Fisher v Madden

Fisher v Madden - [2002] NSWCA 28 - NSWCA 2002 case summary — Zoe

[31]

13 The narrowness of her right is further emphasized when one considers whether it is a "contingent" debt or claim within s553. The word "contingent" is a slippery word. In the field of real estate, Fearne's Contingent Remainders (a book which Baron Parke took with him on his honeymoon) describes a contingent remainder as a remainder limited so as to depend on an event or condition, which may never happen or be performed, or which may not happen or be performed until after the determination of the preceding estate. Even in the case of such a contingent remainder, one always knows the nature of the preceding estate and the nature of the contingent remainder, which might or might not come into existence. In cases other than real estate, life is more precarious still. In Federal Commissioner of Taxation v Gosstray [1986] VR 876 at 878 Tadgell J said: "An attempt to formulate a universally applicable definition of a contingent debt or of a contingent creditor is difficult, and probably not very useful having regard to the variety of contingent claims that may properly be the subject of proof. A contingent creditor, like an elephant, is rather easier to recognize than to define. The following statement by Pennycuick J. In Re William Hockley Ltd [1962] 1 WLR 555, at p. 558; [1962] 2 All ER 111, is well known: "The expression 'contingent creditor' is not defined in the Companies Act, but must, I think, denote a person towards whom under an existing obligation, the company may or will become subject to a present liability upon the happening of some future event or at some future date." In Re Gasbourne Pty Ltd [1984] VR 801 at p 837, Nicholson J said that he did not regard that description as exhaustive, and with respect I would not disagree. In Community Development Pty Ltd v Engwirda Construction Co . (1969) 120 CLR 455, at p 459 Kitto J, having observed that not much assistance is to be gained from observations to be found in reported cases as to the import of the word "contingent" in the context now being considered, regarded what Pennycuick J had said as being "perhaps rather a definition of a 'contingent or prospective creditor'". Kitto J did, however, consider tht the importance of the words of Pennycuick J "for present purposes lies in their insistence that there must be an existing obligation and that out of that obligation a liability on the part of the company to pay a sum of money will arise in a future event, whether it be an event that must happen or only an event that may happen".

[35]

17 SHELLER JA: This appeal concerns the impact on the order of priorities set by s433(3)(c) of the Corporations Law (the Law) of a potential order which might be made by the Industrial Relations Commission of New South Wales retrospectively varying a contract of employment between a company and its employee to require the company to make a retrenchment payment to the employee. Introduction 18 On 29 May 2000 the respondent, Martin Madden, was appointed Receiver and Manager of Dataflow Computer Services Pty Ltd (Dataflow). The appellant, Karen Fisher, had been an employee of Dataflow since 1983. On 14 July 2000 Mr Madden terminated her employment because she was redundant. On 2 August 2000 Ms Fisher began proceedings (No IRC 3784 of 2000) against Dataflow in the Industrial Relations Commission for relief under s106 of the Industrial Relations Act 1996. That section provides: " Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract of from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case."

[38]

21 So far as presently relevant, s433 of the Law, in the form it took at the date Mr Madden was appointed receiver, provided as follows: " Payment of certain debts, out of property subject to floating charge, in priority to claims under charge …. (2) This section applies where: (a) a receiver is appointed on behalf of the holders of any debentures of a company or registered body 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 body, of any property comprised in or subject to a floating charge; and (b) at the date of the appointment or of the taking of possession or assumption of control (in this section called the relevant date ): (i) the company or registered body has not commenced to be wound up voluntarily; and (ii) the company or registered body has not been ordered to be wound up by the Court. (3) In the case of a company, the receiver or other person taking possession or assuming control of property of the company shall pay, out of the property coming into his, her or its hands, the following debts or amounts in priority to any claim for principal or interest in respect of the debentures: (a) first, any amount that in a winding up is payable in priority to unsecured debts pursuant to section 562; (b) next, if an auditor of the company had applied to the Commission under subsection 329(6) for consent to his, her or its resignation as auditor and the Commission had refused that consent before the relevant date - the reasonable fees and expenses of the auditor incurred during the period beginning on the day of the refusal and ending on the relevant date; (c) subject to subsections (6) and (7), next, any debt or amount that in a winding up is payable in priority to other unsecured debts pursuant to paragraph 556(1)(e), (g) or (h) or section 560. ….. (9) For the purposes of this section, the references in Division 6 of Part 5.6 to the relevant date shall be read as references to the date of the appointment of the receiver, or of possession being taken or control being assumed, as the case may be."

[39]

22 Division 6 of Pt 5.6 of the Law was headed "Proof and ranking of claims". Section 553 in that Division "Debts or claims that are provable in winding up" provided: "(1) Subject to this Division, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company.". 23 Section 556(1) in Division 6 of Part 5.6 of the Law provided that in the winding up of a company certain "debts and claims must be paid in priority to all other unsecured debts and claims". There followed fourteen lettered paragraphs, the first ten of which consisted of various expenses, costs and debts incurred in the course of winding up, official management or by a member of a committee of inspection. The last four paragraphs of subs(1) were: "(e) subject to subsection (1A) [which limited the amount paid] - next, wages and superannuation contributions payable by the company in respect of services rendered to the company by employees before the relevant date; (f) next, amounts due in respect of injury compensation, being compensation the liability for which arose before the relevant date; (g) subject to subsection (1B) [which limited the amount paid] - next, all amounts due: (i) on or before the relevant date; and (ii) because of an industrial instrument; and (iii) to, or in respect of, employees of the company; and (iv) in respect of leave of absence; (h) subject to subsection (1C) [which excluded any amount attributable to non-priority days] - next, retrenchment payments payable to employees of the company." Only paras (e) wages and superannuation contributions payable by the company in respect of services rendered to it by employees "before the relevant date", (g) amounts due on or before the relevant date to employees in respect of leave of absence under an industrial instrument, and (h) "retrenchment payments payable to employees of the company", were referred to in s433(3)(c). Paragraph (f), which was not referred to in s433(3)(c), gave priority to amounts due in respect of injury compensation, the liability for which arose before the relevant date. Subsection (1C) aside, para (h) set no temporal condition or limitation.

[43]

29 The facts in the second case were that Mr Whitton had been appointed receiver of the defendant on 8 March 1995 and on the same day agent for the mortgagee in possession. On 10 March 1995, his appointment as receiver was terminated. The defendant carried on a printing business. At a meeting of creditors on 28 April 1995 the defendant went into voluntary liquidation. From 8 March 1995 the defendant was actively conducting its business with a number of employees under Mr Whitton's control until he sold the business on 27 April 1995. On that date he terminated the employment of the employees. One of the questions for consideration by Bryson J was whether Mr Whitton, as agent of the mortgagee in possession, was obliged by s433(3) of the Law to pay out of certain moneys received by him after 8 March 1995 retrenchment payments payable to former employees (see p129). In dealing with this question, Bryson J said at 148: "Question 2.3 deals with retrenchment payment. By the definition in s556(2) this means any retrenchment payment whenever it becomes payable, even if after the controller's assuming control. In the present case the retrenchments occurred while the controller was still active. Entitlement to retrenchment payment arising as a result of termination of employment on 27 April would, in my opinion, give rise to an entitlement to a priority payment out of whatever property ever was within the net of s433(3). There must, as a matter of implication to avoid absurdity, be some ultimate limit to the time when a retrenchment payment becomes payable if it is to qualify for priority, notwithstanding the references to time in the definition of 'retrenchment payment'. It is difficult to suppose that a retrenchment which occurred alter [after] a controller had completed his operations and accounted to all interested parties of whom he was aware would involve liability under s433(3). To what extent claims for leave of absence or retrenchment payments are preferred under s433(3), if to any extent, and whether Mr Whitton has breached any obligation imposed on him by s433 cannot be determined without elaborate and detailed consideration, in the exercise of which the parties referred to as to the ascertainment of quantum."

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