "his property" in sec. 221P means all his property comes from the High Court in
F.C. of T. v. Barnes 75 ATC 4262; (1975) 133 C.L.R. 483 where it was held that the whole property of the company had in fact passed notwithstanding that a worthless equity of redemption in the assets charged and assets secured by a pre-existing mortgage had not.

While there are statements in Barnes, for example by Gibbs J. at ATC p. 4270; C.L.R. p. 499, which suggest that literally all the property need not be seen to have passed, the potential exceptions do not in my view apply to assets of the dimension and commercial reality of those in Queensland collected by the liquidator. Property which may be ignored for the purpose of testing whether sec. 221P applies includes such assets as a worthless equity of redemption, those which under the Bankruptcy Act a bankrupt may retain and perhaps those of no commercial or practical significance. It is a question of fact to be determined in each case whether as a matter of commercial and practical reality assets have been retained by the company so as not to pass to the control of an alleged "trustee". It would seem realistic to contemplate the law will approve Gibbs J.'s observation that what must pass is what from a practical and commercial point of view would be regarded as the whole of the property of the company or bankrupt as the case may be (Barnes p. 4270; p. 499).

No problem of this kind really arises here because the Queensland assets were sufficiently substantial. If it can be said that they did not pass into the control of the applicants, the applicants did not gain control of all the property of the company.

Barnes is the leading authority on sec. 221P. It does not provide a fully comprehensive interpretation and indeed does not deal with what is said to arise here from separate assets being under the control of different persons each arguably within the definition of "trustee". But in my opinion Barnes clearly is authority for the proposition that sec. 221P does not apply where the trustee said to be in control of assets on which priority is claimed does not control all those of the company.

In their joint judgment in Barnes, Barwick C.J., Mason and Jacobs JJ. at ATC p. 4265; C.L.R. p. 490 said:

"`Trustee' is defined in sec. 6(1) of the Act to include a receiver unless a contrary intention appears. We can see no contrary intention in sec. 221P provided that the words `his property' are recognised to refer to the whole of the employer's property."

By this two things were said:

1. a receiver is capable of being a trustee within the meaning of sec. 221P;

2. a receiver is not a trustee within sec. 221P where he or she is not in control of all the property, the "contrary intention" referred to in sec. 6(1) being demonstrated by sec. 221P because it is expressed (as interpreted) to apply only to a trustee who has control of all the property. Thus a receiver who has part of the property is not a trustee.

In my opinion, Barnes, despite submissions to the contrary on behalf of the Commissioner, lays down that the section requires that all the property must pass into the required control. It was said clearly in the above statement and also at ATC p. 4267; C.L.R. p. 493 in response to the argument that sec. 221P was not a law with respect to taxation but to confiscation:

"We do not think so for reasons which appear when the precise operation of the section is examined. First, the section does not provide that the debt due to the Crown shall have priority over all secured debts of a defaulting employer. It provides especially for the case where the whole of the property of a defaulting employer has vested in a trustee. It provides that in that case alone the debt due to the Crown shall have priority over secured debts... The case is quite different in nature and effect from a case

ATC 4397

where it is attempted to give the Crown priority in payment to a secured creditor whose security is a particular asset and whose beneficial interest in that asset would thereby be taken from him."

(Emphasis is added.)

It is significant that this was said in response to the contentions that sec. 221P was beyond power. The observations were not obiter dicta but part of the ratio of the decision in that regard.

Again at ATC p. 4267; C.L.R. p. 494 their Honours said:

"The overall effect of sec. 221P(2), therefore, is that when the whole of the property of a defaulting employer vests in or passes under the control of a trustee and when it includes property representing the value of the deductions made and not paid over, the Crown debt is given priority even over a creditor entitled to the whole of the employer's property, as it then exists, as security for his debt. Such a law is a law with respect to taxation."

(See also Gibbs J. as he then was at ATC p. 4270; C.L.R. pp. 499-500.) (Emphasis is added.)

Needless to say Barnes has been widely understood to require that the whole property of the company must pass into the control of the trustee before sec. 221P applies. (
Smith & Anor v. D.F.C. of T. & Anor (1978) 38 F.L.R. 347; (1979) W.A.R. 123;
D.F.C. of T. v. A.G.C. (Advances) Ltd. & Ors 84 ATC 4177; (1984) 1 N.S.W.L.R. 29;
Re L.G. Holloway Transport Pty. Ltd. 83 ATC 4164; D.F.C. of T. v. A.G.C. (Advances) Ltd. & Ors 84 ATC 4776; (1985) 1 Qd.R. 464; Waters v. Widdows (1984) 2 ACLC 714 at p. 720; (1984) V.R. 503 at p. 509.)

It is perhaps more contentious, particularly having regard to the analysis of Gibbs J. in Barnes, whether it is correct to hold the applicants, although receivers, are not trustees because they do not control the whole of the assets of the company and never did. The distinction between the applicants not being trustees and being trustees to whom the whole property did not pass has potential importance on the amalgamation point. Before turning to that, however, I must deal with the contention for the Commissioner that the whole of the assets of the company did come under the control of the applicants.

It is clear that since their appointment the Victorian assets have come under the control of the applicants. In my opinion, the contention that the Queensland assets also came under their control is untenable. Mrs Moshinsky for the Commissioner and Mr Brett for the liquidator, the latter in an alternative submission, contended that because the applicants could have controlled them they should be regarded as having done so. This submission refers to what was said in Barnes at ATC p. 4265; C.L.R. p. 491:

"In our opinion, the property of the Company which passed under the control of the defendant upon his appointment by the mortgagee as receiver under the deed was the whole of the assets and undertaking of the Company, control of which could pass to him as receiver under the terms of the deed. It is an important qualification that the `property' is limited to that in respect of which control could pass to the defendant. If independently of this security there had been a mortgage or other security over certain assets of the Company, control of those assets could not pass to the receiver."

(Emphasis is added.)

This, however, was in the context of identifying "property" to which sec. 221P was applicable. The observations did not refer to what "could" as a matter of physical or practical possibility pass into control but what could and did according to the tenor of the charge and presumably as a matter of law. Their Honours were also asserting that the "property" did not include that which was secured by pre-existing mortgage or other security.

The Commissioner must in my opinion establish control in its target trustee. At no time did the applicants have control or the slightest measure of it over the Queensland assets.

I accept the submission that in fact the liquidator was entitled by virtue of his appointment by order of this Court to take control before the applicants. Where there is competition in point of time between a judicial act and a non-judicial act the law gives precedence to the judicial act. (In
re Warren, ex parte A.M. Wheeler v. The Trustee in Bankruptcy (1938) 1 Ch. 725 at p. 739.)

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It follows that the applicants could not in any event, as against the liquidator, have taken the Queensland assets, the charge being void against him so as to provide no impediment to the discharge of his duty as provisional liquidator to take control. In any event, I am persuaded that "control" within sec. 221P means de facto control or at least control to a greater extent than any achieved by the applicants. (Barnes at ATC pp. 4265-4267; C.L.R. pp. 491-493; Re Obie at p. 470; Re L.G. Holloway Transport Pty. Ltd. at p. 4167; D.F.C. of T. v. A.G.C. (Advances) Ltd. at ATC pp. 4179-4180; N.S.W.L.R. p. 33.)

While it may well be that a thoroughly definitive meaning of "control" has not yet emerged it is clear that in no sense have the applicants exercised control over the Queensland assets. I find as a fact they have not exercised any. In my view, the presence or otherwise of "control" is ordinarily a question of fact. Its meaning in sec. 221P is not technical but refers to what is actual or "de facto". (D.F.C. of T. v. A.G.C. (Advances) Ltd. at ATC pp. 4178 and 4179; N.S.W.L.R. pp. 31 and 33;
D.F.C. of T. v. Horsburgh & Anor 83 ATC 4823 at p. 4827; (1983) 2 V.R. 591 at p. 596; 84 ATC 4501 at p. 4508; (1984) V.R. 773 at p. 783.)

The applicants accordingly are not and have not been in control of the assets of the company in Queensland. It might be said that the consequence is that the applicants are not trustees within the meaning of sec. 221P. The statement in Barnes at ATC p. 4265; C.L.R. p. 490 which would found this conclusion was in response to the view of the minority in
F.C. of T. v. Card (1963) 109 C.L.R. 177 that receivers were not "trustees" within the section despite the definition because a contrary intention appeared in sec. 221P. Barwick C.J., Mason and Jacobs JJ. held (p. 4265; p. 490) in effect that a contrary intention was shown in sec. 221P only in the case where all the property did not vest or pass into the control of the receiver. It is because the section was interpreted to be applicable only where "all" the property did. Thus a receiver in control of part is not a "trustee". The reasoning of Gibbs J. (as he then was) in Barnes was I think different. His Honour thought that a receiver is a trustee by virtue of the definition but agreed with the majority on the basis that all the property had for practical purposes passed. (See ATC p. 4269; C.L.R. p. 498.)

If it is correct that the applicants are not trustees because they received only part of the property then the amalgamation point is clearly untenable. This is because there are not two trustees but one, namely the liquidator.

However, it may be said that it was not essential to hold that a receiver of part of the property is not a trustee, as against his being a trustee to whom the section does not apply. If the latter is the proper view the amalgamation point requires a different approach.

As the authorities stand I am of the view that the section does not apply in any event where different trustees are in control of different items of property although between them they hold all of it. It is because liability under sec. 221P attaches to a trustee who controls all of it. The applicants do not. On its proper interpretation, I do not think that the section can be interpreted to make liability of a trustee dependent on the identification and characterisation of all those who hold other property of the company. If the section was so interpreted there would be further problems whether the liability is thereby imposed wholly on each trustee, on all jointly or merely rateably.

For these reasons the section does not apply to the applicants or the fund which they control.

The position is not the same as regards the liquidator. The assets he holds are all those of the company not reached by the charge.

Mr Brett of counsel for the liquidator submitted, as I have said, that the liquidator did not have all the assets, alternatively the applicants did. I have, I think, in effect dealt with these contentions. On the authority of Barnes, particularly at ATC p. 4265; C.L.R. p. 491, I am satisfied that the liquidator did come to control all the assets of the company which could pass to him. The Victorian assets were not "property" within sec. 221P because they were the subject of an independent security. (See Barnes at ATC p. 4265; C.L.R. p. 491; Waters v. Widdows (1984) 2 ACLC 714; (1984) V.R. 503; D.F.C. of T. v. Horsburgh 83 ATC 4823 at p. 4827; (1983) 2 V.R. 591 at p. 596.)

In my opinion sec. 221P applies to the liquidator. Having regard to the extent of the liability, the priority of the liquidator's costs

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and expenses by virtue of sec. 221P(3), the effect of the Crown Debts (Priority) Act 1981 (Cth) which preserves the priority of the Commissioner and the amount in the hands of the liquidator, I assume it is unnecessary to consider any other questions of priority in respect of that fund.

Questions 3 and 4 remain.

As sec. 331 of the Companies (Victoria) Code stood at the time of the appointment of the applicants they were obliged to give priority in the manner there described to certain unsecured debts pursuant to para. 441(e) or (g) or sec. 445. The relevant subsections were (e) and (g) which referred to wages limited to $2,000 for any one employee and amounts (unlimited) due in respect of leave entitlements by virtue of "an industrial instrument". By Act No. 192 of 1985 being the Companies and Securities Legislation (Miscellaneous Amendments) Act 1985 the provisions to which I have referred in sec. 441 were amended by removing the limit on the entitlements of employees other than directors and placing a limit of $1,500 in respect of leave claims by directors. A provision was added for payment in eighth priority for retrenchment payments.

Section 441 concerns priorities for payment of debts in a winding up. At the same time sec. 331 was amended to take care of the amendments I have mentioned to sec. 441 by incorporating them in place of the previous provisions. The amendments came into force on 31 March 1986 so that at the time of the appointment of the applicants they were not law.

In essence, the amendments raise the entitlements of employees other than directors and limit those of directors.

It was submitted by Mr Doyle for the employees that the amendments were intended by Parliament to operate retrospectively so as to prescribe the ambit of entitlement in a receivership or winding up not yet completed, alternatively, ones in which payments were not yet made. Alternatively it was submitted that as a matter of interpretation, the applicants were obliged to consider the claims in accordance with the provisions of sec. 331 as amended. In support some reliance was placed on the definition of "company" in sec. 441(2) which was added in the 1985 Act. The definition was that a company means "a company that is being wound up". As sec. 441(1) applied only to payment in priority of debts "in the winding up of the company" it is impossible to give sensible significance to the addition of the definition.

Mr McEwan of counsel for the directors submitted on the other hand that the obligation of the applicants crystallised at the time of their appointment which was before the amendments. The presumption, he submitted, against retrospectivity was not rebutted. He relied further on sec. 29 of the Companies and Securities (Interpretation and Miscellaneous Provisions) Code which says:

"(1) Where a relevant Act repeals a former relevant Act or part of a former relevant Act, then, unless the contrary intention appears, the repeal does not -

  • ...
  • (c) affect a right, privilege, obligation or liability acquired, accrued or incurred under the provision of the relevant Commonwealth Act so repealed, or an investigation..."

In
Lai Corporation Pty. Ltd. (receiver and manager appointed) v. Steinberg (1986) 4 ACLC 547 Pidgeon J. in the Supreme Court of Western Australia relied on sec. 29 in holding that the relevant amendments here discussed did not have retrospective application.

It was contended for the employees that I should not follow the decision of Pidgeon J. as it was incorrect to characterise the statutory alterations as "repeal" rather than "amendment".

In my opinion it is unnecessary to debate the nice question whether what took place was a repeal or an amendment. If the statutory changes are properly to be characterised as amendments so that sec. 29 is inapplicable, the principles to be applied at common law are so similar that they are likely to lead to the same result.

In
Mathieson v. Burton (1970-1971) 124 C.L.R. 1 at p. 22 Gibbs J., as he then was, said:

"The common law principles have been laid down in many cases, but it is necessary to refer only to two well-known authorities. In In
re Athlumney; Ex parte Wilson (1898) 2 Q.B. 547 at pp. 551-552, Wright J. said:

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  • `Perhaps no rule of construction is more firmly established than this - that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matter of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.'

In
Maxwell v. Murphy (1957) 96 C.L.R. 261 at p. 267, Dixon C.J. said:

  • `The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events. But, given rights and liabilities fixed by reference to past facts, matters or events, the law appointing or regulating the manner in which they are to be enforced or their enjoyment is to be secured by judicial remedy is not within the application of such a presumption."'

(See also
Ogden Industries Pty. Ltd. v. Lucas (1970) A.C. 113;
CCA v. X and Y (Victorian Full Court, 4 December 1986 (1987) 5 ACLC 1).)

In
Kraljevich v. Lake View and Star Ltd. (1945) 70 C.L.R. 647 at p. 652 Dixon J. (as he then was) said:

"The presumptive rule of construction is against reading a statute in such a way as to change accrued rights the title to which consists in transactions passed and closed or in facts or events that have already occurred. In other words, liabilities that are fixed, or rights that have been obtained, by the operation of the law upon facts or events for, or perhaps it should be said against, which the existing law provided are not to be disturbed by a general law governing future rights and liabilities unless the law so intends, appears with reasonable certainty."

Section 331(1) provides:

"Where -

  • (a) a receiver is appointed on behalf of the holders of any debentures of a company or registered foreign company that are secured by a floating charge, or possession is taken or control is assumed, by or on behalf of the holders of any debentures of a company or registered foreign company, of any property comprised in or subject to a floating charge; and
  • (b)...

the following provisions of this section have effect."

Subsection (2) provides:

"The receiver or other person taking possession or assuming control of property of a company shall pay, out of the property coming into his hands, the following debts or amounts in priority to any claim for principal or interest in respect of the debentures:

  • ...
  • (c) subject to sub-sections (4) and (5), third, any debt or amount that in a winding up is payable in priority to other unsecured debts pursuant to paragraph 441(e) or (g) or section 445."

Speaking of this section Gobbo J. in
General Credits Ltd. v. Chemineer Nominees Pty. Ltd. (in liq.) & Ors (1986) 4 ACLC 570 said (p. 574):

"It is clear that the critical time is the time when possession is taken. The policy reasons that led to particular protection to employees' claims require in my view that the obligation that comes into existence upon the taking of possession is not judged with the benefit of hindsight by considering what actually occurs with respect to the debenture holder's claim. At the point when possession is taken, it is highly desirable that the obligation to respect the particular preferential creditor take effect in more than a merely negative way."

His Honour held that the obligation was continuing so that it could not be said to have been discharged notwithstanding payment out of the debenture holder and, I think, was speaking of the provision in a different context. But his view of the section has some relevancy here.

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If it is correct, as I think it undoubtedly is, that the obligation on the applicants crystallised at the date of their appointment, it was not only to make payments to the preferred creditors but to make them according to the criteria provided by sec. 441 as it then stood. Once sec. 331 is to be understood as imposing the obligation at the date of the appointment it can hardly be said that only the obligation crystallised but not the quantum which remained vulnerable to changes in the law thereafter. If that were the case, it would remain quite uncertain whether the obligation could be said to have been discharged after one or more payments and if so which, or after termination of receivership. The obligation admittedly is continuing in the sense that it is imposed until discharged. But that is not to say that the extent of the obligation is other than defined by the law as it stood at the time of appointment.

Although it was submitted on behalf of the employees that the amendments in 1985 were "remedial" so far as they were concerned, it was countered by the submission that they could not be so regarded by the directors.

In my opinion, the presumption that the amendments were to operate prospectively has not been shown to have been rebutted. The obligations of the applicants are in accordance with the law as it stood at the time of their appointment.

I answer the questions as follows:

 

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