Weston (Liquidator); In the Matter of 7 Steel Distribution Pty Limited (In Liq) [2015] FCA 742

Weston (Liquidator); In the Matter of 7 Steel Distribution Pty Limited (In Liq) [2015] FCA 742

HSBC, as a secured creditor whose receivers made compulsory employee priority payments under s 433(3)(c), is entitled by equitable subrogation to be paid in priority in the winding up to the extent those payments diminished its security, reflecting the same priority those employees would have received.

Parties
First Plaintiff: Paul Gerard Weston in his capacity as Liquidator of 7 Steel Distribution Pty Limited (ACN 131 352 264) (In Liquidation); Second Plaintiff: 7 Steel Distribution Pty Limited (ACN 131 352 264) (In Liquidation)
Jurisdiction
Australia
Judgment Date
21 July 2015
Procedural Posture
Application for Direction in Liquidation / Judgment on Application Under S 511(1) of the Corporations Act 2001 (cth)
Outcome
Application granted. Direction and orders made as sought.
Legal Topics
Liquidator's Directions, Priority of Claims, Subrogation of Secured Creditor, Employee Entitlements in Liquidation
Corporations Law Insolvency Liquidator's Directions Priority of Claims Subrogation of Secured Creditor Employee Entitlements in Liquidation

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Parties

Paul Gerard Weston in his capacity as Liquidator of 7 Steel Distribution Pty Limited (ACN 131 352 264) (In Liquidation)

First Plaintiff

7 Steel Distribution Pty Limited (ACN 131 352 264) (In Liquidation)

Second Plaintiff

Procedural Posture

Application for Direction in Liquidation / Judgment on Application Under S 511(1) of the Corporations Act 2001 (cth)

Legal Issues

  1. 1 Whether a secured creditor (HSBC) which has realised its security and whose receivers paid employee priority claims under s 433(3)(c) is subrogated to the rights of those employees in the liquidation.
  2. 2 Whether the liquidator is justified in paying HSBC in priority to other unsecured creditors the amounts paid by the receivers to employees under s 433.

Ratio Decidendi

HSBC, as a secured creditor whose receivers made compulsory employee priority payments under s 433(3)(c), is entitled by equitable subrogation to be paid in priority in the winding up to the extent those payments diminished its security, reflecting the same priority those employees would have received.

Court Disposition

Application granted. Direction and orders made as sought.

Orders

  • The liquidator is justified in regarding HSBC as subrogated to the rights of employee priority creditors paid by the receivers under s 433 and in paying HSBC in priority to ordinary unsecured creditors to the extent of those payments.
  • The plaintiffs are to file electronically their written outline of submissions and Exhibit PGW-1 to the affidavit of Paul Gerard Weston sworn on 11 June 2015 by 22 July 2015.